Horizon, Host: Ted Simons

May 21, 2009


Host: Ted Simons

Special Session: Corporate Tax Credits


  • Governor Jan Brewer called a special session to expand Arizona‚Äôs corporate tax credit law to benefit disabled and foster kids. Already, corporations that owe state income tax can choose to give some, or all, of that money to a school tuition organization which uses the money to help low income kids attend private and religious schools. The special session seeks to create a similar program for foster and disabled kids.
Guests:
  • Tim Keller - Executive Director, Arizona chapter of the Institute for Justice
  • John Wright - President, Arizona Education Association
Category: Business/Economy

View Transcript
Ted Simons:
Good evening. I'm Ted Simons. Governor Jan Brewer called a special session of the state legislature. She wants lawmakers to expand Arizona's corporate tax credit law to benefit foster and disabled kids. Under current law, corporations that owe state income taxes can choose to give some or all of that money to a school tuition organization. Those S.T.O.s use the money to help low-income kids attend private and religious schools. It appears lawmakers will try to set up a similar program capped at $5 million a year, to benefit disabled and foster kids. This all comes after the Arizona Supreme Court ruled that state voucher programs for disabled and foster kids violate Arizona's constitution. Joining me now to talk about the special session is Tim Keller, executive director of the Arizona chapter of the institute for justice. And John Wright, president of the Arizona education association. Good to have you both on "Horizon." Thanks for joining us.

Tim Keller:
Thank you.

John Wright:
Thank you.

Ted Simons:
Tax credits to keep special needs kids in private schools. Why is this a good idea?

Tim Keller:
It's absolutely critical. In March the Arizona Supreme Court struck down two state-funded voucher programs that were helping families and children attend private schools that were providing an outstanding education for children who otherwise weren't receiving such an outstanding education in public schools. Ever since the program, parents have been struggling, what are they going to do with their children? This is a terrific act by the governor to reach out and say, we're going to help you, parents; we're going to do what we can to help your kids stay right in schools where they're already succeeding.

Ted Simons:
Why is that a bad idea?

John Wright:
What you have is special interests trying to rush through the back door with the Arizona Supreme Court said you cannot bring through the front door. And that is state support for religious and private schools. It didn't just strike it down; it ruled it unconstitutional, violating the clauses in our constitution that prohibit state money from supporting religious discriminatory schools or private education.

Ted Simons:
Let's go to the legal aspect of this. Supreme Court says no to a certain way much getting that money funneled into private schools. Is this just not an end around the Supreme Court?

Tim Keller:
No, it's not. Arizona has for over a decade offered individual tax credits for private citizens to donate to private charities, receive a dollar for dollar tax credit. The organizations then offer scholarships to families to attend private schools. In 1999, the Arizona Supreme Court said there is no constitutional prohibition on tax credit programs.

Ted Simons:
But are these donations -- I hear the word "donation" but it sounds as though it's not appropriated by the state or the treasury, this is basically probe rated by corporations who get the money through a certain avenue.

Tim Keller:
Absolutely--

John Wright:
That's exactly it.

Tim Keller:
Absolutely not. These are private donations that are eligible for a tax benefit. There is no distinction between the tax credit program and, for example, charitable deductions for contributions to organizations like churches, synagogues, or other institutions that help low-income parents.

Ted Simons:
Is there a distinction?

John Wright:
There's no distinction. This is a redirection of tax dollars. If a corporation does not have a tax liability, they can't take this credit. They can't use the money this way. This is a redirection of tax dollars. And in fact, it is -- I believe it is -- I believe the governor and these legislators have said as much. When they have said this special session is meant for the preservation of school choice for the disabled and foster care students impacted by the Supreme Court decision. They said we were told we can't do it this way; we're going to try to do it this way. It's a redirection of tax dollars and it will be found unconstitutional as well.

Ted Simons:
The governor says this does not add additional costs to the state budget. Is she correct?

John Wright:
She's not correct in the impact. Because every $5 million the state does not collect is $5 million it does not have supporting the million children who are in our public schools now. We are just at a budget hearing yesterday, and cut after cut after cut, and the senate budget committee chairman, the appropriations chairman said time and again, we can't afford it. We can't afford it. Suddenly we can afford $5 million plus $5 million here for a very small group of kids we can address in many other more effective ways.

Ted Simons:
Why can we afford this now at a time when the legislature is looking to cut so much, including education?

Tim Keller:
This program is budget positive. It's not merely budget neutral. The scholarships provided by the school tuition organizations are consistently much lower than the state would spend to educate that child in a public school. So this program will save the state money.

Ted Simons:
Do you agree with that?

John Wright:
No. The language says these scholarships will be 90% of the private school voucher program or the amount that the state pays for public school attendance. So it's not only not budget neutral, it's a drain on the budget of at least $5 million every year when we're cutting $833 million out of public school fund can.

Ted Simons:
The idea that these kids could possibly get a better experience in these private schools, why is it not a good idea to find whatever way possible to help those kids?

John Wright:
I think it could be a very good idea to find the best possible school for all children. It just seems these folks really don't understand our constitution about how to pay for it. If we want to make sure that these 400 students in these schools now can continue, let's raise private money. Let's ask for charitable contributions there. There are plenty of good intentioned Arizonans with means to be able to provide donations. We don't all need a tax credit to make a donation. People can give money. I don't ask for tax credit for the money I give my church, not to the Y, not to other charitable organizations. We don't need to create a scheme of tax credits to attract private organizations for good purpose.

Ted Simons:
Respond to that if you would, please.

Tim Keller:
This is not state money. These are private contributions to private charities. School tuition organizations are charitable organizations as recognize by the federal government. Nonprofit organizations. The state offers a particular type of tax benefit for their contribution. Namely a tax credit. But there's no distinction constitutionally between a credit and a deduction. If Mr. Wright is correct, and the court is going to say tax credits are unconstitutional, they have to wipe out entire system of tax deductions.

Ted Simons:
Last question. We've got a special session on this. Why the rush?

Tim Keller:
It's important that this program go into effect as soon as possible. So that school tuition organizations can start raising money, asking for these contributions from corporations, and that they can go into effect as quickly as possible so parents can have the assurance that that money will be available for them in the fall.

John Wright:
What's important is our lawmakers do the job we elected them to do as soon as possible. That's great. Sound, public policy, a responsible budget, address a 36% budget deficit for the next year. Make sure we have the programs we need for the million children that will go to public schools in 2010, and find private ways to address these 400 kids, because our legislature has real work to do, they shouldn't be taking a time-out for this.

Ted Simons:
We'll stop it there. Gentlemen, thank you both for joining us on "Horizon."

John Wright:
Thank you.

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