tax troubles

How Trump’s tax law may have just gotten in the way of Betsy DeVos’ favorite policy

US President Donald Trump tours Snap-On Tools alongside Snap-On CEO Nick Pinchuk (2nd R), Secretary of Treasury Steve Mnuchin (L) and Secretary of Education Betsy DeVos (2nd L) in Kenosha, Wisconsin, April 18, 2017, prior to signing the Buy American, Hire American Executive Order. (Photo credit: SAUL LOEB/AFP/Getty Images)

Two statements highly critical of the Trump’s administration education policies hit reporters’ inboxes in quick succession Thursday evening.

That’s hardly unusual, but the sources were: Two groups that promote school choice and private school vouchers, EdChoice and the American Federation for Children — the same AFC that Trump’s Secretary of Education Betsy DeVos used to chair.

What was all the fuss about? A proposed tax rule, issued Thursday by the Treasury department, that threatens to undermine school choice tax credit programs. Critics call those programs “backdoor vouchers,” and they operate in some states where traditional vouchers, which allow students to attend private school using public money, aren’t legal.

Read more about the rise of tax credit programs here.

“As usual, the government has taken a sledgehammer to a nail, overreaching in a way that will hurt children in need who have benefited from scholarships to attend schools where they can learn,” said Leslie Hiner of EdChoice. (EdChoice is a supporter of Chalkbeat.)

A spokesperson for Betsy DeVos did not respond to a request for comment.

This all started with the new tax law passed late last year. The law included a $10,000 limit on the state and local taxes someone could deduct from their federal tax bill — a provision that would disproportionately hit people living in blue states, which generally have higher taxes.

Politicians in some of those states devised a workaround to keep residents’ tax bills lower: Instead of paying state and local taxes, residents could donate to a government “charity” fund, since charitable donations aren’t subject to the $10,000 cap. Connecticut, New York, and New Jersey have adopted this approach to varying degrees, and other states have considered it.

If that strategy sounds familiar, it’s because it’s similar to how tax credit scholarship programs work in states like Arizona.

Residents donate to nonprofit organizations that use the money to issue scholarships, or vouchers, to private schools. In exchange, the donors get generous tax credits, often reducing how much they owe in taxes by as much as, or more than, they donated.

The Trump administration was not happy with the idea that some states would circumvent its new rule. So the Internal Revenue Service issued a rule Thursday limiting these state and local tax workarounds: donations will no longer be fully deductible if the donor gets a tax credit in return.

That has the school choice groups worried.  

“This will reduce charitable contributions to scholarship granting organizations, reduce the number of scholarships available, and potentially force thousands of students into the low performing schools they were fortunate to escape,” AFC president John Schilling said in a statement.

A spokesperson for AFC said the rules would affect scholarship programs in at least 13 states, though the IRS insists the impact won’t be widely felt.

“We appreciate the value of state tax credit programs, particularly school choice initiatives, and we believe the proposed rule will have no impact on federal tax benefits for donations to school choice programs for about 99 percent of taxpayers compared to prior law,” Treasury Secretary Steve Mnuchin said in a statement.

Some experts told Politico it wasn’t clear whether the new rule would apply to the tax credit voucher programs; the change may also be subject to legal challenge. But school choice groups say the uncertainty could dampen interest in donating to tax credit programs (although the state incentives would would be unaffected).

Others have celebrated the rule change, which still has to go through public comment.

Carl Davis of the Institute on Taxation and Economic Policy, a progressive think tank, points out that scholarship donors in some states have been able to essentially turn a profit under previous rules, getting a tax benefit larger than the amount they donated.

“The IRS deserves praise for resisting efforts to carve out exceptions for donors to private schools that would allow them to continue profiting from their role in the movement of public dollars into private schools,” he wrote in The Hill.

College Access

How an effort to prepare Michigan high schoolers for college slipped through the cracks

The proposal to make it easier for students to earn college credit while still in high school seemed like the rare education policy idea with no natural enemies in the Michigan legislature.

When a bill was proposed in the Republican-controlled Senate, it passed in a unanimous vote.

Then it vanished — apparently pushed aside by more pressing concerns.

“Boy, we must have just missed it,” said Tim Kelly, a former representative who, as chairman of the house committee on education, had the power to bring the bill to a vote last year. “I can’t imagine why I wouldn’t have been in favor.”

Advocates of so-called dual enrollment are hoping their next attempt won’t meet the same fate. They want to lift a cap on state-funded college courses that students can take while still in high school. Dual enrollment is widely considered to be one of the most powerful ways to increase the number of people who earn college degrees.

In an inaugural address to the legislature, Gov. Gretchen Whitmer promised to sharply increase the number of Michiganders with degrees to 60 percent by 2030. That number currently hovers around 43 percent, putting Michigan in the bottom third of states.

Michigan is one of five states that limit dual enrollment; its limit is the strictest of any state. Advocates say that limiting students to 10 college courses in four years is unusual and unnecessary.

The cap is not the only obstacle preventing students from earning valuable experiences — not to mention college credits — before they turn 18.

It may not even be the most significant. When advocates worry that the growth of dual enrollment in Michigan is slowing, they lay much of the blame on financial incentives that give schools little reason to help students dual enroll.

“I think we should look at [lifting the cap], but we should also look at the funding mechanism,” said Brenda Carter, a state representative who serves on the house education committee. “How many schools in Michigan are limited in what they can offer their students because of funding?”

Schools are required to pay roughly $7,800 in annual tuition for students who choose to take college courses, and some have suggested that the state should help offset those costs.

But any new funding for dual enrollment would require a political battle. Lifting the cap, less so.

That’s why supporters of lifting the cap were so bemused when, last year, a bill that had garnered strong bipartisan support in the Senate never went to a vote in the House.

“That was really surprising,” said Brandy Johnson, executive director of the Michigan College Access Network, a nonprofit that aims to increase the number of students who earn college degrees. In a 2015 report, the organization called for the legislature to “eliminate restrictive rules” surrounding dual enrollment.

Johnson guessed that the 2018 dual enrollment bill slipped through the cracks in part because of its relatively low profile. It was eclipsed in the news cycle by an ongoing debate about school funding and by a political furor over social studies learning standards.

Several legislators told Chalkbeat they didn’t know that dual enrollment is capped.

Among them are Carter and Dayna Polehanki, a Democrat who was elected to the senate in November and is now a vice-chair of the Senate’s education committee, said she became familiar with dual enrollment while working as a high school teacher in Macomb County.

She thought it was good for her students, but said she wanted to learn more about the cap before making up her mind. She pointed out that if students decided to take courses at a community college that were already offered at their local school, schools could find themselves paying for teachers and for students’ community college tuition.

“I can see both sides of that issue,” she said.

The Republican chairs and vice-chairs of both the Senate and House education committees did not respond to requests for comment on Wednesday.

Advocates of dual enrollment say it’s worth sorting out the challenges that could come with allowing high schoolers to take unlimited college credits.

With the cap lifted, high school students could earn a diploma from a traditional high school and simultaneously complete a technical certification or an associates degree from a community college. Those students would save money on college credits, and they would finish high school better-prepared for college than peers who’d never set foot in a college classroom.

Lifting the cap “expands access for students, especially low-income students,” Johnson said.

She warned that not all high schoolers are ready to take a heavy college course load. If the cap is lifted, she said, the state should also make sure that students meet a “readiness threshold” — perhaps a minimum standardized test score — before being allowed to dive into college coursework.

But she added that after the bill passed the Senate last year, she believed it had a chance in 2019.

“I am very hopeful,” she said.

Kelly, who reached his term limit in the house last year, said he hopes his former colleagues take a second look at the issue.

“I would hope somebody does,” he said.

Preschool math

Illinois governor J.B. Pritzker plows $100 million more into early ed — but no universal preschool this year

In the past decade, as other states have ramped up their spending on early education, budget-strapped Illinois has fallen further behind.

In his first budget proposal as governor on Wednesday, J.B. Pritzker, a philanthropist who has contributed millions to early childhood causes at home and nationally, laid out a plan to reverse that Illinois trend with a historic $100 million bump for preschool and other early learning programs.

“I have been advocating for large investments in early childhood education for decades, long before I became governor,” he said, laying out a $594 million early education spending plan that is part of an overall $77 billion package. “Investing in early childhood is the single most important education policy decision government can make.”

Later in the address, Pritzker detailed a smaller increase, but one that some advocates said was a welcome shift in policy: He described first steps toward repairing a child care assistance program that was drained of families and providers during the administration of his predecessor, Gov. Bruce Rauner. The new governor plans to spend $30 million more to rebuild the program. He also will increase income eligibility so an estimated 10,000 more families can participate.

“These priorities turn us in a different direction,” said Maria Whelan, CEO of Illinois Action for Children, which administers the child care assistance program in Cook County. Compared with the state’s previous approach, “I feel like I just woke up from a bad dream.”

Pritzker’s otherwise “austere” budget address, as he described it in his speech, came 12 days after his office revealed that the state’s budget deficit was 14 percent higher than expected — some $3.2 billion.

The state’s early childhood budget funds a preschool-for-all program that serves more than 72,000 3- and 4-year-olds statewide in a mix of partial- and full-day programs. Chicago has been using its share of state dollars to help underwrite its four-year universal pre-K rollout, which has gotten off to a bumpy start in its first year.  

The state early childhood grant also supports prenatal programs and infant and toddler care for low-income families.

Pritzker pledged on the campaign trail to pave a pathway toward universal pre-K for the state’s 3- and 4-year-olds, and this budget falls short of the estimated $2.4 billion it would cost, at least according to a moonshot proposal made in January by the lame duck state board of education. The state’s school Superintendent Tony Smith stepped down at the end of January, and Pritzker has yet to name a successor.

But policymakers and advocates on Wednesday said the considerable $100 million increase is a step in the right direction for a state that has been spending less per student than many of its neighbors. According to the National Institute for Early Education Research, Illinois spent $4,226 per young learner in 2016-2017 compared with a national average that topped $5,000. Seven states spent $7,000 or more.   

“This is a big amount in one year, but also it is what we think is needed to move programs forward, and we’re excited to see it,” said Ireta Gasner, vice president of policy at the Ounce of Prevention, an early-education advocacy group

One item Gasner said she hoped to hear, but didn’t, was increased spending on home visiting programs for families with new babies. Spending on such programs next year will remain flat under Pritzker’s proposal. Home visiting has been suggested as one antidote to the state’s troublingly high maternal mortality rates. An October report from the state’s public health department found that 72 percent of pregnancy-related deaths in Illinois were preventable.

“Overall, we still have a long way to go to serve our youngest families and youngest children,” she said.  

In addition to the $100 million, Pritzker’s office reportedly also will add $7 million to early intervention services for young learners with disabilities and set aside $107 million to help buffer the impact of his new minimum wage increase on daycare center owners and other child care providers who operate on thin margins.

On Tuesday, Pritzker signed into a law a minimum wage increase to $15 an hour.

Illinois faces a critical staffing shortage of preschool providers, and several operators have warned that they face mounting pressures from staff turnover, increased regulations, and stagnant reimbursement rates.