Taxpayer-Funded School Voucher Legislation: A Closer Look at Senate Bill 1

From PSBA: http://www.psba.org/issues-advocacy/issues-research/vouchers/special-issue-proposed.asp
On Jan. 26, Senators Jeff Piccola (R-Dauphin), the Chairman of the Senate Education Committee and Anthony Williams (D-Philadelphia), introduced Senate Bill 1 to create a taxpayer-funded tuition voucher program.  Seventeen senators have agreed to co-sponsor the legislation, including Senators Piccola, Williams, Scarnati, Pileggi, Folmer, Browne, Smucker, Alloway, Erickson, Rafferty, Eichelberger, Pippy and Don White.   Senator Dinniman, the Senate Education Democratic Committee Chairman, is not listed as a co-sponsor.

What Is SB 1?

SB1, called the “Opportunity Scholarship and Educational Improvement Tax Credit Act,” would provide taxpayer-funded tuition vouchers to students from low-income families to be used for either public, private or parochial schools.  The program is phased in, with a focus first on providing vouchers for children attending underperforming schools, then expanding the program in the third year to all low-income children attending any school.  Therefore, each year more students would be eligible to participate. Underperforming charter schools, cyber charter schools or area vocational-technical schools are excluded under the act.  In addition, the bill also includes an increase of $25 million in the Educational Improvement Tax Credit program.

Three-Year Phase-In Voucher Program

The First Year -- Beginning with the 2011-12 school year, the bill creates an opportunity scholarship program to help low-income children currently attending a public school to pay tuition to attend a nonresident public school or a participating nonpublic school.  In the first year, the program is available to low-income children who attended a “persistently lowest achieving school” during the 2010-11 school year and who will reside in the attendance boundary of a persistently lowest achieving school during the 2011-12 school year. 

“Persistently lowest achieving school” -- SB 1 defines “persistently lowest achieving school” as a public elementary or secondary school located in Pennsylvania achieving within the lowest measured group of 5% on the most recent assessment for which data is posted on the Department of Education’s website. Charter schools, cyber charter schools and area vocational-technical schools are not included in the term.

However, using this definition, a school who is in the bottom 5% for just one year can be designated as “persistently” lowest achieving.  The bill requires the Department of Education to publish a list of the persistently lowest achieving schools by April 1, 2011 and then by February 1 of each year thereafter on PDE’s website.

The Second Year -- In the 2012-13 school year, the scholarship program is expanded to include not only those students who qualified for the program for the 2011-12 school year, but also to low-income children already enrolled in a nonpublic school.  SB 1 allows students who attended a nonpublic school during the 2010-11 school year and will reside within the attendance boundary of a persistently lowest achieving school during the 2012-13 school year to receive vouchers.
“Attendance” is not defined in SB 1 for purposes of understanding both first and second year implementation, so it is unclear how long the student would have had to attend either a “persistently lowest achieving school” or a nonpublic school before he or she would be eligible.  For example, would it be limited only to those students who attended the school for the entire year or could the child have been enrolled for any lesser time?

The Third Year -- In the third year phase-in, the 2013-14 school year, the tuition program is available to all low-income children residing in the Commonwealth regardless of residency or the academic success or failure of the school from which the child seeks transfer.  It is in the third year of the phase-in that any low-income student residing anywhere in the state may attend any public or nonpublic school of their choice regardless of the academic performance of their resident school. Additionally, students entering kindergarten become eligible to receive vouchers beginning in the third year.

Eligible Students

In each of the three years of the phase-in, the bill authorizes taxpayer-funded vouchers for a low-income child.  The bill defines a “low-income child” as a school aged child with a household income that does not exceed 130% of the federal poverty line for the school year preceding the school year for which an opportunity scholarship is sought.

It is important to understand that under SB1, this definition covers only those students who receive free school breakfast and lunch.  Those receiving reduced price meals would not be eligible to receive vouchers.

Additionally, SB 1 states that if a student who received a voucher in a prior school year no longer qualifies as “low-income,” he or she will continue to receive a partial scholarship until completing the 8th grade.

Voucher Amount

Under this bill, a tuition voucher equals 100% of the Commonwealth’s share of the resident school district’s total revenue per average daily membership of the prior school.  The term “Commonwealth’s share” is not defined under this bill and it is unclear if the Commonwealth’s share is limited to a school’s basic education funding subsidy or inclusive all dollars received from the state including grants, transportation and charter school reimbursements, and federal dollars passed through the Department of Education. Determining the exact definition of what that 100% state share is will make a significant impact on the amount of voucher money that is to be provided at the expense of the resident school district.  As written, this means that all state revenue including payments for special education, transportation, debt service, charter school subsidy, PSERS subsidy, grants and other special funding along with property tax reducing gaming revenue would be calculated as part of the funding that will pay for vouchers.  This raises various inconsistencies. For example, the voucher amount would include funding for transportation, but the resident school district still would be required to provide transportation for the voucher student.
SB 1 also establishes an “Excess Scholarship Fund” that would contain money for vouchers intended to be awarded to students in excess of the amount of the tuition actually charged by a school. The money in the fund would be applied toward costs of the voucher program for upcoming years, beginning in 2012-13.

The state budget would be expected to include money each year to cover the costs of the voucher program. However, if insufficient funds are appropriated in any fiscal year, the Education Opportunity Board would make pro rate reductions in the amount of voucher awards provided.

Applying for and Receiving Voucher Money for Nonpublic Schools

A parent of an eligible student who wants to receive a voucher to be used at a nonpublic school must first apply to a newly-created state Education Opportunity Board (described in a later section) by April 1 (June 1, 2011 in the first year). The board would notify the parent whether the voucher will be awarded. The parent then applies for enrollment directly to the nonpublic school, which would decide whether to accept a child’s enrollment application. The nonpublic school must provide written notice to the board of each new voucher student accepted. The board would notify the parents that a voucher will be awarded to them.

The state will issue voucher checks directly to the parents.  Voucher checks cannot be awarded for enrollment on a home education program. The parents are to endorse the check for the payment of tuition at the nonpublic school where the student’s enrollment has been confirmed.
If the student is no longer enrolled at the nonpublic school, the school must provide notice to the Education Opportunity Board within 15 days of the student’s withdrawl. The school also must return the full amount of the voucher to the parent, not the state, reduced on a pro rata basis by the tuition for the portion of school year the student was enrolled.  The amount returned to the parent is to be repaid to the board. If the parent fails to repay the board within 15 days of receipt of notification from the board that payment is due, the board may charge interest on the unpaid amount.  If the parent fails to pay within 180 days, the board will impose a civil penalty of an amount not to exceed the full amount of the voucher.

In instances where the student is no longer enrolled at a nonpublic school, there is no language in SB 1 that would require the Education Opportunity Board to return the funds to the resident school district.The funds would remain with the board.

Transportation of Voucher Students (Public to Public)

SB 1 creates a new mandate for school districts to provide transportation for their students to attend other public school districts, an expansion of the current requirement to provide transportation to nonpublic schools in certain instances.

Transportation to a non-public or private school would fall under the same guidelines that have been in place since 1972, that is, the school of residence must provide transportation if the school is located 10 miles or less from the border of the resident school district. The bill creates a new mandate for resident school districts to transport resident students attending a public school that is not a part of the resident school district. The bill is not clear on whether that transportation is limited to those receiving vouchers and choosing to transfer to a non-resident public school or to any student attending a non-resident public school. The distances would be the same as for the transportation of students to non-public or private schools. This requirement would apply only if the school district provides its resident students with transportation to its own public schools. 

Additionally, if the school district does not provide transportation to its own schools for its students, but provides its students with transportation for any field trips then it must transport the resident voucher student to the nonresident public school, including a charter school, that is located not more than 10 miles from the student’s resident school district.  The district, in this instance, must also provide transportation for such nonresident public school voucher student for field trips.

School Districts Required to Provide Notice of Voucher Program

By May 1, 2011, and by March 1 of each year thereafter, each school district must provide to all residents of the school district with school-age children written notice of the taxpayer-funded voucher program. As the bill is drafted, this requirement applies to all school districts, regardless of whether or not any of their schools have been declared as “persistently lowest achieving.”

The notice must include a statement as to whether any of its schools have been designated as a persistently lowest achieving school, and direct parents to nonresident public schools or participating nonpublic schools for enrollment information. The notice also must include information on a local scholarship program, if available,and provide application instructions.

The notice would be in a form provided by the Education Opportunity Board and must be mailed to residents with school-age children and also posted on the district’s website. It is unclear how a school district would be aware of families with young children just entering school age, including families who are new to the district.

Local Scholarships Created by School Districts

SB 1 also authorizes school districts to create local scholarship funds for students who leave the district to attend a public school in another district.  For a school district choosing to offer local scholarships, it must by May 1, 2011, and by March 1, of subsequent years notify all residents with school-age children of the availability and amount of the local scholarship for the following school year and the process for application.  The notice must be by mail and posted on a district’s website. It also sets for the deadlines for receipt of application by parents of low-income children for local scholarships and the dates by which the board must notify parents if awards will be made. 

Enrollment of Nonresident Students in Public Schools

The bill’s language is unclear as to whether public schools will be required to enroll a nonresident voucher student. 

The bill first requires each school district to develop guidelines setting forth the terms and conditions under which it will enroll nonresident students receiving vouchers and local scholarships. Districts also would develop an enrollment application form and process. 
However, in the next sentence the bill states that if a school district determines to enroll such nonresident students it must accept them on a first-applied, first-accepted basis, provided that the child’s enrollment does not violate a binding desegregation order; the student has not been expelled or in the process of being expelled; or in the instance of a magnet school, the nonresident student meets the established eligibility criteria.  The bill also caps the tuition charged by a nonresident school district to a voucher student to the total amount of the voucher and the local scholarship awarded to the student. 

Payment to Public Schools for Special Education Students

Services for nonresident students with disabilities will be charged to the district of residence. This includes services for students who attend other public schools, including area vocational-technical schools, as well as nonpublic schools.  The charge would be against the district’s state’s special education subsidy, provided that the resident district is not charged more than the difference between the current year cost of the services had the student remained in the resident school, and the sum of the voucher, and the per pupil special education funding following the student.

The resident district must provide the Education Opportunity Board with documentation of the prior year’s cost of special education services for a voucher student and an estimate of the cost that would have incurred had the student remained in the district. Any cost not covered by this funding must be borne by the nonresident school district.

Enrollment Flexibility for Nonpublic Schools

SB 1 specifies that nonpublic schools may not discriminate in its enrollment decisions on the basis of race, but provides wide flexibility to these schools regarding their admissions policies. Under these loopholes, it is the nonpublic school that has the ultimate decision of whether to admit a student, not the parent.

Loophole # 1 – Nonpublic schools may not be prohibited from limiting admission to a particular grade level, a single gender or to areas of concentration of the school.

Loophole #2 – The state (or any of its agencies, officers or political subdivisions) may not impose any additional requirements that are not already authorized. 

Loophole #3 – A nonpublic school may not be required to enroll any voucher student if the school does not offer appropriate programs or is not structured or equipped with the necessary facilities to meet the special needs of the student or does not offer a particular program requested. Presumably, this includes special (and gifted) education programs, and can be used to limit admission for other reasons.

In addition, SB 1 does not require nonpublic schools to administer state assessments used by public schools to determine student and school achievement, nor does it specify how schools will track and report on the academic progress of its students who receive state vouchers.

New Education Opportunity Board to Set Rules

SB 1creates a new three-member governing body called the Education Opportunity Board, established within the Department of Education that would develop guidelines and procedures for the administration of the voucher programs, including the application and approval process. 

The three members of the board would be appointed by the governor and confirmed by the Senate for a term of four years. No more than two of the three members may be of the same political party as the governor.  The board members would be unpaid, but may hire an executive director and staff. The board and staff would be housed within PDE at an undetermined expense and have use of the governor’s General Counsel for legal advice and assistance.

The board would have 30 days after the enactment of SB 1 to develop its guidelines. The board would provide guidance regarding:

1. Forms to apply for vouchers, including application and approval process and deadlines for application and notification.
2. Procedures to verify the accuracy of the information in an application.
3. Procedures for school district, school and parent notification of voucher awards.
4. Procedures for administration of the voucher programs.
5. Confirmation of school enrollment by voucher recipients.
6. Restrictive endorsement of voucher checks to recipients enrolled in nonpublic schools.
7. Procedures for nonpublic schools to pay pro rata refunds of voucher money to parents who withdraw their child from such schools.
8. Development and distribution of public information concerning the voucher programs.
9. Any other procedures necessary to fully implement the voucher programs.

The guidelines would be developed by the board without any public input and would not be subject to the regulatory review process. Instead, the rules created by the board would simply be published as a “statement of policy” in the Pennsylvania Bulletin, posted on PDE’s website and mailed to each school district.

Further, all programs, procedures and guidelines authorized by the board at any time will not be subject to any regulation or review by the State Board of Education.

Annual Report -- Beginning after the first year of the voucher program, the board would prepare an annual report for the governor and General Assembly that also would have to be made available to parents of voucher recipients and posted on PDE’s website.

The report would include information on the total number of opportunity scholarships requested and awarded, the total dollar amount awarded  and also be disaggregated by: 1) students attending public and nonpublic schools; 2) the grade level of the students; 3) whether the student livs in a school district with at least one persistently lowest achieving school; 4) a list of the nonresident public schools and nonpublic schools where voucher students enrolled; and 5) the total number and dollar amount of local scholarships awarded, disaggregated by the resident school districts that made the awards.

Board will conduct “effectiveness study”

Following the 2014-2015 school year, a study of the effectiveness of the voucher program is to be conducted by the Education Opportunity Board, rather than an independent research group or task force.  The report would be submitted only to the Governor and minority and majority chairmen of the House and Senate Education Committees, and is not required to be made public.

SB 1 does not provide any details as to what components would have to be evaluated in the study; without such language the board could determine what it wanted to include or not include.  Since “effectiveness” is not defined under this bill, it is unclear whether a one-time study will look at any of the following elements:

1. student achievement of voucher students,
2. graduation, transfer and drop-out rates of voucher students at receiving schools;
3. stratification of voucher students along racial, ethnic, socioeconomic and achievement lines, for receiving and sending schools;
4. the tuition and expenses that taxpayer-funded voucher students will have to pay;
5. private school selection process of voucher students to determine if they are selected on a random and religious-neutral basis or if other factors such as a student’s past academic history or family relationships of students are used as a basis for acceptance;
6. the distribution, availability, uniformity of school profiles to parents, the public and the Department detailing budget and other financial information, student performance, graduation rates, and the certification status of teachers;
7. the effect on the available resources of the public schools, including lost aid and school district administrative oversight costs;
8. the impact of the supply response – the formation of new private schools, expansion of existing private schools and the price of private schooling; and
9. access to key English language learner programs, learning supports and special needs, tutors, and counselors.

Educational Improvement Tax Credit Expanded

The EITC program was established in 2003 and gives tax credits to businesses on a variety of business taxes for contributing to a scholarship organization or to an education improvement organization (EIO) many of which are school district foundations. A scholarship organization is one that is free from federal taxation and one that contributes at least 80% of its annual cash receipts to a scholarship program.  An EIO is also exempt from federal taxation and contributes at least 80% of its annual receipts to a public school for innovative education programs.

SB 1 would change the ratio of credit amount made available to scholarship organizations vs. educational improvement organizations.  Currently, 2/3 of the funds generated by the program go to scholarship organizations and 1/3 goes to the EIOs. SB1 would change that to ¾ going to scholarship organizations and 1/4 going to EIOs.

Additionally SB 1 would increase the current Earned Income Tax Credit from $75 million to $100 million for 2011-12.  With the change in division of funds, funding for scholarship organizations would go from $50 million to $75 million, and money for EIOs would remain at $25 million.

While SB 1 would not change the eligibility guidelines for families receiving scholarships under the program, the bill adds an escalator clause. Beginning July 1, 2012, the Department of Community and Economic Development would be required to annually adjust the maximum annual household income amounts to reflect any upward changes in the Consumer Price Index in the preceding 12 months.