Legislative Memo: Regarding the Education Tax Credit Act and the Education Investment Incentives Act

March 27, 2015 —  Subject: Executive Budget: Education, Labor and Family Assistance, Part E (S2006/A3006), Establishes the Education Tax Credit Act

A.2551 (Cusick), Establishes the Education Investment Incentives Act
S.1976 (Golden), Establishes the Education Investment Incentives Act

Position: OPPOSE

In his budget Governor Cuomo has proposed legislation that would provide tax credits to individuals, corporations, and partnerships that donate money to public schools and, through “educational scholarships,” to students who attend schools that provide religious education. Similar legislation has been introduced in the Assembly. A bill in the Senate would also provide a tax-credit for donations to charter schools.

Providing tax credits to education “investors” represents a bold step toward the further privatization of public education in New York State – in effect, underwriting the transfer of tax dollars to sectarian schools and charter schools.

The various legislative proposals would authorize up to $675 million dollars in “education investment tax credits” in the next three years – money that would otherwise be paid to the state’s general revenue fund. Deficits would have to be offset by raising taxes, or by distributing budget cuts across program and service areas.

This tax-credit scheme would further jeopardize the financial health of public schools. School funding has been cut sharply since the financial crisis in 2008, and the state has failed to fund public schools at levels ordered by the Court of Appeals in litigation initiated by the Campaign for Fiscal Equity more than a decade ago.

What’s more, the state would facilitate the transfer of public money to religious schools, in violation of the constitutional principle that bars the government from endorsing religion.

Lawmakers must soundly reject this proposal.

Education policy by the 1 percent
The proposed tax credit would create a special class of education investors with significant influence in shaping education policy.

This tax benefit would be a boon to the state’s most wealthy residents, and to those tuition-based parochial schools and charter schools that are the recipients of these benefactors’ largesse.

This is because the legislation creates a high-value tax credit -- as opposed to a tax deduction. A tax deduction lowers taxable income – based upon a percentage of certain expenses incurred by a tax payer (a mortgage-interest deduction, for example). The proposed tax credit would reduce total taxes owed by up to 90 percent: For example: an individual or corporation donates $100,000 to a private school; the taxes due the state are cut by $90,000.

This proposal represents a radical departure from the principle that the funding of public school education is a public duty, a duty that is shared equitably in the service of a collective good – universal public education.

Students left behind
Privately operated charter schools differ from traditional public schools in one respect that is particularly important: they select their students. Charter schools and private, sectarian schools have the prerogative of rejecting applicants who do not test well, who are special-needs learners, who speak English as a second language, who may be disadvantaged by the many challenges presented in a society whose defining characteristics include poverty and inequality.1

And if this phenomenon is analyzed beyond a single community or county, it becomes apparent that the selectivity of private schools has the effect of excluding a demographic that is not privileged, that is comprised disproportionately of students in families and communities that are the least privileged, and the most vulnerable.

An end run around the Establishment Clause
The proposed “education investment tax credit” is an attempt at an end run around the constitutional principle that bars the state from endorsing religion. The New York State Constitution incorporates this principle, and prescribes its application, in this provision:

“Neither the state nor any subdivision thereof, shall use its property or credit or any public money, or authorize or permit either to be used, directly or indirectly, in aid or maintenance, other than for examination or inspection, of any school or institution of learning wholly or in part under the control or direction of any religious denomination, or in which any denominational tenet or doctrine is taught. . . .”2

The education tax credit proposes not merely to provide scholarship support to students who attend religious schools, but rather an elaborate legislative maneuver (through the “education investment tax credit program”) that has the potential – and, indeed, the objective – of fundamentally altering the policies and rules that direct the state’s funding of education.

Conclusion
The NYCLU urges legislators to reject categorically this legislation.

Footnotes
1 See, e.g., Michael Powell, “Gilded Crusade for Charters Rolls Onward,” New York Times, March 12, 2014. See, also, Diane Ravitch, Reign of Error, The Hoax of the Privatization Movement and the Danger to America’s Public Schools (New York: Alfred A. Knopf, 2013), p. 159 (see, in particular, Chapter 16, “The Contradictions of Charters”).

2 NY Constitution, Art. 2, §3.