Posted April 22, 2010

By Lou Baldwin
Special to The CS&T

PHILADELPHIA – It’s the classic good news-bad news scenario.

The good news is Pennsylvania’s Educational Improvement Tax Credit (EITC), which funds educational scholarships, has been expanded by increasing the ceiling for family income from $50,000 to $60,000.

Eligibility has also been widened to include special education and summer programs, which can extend to non-traditional educators, for example a YMCA summer program.

In addition, the program that grants businesses state tax credits to offset funds given to scholarship programs has been altered to make it easier for small businesses to participate.

The catch is although the current proposed state budget increases basic education spending by $354 million, the total dollar amount of tax credits authorized has been cut. Since the amount of credits was cut it means there will be fewer scholarships, no matter how eligibility is raised.

“It was cut 15 percent last year, and will be cut another 10 percent this year,” said Sean McAleer, director of education for the Pennsylvania Catholic Conference (PCC), the public policy advocacy group of Pennsylvania’s bishops. He estimates last year’s cut has already resulted in 6,000 fewer scholarships awarded. And in some instances, scholarships were awarded but for a lesser amount than previously.

McAleer was a presenter April 15 at what was billed as a town hall meeting at Cardinal O’Hara High School as part of Operation Restore, an initiative spearheaded by Harrisburg-based REACH (Road to Educational Advancement through Choice) Alliance, aimed at restoring the authorized tax credits to their level of two years ago, $75 million.

“Operation Restore is a first priority of the bishops of Pennsylvania. Advocacy is very important,” McAleer said. “You have to understand how vital this program is to public schools and to private schools. Get your friends, your families, everybody involved in advocacy. Without your help we haven’t got a shot.”

The latest cut, which was included in Gov. Edward Rendell’s proposed budget, has already been approved by the legislature but the senate has not yet voted. This especially affects nonpublic education, including Catholic schools, because two-thirds of the credits are earmarked for nonpublic education while the other third goes to support public school programs.

Generally speaking, companies that participate in the program receive a 75 percent credit against various state taxes for a one-year commitment to their donation to a nonprofit scholarship-granting or educational improvement program, or a 90 percent credit for a two-year commitment. These are actual deductions from taxes owed, not simply a deduction from income before computing state taxes.

These donations may also be deductible from income for federal tax purposes, which together with the state deduction may result in the contribution costing the company nothing at all.

State taxes against which companies may apply the credit include corporate net income tax, capital stock and franchise tax, bank and trust company shares tax, insurance premiums tax and mutual thrift institutions tax.

Most of those who attended the rally were administrators in Catholic schools who are well aware of the impact the EITC program has.

“We have 12 families here at O’Hara who would not be here right now without EITC money,” said William McCusker, president of Cardinal O’Hara. “Our state representatives have been very helpful to us on this, and this year we received a little over $25,000 through the program.”

For information on how to contact your state legislators regarding Operation Restore see www.operationrestorepa.org.

Lou Baldwin is a member of St. Leo Parish and a freelance writer.