S.B. 1, P.N.

721
“OPPORTUNITY SCHOLARSHIP AND EDUCATIONAL IMPROVEMENT TAX CREDIT ACT”

I. Overview

 Includes scholarships for both public-to-public and public-to-private school choice

 Includes an EITC funding increase bringing the program to $100 million and moves the EITC provisions back
into the School Code
o An increase of $25 million over the $75 million that will be in effect in fiscal year 2011-2012

 Program will be administered by an Educational Choice Board (an independent board inside PDE)

 Pennsylvania Supreme Court will have exclusive jurisdiction over challenges, with the ability to render a
declaratory judgment on the law’s constitutionality

 Funding for the scholarship program will be subject to annual appropriation, with funds distributed on a pro rata
basis depending upon appropriations
o Proposed amendment will cap aggregate scholarship awards at $250 million per year in year 3 and
beyond, for children who do not reside within the attendance boundary of a persistently lowest
achieving school and for children who did not qualify for the program in years 1 and 2

II. Scope of Scholarship Program

 Eligibility: All low-income children, phased in as follows:

o Year 1 - low-income students currently attending persistently lowest-achieving schools only
o Year 2 - all low-income students residing within the attendance boundary of a persistently lowest-
achieving school (Proposed amendment: Must reside there as of the first day of classes of a school
year)
o Year 3 - all low-income students regardless of school

 Definition of “persistently lowest-achieving school”: A public elementary or secondary school in Pennsylvania

achieving within the lowest measured group of 5% on the most recent assessment for which data is posted on
PDE’s website
o 144 schools fall within this category
o Excludes schools that students and their families choose (i.e., charter schools, cyber charter schools, area
vo-tech schools, magnet schools and other schools without specific attendance boundaries)
o Proposed amendment would change definition to include a public elementary or secondary school in
Pennsylvania that is among the lowest performing 5% of schools, excluding the same schools as were
excluded before, and also excluding schools that have made adequate yearly progress in at least one of
the two most recent years - this change will better capture the worst performing schools
 Definition of “low-income child”: 130% of federal poverty level ($28,665 for a family of four)

III. Amount of Opportunity Scholarship

 Amount of opportunity scholarship:

o Base amount of 100% of the state’s per-pupil subsidy to the child’s resident school district

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 o Not to exceed the student’s actual tuition at the school district or private school attended

 Excess scholarship fund for existing private school students:

o During year 1, any amount awarded to a student over and above the student’s actual tuition charge will be
placed into a dedicated fund that will be used to help fund the scholarship program beginning in year 2

IV. Implementation

 For public-to-public enrollment:

o In addition to the state-funded opportunity scholarship, a student’s resident school district may create a
locally-funded scholarship equal to at least 35% of local per-pupil spending
 An additional incentive for a district to receive nonresident students
o School districts will not be required to accept scholarship students, but instead will develop their own
admissions policies requiring that, if any students are accepted, they are accepted on a first-come, first-
served basis
 Proposed amendment will require that students be accepted on a lottery basis, rather than first-
come, first-served
 School districts may give priority to students whose resident school districts award a locally-
funded scholarship

 Enrollment applications: Students apply directly to the school district or private school desired, which notifies the
Educational Choice Board of the student’s enrollment
o Athletic recruiting is prohibited

 Scholarship applications: Students apply directly to the Educational Choice Board, which determines the
scholarship amounts and distributes the awards
o For students attending private school: Payment by check made payable to the parents, but endorseable
only to the private school the student attends
 Proposed amendment will provide for enhanced penalties if the check is not endorsed as
directed by the Board (i.e., civil penalty of 300% of the voucher award, ineligibility for future
awards, and criminal prosecution); each check will contain a statement warning the endorser
of the possible penalties
o For students attending public school: Payment made by transfer from the Commonwealth directly to the
public school the student attends

 Education Choice Board:

o 3 members appointed by the governor with Senate confirmation
o 4-year terms
o Develops guidelines for implementation of the program and administers the program
o Board may hire an executive director and staff
o PDE provides office space, funding and equipment

V. EITC

 Increases EITC to $100 million

o An increase of $25 million over the $75 million that will be in effect in fiscal year 2011-2012
o $92 million available to scholarship organizations and educational improvement organizations
o $8 million available to pre-kindergarten scholarship organizations

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 Of the $92 million available to scholarship organizations and educational improvement organizations, 75% will
be available to scholarship organizations, and 25% will be available to educational improvement organizations
o Currently, 2/3 is available to scholarship organizations and 1/3 is available to educational improvement
organizations

 Timing of applications:
o All applications may be filed beginning May 15 for a fiscal year beginning on July 1
o Applications will be accepted in the following order beginning on July 1 (to the extent insufficient credits
are available, applications will be accepted on a pro rata basis):
 Group 1 firms that have applied by July 1 (Group 1: any business firm entering the second year
of a two-year commitment or applying for tax credits for a contribution to an educational
improvement organization that is also a school foundation) -- Proposed amendment would
eliminate priority treatment for school foundations in place of setting aside a certain amount of
EITC funding for these groups (see more detailed explanation below)
 Group 2 firms that have applied by July 1 (Group 2: any business firm renewing a two-year
commitment or contributing to a pre-K scholarship organization in the same amount that it
contributed in the most recent fiscal year)
 Group 3 firms that have applied by July 1 (Group 3: any business firm that is not in Group 1 or
Group 2)
o If any credits remain, the applications of all firms that apply after July 1 will be considered on a daily
basis

 Other proposed changes to EITC program:

o Credits may be claimed on joint returns
o Automatic increase mechanism:
o Beginning in the 2014-2015 fiscal year (the fourth year of implementation of the opportunity
scholarship program), the available EITC credit would automatically increase by 5% if, in any
fiscal year, the amount of credit approved equals or exceeds 90% of the amount of credit
available
o Increased available credit amount would be the base amount available going forward

VI. Amendments

 Amendment A01335 (Piccola) - Omnibus amendment

o Miscellaneous technical corrections and clarifications:

o Electronic Notice: School districts will post notices regarding the scholarship program on their public
Internet websites, rather than send notices by mail
o Enrollment Confirmations: The Education Choice Board will confirm enrollment decisions, ensuring
that schools and districts receive timely notice of students’ enrollment decisions
o Withdrawal from Nonresident Public School: Where a student withdraws from a nonresident public
school, the Board shall pay the pro-rated voucher amount to the school in which the student
subsequently enrolls (whether his resident district, another nonresident district, or a private school);
this provision mirrors language that was already in place in the bill for students who withdraw from
private school
o Residence in More than One School District: Where a student lives within more than one school
district within a school year, the amount of the scholarship will be charged against each resident
school district on a pro rata basis

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 o Homeless Students: Board must develop guidelines for determining the eligibility of homeless
students for opportunity scholarships, consistent with federal law
o Posting of Guidelines: Guidelines will be posted on PDE’s website, rather than mailed to all schools

o “Persistently lowest achieving schools”: Definition revised as explained above

o Cap on Year 3: $250 million cap on scholarships awarded in year 3 and beyond to students who do not
reside within the attendance boundary of a persistently lowest achieving school and were not eligible for
the program in years 1 and 2 (see above)

o Expulsion: Amendment requires that: (1) participating nonpublic schools make available to interested
parents their policies regarding suspension and expulsion of students, including educational
accommodations and counseling that are made available to students and parents; and (2) where a student
is expelled and returns to his home school district, the remainder of the student’s scholarship award for
the rest of the school year is returned to his home school district as well, to be used to provide educational
services which may include an alternative assignment or alternative education

o Testing: Requires participating nonpublic schools to administer annually to voucher students an

assessment or a nationally normed standardized achievement test in math and reading/language arts in
grade 3, 5, 8 and 11; requires the board to develop a least of at least 8 tests from which the school must
choose if it does not administer an assessment; requires the school to provide the student’s individual test
results to the parent and post aggregate results of all students who take the test on the school’s website (if
any), so long as no student’s identity is revealed; requires the school to bear the cost of the test and
forbids the school from imposing a testing fee on the scholarship recipient; also adds testing policies to
the list of policies that must be made available to interested parents

o EITC Compromise for EIOs: Instead of placing EIOs that are school foundations in a priority group for
purposes of awarding EITC credits, carves out 20% of the amount available from the tax credits for
contributions to EIOs and sets them aside for contributions to EIOs that are also school foundations; also
specifies that tax credits remaining after July 1 from the amount set aside will be made available to
business firms for contributions to any EIO

o EITC Addition: Business firms will be able to make EITC contributions in return for a credit on the
Surplus Lines Tax, a tax imposed under the Insurance Law

o Middle-Income Scholarship Component in Year 4:

o Beginning in year 4, would establish two new programs to bring educational choice to the middle
class:
 Public school demonstration grant program
o A school district may apply for funding to establish a tuition grant program for
students who wish to attend a nonresident public school
o School districts applying must demonstrate a commitment of funds received from
both local sources and the Commonwealth equal to at least $3 for every $1 of
grant funds received
o Program is entirely optional to school districts
 Middle-income scholarship program
o Students would apply to the Board for scholarships, which would be awarded on
a pro rata basis from moneys available in a set-aside portion of the Excess
Scholarship Fund
o Private schools accepting students under the middle-income scholarship program
would be required to comply with rules on enrollment, discrimination, testing,

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 tuition, etc. that would be substantially identical to those applying to the low-
income opportunity scholarship program
o Would apply to students with a household income not exceeding 3 times the
Federal poverty line
o Funding mechanism: The Excess Scholarship Fund would be divided in half, with:
 Half of monies in the fund still used to help fund the low-income opportunity scholarship
program
 Half of monies applied toward the new middle-income programs:
o ½ of this amount applied toward the public school demonstration grant program
(with unused funds being applied toward the middle-income scholarship
program)
o ½ of this amount applied toward the middle-income scholarship program