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Today I am very pleased to be able to speak to you about our state’s exceedingly successful and popular corporate tax credit program that benefits Pennsylvania school children. Now in its sixth year, PA’s Education Improvement Tax Credit (EITC) program is considered by many of your colleagues as one of our state’s biggest educational achievements of the past decade.

A Brief History

On May 7, 2001, by an overwhelming bi-partisan majority, Pennsylvania made history by becoming the first state to pass an education tax credit aimed at corporations. The EITC program, provides companies with up to a 90% tax credit for donations to non-profit scholarship or educational improvement organizations.

The initial size of the EITC program was $30 million – with $20 million being allocated to Scholarship Organizations (SOs) and $10 million to Educational Improvement Organizations (EIOs). SOs award scholarships to children all across Pennsylvania in order to assist them in attending the school of their choice – public, non-public or religious. EIOs fund innovative projects in public schools across the Commonwealth. Examples of innovative programs that have been funded through EITC donations are wireless computer labs and before and after school programs.

Eligible companies were able to take up to $100,000 in tax credits per each state fiscal year.

Due to overwhelming demand, in December 2003 the legislature doubled the maximum tax credit to $200,000, expanded the EITC program by $10 million and created a new $5 million pre-K EITC program.

In July of 2005, despite a very tight budgetary year in PA where funding for many programs remained flat or was even reduced, the legislature expanded the EITC program by adding an additional $4 million to the bring the total cap to $44 million.

Again in July of 2006, the legislature expanded the EITC program by adding an additional $10 million to bring the total cap to $54 million.

Today, the total EITC program amounts to $59 million – with $36 million being allocated to SOs, $5 million for pre-K SOs, and 18 million to EIOs.

Impact

During this current 2006-2007 school year more than 33,000 children across Pennsylvania are benefiting from EITC scholarships and countless numbers of children in public schools are benefiting from innovative programs that would have likely gone unfunded.

Nearly every one of PA’s 67 counties had students who received donations from Scholarship Organizations or attended a public school that benefited from an innovative educational program provided by an Educational Improvement Organization.

The EITC and Pre-K EITC programs represent a sound investment in our children’s educational futures. Through information gathered by DCED and REACH, it is estimated that the average scholarship received by a student through the EITC program is approximately $1,000. The average pre-k scholarship is approximately $1,150 per child.

The Administration’s Pre-K Counts program proposes to educate 11,100 children at an average cost of nearly $6,750 per child costing PA tax payers $75 million annually. In other words, Pre-K Counts is nearly six (6) times more costly than the existing Pre-K EITC program which could make pre-k education available to the same 11,100 children for about $13 million per year.

What’s more, EITC scholarships have provided tens of thousands of lifeboats to low-income and working-class families looking for the right school for their child. And, the state’s $36 million investment in the EITC program is saving PA taxpayers over $294 million per year.

Each time a child moves from a public to nonpublic school and each time a child is able to stay in a nonpublic school as a result of the EITC, both taxpayers and families win.

Testimony of Andrew T. LeFevre, Executive Director, REACH Alliance & REACH Foundation, before the Senate Appropriations Committee, May 1, 2007. First posted here.