Capitol Connection

Pritzker vows to gut private school tax credits

Controversial program was part of historic school funding formula

ILLINOIS (WCIA) -- It was the final piece to the bipartisan school funding formula negotiation which passed despite high drama in the legislature last summer, but Democrat J.B. Pritzker intends to gut the controversial private school tax credits if he's elected governor in November. 

"I am opposed to that $75 million tax credit, that school voucher program that [Governor Bruce Rauner] has created," Pritzker said Wednesday at the Illinois Education Association Professional Development Center in Springfield. "We should as soon as possible do away with it."

Pritzker has also called it a "backdoor voucher program" and said at a campaign stop in Chicago on Tuesday he would end it immediately upon taking office. 

"This is something totally different. This is not a voucher program or a backdoor voucher program," said Rabbi Shloma Soroka, who lobbied Springfield lawmakers to support the private school tax credits on behalf of a Jewish advocacy group. 

"Even though the Supreme Court ruled it was not a violation of the state’s constitution to have vouchers in Illinois, this is not a voucher program," Soroka said. "This is private citizens giving private donations to a private 501(c)(3) that funds private students to go to a private schools. Never does the money pass through a state treasury or agency. It’s not funded by the government. It’s not funded by taxpayers.

Senate Majority Leader Don Harmon (D-Oak Park) made a similar point from the Senate floor during the debate on the final school funding bill. 

"The controversial part of this bill, the tax credit funded scholarships, it’s not a voucher program," Harmon said, cautioning lawmakers not to misrepresent the new concept to their constituents. 

Under a traditional voucher program, parents receive a reimbursement from the state for the tuition payments they make to a private school. Under this tax credit program, donors receive a 75 percent tax credit for their donation to a state-regulated scholarship fund. In order to claim that new tax credit in Illinois, the donors are required to certify they are not "double dipping" or claiming the same donation as an exemption under the federal tax code. 

In states like Georgia, some donors claim a stackable credit, resulting in more net tax savings than their original donation. 

Senator Andy Manar (D-Bunker Hill), who helped to shepherd the new funding formula through the legislature, encouraged his Democratic colleagues to give the tax credit program a chance, but only on the condition donors didn't abuse it's structure. 

"I know that wealthy people have really good tax lawyers," Manar said at the statehouse on Thursday. "If lawyers for rich folks in Illinois find a way around this law and find a way to profit from this new program, I guarantee that there will be an incredible effort to end it immediately.

While Pritzker opposes the use of tax credits for private school scholarships, he supports them when it helps him pursue profit. According to state records, Pritzker claimed a total of $1.9 million in tax credits for companies he owns under the Angel Investment Credit Program, an initiative proposed under Governor Pat Quinn to entice wealthy investors to provide working capital to upstart companies in the state. Governor Bruce Rauner revived the program after it stalled in 2017. 

When asked to explain how one tax credit was more virtuous than another, Pritzker responded, "I think that, listen, there are lots of reasons why the state provides tax incentives for different things. For job creation, for example. Here, what the governor did, it is not the fact that he provided a tax credit for kids to go to school, it is the fact that he took it out of the public school system. That is what he did. He took it out of the public school funding and moved it into this private tax credit. That is a problem because we are already underfunding our public schools. So to take it out and put it into this private tax credit system seems to me very unfair to public schools."

Rabbi Soroka, who recently met with Pritzker to discuss this issue, condemned what he considers "campaign rhetoric." 

"I think this whole thing of pitting the tax credit programs against the public schools, it just doesn’t float because that’s not really what it’s all about," Soroka said in a phone interview with WCIA. 

"A voucher system takes money directly out of the state’s education spending budget," he explained. "This is from general revenue. So when you’re talking about up to $75 million of state revenue which is close to $40 billion, and an education budget that can be anywhere between $6 to $8.5 billion, when you talk about a program that takes away money from public schools, it’s almost laughable. It has absolutely no impact on funding public schools.

Pritzker's position also puts him at odds with Senator Manar, who endorsed Pritzker in the Democratic primary election. 

"I have never prescribed to that argument from any angle actually," Manar said when asked if the tax credits come at the expense of public schools. "It is a separate provision in the law. It addresses the tax code. It doesn’t have anything to do with the school code. It deals with how income taxes are paid and the amount of income taxes paid. So I have never prescribed to, 'You can only be for one and not the other, or vice versa.'"

In a follow up exchange, the Pritzker campaign doubled down. 

"Bruce Rauner used school children as leverage to establish a back door voucher program that siphons money away from public schools," campaign spokeswoman Jordan Abudayyeh said in a statement. "It's appalling that the state loses out on precious education funds in order to give to wealthy donors a tax break. J.B. believes in investing in our public schools so that every child, no matter their zip code, has a quality education in their own neighborhood." 

Except that's not occurring under this new law. A critical linchpin of the new funding formula was a hold harmless provision that insured no school district would lose funding on a per-pupil basis, which protected against any loss of funding in the event of public school students leaving for private school. 

Still, critics point to the concept of a tax credit as a de facto expense for the state. 

"Could the state government lose a little bit of revenue from this? Possibly," Soroka said. "Arguably, every student that switches out [of public school] is saving the state money. In the long run, it could actually be resulting in a cost savings for the state.  

"Advocates for that program are going to have to prove that that is money well spent," Manar said, adding the students enrolled will be measured by standardized tests. "That is a debate that is going to be had in a few years.

The new school funding formula is set to expire after five years. 

"In due time, that program will be put under scrutiny without question," Manar added. "If it doesn’t produce results, I would venture to say it is not going to be renewed and it may be ended early.

Would Manar support Pritzker's call to end the tax credit program immediately? 

"For me, it is too early to tell. But I am interested in is Datametrics. Is it doing what you’re supposed to do for the cost? Does it produce a result for the cost that it has in the state budget? If it isn't after two years from now, then I am going to be one of those that says we need to end this and we can spend this money more effectively elsewhere. Today, we are just starting. That tax credit is being put into motion."

Within the first few days of scholarships becoming available, more than 40,000 families had submitted applications. Currently, the program only has capacity to serve up to 12,000 children, which means most applicants will be turned away. 

Cardinal Blase Cupich, the Archbishop of the Chicago Catholic Diocese who helped broker the school funding deal with House Speaker Michael Madigan, spoke about the surge in enrollment when he visited lawmakers at the state capitol in February. 

"Scholarship granting organizations have received demands for scholarships that are multiples of the $100 million. Just yesterday (February 27th), Empower Illinois launched its site and had almost 34,000 applicants which would equate to a demand of $200 million, as opposed to the $100 million that was allocated. That is just one scholarship granting organization. I know Big Shoulders also had about 10,000 applicants. So it is very clear that there is a pent up need there and that there is a growing constituency in favor of this. I think that people need to listen to their constituents about this issue."

At the time, Pritzker and his primary rivals were already threatening to end the tax credit program on the campaign. Cupich cautioned against it. 

"I would remind everybody that the bill that was passed that allowed for the private school tax scholarships was passed with a funding bill for the whole state," Cupich said. "There was a non-severability clause in that bill so you cannot get rid of one of them without collapsing the whole bill."

The Archbishop may have been referring to a clause that prevented a legal challenge to the tax credits in court. There is no provision in the funding formula that prevents a future legislature from making revisions to the law. 

"Of course, legislatively, we can uncouple those two," Pritzker said on Wednesday. 

In doing so, he would face severe opposition from Republican lawmakers who cast votes in favor of the final bipartisan funding formula, and would risk reigniting a protracted debate that has long divided the legislature. 

Senator Jason Barickman (R-Bloomington), who was a lead Republican negotiator on school funding, said "Pritzker is choosing to advocate for Chicago's pension payment and against scholarships for kids in underperforming schools." 

Former Florida Governor and 2016 presidential hopeful Jeb Bush highlighted Pritzker's personal wealth and his willingness to reject the bipartisan deal in a tweet he posted Thursday afternoon, which declared Rauner a "champion." 

The Rauner campaign, which is supremely confident public opinion polls support their side in this debate, also highlighted the economic aspect of Pritzker's stance. 

"It's shameful for Pritzker to say he would immediately end the scholarship program when so many low-income students will soon be benefiting from a better education," campaign spokesman Will Allison wrote. "It's clear Pritzker is out-of-touch with struggling families who can finally choose a brighter future for their children."

"Of course I want poor children to have the choice to go to a good school," Pritzker responded on Wednesday. "That is why I want to raise up our public school system. What I really oppose is taking money out of the public schools and that is what happened here in order to provide that private tax credit to wealthy people."

Rabbi Soroka says he's confident Pritzker will soften to the private school tax credits if he takes time to listen to the stories of families who applied for scholarships.

"I know families where they send the majority of their kids to public school and they’re happy there, but they have one child who either has a certain disability or difficulty in school, and they’re not succeeding and the parents feel the child could do better in a different setting," he said.

"Other families live in areas where they are assigned public schools that are overcrowded and underperforming. They just don’t have an option. They can’t afford to move out and they can’t afford private school. This is an opportunity that they otherwise wouldn't have.

"Then there are many other families that would like to send their child to a school that impart not only subject matter and material that they will need for a career, but the values they want to raise their children with. You know, faith-based schools that have not only secular studies, and general studies but also a religious education. Parents who want to raise their children in a certain environment but can’t afford it, now they can. Unfortunately, there’s not enough money with only a $75 million dollar tax credit program, which at most will provide $100 million dollars. We haven’t reached that cap. There’s simply not enough money for everyone. Hopefully, we’ll be able to expand the program. There’s definitely a need out there, definitely a high demand."

 


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