Private School Scholarships: Money Laundering for the Masses

Welcome to the United States of Scam-erica. Or Griftopia, as Matt Taibbi calls it in his book on the Wall Street meltdown. “There are really two Americas,” Taibbi writes. For the grifter class, government is “a tool for making  money,” while “in everybody-else land, the government is something to be avoided.”

Not anymore. Here is the lesson Americans gleaned from the financial meltdown on and bailout of Wall Street: If the feds won’t prosecute ‘em, join ‘em. Corruption has trickled down.

Now the government haters have their hands out, too. One Georgia Christian school, for example, instructs parents in how to use a state scholarship program to launder their taxable income and turn it into tax-free tuition money. Georgia’s private school scholarship program launched in 2010 diverts about $50 million a year from state school budgets by giving “dollar-for-dollar tax credits” of up to $2,500 a couple for donations to nonprofit scholarship organizations that help needy students access private schools. As the New York Times reports:

That was the idea, at least. But parents meeting at Gwinnett Christian Academy got a completely different story last year … A handout circulated at the meeting instructed families to donate, qualify for a tax credit and then apply for a scholarship for their own children, many of whom were already attending the school.

Once the scholarship bill passed, the Times continues, “parents of children in private schools began flooding public school offices to officially ‘enroll’ their children.” To enroll, but not to attend. Rep. David Casas, one of the bill’s sponsors, explained why in a YouTube video (the video has been taken down; transcript by the Southern Education Foundation):

“Some people felt a little bit weird about that; felt it was a little dishonest that they would take their child, enroll them in a public school and not have them actually attend, but all of a sudden they actually qualify for a scholarship. I’m telling you, we deliberately put the wording in there for that.”

Georgia House Bill 325 is a reverse Robin Hood, a legal document worthy of the pay-day loan industry. Even Casas’ audience for the video worried that his scheme was a scam, but the Georgia Department of Education accepts his interpretation. Nevertheless, Johnathan Arnold, headmaster of Covenant Christian Academy in Cumming, Ga. views using the program to discount tuition for existing private school students “unethical.”

Similar back door voucher programs like Georgia’s are already in place in eight states, and recently approved in Virginia. Of course, these bills owe their parentage to the American Legislative Council (ALEC), and draw heavily on its model bill, The Family Education Tax Credit Program Act. Most of the private schools are religious, according to the Times, receiving what public school officials consider “poorly disguised state subsidies.” Because Georgia’s student scholarship organizations (SSOs) have been slow to award scholarships, money has piled up to be rolled over to future years. The Southern Educational Foundation found that instead of saving the state money in the short term, “the state government incurred an additional cost of $7,510 in financing a partial scholarship in a private school above and beyond what it would have paid in 2009 for the education of the same student in a public school.” That is, assuming all students who receive SSO scholarships had actually moved from struggling public schools to private ones (presumably better, but often not).

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