SB 23 Summary

A few main points about SB 23:

  1. There can only be 3 scholarships organizations, these are to be chosen by the state Comptroller.
  2. There are no transfer requirements for students.  This means that students, eligible under the income requirements, qualify for the program whether they are transferring from public school or not.
  3. When awarding scholarships, students from “academically unacceptable” public schools based on the Texas Education Agency ratings (roughly 6% of public schools statewide) have priority over other students.
  4. The income eligibility limit is 200% of level eligible to receive Free of Reduced Price Lunch. ($85K for a family or four or $100k for a family of 5)
  5. 20% of the program will go to help children attend tuition supported prekindergarten at public schools and public school students to attend after-school programs.  This leaves 80% of the program for private school scholarships.

Here’s how the bill works:

Scholarship Organization Requirements

The comptroller will choose three scholarship organizations to award tax credit scholarships. These scholarship organizations will be geographically distributed throughout the state and must demonstrate 5-years of previous experience awarding K-12 scholarships.

Each scholarship organization will need to:

  • Undergo an annual audit;
  • Cap administrative expenses at 5%.
  • Spend at least 76% of its income on scholarships for students to attend a K-12 private school;
  • Spend at least 19% of its income on scholarships for tuition supported prekindergarten at public schools and public school students to attend after-school programs.
  • Give priority to students who received scholarships the previous year or who attend a public school rated “Academically Unacceptable” (see next section).
    • If there are not enough scholarships for all students from “Academically Unacceptable” public schools, then scholarships must be awarded by lottery.

Students Eligibility

Student with a family income below 200% of the Federal Poverty Level are eligible for a scholarship. However, scholarships must go to students in the following order of priority:

  • First Priority – Students (and their siblings) who received scholarships in the previous year.
  • Second Priority – Students attending public schools rated “Academically Unacceptable” (roughly 6% of public schools in 2011).
  • Third Priority – All other students.

This means that students attending private schools may receive scholarships once all applicants from “academically unacceptable” public schools have received scholarships. Since only about 6% of public schools are rated “academically unacceptable,” it is unlikely that the scholarship money will be used up before it reaches students in Jewish schools.

Scholarships to private schools can be worth up to 80% of the statewide state education spending – roughly $7,040 this year. Scholarships for public school students to attend a after-school program cannot exceed $1,000.

Schools Requirements

In order to participate in the scholarship program, private schools must:

  • Be accredited by an organization recognized by the Texas Private School Accreditation Commission.
  • Annually administer the state standardized test, or another nationally norm-reference standardized test.
  • Have written policies regarding:
    • Admissions;
    • Curriculum;
    • Safety;
    • Food service inspection;
    • Student to teacher ratios.

Corporation Requirements

Corporations that donate to a scholarship organization receive a receipt from the organization. They then file that receipt with their insurance and franchise taxes to receive a credit for 100% of the donation amount.

A corporation’s tax credit cannot exceed 5% of its insurance and franchise tax liability. Otherwise, there is no limit on the size of the tax credit scholarship program. In reality this means that the size of the total program per year is capped 5% of the franchise and insurance tax combined.

If all corporations had claimed the maximum credit amount in 2012, this would have generated $303 million in donations. A number not likely to be reached.