A proposed dollar-for-dollar tax credit for donations to private-school scholarship funds would enable more students to attend parochial schools in Nebraska, but on Thursday the notion prompted concerns about potential abuse and cost to the state.
The measure would allow donors who establish so-called "opportunity scholarships" to subtract 100 percent of the value of the scholarships from their state income tax bills.
The scholarships would be available to students who transfer from public school or are entering private school in kindergarten or ninth grade, and whose families earn a wide range of incomes — up to about $90,000 for a family of four.
Supporters say the tax credits would give low- and middle-income families more choice in where they send their children to school and boost competition that could improve education for students.
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"I believe that competitive values ... bring about improved outcomes," said Sen. Jim Smith of Papillion, who sponsored the bill (LB295).
Similar programs are popular and successful in the 17 states that have them, said Jim Vokal, CEO of the Omaha-based Platte Institute for Economic Research.
But critics raised a slew of questions about the proposal during a three-hour pubic hearing before the Legislature's Revenue Committee.
While credits would be capped at $10 million total the first year, the single-year cost to the state could climb to $74 million within a decade, said Sen. Paul Schumacher of Columbus.Â
However, the bill would also create savings by lowering the number of students enrolled at public schools, resulting in less state aid, Vokal said.
Opponents representing Nebraska's public schools said it wouldn't be an even trade, because dollars lost to those districts would shrink the number of options and special programs available to public school students.
"Can Nebraska afford to pay for two systems of education?" asked Lincoln Board of Education member Kathy Danek.
And some donors could even profit off other taxpayers, by claiming the full nonrefundable credit in Nebraska yet still deducting the donation from their federal income taxes, said Renee Fry, executive director of Lincoln-based OpenSky Policy Institute.
The practice has caught on in other states, Fry said.
"It looks like you can make money, and people have figured this out."