Ky’s public dollars should stay in public schools instead of being funneled to wealthy

In 2021, as public school teachers, parents and other supporters were prevented from being in the Capitol by the pandemic, lawmakers funded private schools with public dollars for the first time in our state’s history. HB 563 allowed funds to be diverted to private education in nine counties for the next five years at a cost of $25 million a year. Many warned at the time that this was just the first step toward the long-term goal of privatizing our public schools.

Despite the program being suspended after the Franklin Circuit Court ruled that aspects were unconstitutional, those fears are already beginning to materialize. Bills have been filed in the House and Senate (HB 305 and SB 50) that would make the vouchers permanent, expand them to every county, double or quadruple their cost and open them up to even more higher-income families.

Voucher tax breaks are a choice fundamentally at odds with the state’s constitutional mandate to adequately fund public schools and its prohibition against public spending on private education. These tax breaks take money off the top of the state budget before a single dollar is put into schools, libraries and other public services.

The Kentucky Supreme Court explained the state’s responsibility to its public schools in the 1989 Rose decision that led to the Kentucky Education Reform Act (KERA): “Equality is the key word here. The children of the poor and the children of the rich, the children who live in the poor districts and the children who live in the rich districts must be given the same opportunity and access to an adequate education. This obligation cannot be shifted to local counties and local school districts.” Yet diverting resources from the General Fund means less state money into school funding — the largest item in the state budget —more local obligation and fewer resources overall for poorer districts.

After years of cuts and eroded funding spurred by the growth of tax breaks, the state’s per-pupil core funding contribution to public schools this year is an inflation-adjusted $921 less per student than it was in 2008. The funding gap between property wealthy and poor school districts is just shy of where it was before KERA.

Diverted dollars worsen geographic inequalities, and vouchers don’t help those individual students most in need, but worsen racial and socioeconomic gaps. The most affluent families eligible tend to benefit most from vouchers, including families already paying for private school. The House proposal is so generous that a family of 4 with $121,175 in annual income could get their private school tuition subsidized.

Further, private schools do not share public schools’ mandate to serve all students and protect them from discrimination based on race, religion, ethnicity, sexual orientation, disability or zip code. Kentucky’s voucher program awards tax dollars to private entities while shielding them from state and local oversight and authority.

To fund private education with public resources, the voucher tax credit is one-of-a-kind in its magnitude. For each dollar a “donor” gives to a participating Account Granting Organization (AGO), they get 95 to 97 cents back – an amount 19 times bigger than the state’s charitable deduction for other kinds of giving to nonprofits such as places of worship, veterans associations and food banks. State and federal deductions return a couple more pennies on the dollar to the donor, making it essentially a dollar-for-dollar transaction. In its opinion on HB 563, the court states: “These taxpayers are not donating their own money to AGOs; they are taking the money they owe to the state in income taxes, and redirecting it to the AGOs as authorized by this legislation.”

Some wealthy investors can even make money off the scheme. For example, a high-income donor holding stock with a current market value of $100,000 for which they paid $20,000 could avoid capital gains taxes on that increase in value by donating the stock to an AGO and receiving a tax credit on the full $100,000 value. In so doing, they would walk away with $20,140 more in their pocket than if they simply sold the stock.

Well-funded public schools are a hallmark of a strong democracy. Weakening them further by shifting dollars to private entities means less accountability, less equality, and more for the people at the top who need it least.

Anna Baumann is Deputy Director of the Kentucky Center for Economic Policy.