Arizona Legislature adopts sweeping education reforms
by Matthew Ladner, Ph.D.

This session Arizona lawmakers enacted some of the most far-reaching K-12 education reforms in state history. The changes have received little attention from any Arizona media so far. But you can bet you’ll hear much more as the state implements the new laws.

Ten years ago Florida implemented a set of education reforms that transformed their schools from among the worst performers on national tests to among the best. Several of the bills that Governor Brewer has signed into law are modeled on Florida’s success.

1. Arizona now will annually issue schools a letter grade of A, B, C, D, or F.
2. The state now will have a robust program for experts in math, science and other areas to teach their subjects without first getting a teaching certificate from a college of education.
3. Lawmakers have curtailed social promotion by holding back some third graders who have yet to learn the basics of reading.
4. Legislators expanded the sources available to launch new charter schools.
5. Lawmakers increased the size and transparency of the state scholarship tax credit program and changed to the date for claiming the tax credits from December 31 to April 15.
6. The Legislature also specified school districts cannot use “years on the job” as the only criteria when deciding which teachers to keep. The Arizona Department of Education will be required to develop teacher and principal evaluations that include how well students score on specific tests.

Each bill contains important policy changes that will improve education by holding educators accountable to parents and taxpayers. The “A” to “F” school labels and teacher evaluation reforms could revolutionize Arizona’s public schools if properly implemented.

We have many people to thank for these remarkable changes. Former Florida Governor Jeb Bush and Patricia Levesque, the executive director for the Foundation for Excellence in Education, spent their valuable time here in Arizona. Key philanthropic and business community leaders aided with both their money and their time. Governor Jan Brewer and her staff made it a priority to win legislative approval of the Florida-based reforms. The chairmen of the Senate and House education committees, Senator John Huppenthal and Representative Rich Crandall, personally introduced several of the key bills. Most of the measures gathered strong, bipartisan support.

This year, Arizona lawmakers demonstrated with action, not just words, that they will not accept Arizona permanently sitting near the bottom of student achievement rankings. We will not see overnight improvement, and much hard work lies ahead. We have, however, taken the first vital steps to turning our school performance crisis around.

Dr. Matthew Ladner is vice president for research at the Goldwater Institute.

LEARN MORE:

Goldwater Institute: New national test scores show urgent need for education reform

Goldwater Institute: Teachers union pushes for larger class sizes taught by bad teachers

Goldwater Institute: Demography Defeated: Florida’s K-12 Reforms and Their Lessons for the Nation

MEETING NOTICE

On Wednesday, March 31, 2010 at 1:30 pm in SHR1, the Senate Committee on Education Accountability and Reform will hear two school choice bills — HB 2663 and HB 2664.

Arizona House moves to improve tuition tax credit program
by Matthew Ladner, Ph.D.

Through the magic of public access television, I recently watched debate before the state House of Representatives on bills to reform the tuition scholarship tax credit program. I’m happy to report that legislators engaged in a substantive discussion and adopted amendments from both parties.

Congratulations to Representative Rick Murphy for bringing an important and helpful bill, HB2663, to the House. His bill will strengthen oversight through several steps, including empowerment of the state Department of Revenue to revoke the designation of “Student Tuition Organization” for rogue scholarship groups.

I was also impressed with the level of debate from House Democrats. In years past, I’ve had the impression many of these elected officials were content to complain about the scholarship tax credits, but they were not serious about doing anything to address their concerns. In this debate, I saw serious proposals offered.

For instance, Representative Steve Farley offered a floor amendment to allow the Department of Revenue to collect a fee from STOs to fund better oversight. Farley made a convincing case that state government is moving towards user fees during this economic downturn, and scholarship groups ought to be included. The amendment wasn’t adopted. But a fee of less than one-half of 1 percent on the total amount each STO raises each year should provide sufficient funding and merits further consideration.

Other amendments would have required that scholarships funded by the individual tax credits go to students from low-income families, and would have forbidden STOs from considering any recommendations from donors about who should receive scholarships. Reasonable people can and have disagreed on these subjects.

Only the Internal Revenue Service can ultimately determine the legality of donor recommendations. I’ve seen legal opinions going both ways. In the meantime, HB 2663 specifies that donor recommendations cannot be the sole reason any student receives a scholarship, and scholarship groups must consider financial need as a part of their criteria.

No one is getting everything they desire from these reforms. But this bill represents a positive step towards improving transparency and accountability in the program if the Senate and the governor also approve it.

Dr. Matthew Ladner is vice president for research at the Goldwater Institute.

LEARN MORE:

Goldwater Institute: State budget cuts should include education bureaucrats

Goldwater Institute: Fortune Favors the Bold: Reforms for Results in K-12 Education

Goldwater Institute: Arizona’s education stagflation

Arizona Legislature: House Bill 2663

Join the Arizona STO Association (ASTOA) and its members and supporters on the Senate Lawn at the Arizona State Capital to celebrate and show support for Arizona’s many school choice programs.

ASTOA and its members will showcase the positive impact Arizona’s school choice programs, and in particular the tuition tax credits, are making in the lives of Arizona families. Come out leaders so that our state’s leaders will know that school choice matters and that their continued support is important for our children’s educational futures. We look forward to seeing you there!

MEETING NOTICE – OPEN TO THE PUBLIC

On Thursday, December 10, 2009 at 2:00 pm in HHR5, the Legislative Tax Credit Review Committee will be holding a hearing at the Capitol. Rep. Murphy has requested that Harry Miller, President of TOPS for Kids, testify on behalf of the School Tuition Organizations. Supporters of School Choice are encouraged to attend.

ARIZONA HOUSE OF REPRESENTATIVES
1700 West Washington l Phoenix, Arizona l 85007-2844
PHONE:  (602) 926-3233  l FAX: (602) 417-3043

Rep. Rick Murphy (R-Dist. 9)

FOR IMMEDIATE RELEASE                           CONTACT: Becky Blackburn/602-926-3233

Private School Tuition Tax Credit Review Committee to Hold Second Meeting Today

WHAT: The second meeting of the Private School Tuition Tax Credit Review Committee formed by Speaker Kirk Adams (R-Dist. 19) in October is scheduled to meet today to review information provided from individual STO organizations regarding the application, administration and approval processes for the tax credits.

WHO: Dr. Charles North, Associate Professor of Economics, Baylor University will be testifying about his analysis of the economic impact of individual scholarship tax credit program to the state.

Tax expert Jeff Hill, from Hill & Hill Accounting.

Staff presentation on information provided by Arizona’s school tuition organizations.

WHEN: Monday, November 16, 2009 at 1:00 p.m.

WHERE: House Hearing Room 5 | 1700 W. Washington, Phoenix, AZ

November 2, 2009

Arizona House of Representatives
1700 W. Washington Street
Phoenix, AZ 85007

Dear Chairman Murphy:

Thank you for your recent letter dated October 15, 2009. We appreciate and understand the purpose of the requested information and are pleased to provide the following responses:

1. The factors that your organization considers in awarding educational scholarships or tuition grants.

Our organization does not utilize a singular set of standards or criteria when determining our scholarship awards. We view and process each applicant as unique and require that they provide us, through our application process, with their own specific reasons and rationale as to their scholarship request. We do, however, consider the following elements as a part of our award approval process:

• Financial need based upon information provided by the applicant.
• The individual merits of the student/applicant.
• Recommendations of potential recipient students by our donors, schools and other individuals that have reference or connection to the applicants or their families.
• The sustainability of the student’s ongoing private education through an award(s).

Our primary organizational goal is to provide appropriate financial assistance to students who desire educational choice, show a clear desire and commitment to their choice and have sufficient support from their family to sustain their choice both academically and to the best of their ability, financially. We do not award multi-year scholarships and typically provide financial assistance to families who still must shoulder a large percentage of their private school tuition with their own resources.

2. The criteria your organization employs if financial need is considered in awarding educational scholarships or tuition grants.

When financial need is considered in awarding scholarships, the scholarship committee reviews the financial data provided in each application received. Our application asks for data such as total income, total tuition obligation, scholarship assistance already received, other children in the applicant’s family that are presently attending elementary or secondary private schools, etc. (see attached) The selection committee reviews and grades each application individually and awards scholarships appropriately to meet the needs of as many students as possible with the funds available.

3. Please provide your best estimate of the percentage of educational scholarships or tuition grants awarded by your organization to students whose family income does not exceed one hundred eighty-five percent of the income limit required to qualify a child for reduced price lunches under the National School Lunch and Child Nutrition Acts (applicable to corporate tuition tax credits).

In order to provide a reasonably accurate estimate of the percentage of scholarships awarded using the income guidelines set forth under the Corporate Tuition Tax Credit Program, it would require that specific data be obtained from the applicant (all sources of income, household size, etc.) that heretofore has not been required as a part of our application process (except for scholarships paid from our corporate donations). Because this has not been a reporting requirement in the past, we have not collected this specific data from our constituents and therefore, cannot provide a “best” estimate of this percentage. We fear that stating a percentage on the basis of incomplete and heretofore largely unavailable data would be purely speculative and most likely underestimated.

4. The percentage of your organization’s total revenue distributed in educational scholarships or tuition grants.

From 1999 to 2008 APESF has received a total of $5,213,341 in tax credit donation revenues and has distributed $4,645,947 in tuition scholarships. An additional $82,000 is on reserve and allocated to be awarded and distributed before December 31, 2009 which brings the YTD allocated and paid amount to $4,727,967 or 90.7% of all tax credit donations. Additionally, APESF has received $147,387 in tax credit donation revenues as of October 31, 2009 and has allocated $133,000 or 90% to be paid in 2010.

Since our inception in 1999 APESF has also received $205,910 in other income as follows: restricted donations from Board members for start-up and operational expenses of $101,253, application fees $40,632, matching (non-tax credit) donations of $44,050 and interest income of $19,975. We allocate and distribute 90% of the interest earned and matching funds donated which are directly attributed to our tax credit donations.

In 2009 we formed a separate support organization to administer our STO operations and keep operational support revenues and expenditures separate from the tax credit revenues for both tracking and accounting purposes.

5. Please provide the amount of actual donations received and awards made for each calendar year since your organization’s incorporation including year to date information for CY2009.

Please see the attached Table A for a breakdown of actual donations received and scholarship awards distributed. Please note that there is a seasonal nature of donation receipts largely due to the tax related incentive pertaining to such contributions (approximately 90% received in the final 4-6 weeks of the calendar year). The timing of receipts does not permit the distribution of the then cumulative and available scholarship funding in the same calendar year as it is received. The vast majority of the prior year’s tax credit donations and interest earned on those donations are distributed in the following calendar year. The tabular reconciliation of the annual collections and distributions reflect this practice, which is completely dictated by the timing of contribution receipts.

6. A copy of your organization’s application for scholarships.

Please click here for a copy of the APESF Scholarship Application.

7. Do you annually secure a review or audit by an independent certified public account?

An annual independent review is conducted by Monica J. Stern, CPA.

8. Please answer the following questions:

a. Has your organization ever arranged, facilitated, or otherwise encouraged parents to swap donations with other parents to raise money for scholarships for each parent’s own dependent(s)?

APESF does not arrange, facilitate or otherwise encourage parents to swap donations with other parents to raise money for scholarships for each parent’s own dependent(s). Here is a copy of our policy: “Reciprocity or “swapping” of any type is strictly prohibited. When two or more individuals agree to recommend each others’ child when making their tax credit contributions with the expectation that their own family members benefit through the exchange or “swap”, it violates federal tax law which states that you may not deduct a contribution from which you receive or expect to receive any benefit. If reciprocity is suspected, the donor(s) will be notified and their recommendation(s) will not be considered. APESF further suggests that any family applying for a scholarship and also making a tax credit contribution should consider recommending either the general fund or students at a particular school and avoid individual recommendations of specific students to protect their donation’s tax treatment.”

b. Has your organization ever retained donations designated or recommended for a specific child in banked accounts in advance of the child reaching school age?

APESF does not retain donations designated or recommended for a specific child in banked accounts in advance of the child reaching school age. Scholarship awards are distributed to schools within one year of the date the donation is received.

c. Has your organization ever provided scholarships to children attending charter schools for any kindergarten, after school, or summer program?

APESF does not knowingly provide scholarships to children attending charter schools for any kindergarten, after school or summer program. It has come to our attention that a particular private school, Joy Christian School in Glendale, could possibly be considered a charter school based on the nature in which the majority of their teachers are compensated. APESF awarded $300 each to three (3) students in March of 2008 and $900 to one (1) student in March of 2009. APESF will not award any additional scholarship assistance to students at this school until further decisions are made regarding this school’s private school status.

9. If your organization engages in any of the practices identified in Question 8, please provide a narrative of the current practice of your organization for each of the issues above.

Please see the answers above.

We understand and appreciate the nature of your inquiries and are committed to responding in a full, transparent and comprehensive manner. As you work through and complete your review of the information we have provided please do not hesitate to contact our office at 480-699-8911 or email helpdesk@apesf.org.

Sincerely,

Mark D. Moerkerke
Executive Director