Whitehouse, Murray, Wyden Call on GAO to Study State Tax Credit Vouchers for Private Schools
Senators ask congressional watchdog to examine fraud and abuse and lack of accountability in state tax credit voucher programs
Washington, DC – U.S. Senators Sheldon Whitehouse (D-RI), Patty Murray (D-WA), and Ron Wyden (D-OR) are asking the Government Accountability Office (GAO) to review tax credit vouchers that states use to subsidize private school tuition. The request comes as the Trump Administration, led by Secretary of Education Betsy DeVos, is championing a $20 billion federal school privatization program potentially modeled on state tax credit voucher programs. Recent reports have called into question the effectiveness of these state programs and highlighted fraud and abuse in their administration.
“With the strong possibility of federal legislative activity on tax-credit vouchers at the federal level in the near future, we are interested in how states have designed these programs, whether they have strong internal controls, and whether they pose a risk of waste, fraud, abuse, misconduct, or mismanagement,” the Senators write in their request. “A multi-state analysis of this issue by GAO would help inform the advisability of any future federal programs and help ensure proper fiscal accountability and transparency for federal funds.”
President Trump highlighted tax credit vouchers in his address to a joint session of Congress in February, inviting a young woman who used a tax credit-financed voucher to attend a private school to join him at the Capitol.
While states’ tax credit vouchers have grown more popular, some programs have been subject to abuse and mismanagement. In the case of Arizona’s voucher-granting program, a main voucher-granting organization, the Arizona Christian School Tuition Organization (ACSTO), hired the legislator who helped to create the voucher program to be its executive director. ACSTO then hired the legislator’s wife’s business to process donations and vouchers and charge the voucher program hundreds of thousands of dollars for overhead costs.
Full text of the Senators’ letter is below. A PDF copy is available here.
April 13, 2017
The Honorable Gene L. Dodaro
Comptroller General of the United States
Government Accountability Office
441 G Street, N.W.
Washington, D.C. 20548
Dear Mr. Dodaro,
We are writing to request that the Government Accountability Office (GAO) conduct a review of state tax credit voucher programs used to provide subsidies for private school tuition. Currently, about one third of states offer tax credit voucher programs, subsidizing approximately 250,000 students to attend private schools. These programs allow individuals and corporations to receive full or partial state income tax credits when they donate to nonprofit organizations that administer and distribute vouchers to students for private schools. The current administration has proposed a $20 billion school voucher program, and has looked to state tax credit voucher programs, including Florida’s tax credit scholarship program, as a model for their efforts.
The rules governing tax credit voucher programs—contribution thresholds, program caps, award amounts, and student eligibility—vary across states and programs, as do the provisions to ensure fiscal accountability and transparency for taxpayer dollars. In addition, states vary in how they designate the non-profit organizations that administer the vouchers and how many organizations are able to do so. These inconsistencies make it challenging for policymakers to assess the consequences of instituting these types of tax credit schemes on fiscal accountability.
Additionally, the structure of tax credit voucher programs and the difficulty in tracing public dollars through this complicated scheme has raised the potential for fraud or conflicts of interest. A March 2017 New York Times article documented one such situation at the Arizona Christian School Tuition Organization (ACSTO), one of the largest voucher-granting programs in Arizona. In this case, a prominent State Senator was able to profit significantly off of overhead funds from the voucher program while subsequently advocating for its expansion in the Senate. The article also describes concerning tax credit voucher structures in other states including Pennsylvania.
With the strong possibility of federal legislative activity on tax-credit vouchers at the federal level in the near future, we are interested in how states have designed these programs, whether they have strong internal controls, and whether they pose a risk of waste, fraud, abuse, misconduct, or mismanagement. A multi-state analysis of this issue by GAO would help inform the advisability of any future federal programs and help ensure proper fiscal accountability and transparency for federal funds. Therefore, we request that GAO provide information on the following questions, which may be addressed through a series of reports, as appropriate:
- How have states structured tax credit voucher or incentive programs?
- What financial accountability requirements —including any requirements intended to guard against fraud, waste, and abuse—have states established for organizations that administer and manage the programs?
- How have selected organizations administered tax credit voucher or incentive programs (including any steps taken to ensure transparency, efficiency, and accountability)?
- How have selected states monitored these programs? What are best practices and the challenges the programs have encountered?
We are eager to work with you and your staff to ensure timely and useful information is available to meet the needs of the relevant congressional committees. If you have any questions, please contact staff in our offices. Thank you for your attention to this matter.
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