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Nevada Vouchers and More: Making Public Funds Private

December 5, 2016

On September 29, 2016, the Nevada Supreme Court issued a permanent injunction against the state’s voucher, program, called the Education Savings Account (ESA) Program, also known as SB 302.

What is interesting about the ruling is that the Court did not find that the ESA Program violated the section of the Nevada Constitution prohibiting use of public money for sectarian purposes (Article 11, Section 10: “No public funds of any kind or character whatever, State, County or Municipal, shall be used for sectarian purpose.”)

As stated in the Nevada Supreme Court decision, the public money is not considered to be public because it was given from public coffers to parents:

We also conclude that funds placed in education savings accounts under SB 302 belong to the parents and are not “public funds” subject to Article 11, Section 10.

Thus, if the money does not travel directly from the public coffers to the religious school, then, according to the Nevada Supreme Court, the money is not “public money being used for sectarian purposes.”

The Nevada Supreme Court did find the ESA Program unconstitutional because it diverted money intended to fund public education from public education:

The issue remaining relates to the funding of the education savings accounts. Based on the State Treasurer’s concession that SB 302 does not operate as an appropriation bill, and that nothing in the legislative measure creating the State Distributive School Account funding for public education provides an appropriation for education savings accounts, we must conclude that the use of money that the Legislature appropriated for K-12 public education to instead fund education savings accounts undermines the constitutional mandates under Sections 2 and 6 to fund public education. Accordingly… we remand each case for the entry of a final declaratory judgment and a permanent injunction enjoining the use of any money appropriated for K-12 public education in the State Distributive School Account to instead fund the education savings accounts.

So, in order for Nevada’s ESA Program to survive, it must be funded from money specifically appropriated for the program, not from money earmarked to fund the state’s public schools.

But back to the laundering technique that makes public money “not public.”

In May 2013, the Louisiana Supreme Court declared Louisiana’s voucher program unconstitutional by a vote of 6 to 1 for a reason similar to the Nevada Supreme Court ruling: the vouchers took from funding designated for public schools. However, the single dissenting judge tried to split a fiscal hair by writing that if the students leave the public system, their per-pupil allotment reverts back to the state from the public school– which would mean that school voucher funding for that student would come from the state in general and not from money earmarked for the public school. Of course, the problem with such a conception is that public school funding would only be thinly laundered toward private schools, and the fiscal welfare of the state’s public schools would be directly tied to the state’s “generally funding” private schools.

The point is that the public needs to be aware that there are ways to semantically “make” public money “no longer public,” and the way to avoid these shady funding games is for it to be written into the law that public money is to be dispensed directly to public entity identified as the recipient.

It is also a good idea for state law to expressly clarify the conditions under which public money remains “public” (i.e., intended to serve specific, public purposes, and also subject to public scrutiny) and at which point it becomes “private” (i.e., freed from the constraints of “public” spending and scrutiny.)

Finally, in a related vein, the public needs to be aware that offering an “educational tax credit” is a means of indirectly publicly funding a program that likely would not qualify for direct/obvious/above-board public funding. In offering the tax credit, the state does not handle the money– the private individual or private entity pays the money directly to the receiving entity in exchange for a tax break. Since the state-incentivized spending does not land in the public money chest, the money is not considered public and is therefore not subject to rules governing public funds.

US Secretary of Education nominee and “true pioneer of the school choice movement across the country,” Betsy DeVos, explains how the educational tax credit enables what would be public money (collected in the form of corporate taxes) from becoming public money at minute 4:45 in the 2015 Youtube video below in which Edward Pozzuoli, the president of Florida-based Tripp Scott Law Firm, interviews then-American Federation for Children (AFC) Chair DeVos, about tax credits.

The entire 9-minute video is an eye opener; DeVos talks about how the AFC does it all: finds the school choice candidates (she’s particularly keen on private school choice); puts “political effort” behind electing/defeating candidates; “works on the policies… the actual legislation,” and “helps parents and kids to find schools and schools to find parents and kids.”

The transcript of the tax credit segment is as follows:

DeVos: …I will cite the very successful Tax Credit Scholarship Program, with over 70,000 children participating this year. That program, however, is under attack by those who are defenders of the status quo, and that will have to be litigated, but we’re very confident that as that program, and all the choices in Florida continue to grow, and as more students find success because of those choices, the constituency for choices full-range is going to continue to be very strong and grow even stronger.

Pozzuoli: So, those opportunity scholarships: Explain to our viewers what that is.

DeVos: The Tax Credit Opportunity Scholarship is a tax credit against corporate taxes in the state of Florida. So, if you have a business that pays Florida state corporate taxes, you can redesignate up to, I believe it’s 75 percent [Pozzuoli: Right.] of your corporate tax burden to the state annually into a scholarship fund. That scholarship fund is then vouchered out, or given out in incremental amounts [Pozzuoli: Right.] to low-income students and their families to choose the school or educational setting that is going to work best for them.

Pozzuoli: So then, the child and their family can use the voucher and attend a private school [DeVos: Exactly.] or parochial school or whatever?

DeVos. Exactly.

Pozzuoli: And so, since there are no state monies involved, it is all essentially all private monies with the tax credit method.

DeVos: Exactly.

Pozzuoli: Okay.

DeVos: Exactly. Because those funds never go into the state coffers to begin with.

Pozzuoli: So, for some of our corporate partners who will watch this, this is really an opportunity [to invest].

DeVos: …it’s a great opportunity. Absolutely, it is.

There is no discussion of any impact study related to the State of Florida’s losing up to 75 percent of its corporate tax revenue to this private/parochial school choice venture.

But it is an opportunity to slight public funding.

Private school choice depends upon such public coffer diversion.


Released July 2016– Book Three:

School Choice: The End of Public Education? 

school choice cover  (Click image to enlarge)

Schneider is a southern Louisiana native, career teacher, trained researcher, and author of both A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?.

both books

Don’t care to buy from Amazon? Purchase my books from Powell’s City of Books instead.

  1. Laura H. Chapman permalink

    I think this is really an important point. The tax benifits for corporations are not often explained so clearly. Multiply this across sectors of the economy where tax incentives flow to corporations, with the coffers left dry for social services, infrastructure, and so on. I hope you can sustain this focus on the tricky business of deciding when money is for a public purpose and not.

Trackbacks & Pingbacks

  1. Mercedes Schneider: Betsy DeVos on Video Explains How to Turn Corporate Taxes into Vouchers | Diane Ravitch's blog

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