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Tax panel backs tuition credits

$2M would aid some low-income students at private schools by Michael R. Wickline | April 15, 2021 at 3:34 a.m.
Sen. Jonathan Dismang listens to Gov. Asa Hutchinson’s address at the start of the Legislature’s fiscal session at the Jack Stephens Center at the University of Arkansas at Little Rock in this April 8, 2020, file photo. (Arkansas Democrat-Gazette/Thomas Metthe)

The Arkansas Senate Revenue and Taxation Committee on Wednesday advanced a bill that its sponsor said would aim to pay for private school tuition and fees for roughly 250 students using up to $2 million a year in state tax dollars.

In a voice vote, the eight-member committee recommended Senate approval of Senate Bill 680 by Sen. Jonathan Dismang, R-Searcy. Democratic Sens. Keith Ingram of West Memphis and Larry Teague of Nashville dissented.

The bill would create the Philanthropic Investment in Arkansas Kids Program Act, and would apply to tax years beginning on or after Jan. 1 The state Department of Finance and Administration projects that the bill would reduce state general revenue by $2 million in fiscal 2023, starting July 1, 2022.

SB680 would provide educational scholarship grants for eligible students to attend private schools.

It also would provide an income tax credit to individuals or businesses equal to 100% of their contributions to scholarship organizations that provide the grants, according to the finance department. The credit may not exceed an eligible taxpayer's income tax due and unused income tax credits may be carried forward for three years. The finance department's Office of Tax Credits and Special Refunds would issue tax credits on a first-come, first-served basis up to $2 million per calendar year.

[RELATED: See complete Democrat-Gazette coverage of the Arkansas Legislature at arkansasonline.com/legislature]

Students with a household income that's up to 200% of the federal poverty level would be eligible for the scholarships, Dismang said. The scholarships would be for up to 80% of the state foundation funding for each student applying from kindergarten through eighth grade and for up to 90% of the state foundation funding for students in ninth grade through 12th grade, he said.

"I am simply presenting a bill that allows parents to make decisions that are in the best interest of their child's lives and their particular situation," he said.

PUSH-BACK EXPECTED

Dismang said he expects opponents of his bill to testify that the measure "is the camel's nose underneath the tent, that somehow that this is the beginning of the demise of public education in the state of Arkansas, that somehow that this is going to redirect funding that would have otherwise went to the public schools, and ultimately that I am just undermining public education as a whole."

"None of that is accurate," he said. He said he believes that in most cases the public schools are the best place for a child, but "I don't believe and I know that is not always the case."

Mike Hernandez, executive director for the Arkansas Association of Educational Administrators, told the Senate tax committee that the state laws for the public schools are complicated and sometimes school districts struggle to implement the laws and "sometimes we don't do kids the best service.

"But at the same time, I feel like when I look through this bill and I see that the things that ... these private schools have to follow health and safety laws," he said. "They have to give a norm-referenced test and we really focus on parent satisfaction. I think that parent satisfaction is important, but I feel like we are abandoning what we say is important. I have trouble reconciling when we say this is important for this subset of kids that everybody has to follow these regulations, and over here we have much less condensed version of what we feel is important for kids."

In addition to establishing the standards required for the scholarship-granting organizations and tracking their grants, the state Department of Education's Division of Elementary and Secondary Education would hire an independent research organization to review information submitted by the private schools on the academic achievement of students attending those schools under the program created by the bill, the finance department said.

EDUCATION DEPARTMENT BACKING

Department of Education Secretary Johnny Key told the Senate tax committee that "in our review of Senate Bill 660, the department finds the bill to be a reasonable and responsible approach to providing additional education choices for low-income families in Arkansas."

Because the bill would cap the tax credits at $2 million, "this bill would not create an impediment to our responsibility under the constitution to fund our public schools," he said. The bill is consistent with what the state has done for a number for years with respect to state funding of vouchers for private prekindergarten programs and state-funded scholarships for private colleges and universities, he said.

Last month, House Bill 1371, by Rep. Ken Bragg, R-Sheridan, which would fund private school tuition for qualifying students with up to $4 million in state income tax credits, failed to clear the House.

Also Wednesday, the Senate Revenue and Taxation Committee advanced:

• Senate Bill 566 by Sen. David Wallace, R-Leachville, which would extend a sales and use tax credit to help Nucor Steel Arkansas.

Under the bill, a company that qualified for a retention tax credit through the InvestArk program by an application approved by the Arkansas Economic Development Commission between June 22 and June 28, 2017, may incur eligible project costs within six years rather than four years of the incentive agreement between a company and the commission, the finance department said.

The InvestArk sales and use tax credits for the eligible companies may be claimed after July 1, 2023, are contingent on a positive economic analysis by the commission's director, and may be claimed up to $750,000 for each qualifying project in any fiscal year under the bill, the department said. The department projects the bill would reduce state general revenue by up to $3.4 million a year in fiscal years 2024-28.

• Senate Bill 181 by Sen. Trent Garner, R-El Dorado, which would expand the sales-tax holiday to include electronic devices, effective July 1. State law provides a sales-tax holiday for purchases of clothing, clothing accessories or equipment, school art supplies, school instructional materials and school supplies.

The bill is projected by the finance department to reduce sales and use tax revenue by $1.95 million in fiscal 2022.

• Senate Bill 244 by Sen. Kim Hammer, R-Benton, which would expand the current sales-tax exemption for instructional materials to include the electronic equipment required to make use of technology-based educational materials and electronic software, effective July 1, 2021.

Paul Gehring, an assistant revenue commissioner for the finance department, said the bill would be likely to reduce sales-tax collections by less than the $4.5 million a year that the department initially projected.

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