South Carolina’s program to send children with special needs to private schools with public money was the camel’s nose under the tent.
The original idea was a complicated plan to subsidize almost all children whose parents wanted to escape public schools, without stepping on a state constitutional provision that could ban vouchers.
Fortunately, lawmakers recognized that the main beneficiary of such a program would be the intermediaries who created the “scholarship organizations” on which they depended and private schools that they would invite to enter our state. So, after years of failed efforts to sell their plan, supporters have reduced and settled with a much smaller program aimed at children with special needs and on a limited budget – with the stated intention of one day expanding it into the program. of your dreams.
But, after just two years, the legislature had to shut down private scholarship organizations, at least one of which was playing with the rules, and replace them with a state-controlled company, Excepcional SC.
Now, less than five years later, the new program has faced financial problems, so it is asking the legislature to loosen the rules under which it operates. It’s a bad idea.
Before explaining why, we must explain how the program works. The people who run Exceptional SC call themselves fund-raisers, but that is an inappropriate name. What they manage is a 100% legal money laundering operation. They persuade people to “donate” money to the scholarship program in exchange for 100% tax credits. These are not tax deductions, which allow you to recover, say, 20% of your expenses, but credits: if you donate $ 10,000 to the program, you can subtract $ 10,000 from your tax bill.
Therefore, the effect of the program is to allow people to divert their income tax payments from public schools and the judicial system and from prisons and DHEC and other general programs that benefit the entire state and instead channel the money directly to private schools that are not. t be accountable to the public for their results.
And, as David Slade of the Post and Courier found out in 2014, the people who pay the alternative federal minimum tax don’t just make up for the deal. In addition to recovering all of their “donation” in a state income tax credit, they can also deduct it from federal taxable income. And because South Carolina uses federal tax revenue as a starting point, they cut their SC taxes even further. Thus, they can actually earn money by “donating” to a program that aims to induce parents to leave public schools.
That alone is reason to dismantle the program, but unfortunately the legislature never thought it worth doing.
The good news is that fewer people are participating in the program, apparently as a result of Exceptional SC’s work on legal fundraising efforts and Trump-era tax cuts, which made donations less attractive to everyone except the wealthiest . The tax deviations have fallen so much that Exceptional SC has exceeded its statutory limit of 2% on allowed administrative costs and had to fire its director.
The bad news is that state lawmakers want to change a situation that we should be celebrating. The House’s Ways and Means Committee voted 19-1 last month to liberalize the rules for the tax credit program: allowing “donors” to use their tax credits to eliminate 75% of their state income tax, up from 60% today , and allow them to use their tax credits over four years instead of one.
H.3899 would also remove the supervision of the Revenue Department from the program, eliminate the requirement that schools provide the Educational Supervision Committee with test scores for students receiving scholarships and allow the Exceptional SC to more than double, by 2% for 5%, the revenue share, can spend on administrative costs instead of scholarships.
Even if it made sense to encourage more people to divert their income tax payments from programs that cater to all South Carolina residents, we cannot find any justification for reducing already inadequate testing requirements (as opposed to public schools, which must administer specific state tests, schools that receive scholarship funds choose which tests to apply), to eliminate supervision by the state Revenue Service or to allow the program – whose function is simply to distribute scholarships, on a first-come, first-served basis. money from these grants for overheads.
As Rep. Gilda Cobb-Hunter told us, “There were so many challenges with this program. I don’t know how long we are going to continue this experience. “
Given the unbalanced vote in the Forms and Resources Committee, we do not have much hope that the Chamber will decide that it is time to end the experiment.
But we hope that senators at least refuse to agree to reducing the little excess state we have and making it more attractive for people to divert their taxes from public schools that will always have the responsibility to educate the overwhelming majority of South Carolina’s children. .
