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EXECUTIVE SUMMARY
Decades of chronic underfunding and inequitable funding have been spiraling Pennsylvania’s public school system into crisis—failing our kids and threatening the future of the Commonwealth. Luckily, the root problem has been recognized by Commonwealth Court, which has ruled that our state’s current funding system for K-12 schools is unconstitutional and the state must take action to adequately and equitably fund our schools. Pennsylvania is now on the hook to invest significantly in the Commonwealth’s public school system to comply with the 2023 Commonwealth Court decision. The Basic Education Funding Commission (BEFC), made up of legislators of both parties and the Governor’s office, released a report in January 2024 with recommendations for how Pennsylvania can achieve a constitutionally compliant school funding system. The plan includes a $5.1 billion state investment over seven years to make sure each school district has the funds they need to enable their students to meet state achievement standards.
Given the court mandate to fix public school funding, Pennsylvania doesn’t have a public dollar to waste on funding private schools – schools that can and do discriminate and operate without any financial or educational accountability. Our priority should be to fund public schools, which are required to educate all of our state’s young people and do so in an accountable way. This report provides a cautionary tale for those considering expanding existing taxpayer-funded vouchers to attend private schools in Pennsylvania or creating a new program.
Vouchers have been in the news a lot in Pennsylvania in the past year because some lawmakers, with signaled support from Governor Josh Shapiro, have proposed establishing a new voucher program that would be accessible to K-12 students in school districts with test scores in the bottom 15% of all school districts. Some criticism of this proposal has been based on experiences in other states that have expanded small, restricted voucher programs into universal voucher systems that threaten to substantially undercut funding for, and the quality of, the public K-12 system that educates most school- age children.
Pennsylvania does not need to rely only on evidence from other states in evaluating whether to establish a new taxpayer-funded school voucher program. The reason: Pennsylvania already has two existing voucher programs now funded for a combined $470 million per year, over four times more than in 2012-13, the first year of the Opportunity Scholarship Tax Credit (OSTC) program, the newer of the two new voucher programs. The legislature first provided funds for the Educational Improvement Tax Credit (EITC) program in 2001-02.
Tax credits for businesses fund the two existing Pennsylvania voucher programs, reducing the contribution of corporate taxes to the General Fund dollar-for-dollar. This report updates a 2017 Keystone Research Center report on these two existing voucher programs, which have received about $2.6 billion in state tax credits since their inception.1 We find:
- All students in the state do not benefit equally from Pennsylvania’s voucher program—students in rural communities often don’t have access and participating schools are allowed to, and do, discriminate against students.
- Both the newer OSTC program and the taxpayer-funded vouchers paid out of the EITC program serve primarily large urban areas of the state, especially in southeastern, south central Pennsylvania, and Allegheny County.
- Available data on participating OSTC private schools allows us to look closer at the location of these schools. A significant mismatch exists between where OSTC students eligible for scholarships live and the location of private schools accepting these vouchers. Students in rural areas have few, if any, private schools to choose from. Local public schools remain the primary option for most rural families.
- EITC data available is more limited, so we can only look at the addresses of the scholarship organizations (SOs), non-profit intermediaries that receive and disburse voucher contributions from businesses that receive tax credits. In 2022-23, 29 rural counties had no scholarship organization (SO) linked with the EITC
- Private schools receiving EITC or OSTC taxpayer-funded vouchers routinely discriminate against students for reasons including their sex, disabilities, sexual orientation, religious beliefs, socioeconomic status, and gender identity or expression. Almost all private schools affirm their right to discriminate in their school policies, usually stated in black and white on the schools’ websites. These schools provide “choice” for the school but not for all students.2
By design, neither the EITC nor OSTC program requires meaningful educational or financial accountability; Scholarship organizations and schools have few reporting requirements, making it difficult to assess impact or program compliance.
- Schools that receive EITC and OSTC scholarships are not required to report on students’ academic progress or to provide other information documenting school quality. There are also no requirements to report information on student demographics. In fact, state legislation prohibits the Department of Community and Economic Development from asking for additional information on OSTC and EITC voucher students than the minimal reporting requirements laid out in the state law establishing these programs.
- The state does not require students on EITC and OSTC scholarships to take any tests to measure academic status or progress. This lack of information makes it impossible to measure the impact this program has—positive or negative—on student achievement.
- As noted, no data has been collected on the socio-economic characteristics of EITC or OSTC scholarship recipients, their families, their communities, or the student population of private schools that scholarship recipients attend. Such data would be necessary for meaningful educational accountability and for systematic analysis of the achievement of scholarship students compared to socio-economically similar students in public schools. Research on voucher programs in states that did collect data on achievement and student characteristics has found that students do not fare better academically, and often fare worse, than they did in public school.
- Pennsylvania allows scholarship organizations to keep up to 10% of the funding that they receive, compared to only 3% in a similar program in The December 2023 school code bill lowered this cap from 20%. in. At 10%, Pennsylvania’s administrative cap remains the highest of any state in the nation, tied with Arizona and several other states. In Arizona, extraordinary examples of personal enrichment have been documented, including by a legislative leader who, in 2014, drew $125,000 annually as Executive Director of a scholarship organization and owned businesses paid over two-thirds of a million dollars by that same SO. Does such self-dealing happen in Pennsylvania? We don’t know.
The EITC/OSTC programs are subsidizing religious schools that have few state-required standards regarding curriculum. Some of these schools receiving public money teach creationism as science and present the Bible as factually accurate history.
- We estimate that at least 78% of the funds for OSTC and EITC vouchers go to religious schools – about $240 million dollars in 2022-23. In Pennsylvania, religious schools do not have to be accredited or abide by meaningful curriculum standards.
- Although many private religious schools have similar curricula to public schools, a significant number teach “scientific creationism” with instruction based on a six-day creation taking place only a few thousand years ago. Other subjects are also grounded in creationism and the use of the Bible as a literal account of For example, the Association of Christian Schools International (ACSI) received about $9 million in OSTC and EITC dollars in 2022-23 to distribute among its 155 Pennsylvania member schools. ACSI describes its member schools as having “the highest belief in biblical accuracy in scientific and historical matters.”
- The lack of academic and financial accountability for private schools receiving OSTC and EITC funding is a political and legal It serves the purpose of overcoming resistance to vouchers by religious schools that object to state oversight of teacher certification, student admission, and curricula. The lack of accountability underpins the ongoing partnership between these schools and free market and business advocates of transitioning education from a public to a private system.
PA’s existing voucher program subsidizes the state’s most elite and expensive private schools, as well as affluent families.
- A portion of voucher dollars go to expensive private schools that serve high proportions of affluent children. Just 24 of the most exclusive – and most expensive (average tuition of $41,497) – Pennsylvania private schools received at least $16.7 million in EITC and OSTC tax credits in 2022-23.3 The Episcopal Academy in Newton Square alone received nearly $5 million, buying down its $41,500 tuition for students. We know nothing about the socio-economic characteristics of the Academy’s voucher students.
- We also have no information on whether accessing OSTC/EITC scholarships has any impact on the overall demographic and family income composition of these expensive private schools or simply serve as a windfall for these schools. Private colleges have massively increased their endowments in recent decades while their student body comes increasingly from a narrow slice of rich families.4 The same dynamic, with taxpayer dollars substituting for the private donations that go to university endowments, may operate in K-12 private schools.
- While the OSTC and EITC programs are supposed to be income-limited, there does not appear to be any auditing of whether families receiving scholarships comply with the income requirements. There is also no policing of “side deals” in which affluent families provide, for example $35,000 in tax credits and then receive a cut in tuition to half that level.
- Pennsylvania’s voucher programs can, and likely do, serve high-income families, with income limits of $108,444 plus $19,088 for each dependent member of the household. For a family of four (2 parents and 2 kids), that income limit would be $146,620, which is nearly 500% of the federal poverty line. This is higher than the income limits of any other state’s tax-credit voucher program. Programs are not required to report on the incomes of scholarship students’ families.
- Even with the average EITC or OSTC scholarship, tuition to many elite private schools would still be out of reach for many working families. Using the IFO’s estimates, the average EITC ($2,314) and OSTC ($1,983) scholarship would barely make a dent in average tuition at the top 25 best private schools in PA, covering just 5.8% or 5.1% respectively of $41,497 (average tuition in these schools). Unless scholarship students receive significant other aid, these schools would be out of reach financially for most low-income students.
- Businesses contributing to the two programs can “triple dip” by receiving a state tax credit, a reduction in their state taxable income, and a reduction in their federal taxable income. They sometimes get back more in tax breaks than they provide in contributions.
The inadequate accountability in Pennsylvania’s $470 million OSTC and EITC programs (for 2023-24) makes clear that the state should not divert more taxpayer dollars to these programs or create a new one. At minimum, a comprehensive financial and educational audit of these programs must be done first, including to evaluate curricula schools use and make recommendations regarding basic curriculum standards. The Independent Fiscal Office (IFO) attempted to evaluate the effectiveness of these programs and reported that, due to a lack of reporting requirements, it could not do so. Pennsylvania should also prioritize fully and fairly funding our public schools, which serve all of Pennsylvania’s students. A public dollar spent on expanding existing or creating new voucher programs in Pennsylvania is a dollar less that can be spent to meet our court-ordered mandate to fix our unconstitutional public school funding system.
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