Who’s Trading Public School Funding for a Tax Credit?

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Ever wonder why our roads and public school buildings are crumbling?

 

Ever wonder why schools can’t afford books, buses and nurses?

 

Ever wonder why classroom teachers are forced to buy paper, pencils and supplies for their students out of pocket?

 

Because businesses like Giant Eagle, American Eagle Outfitters, and Eat’n Park aren’t paying their fair share.

 

It’s a simple concept – you belong to a society, you should help pay for the roads, bridges, schools, etc. that everyone needs to keep that society healthy.

 

After all, as a stockholder, CEO or business owner, you directly benefit from that society. If it didn’t exist, you wouldn’t have nearly as many customers – if any.

 

Many of us learned this kind of stuff in kindergarten or grade school.

 
But ironically programs that allow businesses to avoid paying their fair share are being used to short change many of those same kindergarten and grade schools.

 

In Pennsylvania, one such program is called the Educational Improvement Tax Credit (EITC), and everyone from local banks to Duquesne Light to UPMC healthcare providers are using it to lower their taxes while stealing from the public school cookie jar.

 
Here’s how it works.

 
If you expect a tax bill of $X at the end of the year, you can donate that same amount to the state for the purpose of helping parents pay off enrollment at a private or religious school for their children. Then you get between 75-90% of that donation back.

 

So if your tax bill is $100 and you donate $100, you can get back $90 – reducing your total tax bill to a mere 10 bucks.

 

Heck! Since this money is classified as a “donation” you can even claim it on your taxes and get an additional refund – even to the point where you end up making money on the deal! Pennsylvania even allows a “triple dip” – so you get the EITC tax credit, a reduction in your taxable income, and a reduction in your federal taxable income. We actually pay you to shortchange us on your taxes!

 

Now I’m oversimplifying a bit since you can only use the EITC for up to $750,000 a year, but it’s still a sweet deal for businesses. It just really hurts nearly everyone else because it reduces the state’s general fund – by $124 million last year, alone.

 

When we give away hundreds of millions of dollars every year to religious and parochial schools, we have less money to spend on public schools, roads and all other services that benefit the majority of our citizens – especially the poor who rely more heavily on these services.

 
So why doesn’t the state just budget this amount of money directly to religious and private schools instead of ransacking the general fund after businesses donate it to the tax incentive program?

 

Because it’s illegal to give taxpayer dollars to religious and private schools. The establishment clause of the First Amendment forbids it.

 

The founders of our country didn’t want a state religion with schools teaching theological propaganda like we had in Great Britain. Moreover, they demanded tax dollars be spent with accountability to the whole public – something you cannot do in a private or religious school which isn’t set up for everyone but only those who choose and can afford to go there.

 

However, some smart ass thought of an alleged loophole. He said that if tax money is turned into a tax credit, it’s no longer tax money and it doesn’t violate the rules to spend it on religious and private schools.

 

So this is a fiscal sleight of hand meant to give businesses a tax break while boosting private schools.

 
Who’s guilty of hiding behind this loophole to bolster their bottom line while short changing ours?

 

Probably a lot of businesses you know.

 

Thankfully, their donations to the EITC Program are a matter of public record as is how much money returned to them as savings.

 

You can find a handy database of state businesses right HERE searchable by county compiled by Pennsylvania Capital-Star.

 

 

I happen to live in Allegheny County in the Pittsburgh region – the second highest area of the Commonwealth for these tax dodge…. I mean credits.

 

 

Across the county in 2017-18 (the most recent year for which data is available), Allegheny County businesses donated $15,741,544. They got back $14,180,261 in tax credits.

 
A quick search came up with these noteworthy businesses:

 
Fatheads – the Southside sports bar along Carson Street in Pittsburgh
Contribution: $ 10,000
Tax Credit: $ 9,000

 
AEO Management, Co. 
(American Eagle Outfitters Corporate Office in the South Side, Pittsburgh)
Contribution: $ 350,000
Tax Credit: $ 315,000

 
Apex Diamonds, Inc. (A Pittsburgh jeweler)
Contribution: $ 149,000
Tax Credit: $ 134,100

 
Cochran Motors, Inc. (car dealership in Monroeville)
Donation: $ 100,000
Tax Credit: $ 90,000

 
Deer Leasing Co. (freight and cargo business) THREE ENTRIES:
Donation: $ 444,444
Tax Credit: $ 400,000

 

Deer Leasing Co.
Donation: $ 221,111
Tax Credit: $ 200,000

 

Deer Leasing Co.
Donation: $ 388,888
Tax Credit: $ 349,999

 
-Dollar BankTWO ENTRIES
Donation: $ 225,000
Tax Credit: $ 202,500

 

Dollar Bank
Donation: $ 400,000
Tax Credit: $ 360,000

 
Duquesne Light CompanyTHREE ENTRIES
Donation: $ 10,000
Tax Credit $ 10,000
(So 100% return on investment!?)

 

Duquesne Light Company
Donation: $ 50,000
Tax Credit: $ 45,000

 

Duquesne Light Company
Donation: $ 240,000
Tax Credit: $ 216,000

 

-Eat’n Park Hospitality Group, Inc. (Corporate headquarters in Homestead)
Donation: $ 25,000
Tax Credit: $ 23,500

 

-Federated Advisory Services Company (Asset management company) – THREE ENTRIES
Donation: $ 111,111
Tax Credit: $ 100,000

 

Federated Investment Counseling
Donation: $ 111,111
Tax Credit: $ 100,000

 

Federated Investment Counseling
Donation: $ 222,222
Tax Credit: $ 200,000

 
Giant Eagle, Inc.TWO ENTRIES
Donation: $ 833,333
Tax Credit: $ 750,000

 

Giant Eagle, Inc.
Donation: $ 221,111
Tax Credit: $ 200,000

 
Glimcher Brokerage, Inc. (Real estate company) – TWO ENTRIES
Donation: $ 380,000
Tax Credit: $ 342,000

 

Glimcher Group, Inc.
Donation: $ 300,000
Tax Credit: $ 270,000

 
HM Health Insurance Company (Camp Hill, Pa) – THREE ENTRIES
Donation: $ 50,000
Tax Credit: $ 45,000

 

HM Health Insurance Company
Donation: $ 243,333
Tax Credit: $ 219,000

 

HM Health Insurance Company
Donation: $ 165,556
Tax Credit: $ 150,000

 
PNC Bank, N.A. – TWO ENTRIES
Donation: $ 685,000
Tax Credit: $ 616,500

 

PNC Bank, N.A.
Donation: $ 148,303
Tax Credit: $ 133,500

 
Rohrich Imports, Inc. (Luxury Pittsburgh Car Dealership)
Donation: $ 60,000
Tax Credit: $ 54,000

 
The Buncher Company (property management company) – THREE ENTRIES
Donation: $ 416,667
Tax Credit: $ 375,000

 

The Buncher Company
Donation: $ 416,667
Tax Credit: $ 375,000

 

The Buncher Company
Donation: $ 221,111
Tax Credit: $ 200,000

 

The Huntington National BankTWO ENTRIES
Donation: $ 549,556
Tax Credit: $ 494,600

 

The Huntington National Bank
Donation: $ 111,111
Tax Credit: $ 100,000

 
UnitedHealthcare of Pennsylvania, Inc.
Donation: $ 200,000
Tax Credit: $ 180,000

 

-UPMC Diversified Services, Inc. (Healthcare provider) – SIX ENTRIES
Donation: $ 200,000
Tax Credit: $ 180,000

 
UPMC Diversified Services, Inc.
Donation: $ 200,000
Tax Credit: $ 181,000

 

UPMC Diversified Services, Inc.
Donation: $ 190,000
Tax Credit: $ 171,000

 

UPMC Health Benefits, Inc.
Donation: $ 200,000
Tax Credit: $ 180,000

 

UPMC Health Benefits, Inc.
Donation: $ 200,000
Tax Credit: $ 181,000

 

UPMC Health Benefits, Inc.
Donation: $ 200,000
Tax Credit: $ 180,000

 

But this leaves out the largest and shadiest group donating to the EITC Program – Limited Liability Corporations (LLCs).

 

 

These “special purpose entities” are set up to represent individual donors so they can more easily divert tax dollars to private and parochial schools.

 

LLCs represent hundreds of individuals who allow the LLC to donate on their behalf and then they get the tax credits passed back to them. It’s a way to encourage the wealthy to get the tax cut and support school privatization without all the hassle of doing the paperwork themselves.

 

And most (if not all) of these LLCs are set up by religious organizations to boost their own parochial schools.

 

For instance, Business Leadership Organized for Catholic Schools is perhaps the largest LLC receiving EITC funds.

 

Across the state, these organization made $15.6 million in donations and claimed $14 million in tax credits.

 

In Allegheny County, the largest are CASTA-SOS LLC and Pittsburgh Jewish Scholarship LLC.

 

CASTA was set up by the Catholic Diocese of Pittsburgh. Pittsburgh Jewish Scholarship benefits Jewish schools in the city.

 

Here’s how much they took from the state general fund last year:

 

CASTA-SOS I LLC
Donation: $ 509,500
Tax Credit: $ 458,550

 

CASTA-SOS II LLC
Donation: $ 460,890
Tax Credit: $ 414,801

 
Pittsburgh Jewish Scholarship I LLC
Donation: $ 675,250
Tax Credit: $ 607,725

 

Pittsburgh Jewish Scholarship II LLC
Donation: $ 750,000
Tax Credit: $ 675,000

 

EITC money went to almost 1,170 different organizations across the state. A fraction were YMCA’s, the Salvation Army and preschools. But the vast majority were private and religious schools.

 

Defenders of the project claim this money goes to fund “scholarships” for poor children to help defray the costs of enrollment at these schools.

 

However, a family making as much as $100,608 per year can qualify for an EITC scholarship for their child. A family with two children could make up to $116,216 and still qualify.

 

Consider this: one of the largest single recipients of this money in Allegheny County was the exclusive Shady Side Academy in Pittsburgh. The private secular school took in almost $1 million last year so that its wealthy students didn’t have to spend as much on enrollment.

 

Why are we subsidizing the rich?

 

Why are we robbing the poor to do so?

 

Why are we using public money to fund the teaching of climate denial, creationism, indoctrination in religious and political ideologies?

 

The short answer – our politicians are spineless and indebted to the people this benefits.

 

Just this summer, the Pennsylvania legislature AGAIN increased the limit for the program by an additional $25 million.

 

That’s the pattern. Every year, the Republican-controlled (and heavily gerrymandered) legislature can’t get their regressive policies passed Democratic Gov. Tom Wolf. They need some Democrats to support their spending priorities. So they entice right-leaning Democrats with increases to these tax incentive programs in order to reach compromises.

 

The result – every year we allow more tax dollars to fly away to private and religious schools while further undermining funding for public schools.

 

But it could have been worse. Earlier in the year, the legislature passed a measure to increase the EITC Program by $100 million. Thankfully it was vetoed by Gov. Wolf. Unfortunately, he let the $25 million increase get through.

 

This is a problem that is not going away.

 

We need to let our lawmakers know in no uncertain terms that we do NOT support these programs. And this isn’t just Republican lawmakers. We especially need to pressure Democrats and even run challengers to those who are not progressive enough in the primaries.

 

And we need to let businesses who partake of the smorgasbord of tax credits that doing so will lose them our business.

 

If we want to stop theft disguised as “tax credits,” we have to start hitting these businesses where it hurts – in the pocketbook.

 

Because they certainly don’t feel it in their hearts.


 

Like this post? I’ve written a book, “Gadfly on the Wall: A Public School Teacher Speaks Out on Racism and Reform,” now available from Garn Press. Ten percent of the proceeds go to the Badass Teachers Association. Check it out!

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Report: US Shortchanged Public Schools by Hundreds of Billions of Dollars Over Decades

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Fun Fact: Between 2005 and 2017, the federal government withheld $580 billion it had promised to spend on students from poor families and students with disabilities.

 

Fun Fact: Over that same period, the personal net worth of the nation’s 400 wealthiest people ballooned by $1.57 trillion.

 

So, rich people, consider this the bill.

 

A new report called “Confronting the Education Debt” commissioned by the Alliance to Reclaim Our Schools (AROS) details the shortfall in minute detail.

 

For instance:

 

  • $347 billion owed to educate low-income students most of whom are children of color.

 

  • $233 billion owed to provide services for students with disabilities.

 

And this is just the shortfall of the last dozen years! That’s just money due to children who recently graduated or are currently in the school system!

 

We’ve been cheating our children out of the money we owe them for more than half a century!

 

Federal education funding levels were first established in 1965 as part of Pres. Lyndon Johnson’s War on Poverty in the landmark education law, the Elementary and Secondary Education Act (ESEA).

 

That law, which has become little more than a boondoggle for the standardized testing and school privatization industries, originally was passed to address inequality in America’s education funding.

 

Now this report from a coalition of groups including the Education Justice Research and Organizing Center, the National Education Association, the American Federation of Teachers, Center for Popular Democracy and the Action Center on Race and the Economy points out the multifarious ways we have failed to live up to the standards we set in that original legislation and beyond.

 

One of the most glaring examples of neglect is Title I funding.

 

The Johnson administration admitted that schools with a high concentration of students living below the poverty line needed extra support to succeed at the same levels as students from middle class or more affluent backgrounds. So the law promised to provide an additional 40 percent for each poor child above what the state already spent per pupil.

 

And then it promptly failed to fund it. In 1965 and every year since!

 

These are not just numbers. With this money, high poverty schools could provide:

 

  • “health and mental health services for every student, including dental and vision services; and

  • a full-time nurse in every Title I school; and

  • a full-time librarian for every Title I school; and

  • a full-time additional counselor in every Title I school, or

  • a full-time teaching assistant in every Title I classroom.”

 

A decade later, in 1975, the same thing happened with The Individuals with Disabilities Education Act (IDEA).

 

Congress told local districts they’d have to do more to help disabled students succeed academically. However, doing so costs money. Lawmakers admitted that disabled students cost more to educate and that local districts often struggle to find the funding to help them succeed.

 

Once again, Congress pledged to pay up to 40 percent of that additional cost, with local and state funds covering the remainder.

 

Once again, Congress failed to fund it.

 

STATE AND LOCAL FAILURE

 

But it’s not just the federal government that has shirked its duties to school children.

 

State and local governments also stiffed generations of students out of the resources they deserved – especially if those students have black or brown skin.

 

Beside the federal government, public schools are funded by their local municipalities and the state. Local governments pay for about 45 percent of school budgets.

 

However, since most of this allotment is determined by property tax revenues, it ensures the poor get fewer resources than the rich. Kids from rich neighborhoods get lots of resources. Kids from poor areas get the scraps. Inequality is built into the funding formula to ensure that students don’t start out on an even playing field and that economic handicaps are passed on from one generation to the next.

 

State governments are no better. They provide about 47 percent of school budgets.

 

As such, they are in the position to right the wrongs of the local community by offsetting the inequality of local governments – but only 11 states do so. Twenty states close their eyes and provide the same funding to each school – rich and poor alike – regardless of need or what each community can afford to provide for its own children. But 17 states are even worse. They actually play Robin Hood in reverse – they funnel more money to wealthier districts than to poor ones.

 

As a result, schools nationwide serving mostly students of color and/or poor children spend less on each child than districts serving mostly white and/or affluent children.

 

TAX CUTS

 

And while our federal, state and local governments have failed to meet their responsibilities to students, they have required fewer taxes from business and industry.

 

In the late 1940s and 1950s, the top marginal tax rate was more than 90 percent. Today it is 37 percent.

 

Congress just passed a series of whooping tax cuts that go into effect in 2019. More than half of the benefit of these cuts will go to the richest five percent of taxpayers. The law is expected to cost the federal treasury as much as $1.5 trillion in lost revenues over the next decade.

 

Nearly every state levies a much greater share of taxes from low- and middle-income families than from the wealthy.

 

And that’s before we even start talking about corporations!

 

While the US federal corporate tax is 35 percent, the effective tax rate that corporations pay after loopholes and deductions is only about 14 percent. This costs the federal government at least $181 billion in annual revenue, based on 2013 estimates by the Government Accountability Office. Local and state corporate tax and abatement programs make it even worse.

 

This is a choice. We are not requiring the rich to pay their fair share.

 

SCHOOL-TO-PRISON

 

Instead of investing in ways to help educate children, one of the only areas we’ve increased funding is incarceration.

 

The private prison industry is booming, fueled in part by a lack of opportunities in schools.

 

According to the report:

 

“In 2017, the National Association of School Resource Officers claimed that school policing was the fastest-growing area of law enforcement. The school safety and security industry was reported to be a $2.7 billion market as of 2015. Most of that $2.7 billion is public money now enriching the private security industry instead of providing real supports to students.”

 

According to the US Department of Education, 1.6 million students go to a school that employs a law enforcement officer but not a guidance counselor.

 

That is not an unalterable economic reality. It is a failure of priorities. It is the mark of a society that is not willing to help children but will swoop in to punish them if they get out of line.

 

SCHOOL PRIVATIZATION

 

 

Finally, the report identifies school privatization as a contributing factor to this systemic neglect.

 

Charter schools are legal in 44 states plus Washington, D.C. and Puerto Rico. They have “systematically stripped public school budgets through the creation of parallel structures of privately-operated, publicly-funded schools.”

 

Cost studies in San Diego, Los Angeles, Nashville, Michigan, Pennsylvania, Durham and other localities have come to the same conclusion: “the privatization of schools has contributed to austerity conditions in traditional public schools.”

 

Yet Congress continues to appropriate millions of dollars to the Department of Education’s Charter Schools Program (CSP), which funds new charter start-ups and expansions. The program has a budget of $500 million this year, alone. It is the largest single backer of charter schools in the nation.

 

According to the report, “In other words, the U.S. Department of Education is operating a program that directly undermines public schools.”

 

SOLUTIONS

 

But the report isn’t just about what’s wrong. It outlines how we can make it right.

 

It outlines three policy initiatives:

 

1)      “Full funding of Title I and IDEA to target federal support to low-income children and students with disabilities.

2)      The creation of 25,000 Sustainable Community Schools by 2025.

3)      A new focus for the U.S. Department of Education, on ensuring and incentivizing equity in public schools across the country.”

 

And we can pay for it by:

 

A. “Make the wealthy pay their fair share of taxes.

  • Rescind the 2017 tax code changes, which overwhelmingly favor the top 1 percent of income earners.
  • Close the federal carried interest loophole, a step that could increase federal revenues by between $1.8 and $2 billion annually or, according to some researchers, by as much as $18 billion annually.
  • If the carried interest loophole is not closed at the federal level, states can impose a surcharge on carried interest income at the state level, raising millions for state budgets.
  • Enact so-called “millionaire’s taxes” that increase the tax rate on a state’s highest earners. New York and California have already passed such law.

 

B. Require wealthy corporations to pay their fair share.

  • End or reduce corporate tax breaks that cost the federal government at least $181 billion annually.

  • Reduce state and local subsidies to businesses for economic development projects and hold school funding immune from tax abatements.

  • Enforce and strengthen programs like Payment in Lieu of Taxes (PILOT) to ensure that wealthy institutions pay their fair share towards local budgets.

 

C. Divest from the school-to-prison pipeline.

  • School safety and security is now a $2.7 billion industry. Much of that money is public money, going to profitable corporations instead of schools.
  • Divest from expensive security systems, metal detectors and legions of school-based police officers and instead invest in counselors, health and mental-health providers and other supports that make schools safer.

 

D. Place a moratorium on new charter schools and voucher programs.

  • A moratorium on the federal Charter Schools Program would free up $500 million annually, which could be used to support the creation of Sustainable Community schools.”

 

The executive summary concludes with the following statistic.

 

Even a 10 percent increase in funding for each high poverty student maintained through 12 years of public school can dramatically change the likelihood of academic success. It can boost the chances that students will graduate high school, achieve 10 percent higher earnings as adults and a 6 percentage point reduction in the annual incidence of adult poverty, according to a 2015 report.

“Ten percent is pocket-change for a nation that has orchestrated the rise of an unmatched billionaire class. In the richest nation in the world, it is possible to fully fund all our public schools, and to provide Black, Brown and low-income children with the educational resources and additional supports and services they need to achieve at the highest levels.”

 

The facts are in, folks.

 

We can no longer gripe and complain about a public education system we fail to support without recognizing the cause. We have failed to meet our responsibilities to our children – especially our children of color.

 

The solution is simple – equity.

 

We need to demand the rich do the right thing.

 

We cannot achieve greatness as a nation when wealth and privilege continue to shirk their duties and our lawmakers do little more than enable greed and corruption.

 

The bill is here.

 

Time to settle up.


READ THE WHOLE REPORT.


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