Financial scandals at a pandemic relief voucher program and an online charter school demonstrated the risks of directly handing parents state dollars to educate their children.
Now, the Oklahoma Legislature is pursuing a tax credit plan as its main vehicle for funding private and home school students this session — which some say has more accountability baked in.
Details of the plan are still in flux. Two bills moving through the Senate — House Bill 1935 and House Bill 2775 — are the current focus. House Bill 1935 authorizes the tax credits but is contingent on approval of House Bill 2775, which funds teacher pay raises, a bonus program for top teachers and additional school funding totaling $630 million.
In Oklahoma’s Bridge the Gap Digital Wallet program, parents were given voucher-like accounts for students early in the pandemic. At least $650,000 in non-educational purchases were made, according to a federal audit. Some parents who received grants for educational items purchased TVs, furniture, home appliances, Christmas trees, gaming consoles, and more. Because federal pandemic recovery funds were used, the state may have to pay it back.
Epic Charter Schools has been giving parents similar accounts, filled with a portion of each student’s education funding since the school opened in 2011.
For years, what parents purchased was shielded from public view, but in 2021, auditors gained access to the bank account for the learning fund. They found the school’s founders used the account to pay for personal expenses, make political campaign donations and amass millions in profit, investigators allege in court filings. The two men and their chief financial officer have been charged with financial crimes, including embezzlement.
The state auditor calls it the “largest amount of reported abuse of taxpayer funds in the history of this state” with nearly $30 million in public dollars misused.
Accountability for both appears to be improving: Epic has tightened controls on its learning fund, and the state is working to strengthen oversight of federal grants amid the Digital Wallet fallout. But the public funds lost to waste and abuse may never be recovered.
Tax credits are seen as more accountable because, in most cases, parents spend their own money first. Also, tax credits aren’t an up-front cost for the state, but instead a reduction of future tax collections.
Versions of legislation approved by Senate committees on Monday would provide parents tax credits for private school tuition to $7,500 per child or $1,000 per family for homeschool expenses. It caps household income at $250,000 to qualify.
House Speaker Charles McCall, R-Atoka, has steadfastly opposed private school voucher legislation because of the potential negative impact on rural communities and their schools. Lack of accountability over the funds in the Digital Wallet program is one reason he prefers the tax credit approach, according to an interview with KGOU.
“The tax credit is not the state passing out checks or money to people just because they might ask for it. There is accountability and oversight,” he said. “They’ll have to prove up those expenses, submit those to the Tax Commission for review before the tax credit is granted or recognized.”
Infighting between leaders of the House and Senate could doom the plan or scuttle other education-related bills. McCall, who authored the two bills, said if the Senate alters the legislation, he would consider the action “sabotage” against the education plan. He warned that the House will not consider any education bills from the Senate if his bills were amended.
On Monday, the Senate challenged the threat by amending and advancing both bills. The tax credit bill was approved by Senate finance and education committees and the education funding bill was approved by education and appropriations committees.
The Senate’s version increased the tax credit for private school tuition, decreased the homeschool tax credit and added the income cap. It also removed a provision that would suspend the tax credits if funding for public schools is ever reduced.
“If you get a child who is excelling in a private institution and we have a 1% revenue failure, to completely yank away that opportunity was deemed inappropriate,” Treat said. Instead, in the event of a revenue failure, the current version would reduce the tax credit proportionally.
The Senate committee also amended the education funding bill, mainly by moving from an across-the-board teacher raise of $2,500 in the House version to graduated raises of $3,000 to $6,000 depending on years of service, similar to what Sen. Adam Pugh, R-Edmond, proposed.
And it added a $30 million grant program for school districts to give some teachers merit-based bonuses.
Both bills are expected to be heard on the Senate floor on Thursday. If approved, the bills will move back to the House for consideration.
Treat said he hopes McCall will put historic funding of public education and school choice ahead of those claims. “I trust he’ll do the right thing,” Treat said.
Thirty-one senators have signed on as co-authors of the tax credit plan, signaling broad support.
But some say the plan is still not accountable enough. Sen. Julia Kirt, D-Oklahoma City, said these tax credits would create a headache for the Oklahoma Tax Commission and there aren’t enough consumer protection measures. Kirt also said the Senate’s estimated cost of $100 million is likely too low; under the House version, the fiscal impact was estimated to be $300 million.
Oklahoma already provides tax credits to people and businesses that donate to private school scholarships through the Equal Opportunity Scholarship program. Lawmakers expanded the cap on that program in 2021 to $25 million for donations to private school organizations and $25 million for public school organizations.
The impact of that program to state revenue is not yet realized. Total credits awarded for 2022 are not yet available because the filing deadline hasn’t passed.