Legislative Testimony for LB670: Adopt the Opportunity Scholarships Act

Thank you Vice Chairman Friesen and members of the Revenue Committee, and thank you, Madam Chair for introducing this bill. For the record, I’m Adam Weinberg, and I’m the Communications and Outreach Director at the Platte Institute.

The Platte Institute supports LB670 and Opportunity Scholarships above any other tax expenditure the Legislature could adopt or has adopted.

As we’ve shared with the committee throughout the session, we believe the value of any tax expenditure should be measured by its economic and public policy rationale. While this committee is asked to approve numerous tax expenditures, few involve providing a service that is constitutionally protected for every young person in this state.

 But Opportunity Scholarships have another strong policy basis that can be observed in an increasing number of states: it provides educational opportunities to children whose families wouldn’t otherwise have the economic means to access them.

LB670 accomplishes this goal by encouraging Nebraskans to donate their own money to nonprofits that help students whom would otherwise be supported by state and local property taxpayers.

We believe Sen. Linehan has worked diligently with this draft of the bill to eliminate a number of major objections. Under LB670, no individual donating to an Opportunity Scholarship can claim a tax credit to reduce their state tax liability by more than 50 percent. In addition, a federal income tax deduction cannot be claimed on any portion of the donation that is claimed under the Opportunity Scholarships Act.

Following federal tax reform, more people than ever will be taking the standard deduction, meaning this policy can help ordinary Nebraskans who earn a paycheck better afford donating to scholarship funds.

We believe considerations of cost to the state can also be addressed by reading through the Tax Expenditure Report and recent committee history.

Respectfully, providing tax-free admission to the zoo, or giving a tax break to renovate a hotel, or paying turnback taxes to the Ralston Arena does not have as clear of an impact on the well-being of Nebraskans as providing educational options for children who don’t have them right now.

It should also be kept in mind, though, the wide variety of studies and examples that show states with similar scholarships are doing well financially and saving money.

Florida has the country’s largest program, educating about 100,000 students a year, mostly children of color from single-parent households. Florida has no personal income tax, lower property and similar sales taxes to Nebraska, and yet they continue to expand their program while maintaining the country’s fourth best fiscal ranking from the Mercatus Center at George Mason University.

Here at home, TEEOSA experts at Nebraska School Finance Strategies have published research on this policy.

The 30,000 foot view of their findings, and how it differs with the fiscal note, is that they acknowledge private schools with significant capacity in Nebraska are largely situated in the vicinity of equalized school districts. That means they will have a greater impact on the formula than a dispersed migration of students. If the Legislature carries out this program properly, by encouraging Nebraskans to donate and allowing enough students to participate, it will enable a large enough transfer of students from public school to private school in those districts that it can reduce costs for the state.

Now, as this committee likely knows, this policy would have to be part of a grand bargain to have any chance of success in a 33-vote Legislature. One thought I’ve had over the years, if it helps any, is that the bill could be amended to include a companion tax credit program for public school foundations or for educators.

Illinois may also be a recent example to consider. Today, it has a $75 million tax credit scholarship program, not because everyone in their legislature agreed with the policy, but because it was a compromise accepted in a larger package of education funding reforms.

While we shouldn’t be naïve about the uphill battle education choice faces, Opportunity Scholarships can naturally coexist with efforts to rework the education funding system and find new revenues for public school districts. We would be glad to work with any senators interested in finding an acceptable compromise.