Will Student Scholarship Organizations get more redirected Georgia income taxes?

H.B. 140 “Local boards of education; teacher enrichment contributions to
public schools,” sponsored by Rep. Earl Ehrhart (R-Powder Springs), David Casas(R-Lilburn) and Rick Jasperse (R-Jasper); want to increase the cap from $50M to $100M on nonprofit 501(c)(3) Student Scholarship Organizations (SSOs) tax credit.  The language of this bill is broad and could be abused, since these nonprofits are not transparent or accountable to the public, using Georgia income tax credits.

Georgia SSOs have to give 90% of their donations into scholarships, spend 10% on their administrative costs for staff and board of directors, and 25% of SSO money to carry forward for the next fiscal year.  Audits are to be done yearly.  Reports and lists of donations and scholarships are only seen by the General Assembly and the Georgia Department of Revenue (GADOR) not by the public; because of nonprofit confidentiality.  Anyone can donate to an SSO, with partnered private schools that solicit donations for their SSO.

According to the Georgia Department of Education (GADOE) there are 38 SSOs, which does not oversee SSOs or their reports.  The first bill was created in 2008 with H.B. 1133.  In 2011, H.B. 325 was created to prevent SSOs revealing publicly their information.  If local control, choice, transparency, and accountability by students and teachers are important; why create laws and bureaucracy that protects those in power of these SSOs, from public accountability?

Nothing in the language of these three bills, claim the intent was to help low income or minority public school children.  The law only mentions “a Georgia resident enrolled or eligible to enroll” in a public school, but not that they attend the school.  SSOs determine who is enrolled.

Dan Wiseman of the Archiocese of Atlanta tells AJC,  “While students already in Catholic schools in Georgia are not eligible to apply for this scholarship fund, younger siblings just beginning school could be eligible.  For students already in Catholic schools, each school in the Archdiocese of Atlanta has access to tuition assistance funds” of $6M.

G.R.A.C.E. scholarships are available for low-or-middle-income families currently in public schools to transfer to Catholic schools.  To qualify for a scholarship the family “federally adjusted gross income cannot exceed $90,000,” so the lower-middle-class income stops at $90K.

Some say this is private donations, while others say it is “state appropriations.”  Yet tax credits are a sum deduction, from the total taxes you paid and owe the government.

Jim Kelly, an education attorney and founder of Georgia GOAL Scholarship Program (also the spouse of GOAL's president Lisa Kelly) told AJC the U.S. Supreme Court ruled the tax credit is a private charitable contribution, not taxpayer dollars.  Some Republicans say SSO tax credits are “state appropriations,” which is money set aside by lawmakers for a specific use; in this case $50M.  Both are right; since it is private donations, which is state appropriated tax revenue to use for this government program.

If someone donates $1,000 to a SSO and also paid $1,000 in their Georgia income taxes during the year at their job; the donor paid $2,000 total for both their state income taxes and the SSO.  The donor loses $1,000 to the SSO, and the GADOR redirects $1,000 in GA income taxes, to the taxpayer donor that already paid during the year.

According to a GADOR source that tells Patch, “If you are preapproved for $1000 and donate $1000, you would be able to claim $1000 credit against what you owe the state in income tax.  If that amount is $1000, it would balance out to be $0 when the credit is applied.  Thus you would be out your $1000 donation to the SSO.”

H.B. 140 will help public school teachers with an enrichment program, by private donations, but no specifics on what these programs are.  The bill defines “Teacher enrichment” as a “professional development for certified teaching staff or salary enhancements or bonuses.”  The “Teacher enrichment contribution” means “a cash contribution by a taxpayer to a public school for purposes of teacher enrichment for which the taxpayer receives a tax credit.”

Any contribution “received by a public school may only be used by such school for purposes of teacher enrichment; (however)...the school may retain one percent of such contributions for administrative costs.”  A school can retain a 1% administrative cost, to help struggling public schools that lacks public funding paid by private donations, which is redirected Georgia income taxes.

Each public school contributions “shall maintain a separate account for the use of such funds.”  “A public school may transfer funds received as teacher enrichment contributions to another public school,” but will not show this transaction, because of nonprofit confidentiality.  Imagine, if public schools operated in this manner with secret lists and reports; how soon would the public demand transparency?

“Each public school which receives a teacher enrichment contribution shall report to the Department of Revenue.”  With a “list of contributions, including the dollar value of each contribution and the dollar value of each approved tax credit,” which is not for the public.

H.B. 140 states “The Department of Revenue shall post on its website the information received from each public school (but)…The Department of Revenue shall not require any other information from public schools with respect to teacher enrichment contributions...All information or reports provided by public schools to the Department of Revenue shall be confidential taxpayer information.”  This is contradictory to say the GADOR can post the info, then deny it over confidentiality.

This is the same language as H.B. 325 to allow SSOs, not the public, to determine if SSOs are abusing nonprofit confidentially.

The GADOR “shall provide a list of all public schools receiving contributions from businesses and individuals granted a tax credit...to the General Assembly by January 30 of each year.”  Only the General Assembly and the GADOR, can look at these lists and reports for SSOs and public schools.

It seems lawmakers are telling the public, we cannot be trust with this information, because it is on a need-to-know bases.  Yet this is not top secret military plans, this is a law that helps some Georgians get back their own Georgia income taxes, which they paid during the year just for donating.

H.B. 140 shares the same language of H.B. 325, with whom to award a scholarship.  An “Eligible student’” means “a student who is a Georgia resident enrolled or eligible to enroll in a Georgia secondary or primary public school or eligible to enroll in a qualified first grade, kindergarten program, or pre-kindergarten program; (however)...if a student is deemed an eligible student pursuant to this paragraph, he or she shall continue to qualify as such until he or she graduates, reaches the age of 20, or returns to a public school, whichever occurs first.”

The first bill H.B. 1133 only stated an eligible student was “a Georgia resident enrolled,” but H.B. 325 added this extra language of “eligible to enroll” to continue qualifying until students graduate, reach 20 or return to public schools.  A student is “eligible” for scholarships their entire young life by just enrolling once; but not attending a public school.  The law is circulatory:  A fail safe bureaucracy.

No language in the bills defines enrollment, nor if public students are enrolled for X number of years.  Any law that is created, defines what is legal or illegal behavior.  Law-enforcers (or lack there of) can define from the broad language, while others use loopholes in legal terms for abuse.

“Eligible” by Websters dictionary is “qualified to participate or be chosen.”  “Enroll” by Websters dictionary is “to insert, register, or enter in a list, catalog, or roll.”  Both terms, do not define if currently attending for X number of years in a public school; only that they are “eligible to enroll" from preK-12.

The Academe of the Oaks, defines eligibility a “Students currently enrolled in a Georgia public school (Apogee policy requires that a student have attended at least 30 days of public school to be considered eligible); and Homeschool, KIPP school, and charter school students.”  Apogee Scholarship Fund 30 day policy to attend, is broad language for abuse by local control from SSOs.

“The maximum scholarship amount given by the student scholarship organization in any given year shall not exceed the average state and local expenditures per student.”  This limits scholarships, determined by the education funding mechanism.

According to GADOE, a 2013 SSO scholarship will not exceed $9,046; yet most private schools costs over $10K a year.  How can a low-income family that makes $12-50K a year pay the extra tuition, if SSOs were intended for low-income families?

Each SSO has to “maintain separate accounts for scholarship funds and operating funds.  Until obligated revenues are designated for specific student recipients.”  SSOs “shall hold the obligated revenues in a bank or investment account owned by the student scholarship organization and over which it has complete control.”

SSOs “Must have an independent board of directors with at least three members;” “May transfer funds to another student scholarship organization;” and “Must conduct an audit of its accounts by an independent certified public accountant.”

An independent public accountant audit the public can never see, unless the SSO voluntarily gives out that information to the public.  Georgia GOAL voluntarily gives their yearly reports on their website.  The problem is SSOs like GOAL, cannot oversee or peer pressure other SSOs to reveal their information by a coalition.  The only oversight of these lists, audits and reports; are lawmakers and the GADOR.

An example of abuse by an “independent board of directors” is the Georgia Student Scholarship Organization (GASSO) at a P.O. Box, Cumming 30028, but has no partnered schools on their website.

The three highest paid directors of GASSO are:  Robert Jasion, Mark Langton and Stefani Sanchez.  GASSO's Mark Langton and Robert Jasion are Managing Directors of Connect Chemicals USA, LLC located at 107 Colony Park Dr, Suite 100 in Cumming 30040.

The 2011 GASSO tax Form 990 shows:  $6.35M in donations; $5.99M paid out through 2,866 scholarships; and their net assets were $1.1M.  Their independent contractor was P&L Chemical Inc DBA P&L Management Co, for rent, program & management services was paid $297K.  For 2011, the three directors were paid $169.4K each, through their nonprofit affiliated with the Connect Chemicals and P&L Chemical Inc businesses.

For 2012, each were paid $175.6K, but paid $109.5K in 2009.  In 2012, Jasion tells AJC their average scholarship was $2,044, ranging from $49 to $13,050; he said “Our motto is we never turn down a school that asks for help.”  Do these directors qualify as “independent” directors, by the SSO laws?

H.B. 140 also defines a Corporation “as defined in paragraph (4) of Code Section 14-2-140 and also means a Subchapter 'S' corporation under Subchapter S of Chapter 1 of the Internal Revenue Code.”  This SSO law adds the new language, of including 'S' corporations.

‘S’ corporation are small business, which allows taxation similar to a Limited Liability Company, partnership, or sole proprietor, which pay no corporate taxes; reduced taxable gains; liability protection; and write off start-up losses.  The 'S' Corporation has less than 75 shareholders, which can be individuals, estates or trusts.  This builds onto the SSO bureaucracy legal language for both ‘C’ and ‘S’ corporations; large and small, to receive 75% off their GA income tax liability.

When sources were asked to give an example of how the 75% off a companies Georgia income tax liability works, they do not.

The Georgia GOAL states “Presently, this tax credit is only fully available to “C” corporations.  Until the law is changed, regardless of the amount contributed to GOAL by an “S” corporation or other “passthrough”entity, “S” corporation shareholders (or the owners of such other “pass-through entities”) are subject to the individual limitations of $2,500 or $1,000.”

The Christian Heritage School states, “if your business is set up in such a way that it is not subject to income tax (e.g., S corporations, partnerships, and most LLCs), the business cannot participate.  Instead, you, the owner, could participate.  If your business is a “C” corporation, the corporation can donate and receive a credit for up to 75% of the corporation’s annual GA income tax liability.”

H.B. 140 states “For a taxpayer that is a corporation, if the corporation has other state tax liabilities, such as a tax liability for the sale of alcoholic beverages or tax liability based on insurance premiums, the credit against the tax imposed by this chapter for qualified education expenses may be used to offset those liabilities; (however)...the credit shall only be credited once in any taxable year.”

If ‘C’ and ‘S’ corporations have other state tax liabilities; then Georgia income taxes will pay off corporation's alcoholic sales and insurance premiums by a state appropriation of $100M, from their donation to an SSO.  Sounds like a tax subsidy.

To counter these SSOs, Rep. Keisha Waites (D-Atlanta) has sponsored the H.B. 13 “Protecting Public School Funds Act;” to challenge the income taxes used to fund private schools and repeal the qualified education tax credit for SSOs.

This law builds onto SSO bureaucracy and their supporters by parents and companies, for this subsidy or earmarked appropriated tax credit.  Any law or rule creates a bureaucracy by any lawmaker, no matter Democratic or Republican; yet vested interest groups will lobby to keep it alive.  These SSOs educational bureaucracy helps private school parents reduce their tuition, by redirecting their Georgia income taxes as a neo-voucher.

Some call this a dependency on their bureaucracy, I call it a Vice-Virtue law.  The virtue to help some children, creates a vice by promoting an incentive that is dependent on a tax credit, but does not help all children.

H.B. 70 is a scholarship voucher for special needs students to attend a public or private school, but waiver the requirement to attend a public school for one year, before enrolling.  This builds onto the private school bureaucracy, with redirected income taxes from public schools.

It will be hard to repeal these SSO laws, unless the public understands how these SSOs really work by transparency and recognizing abuse.

SSOs intent to help low-income public students was the theory, but does not match how they are truly practiced.  One theory describes how SSOs work.

The Principle-Agent Theory in Moral Hazard is where one party – the agent; acts on behalf of another party – the principle.  The agent i.e. SSOs have more information of their actions and intent, than the principle, i.e. the Public.  The agent was created by the principle by law to reform education, but the Moral Hazard occurs, because the agent has their own self-interest.

The Public cannot monitor SSOs acting inappropriately, so both the principle and agent no longer shares their initial interest.  The Public's lack of information and monitoring how SSOs work, prevents a cheque and balance.

It seems no accountability is needed for those in positions of power and influence of these SSOs, but teachers, staff and students have to be accountable.  It is hypocritical to impose accountability for those on the bottom, but not for those on top.

Even to assume one socially engineered human bureaucracy of government schools, should be replaced with another socially engineered human bureaucracy of private schools, will not solve all our problems.  How can one human organization be any better than another, if the human element still operates them both?

These SSO laws do not create any more choices for education, like magnet schools or experiment with new types of school systems.  The only choices are charters and private schools, by defunding the competition of traditional public schools.

The intent of these SSO laws and H.B. 140, is not helping all low-income minority public school students to go to private schools, but helping currently attending private school parents to reduce their tuition.  These SSOs should be responsible for their actions by peer pressure from independent groups, just like any other human organization, by accountability and transparency.  Every individual, like every SSO, has to be responsible to someone else above and below them; if we
truly believe in cheques and balances in America.