Jay P. Greene's Blog

(Guest Post by Matthew Ladner)

So in the old Pink Panther movies, Inspector Clousseau had this butler named Cato. Apparently, at some point, Clousseau had ordered Cato to conduct surprise attacks in order to keep his fighting skills sharp. Cato took to this role with relish, and Clousseau was unable to get him to stop. Clousseau did not seem to think that the value of the practice outweighed having his apartment destroyed on a regular basis, but Cato certainly seems to have thought it to be the case.

So…

My pals at the Cato Institute hold a strong preference for tax credits over vouchers. They have some reasons to do so- tax credits have thus far proven more durable to court challenge, and so far operate with fewer regulations on private schools. We’ve lost voucher programs in the courts in Colorado, Florida and Arizona and no tax credits yet.

Voucher-only supporters (I am not of this camp) usually about now would note their preference for programs that provide a meaningful level of subsidy to low-income people, and then would recite a litany of perceived deficiencies in existing school tax credit programs. The Illinois personal tax credit program, for instance, can certainly be justified given that taxpayers sending their children to private schools are suffering a double payment penalty.  With a maximum subsidy of $500, however, it doesn’t help anyone much and does very little to put private education within reach of the poor. They would also note that there is less to this less regulation business than meets the eye, given recent tax credit programs in Arizona and Florida which (gasp) require students to take a nnr exam.

Personal tax credits cannot address the needs of poor, especially of the poor with multiple children, or children with disabilities. There are two possible fixes- refundable credits, and scholarship credits. Under a refundable credit, the government would provide you a payment for private school expenses even if it exceeds your tax liability. Cato opposes refundable credits, and we don’t have any examples of them in any case. Scholarship credits involve having non-profits pool donations from tax-donors (either personal or corporate donors depending on the program) and giving scholarships to kids.

Arizona lawmakers passed a school voucher program for children with disabilities in 2006. Edu-reactionaries sued against it and killed it with a Blaine Amendment. We passed a corporate tax credit program in an effort to save the kids on the program, but it debuted during a national financial collapse that impacted housing-crazy Arizona especially hard. The program has helped some students, but I don’t think it is unfair to say it underwhelmed, and had a $5m cap in any case. There was zero possibility that this program could grow into something like the fully scalable, elegantly operating McKay program, which funds special needs children on demand.

The Arizona Supreme Court did repeatedly broadly hint that a program with multiple possible uses for funds would not violate the Blaine Amendment. Nick Dranias and I researched the matter carefully and proposed a system of public contributions to ESAs as a solution. School choice champions in the Arizona legislature crafted a bill, which has now been signed into law by Governor Brewer.

Out jumps Cato from behind the leftovers in the fridge to the attack!

I could go into full OCD point by point refutation mode, but I will spare you by making a few brief comments. First, Adam’s discussion about “third-party payers” is odd to say the least, given Cato’s support of scholarship tax credits. Scholarship tax credits don’t just have third-party payers, they also have fourth party payers- donors and scholarship organizations.

Perhaps the Cato Institute only supports personal credits these days, although I doubt it. Such a preference would constitute utter indifference to equity concerns.

I also think Adam should not rush to jump to any conclusions regarding constitutional issues. When an Arizona Supreme Court justice gets a teacher union attorney to admit that a program with multiple uses solves a Blaine problem in open court, I’m willing to bet that ESAs are constitutionally distinct from vouchers in some circumstances. Further, Adam may be premature in concluding that deposits into these accounts remain “public funds.” Payments to individuals under contractual agreements with the government are not considered public funds- otherwise someone could sue to prevent the state from hiring anyone. Some of the money will end up paying for private school tuition, verboten under Blaine! Some of the top Constitutional attorneys in the country contributed to the development of this proposal including the crack team of Dranias and Bolick at the Goldwater Institute and Tim Keller at the Institute for Justice. I’ll take my chances with them in any court.

I encourage my friends at Cato to give equity concerns some serious consideration. Personal use credits are weak tea when dealing with poor children, children in large families, and children with disabilities. Some families are large, poor and have children with disabilities. This is not to say that personal use credits are bad- in fact, I say that they are a good but limited tool. The same applies to scholarship credits- they are good as far as they go.

Nor finally are choice mechanisms mutually exclusive, and we need every tool we can get.

This entry was posted on Friday, April 22nd, 2011 at 9:33 am and is filed under Education Savings Accounts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.