Marsh bill allows more tax credits for Alabama Accountability Act

Senate President Pro Tem Del Marsh, who led the controversial passage of the Alabama Accountability Act four years ago, wants to expand the tax credits available to those who donate to scholarship programs created by the school choice law.

Some education groups are opposed to the bill because the tax credits reduce funding for public schools.

Marsh's bill does not raise the total maximum amount of the tax credits, which would remain capped at $30 million a year.

Donors gave $19.9 million last year, down from $25.8 million in 2015.

Marsh, a Republican from Anniston, said his intent with the bill was to create more ways for taxpayers to donate and earn a credit to help reach the cap.

Marsh said he is concerned that students who receive scholarships under the program might lose them if donations fall short.

"What's most important to me is what we don't want to see in any given year, that young people who have received these scholarships, because of lack of funding lose that scholarship," Marsh said.

Marsh said he believes donations fell off last year because some companies that would have donated did not have enough tax liability to claim the credits.

Under the Accountability Act, taxpayers can claim a credit on their state income for donations to scholarship granting organizations set up under the law.

Marsh's bill would allow companies that donate to also get credits on their utility gross receipts tax.

To be eligible to deduct the utilities tax, they would have to have a minimum of $100,000 liability under that tax.

They could receive credits for up to 75 percent of their utilities tax liability for scholarship donations.

Marsh's bill would make other changes to help reach the $30 million cap.

Individuals and corporations could receive income tax credits equal to up to 75 percent of their income tax liability. The cap is now 50 percent.

Sally Smith, executive director of the Alabama Association of School boards, said the association has "grave concerns" about the bill.

"This makes it easier for them to reach the cap, which means a reduction in funds to our public schools," Smith said.

Smith said it's important to take a long-term view. She's concerned that if taxpayers are allowed to take a credit of up to 75 percent of their income tax liability it will result in a rise in donations that will increase the pressure to raise the $30 million cap.

"So presumably, looking in the future, if this increases contributions or people taking the tax credit, it will be very detrimental because we've always feared that the cap will increase as well, as time went on," Smith said.

Students can use the scholarships to attend private schools. Eligibility is based on income.

When the Accountability Act passed in 2013, it was billed as a way to help  children in "failing" schools whose parents could not otherwise afford private school.

Students who are zoned for schools designated as "failing" under the law get priority for the scholarships.

Almost 4,000 Alabama students attend private schools using the tax-credit scholarships, according to latest reports from the Alabama Department of Revenue. 

About 1,300, or one-third, were zoned to attend a "failing" school.

[Related: Few Alabama students use choice given under Accountability Act]

The Accountability Act defines a "failing" school as those in ranking in the bottom 6 percent statewide on standardized tests.

Marsh's bill would not change that criteria but would change the term "failing" to "underperforming."

"That was a request of the education community because they don't like the label of a failing school," Marsh said.

He said the terminology did not matter to him.

"I don't want to do anything that would be detrimental," Marsh said. "If they think that labeling it a failing school is detrimental, that's fine, move it to an underperforming."

Smith said the change of terms was the only positive change she saw in the bill.

Marsh said the bill added some accountability measures. It says that scholarship granting organizations would be audited every three years to ensure compliance with administrative and financial accountability standards.

Smith questioned whether triennial audits would be an adequate way to monitor the organizations.

Eric Mackey, executive director of School Superintendents of Alabama, said in an email:

"We have serious concerns about reopening this Act and providing additional tax credit vouchers to pay private school tuition, especially without accompanying accountability measures. We still want to take time to thoroughly analyze (the bill) but we cannot support any efforts to divert even more money away from our already cash-strapped public school classrooms to private schools."

Amy Marlowe, spokeswoman for the Alabama Education Association, said the AEA was still reviewing the bill and was not yet ready to take a position on it.

The AEA has been opposed to the Accountability Act from the outset. The AEA supported lawsuits in unsuccessful efforts to stop the law and would support repealing it, Marlowe said.

Marlowe said AEA would support eliminating the use of the term "failing school."

"We don't believe that any school in the state should be labeled a failing school," Marlowe said.

Marsh's bill would also expand how the scholarship money can be used.

In addition to paying for tuition and mandatory fees, students could receive money for other "qualifying expenses" such as uniforms, textbooks, school supplies, tutoring, summer school, school meals and transportation.

Scholarship granting organizations must use at least 95 percent of funds donated for scholarships. The money for other qualifying expenses would come from that 95 percent and would be capped at $800 per student.

Marsh introduced his bill on Thursday, the second day of the legislative session.

It was assigned to the Senate education budget committee.

Lawmakers return to resume the session on Tuesday.

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