Tuition Aid Eludes Needy

Scholarships not widely known, fall far shy of school expenses

PHOENIX (Wire Services) December 13, 2009 — Dawn Hamilton and her husband had always wanted to send their children to a Christian school.

So in 2007, they put their son and daughter in Paradise Valley Christian School in northeast Phoenix. But three months later, her husband lost his job. They would eventually lose their home.

But Hamilton was desperate to keep her children enrolled at the private campus. A 30-year-old nursing student, she began working part time at the school. She signed over her checks to help pay tuition. She learned of the state's tax-credit scholarship program, applied and received aid.
But it was too little, too late.

The children returned to public schools, and the family was left with a still-unpaid $11,000 tuition bill.

State lawmakers created the private-school tuition tax credit to give Arizona's poor the same educational options as the affluent. But 12 years later, many low-income families find it difficult to get enough, or any, of the scholarships to cover the cost of private-school tuition.

Some of the main reasons:

• Many families aren't aware that tax-credit scholarships even exist. The non-profit Alliance for School Choice released a survey in 2007 that found 70 percent of Arizona residents were unfamiliar with the tuition-aid program, in which taxpayers donate to a non-profit tuition organization and reduce their tax bill by that amount. The organizations, which distribute the scholarships, and their trade associations do little or no marketing to the general public.

• Parents often don't know the rules and procedures of the program, such as whether there are income requirements and which tuition organizations might give them scholarships.

• Many of the scholarships fall well short of covering full tuition, in part because tuition groups try to spread their money around and expect parents to help pay for the education, as well. In 2008, scholarships funded by the individual tax credit averaged $1,900. Scholarships funded by a similar corporate tax credit, which cannot by law go to the affluent, averaged less than $2,600 and are capped at $5,800 for high-school students. Tuition can run from $5,000 to $20,000 at private schools. Schools for disabled students can cost even more.

When Hamilton moved to northeast Phoenix and enrolled her children in private school, the family's income was $60,000 a year, low enough to qualify for corporate-funded scholarships. But Hamilton said she didn't know about the tuition aid and no one at the school suggested it.

After her husband lost his job as a computer specialist, the family began draining their savings to pay the bills.

That was when Hamilton discovered the tuition program. She applied to two of three tuition groups listed on Paradise Valley Christian School's Web site. The family got $1,600 to help pay the $11,000-plus annual tuition for her children. Most of the scholarship came from Hamilton's mother, who donated to a tuition organization and requested that the money go to her grandchildren.

At the end of that school year, however, the school told Hamilton her children could no longer attend. The school eventually sued the family for the unpaid fees.

Hamilton said she is grateful for the year her children spent at the school. But she is upset that the school never told her of dozens of other tuition organizations she could have solicited for scholarships. Some of those groups have millions of dollars of unspent donations, records show.

"We only knew about those three (on the Web site)," Hamilton said. "If I came to them in such a desperate situation that I was willing to work for them for six bucks an hour . . . why wouldn't they say, 'Here's an easier way'?"

Tax-credit system

When state lawmakers created the scholarship program in 1997, supporters sold it as a way to give the poor the same opportunity as the affluent to attend private school.

Trent Franks, a former state House member and now a U.S. representative, served as the law's main architect. According to minutes from the legislative debates, Franks said the state should empower "scholarship charities that helped underprivileged or low-income children go to a private school of their parents' choosing" and "give children and their parents an option they did not have."

Then-Rep. Mark Anderson, R-Mesa, the law's chief sponsor, said, "This bill allows children from low-income homes the opportunity to attend their school of choice."

Under the program, taxpayers receive dollar-for-dollar tax credits up to $1,000 from the state. Corporations, too, can divert a set amount of their tax bills for private scholarships.

In practice, many parents are urged by school tuition organizations and private schools to seek tax-credit donations from friends and family members who then ask the tuition organizations to apply the cash to a specific child. Families also seek help from several scholarship organizations to help cover more of the year's tuition costs.

An Arizona Republic analysis of private-school enrollment data found that two of every three scholarships in 2007, the most recent figures available, likely went to students who would have attended private schools without the tax-credit aid.

For poor families, the hurdles are evident. The scholarships don't cover all of the tuition bill, and they're not well-publicized.

Lack of outreach

For residents who live in the poorest neighborhoods of the Valley, where billboards tout social services, low-cost groceries and even options to wire money cheaply, scholarship programs aren't widely advertised.

Many tuition groups say they spend money on outreach to affiliated churches or specific schools. Some have run ads in newspapers and movie theaters for the public at large. But most rely instead on their Web sites and word-of-mouth within their selected schools.

Some tuition organizations don't see a need to reach out to anyone.

"I think the schools do that," said Michelle Terrell of School Choice Arizona, one of 15 organizations that collected tax-credit donations from corporations in 2008.

School Choice Arizona, she said, has never advertised, leaving it up to private schools to send them parents. School Choice Arizona counts on word of mouth and their Web site to provide parents with information.

If parents don't meet School Choice Arizona eligibility or if the tuition group has more families applying than the organization can help, Terrell says she sends them to the Arizona Department of Revenue Web site, which lists 54 tuition organizations.

Some private-school officials said they could use more help in promoting the scholarships.

Paradise Valley Christian reaches out to churches that their students attend, said Sheryl Temple, headmaster, but she would welcome more advertising by the tuition organizations.

"There's definite room for improvement for trying to be a stronger voice for the tax-credit program," Temple said. Although tuition organizations can do only so much, she said, "I think it certainly would help if they strategized and came up with a strong plan of putting that information out."

Members of the Arizona School Tuition Organization Association have talked about a public-awareness campaign, but none has been launched.

"We want to do it," said Harry Miller, who was chairman of the organization until June. "Again, it's just a matter of a dollar and cents thing."

Although individual tuition organizations are permitted to use 10 percent of their income on administrative costs, they spend an average of only about 6 percent. In recent years, about half the reported administrative expenses at about a dozen tuition organizations went to salaries, records show.

Unsure how it works

Even when lower-income parents are aware of the tax-credit program, they may think they're ineligible for a scholarship unless a friend or relative donates to a tuition organization for their child.

Katrina Burby of Laveen, a 27-year-old mother of three, has considered sending her oldest child, a first-grader, to St. Thomas Aquinas in Avondale. Burby, who makes $35,000 a year, mistakenly thought she needed to line up donors who would give specifically for her son to cover the $5,000 tuition at the Catholic school. Such targeted donations are often honored by a tuition group but are not required.

Tuition groups devoted to Catholic schools are among the school tuition organizations that don't accept donations recommended for particular children. Instead, they target their scholarships to low-income families.

"A lot of people still don't know what it means," said Teresa Baker, community relations director for St. Augustine High School in Tucson. "The state tax-credit system is something you really have to sit down and explain to people exactly what it is and the benefits it provides."

Tuition beyond reach

Jennifer Watson knows about all of the tuition aid that exists. She knows how the rules work. But she just can't find enough to cover the cost of keeping her autistic son in the private school of her choice.

Watson wants to keep her 7-year-old son in school at Neurologic Music Therapy Services of Arizona. He made academic and social strides at the private Phoenix school that he didn't make in a year at a public school. Tuition is about $25,000 annually, well beyond the reach of her family's $40,000 income.

Last year she and her husband, Ron, received a $23,000 voucher from the state, and School Choice Arizona covered $2,150. But the state's voucher program ended, and $1,500 in scholarships this year came from relatives who targeted tax-credit gifts to her son.

A special fund created earlier this year for children with disabilities still has little funding.

"I don't feel like I have a whole lot of choice," Jennifer said of her son's academic plight. "If he doesn't go to (that) school, we're looking at maybe homeschooling, which would be hugely detrimental to us."

Watson is one of many parents of children with disabilities who have unsuccessfully sought scholarship aid from TOPS for Kids, said Miller, the former head of the statewide association, who runs TOPS for Kids.

"Do you give to these displaced and disabled kids first?" Miller said. "I don't know. We'll have to go to our board on that one."

Many unknowns
Key areas that have allowed the tax-credit system to flourish with few controls:

Loose oversight. School-tuition organizations, or STOs, don't have to file audited financial statements. The Arizona Department of Revenue doesn't have resources to routinely monitor those who claim the credit or the private organizations holding the money. The non-profit STOs are unlikely to be audited; the IRS audits only about 1 percent of all non-profit tax returns annually.

Vagueness in law. The law requires 90 percent of an STO's revenue go to scholarships. Most donations come at the end of the year. So STOs routinely fail to meet the 90 percent rule in the same year. The law prohibits taxpayers from making donations for their own children but allows parents to strike deals to give to each other's children or enlist friends and family members to donate.

No penalties. The law doesn't provide any fines or punishment for STOs that fail to follow the law.

Lack of transparency. It is not clear who benefits from the scholarships. The law was billed as help for the poor, but it's unclear how often that is the case. There is no way to track performance of students or schools.

Public comments:

FriendScottsOldtimer: This is simply a right wing scheme to gut the public schools by legalized tax evasion. There was never any intent to send poor children to private schools. The point was to enrich Steve Yarbrough and certain other Republicans while at the same time diverting tax dollars to religious schools.

It's a horrible scam and should be ended. The Arizona school system needs the dollars being siphoned off by the wealthy whose children were already in private schools and church schools.