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Pennsylvania Approves Tax Credit Expansion

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Pennsylvania lawmakers have created a new program—and expanded an existing one—to offer tax credits in support of private school scholarships, becoming the latest state to look to the tax code to bolster school choice.

The state already had a tax-credit model in place, the Educational Improvement Tax Credit Program, created in 2001, which gives businesses tax credits for offering private school scholarships to students from families with modest incomes.

Lawmakers agreed to increase the maximum family income for eligibility for that program from $60,000 to $75,000, beginning in July of 2014. And they approved raising the total amount of tax credits available to donors from $75 million to $100 million.

In addition, Pennsylvania legislators gave their blessing to a second program, the Educational Opportunity Scholarship Tax Credit, which will allow businesses to receive a tax advantage if they contribute to offering private school scholarships to students attending academically struggling schools—specifically, schools in the bottom 15 percent of performance.

The action by Pennsylvania's legislature, where the GOP has majorities in both chambers, is being touted as a victory for Gov. Tom Corbett, a Republican who supports private school vouchers. The new tax credit program will "give students in failing schools an opportunity to succeed," Corbett said in a statement. "By giving them a choice, we are giving them a chance."

Tax-credit scholarship programs have become increasingly popular in the states over the past few years, particularly among Republican governors and lawmakers. Critics deride them as back-door vouchers that redirect public funds to the private sector. Detractors also say that in some states, the process for awarding scholarships lacks transparency, and can result in favoritism and impropriety, unless state officials keep close tabs on it.

One group that fought the tax-credit changes was the Pennsylvania School Boards Association. In testimony provided to lawmakers late last month, PSBA Executive Director Thomas J. Gentzel said the new program lacked financial and academic accountability, and that it removed money from the state treasury that would otherwise support public schools.

"Passing legislation that voluntarily diminishes the state tax revenue going into the state general fund in favor of private and nonpublic schools does not help school districts recover from drastic cuts," Gentzel said. "This is simply the wrong time for such a dramatic expansion of these tax credit programs."

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