A Voucher by Any Name – Tax Scholarship Credit Legislation to be Introduced

Posted · Add Comment

By Debra Bradley, Esq., NJPSA Director of Government Relations

For decades, NJPSA has been strongly opposed to legislation that attempts to establish a private school voucher program in New Jersey. This has been true whether the vehicle to transfer public tax dollars to private schools is through a private school voucher, private school tuition assistance, or tax credit scholarships. Fortunately, for most of this time period, our State Legislature has agreed and refused to enact any form of private school vouchers that siphons tax dollars from the support of public schools to the private school sector.  

New legislation is being introduced that may change all that.  

A-4144 (Swain, Schaer, Atkins)  and S-3035 (Gopal, Lagana, Sarlo) called the “New Jersey Student Support Act” would establish a program in the Department of Treasury to provide tax credits to taxpayers contributing to organizations that award “scholarships” to certain nonpublic school students. Although the bill draft has just been introduced, amendments are already being considered to the bill.

Bill Provisions

As currently drafted, the  bill directs the Director of the Division of Taxation to establish a program to provide tax credits to taxpayers that make contributions to a selected student support organization that awards scholarships for eligible students to attend participating nonpublic schools.

The program would allow a taxpayer to claim a tax credit against the corporate business tax or personal gross income tax equal to 100 percent of any contribution made to a student support organization. In the case of the gross income tax credit, a taxpayer must contribute a minimum of $100 to a student support organization in order to claim a tax credit. The value of a credit for an individual taxpayer in a given year or privilege period is not permitted to exceed the lesser of 50 percent of the taxpayer’s total tax liability or $1,000,000 for a tax credit against the corporate business tax or $100,000 for a credit against the personal gross income tax. The maximum amount of tax credits allowable in each State fiscal year may not exceed $250 million.

The bill directs the Division of Taxation to select one student support organization to administer the program, draft regulations to implement the program, and submit an annual report to the Governor and Legislature on the implementation and results of the Program.

The student support organization would receive contributions made to the program, spending no more than five percent of contributions on administrative costs, and distributing the remaining 95 percent as scholarships for eligible families. The student support organization is required to verify student eligibility prior to awarding a scholarship, not limit scholarships to students in a certain school or region, award scholarships equally to all eligible students who apply in a given school year, and provide a student with a scholarship that is not less than the amount the student

received in the prior school year. The student support organization is to publicize the program, carry forward no more than 20 percent of funds each year, and submit an annual report to the State Treasurer and the Commissioner of Education. The student support organization is required to contract annually for an independent financial audit of the program and transmit a copy of the financial audit to the Division of Taxation, the State Treasurer, and the Commissioner of Education no later than December 1 of each year.

To be eligible for a scholarship from the student support organization, a student is to reside in New Jersey and intend to enroll in grades kindergarten through 12 in the next school year. A student is required to have a household income that does not exceed the federal income guidelines for reduced price lunch under the National School Lunch Program multiplied by 4.32.

To participate in the program, a school is to be located in New Jersey and be a nonpublic school that is eligible to participate in the National School Lunch Program.

The bill also includes language requiring that:

  • the provisions of the bill not supersede, impact, or interfere with the full funding in each State fiscal year necessary to satisfy the requirement of the New Jersey Constitution that the Legislature provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all children in the State between 5 and 18 years of age; 
  • the full funding of the veterans’$250 property tax deduction, required to be provided to eligible veterans pursuant to the State Constitution;
  • Full funding of the  the senior citizens’ and disabled persons’ $250 property tax deduction authorized by the State Constitution; and 
  • the full payment of contributions required by law to be made to the State-administered retirement systems.

No later than six months after the conclusion of the fourth school year in which scholarships are awarded under the program, the Department of the Treasury, in conjunction with the Department of Education, any relevant governmental organization, and stakeholders from the nonpublic school community, is required to submit a report to the Governor and Legislature that will include:

  • information on the number of scholarships and the amount of tax credits awarded under the program; 
  • recommendations on improvements to the program; 
  • the number of nonpublic school closures five years prior to awarding any scholarships under the program compared to closures after the implementation of the Program.

NJPSA Action 

Due to the current state aid crisis in over 100 school districts subject to S2, the need to continue to meet public school needs statewide, and the constitutional questions raised by voucher programs, NJPSA has deep concerns about the bill proposal. As a result, NJPSA joined 40 organizations in an Open Letter to the Governor, the Senate President, and Speaker of the General Assembly this week, expressing our opposition to a private school voucher program, even if it is disguised as a “tax credit scholarship!”  You can read our group letter of opposition here.  

As this issue is considered, NJPSA’s Government Relations Team will keep you advised of all developments and the steps you can take to fight this negative proposal.