Kansas audit questions enforcement of tax credit cap for private school scholarships

By: - April 22, 2022 4:28 pm

Mohri Exline, a state auditor, says the lack of an enforcement mechanism for a $10 million cap in the Tax Credit for Low Income Student Scholarship Program could risk individual donors not being able to benefit from these write-offs or, conversely, more tax credits being issued than is permissible by law. (Screen capture of Kansas Legislature YouTube Channel)

TOPEKA — A review of a Kansas school choice tax credit program for low-income students raised concerns Friday about the future enforceability of a cap on total write-offs.

The Tax Credit for Low Income Student Scholarship Program, touted primarily by Republican legislators, is intended to help eligible students attend a private school of their choice. The program reimburses organizations granting scholarships for private schools and caps the program at $10 million a year.

The law requires Scholarship Granting Organizations, or SGOs, to distribute 90% of these contributions within three years and, according to the review conducted by the Division of Post Audit, most SGOs are abiding by the law. An organization cannot accept additional donations until they reach the 90% mark.

However, given the recent growth in program contributions, the program may soon reach the tax credit reimbursement threshold, and it remains unclear how the Department of Revenue or the Department of Education will ensure the cap is not exceeded, said supervising auditor Mohri Exline. She pointed to The Independent School and the Catholic Diocese of Salina Education Fund, the two organizations that have not distributed 90% of the donations.

“In the future, especially as this program grows, these errors may not be as obvious and so in order to make sure that SGOs and not being able to accept further donations until that 90% is spent then there needs to be a little bit better keeping track of that monthly donations to make sure that they’re meeting the 90% requirement,” Exline said.

This creates the risk that individual donors may donate but not be able to benefit from the credit, or conversely, tax credits issued may exceed statutory limitations, Exline added.

The audit is in response to a request by Rep. Jo Ella Hoye, D-Lenexa, and concerns about a lack of strings attached to the program. The Legislature expanded the program in 2021 to all students qualifying for free or reduced-price lunch.

The program was previously open to low-income students eligible for free meals and attending one of the 100 lowest-performing schools. Estimates indicated the changes made would open eligibility to about 44% of students enrolled in public schools.

Scholarship organizations have received over $15.5 million in contributions through the 2021 school year, of which they have distributed $9 million.

“We should stop further efforts to funnel taxpayer money from public schools to private schools,” Hoye said via Twitter following the release of the audit. “Private schools are not held to the same standards of accountability. It’s our constitutional duty to fund public education — Kansans value public schools.”

She praised an audit recommendation that KSDE staff should request monthly contributions and disbursement data in addition to annual data.

The main reason provided by The Independent School and the Catholic Diocese of Salina for why they were unable to distribute 90% of funds was a lack of eligible students. Under the expanded eligibility approved last year, this should no longer be an issue, said Rep. Kristey Williams, an Augusta Republican and champion of the program.

The Catholic Diocese of Salina received $113,000 in contributions in 2018 — 90% of which should have been distributed by 2021 — but the SGO did not distribute any funds through 2021. The Independent School has a smaller shortfall of $6,500.

“I do think that the intention is solid,” Williams said. “Can you imagine if you had to have students only from the 100 lowest performing schools and you had none in your area? And that’s why we changed the law.”

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Noah Taborda
Noah Taborda

Noah Taborda started his journalism career in public radio at KBIA in Columbia, Missouri, covering local government and producing an episode of the podcast Show Me The State while earning his bachelor’s degree in radio broadcasting at the University of Missouri School of Journalism. Noah then made a short move to Kansas City, Missouri, to work at KCUR as an intern on the talk show Central Standard and then in the newsroom, reporting on daily news and feature stories.