The state is spending almost $4 million with a contractor to set up and administer a new private school tax credit program. That’s four times what the Oklahoma Tax Commission estimated in the spring when lawmakers were finalizing the policy.
The Parental Choice Tax Credit sets up a refundable income tax credit of up to $7,500 per child for private school expenses. Lawmakers capped the overall cost of the program at $150 million in tax year 2024, rising to $250 million in tax year 2026. More than 32,000 students are in private elementary or secondary schools in Oklahoma.
Merit International Inc. will be responsible for working with schools and parents to educate them on claiming the tax credits. The application process will use Merit’s software platform. The company will train Tax Commission employees and school representatives to use the software.
The Tax Commission said it chose Merit because it had experience setting up similar educational programs in other states. It also faced a compressed timeline for implementation of House Bill 1934. The commission has a one-year, $3.95 million contract with Merit, agency spokeswoman Emily Haxton said in an Oct. 31 email.
That expense is far beyond initial estimates. The Tax Commission estimated it would take $1 million in administrative costs in the current fiscal year to set up the program, according to a fiscal impact statement the agency provided lawmakers in May. It estimated another $706,000 in administrative costs for fiscal year 2025.
Daniel Seitz, a spokesman for House Speaker Charles McCall, R-Atoka, said lawmakers appropriated $1 million to the Tax Commission for administrative costs. Any costs above that would have to be absorbed by the agency’s budget, Seitz said. They would not come out of the cap available for the private school tax credits.
Tax commissioners discussed the contract at their Sept. 12 meeting. Haxton said discussions are ongoing to see if the Tax Commission would be reimbursed for the agency portion of the contract.
Sen. Julia Kirt, D-Oklahoma City, said she remains concerned about transparency, fraud and accountability under the private school tax credit program.
“Are we going to have any view into this vendor on who’s authorizing them and how they’re authorizing them?” Kirt said. “There’s nothing in the legislation requiring a release of data other than the number of credits. I have big concerns about a third-party vendor and how they’re going to be held accountable. Will data be accessible through open records? Tax Commission data is generally not unless specifically authorized.”
Merit has contracts with Ohio and Kansas to administer education-related tax credits, vouchers and educational savings accounts. The Ohio Department of Education paid Merit $2.25 million in fiscal year 2023 to administer an educational savings account program for after-school activities, according to Ohio purchasing documents.
Merit’s contract with the Oklahoma Tax Commission wasn’t bid out in a full purchasing proposal. Instead, the Tax Commission picked Merit from a list of approved contractors compiled by the Oklahoma Management and Enterprise Services under a statewide contract for IT deliverable-based services, Haxton said.
“Merit’s pricing structure is cost-effective and considers the judicious use of public funds,” the company said in its statement of work to the Tax Commission. “Merit delivers ‘Software with a Service’ (SwaS), not just software. This means our team will work to ensure program success, even as the goals evolve.”
The Tax Commission approved emergency rules for the private school tax credit program at its Oct. 24 meeting after receiving hundreds of public comments. Many commenters were concerned about the mismatch between taking the credit for a tax year, which mirrors the calendar year, and the school year. Commissioners recognized the problem but said the Legislature would have to resolve that issue.
“Throughout the process, we were trying to simplify the taxpayer experience and simplify the school experience, while still maintaining an adequate level of controls in place to make sure the money gets to where it needs to go to,” the agency’s executive director, Doug Linehan, told commissioners.
Another state vendor, PCG Scholar, administers the Lindsey Nicole Henry Scholarship, a voucher program for students with disabilities or other special needs. Lawmakers created that program in 2010, but it faced legal hurdles before reaching full implementation. The State Department of Education oversees the Lindsey Nicole Henry program, which served more than 1,350 students in the 2022-23 school year, according to the Education Department.
Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or firstname.lastname@example.org. Follow him on Twitter @pmonies.