Louisiana spent more than $40 million this year on private school tuition vouchers for low-income children, yet still turned away 4,000 applicants.
Despite the demand — and the fact that vouchers are a policy priority for Gov. Bobby Jindal — the program isn’t expected to grow for the next school year.
In response, t he state Department of Education is quietly switching gears to expand another small program that helps poor children attend private schools.
That means working with nonprofits this spring and summer to recruit private donors — whether individuals or businesses — to pay for tuition under a rebate program created by the Legislature in 2012.
But, as with vouchers, taxpayers are on the hook, paying back almost all of the donations after one year. The Tuition Donation Rebate Program allows donors to eventually recoup 95 cents for every dollar they give to a scholarship, while also being allowed to claim the charitable donation on federal taxes.
Louisiana is one of 14 states that uses tax incentives to underwrite private school tuition. Typically taking the form of tax credits, not rebates, these incentives have been labeled by researchers as “neovouchers” and derided by critics as “backdoor vouchers.”
Steven Monaghan, president of the Louisiana Federation of Teachers, said Arizona was the first state, back in 1997, to use the tax code to pay private school tuition and that such programs can easily spin out of control.
“This was always the bigger threat than the voucher bill,” Monaghan said. “It’s below the surface.”
But while tax incentive programs are very popular in other states, Louisiana’s is tiny, serving 60 children at an estimated cost of about $200,000. In contrast, Florida spent $327 million this year to assist almost 70,000 children.
That could change. Three nonprofit groups tapped to promote the rebates report receiving more than 1,400 applications so far for the 2015-16 school year. If donors are found for all those families, the cost of the program could easily jump to $5 million next year.
That expense could grow much larger yet because Louisiana’s rebate program has no spending cap. Vouchers, by contrast, are limited to however much the Legislature appropriates.
State Rep. Kirk Talbot, R-River Ridge, who sponsored the legislation that created the program, said he carefully studied the good and bad in other state programs as he was creating Louisiana’s version. He argued that the rebates ultimately save taxpayers money.
He noted that a scholarship cannot exceed the state’s per-pupil funding and emphasized that local school boards will save money for every child who ends up attending a private school on a rebate scholarship.
The difference between what the state spends on rebates versus what it would spend if those children attended public schools is about $1,600 per child, he said.
“When you look at it on paper, you say, ‘This can’t be right,’ ” Talbot said. “But it is right. It’s saving money.”
Monaghan, however, countered that “if you lose a student, you don’t lose a teacher.”
“The effect on the public schools is measurable,” he said. “Yes, they are losing all that revenue, but they are not shedding all those costs.”
Scott Richard, executive director of the Louisiana School Boards Association, said private school options such as vouchers and rebates are provoking a “dual system of education” in Louisiana: a highly regulated public system at a competitive disadvantage with a less regulated private system, leading to a new bout of white flight to private schools.
“In some places, it’s basically new segregation that’s occurring,” Richard said.
Lots of Louisiana families, four out of every 10, potentially qualify for the rebate-funded scholarships. They must earn no more than 250 percent of the federal poverty line, or about $60,000 a year for a family of four. That’s the same income threshold used for the voucher program.
Both programs limit scholarships to children who have attended public schools the year before, unless they are just starting kindergarten. Voucher students, however, have to come from public schools with a letter grade no better than a C, D or F. Rebate kids, however, can come from any public school.
Alicia Netter, of Baton Rouge, is using both programs to pay for her children to attend a Catholic school.
She applied a year ago for vouchers for her two children. They were attending Merrydale Elementary, an F-rated public school in north Baton Rouge. She felt her kids were unsafe there and that they were having trouble learning.
She wanted to transfer them to a small Catholic elementary school across town, St. Francis Xavier. The school, which is predominantly African-American, nearly closed a few years ago before the arrival of vouchers boosted enrollment.
With more voucher-seeking children than slots, St. Francis Xavier held a lottery. The older brother, Deondre, 11, was admitted, but Akayla, 9, was not.
Netter decided to enroll Akayla anyway and figure out a way to pay the $3,900 annual tuition. She wasn’t going to separate her two children.
“I was going to take a chance,” Netter said. “Even if she didn’t get in, even if I had to work two jobs, I would do it.”
School administrators suggested the rebates as an alternative and put Netter in touch with representatives of Arete Scholars, a Georgia-based nonprofit. The group was the first entity officially designated to drum up interest in Louisiana’s rebate program as it got rolling in fall 2013.
Netter paid the $30 application fee and hoped for the best. In September, a month after the start of school, she learned the good news. Akayla’s scholarship application was accepted. She could remain with her brother.
Netter said the move to St. Francis has been great for both children.
“My children love the school. I can’t see them going anywhere else,” Netter said. “I love the staff. They are really family oriented.”
Supporters of vouchers say the program provides a needed outlet for families like the Netters, who would otherwise be trapped in troubled schools.
But critics have pointed to lackluster test results for voucher students, noting that less than half of voucher students score at or above grade level on standardized tests. Poor test scores prompted the state in November to temporarily freeze two dozen schools from accepting more students.
The key barrier to expanding the voucher program came from the Louisiana Supreme Court, which in 2013 ruled that the state public school financing formula couldn’t be tapped to pay for private school tuition. That essentially capped that program, as the Legislature instead must appropriate money for vouchers.
Vouchers’ biggest advantage over rebates is they pay a lot more money, double what rebates will pay, often more. Rebates max out at $4,578. Vouchers, by contrast, top out at a much higher level, ranging from $7,136 in DeSoto Parish to $13,706 in Bienville Parish. East Baton Rouge Parish’s top voucher payout is $9,431.
The rebates also present other difficulties.
Danny Willis, Arete’s development director, is trying to line up donors for as many as 450 private school scholarships before the 2015-16 school year starts in August.
“A lot of people don’t know about it and they don’t understand it,” Willis said.
Willis said tax credits are an easier sell to potential donors than tax rebates. In Georgia, the state takes the money people already pay in taxes and redirects it to private school scholarships. The program is capped at $58 million a year and benefits more than 13,000 children.
“That’s why we are able to raise $5 million in our sleep in Georgia,” Willis said.
Louisiana’s rebates take longer to be redeemed. Donors receive their rebate only after the scholarship children have been in school a year. Some donors are interested but are uncomfortable parting with their money for a year or more before getting a rebate, he said.
“There’s a cash flow issue,” Willis said.
Nonprofits recruiting donors
But the state and others advocating for different options for public school students think the rebate option could take off. The Legislature last June earmarked $4 million to develop what it calls “school choice” programs of which the state Department of Education has spent $2.6 million .
About $1 million has gone to startup grants for two large nonprofits, one in Denver, and one in Baton Rouge. They are joining Arete as “student tuition organizations” with the task of attracting more interest in the rebates. All of the groups can collect 5 percent of the donations to cover their administrative costs.
Jonathan Tee, chief operating officer for Denver-based ACE Scholarships, said his organization has received about 1,000 applications so far from interested families. While it is shooting to raise money for all of them, it expects to raise money for at least half.
No money has been spent on advertising , and ACE has been on the ground for f ive months, making the number of applications remarkable, Tee said.
“There’s r eally a demand on the parent s ’ side, and we’ve seen that,” Tee said.
The other new player is New Schools for Baton Rouge, best known for recruiting and raising money for new charter schools in the c a pital city. Leaders there are targeting more elite private schools.
Chris Meyer, chief executive officer of New Schools for Baton Rouge, said his organization is spending time connecting with top-rated private schools in town that have held back from accepting vouchers.
“ There are very few seats (in the voucher program) that seem to be high quality or really moving kids at the level that we want them,” Meyer said.
Meyer said New Schools is starting small but hopes to offer a couple hundred private school scholarships in the next two years. The organization has accepted applications for eight scholarships a nd is working with two schools, The Dunham School and The Emerge Center, he said.
The group also has recruited Chicago-based Cristo Rey, and Milwaukee-based Hope Christian Schools, both of which are shooting for fall 2016 start dates for new private schools. Cristo Rey plans to make use of the rebate program, while Hope Christian plans to use vouchers. New Schools is also recruiting a third private school to Baton Rouge and hopes to make an announcement this summer, Meyer said.
Each nonprofit has its own chief benefactor.
ACE has received $1 million f rom Eddie Rispone, co-founder and chairman of ISC Constructors L LC. New Schools also is initially being funded l argely by one Baton Rouge businessman, Cajun Industries’ founder Lane Grigsby.
The rebates h a ve their upsides for private schools. Unlike vouchers, private schools can still pick and cho o se their students using the admission criteria they use for their other students. Plus, w h ile rebate students, like voucher students, must take state standardized tests, the results cannot be used to cut private schools out of the program that fall short.
And the scholarships would mostly be partial, not paying the full tuition , which is attractive for many private schools. The voucher program, by contrast, requires private schools to treat the payment as full tuition and fees.
“We think it’s good when families have skin in the game,” Tee said.