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A public policy blog from AEI
As the GOP-controlled House and Senate reconcile their respective tax reform bills in the coming days and weeks, education reform should not be left behind. Certainly our federal tax code is unnecessarily complex and filled with special interest carve-outs and loopholes. Reducing the cost and compliance burden on businesses and individuals is a laudable goal and likely an economic boon. But it should not come at the expense of another long-term driver of increased economic and social progress: high-quality K-12 education.
Business rates and spending cuts matter to our economy. But so do our public schools. With 13,000 school districts employing approximately 4 million professionals responsible for educating 50 million students each year, public schools are a major economic engine in the US, and tax policy is an important policy tool.
Tax breaks exist for saving for college, paying back student loans, and other incentives to encourage high-quality and continued education by our current and future workforce. While challenges with charter schools exist, some research shows that public charter schools are outperforming their traditional counterparts on academic and social metrics. This is especially true for the hardest-to-reach students and students from fragile communities. Because of their rigorous and innovative models, charter schools have successfully prepared millions of students who might otherwise have been left behind for careers and college. If that is not a determinant of economic growth, what is?
Congress needs to be just as aware that a (presumed) oversight in the House version of the tax reform bill, currently headed to conference committee, threatens to undermine decades of progress in providing a high-quality, public education to millions of students — our future leaders and workforce.
The first program is the Private Activity Bond Program (PABs). It assists charter school operators with long-term financing, largely on facilities purchases, which make opening a new school affordable with preferred interest rates. To date, the charter school sector has issued more than $15 billion in PABs.
The second is New Market Tax Credits (NMTCs). It incentivizes private investors to loan or invest in low-income community projects including charter schools. Between 2003 and 2016, NMTC investments in charter schools totaled $2 billion in over 200 schools, supporting academic space for 200 public charter schools, and leveraging $3.21 billion in total project financing.
The third is Qualified Zone Activity Bonds (QZABs). It supports the maintenance of existing facilities, issued through school districts. Although a smaller (but vitally important) source of facilities support to charter schools, funding has fluctuated around the $400 million level for the past several fiscal years. Charter schools in at least ten jurisdictions — including Arizona, California and the District of Columbia — have benefited from this source of financing. A 2012 report published by the National Alliance for Public Charter Schools references QZABs.
Charters have benefited from bipartisan congressional support since the 1990s. There is no reason to believe the proposed elimination of those programs are without merit, or exist because members of Congress care little about children. They are in public office to improve the general welfare, which includes supporting tax policies to stimulate our economy.
At the same time, many members are elected to bring financial accountability to a federal budget with a growing debt and deficit.
So here are some parting thoughts learned from experiments outside of the beltway. As a former state official responsible for the creation of a statewide education budget, I know how vital access to capital and facility financing are to all public schools. This is particularly true for existing charter schools and start-ups. But we must keep in mind that financial capital is fundamental to human capital. We affirm this belief through investments in facilities where adults earn a living. We should do the same for public school facilities where students learn to make a living.
As the tax reform package heads to conference, charter schools deserve due consideration.
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