OLS Runs the Numbers on the Opportunity Scholarship Act

John Mooney | March 17, 2011 | Education
Non-partisan assessment bears out some of the fiscal claims of OSA advocates

As debate continues over New Jersey’s foray into private school vouchers, a new non-partisan analysis of the proposed Opportunity Scholarship Act (OSA) backs some of the numbers that are being thrown around by supporters while contesting others.

For one, the fiscal analysis by the Office of Legislative Services (OLS) details how the tax credit plan would be budget-neutral for the state in the long-run, as the bill’s sponsors have claimed.

With actuarial detail, the analysis lays out how the state would lose about $840 million over five years in corporate business taxes, the chief funding lever of the vouchers, but that would be offset by a matching reduction in state aid to the participating districts.

The bill would allow for 40,000 students in 13 selected districts to be eligible for up to $11,000 vouchers to attend schools outside their district, public or private. The vouchers — or scholarships — would be funded through corporate contributions that, in turn, would receive matching state tax credits.

But the OLS report raises other points that are more contentious, including how local schools would lose $1.2 billion in direct state aid revenue. About $350 million would be returned through the bill, the report said, but it also raised other potential costs such as transportation for participating students.

Supporters maintain that with fewer students to serve, districts would save operational costs as well, offsetting any loss in aid and potentially bringing them added dollars. But the OLS report does not explore that supposition, saying it is “indeterminate,” and lists a net loss to districts of $840 million over five years.

Counting Heads

The OLS analysis also does some projections as to how many students would be served in each of the 13 selected districts, using both enrollment and income data. The bill would be steered to low-income students attending low-performing schools, as well as private school students in those 13 districts.

By the OLS’s estimates, Newark would see by far the highest number of enrollees, about 8,200 of the 40,000 students to be served after five years. Approximately 6,000 of those would be public school students, and the rest private. After that would be Paterson, with 6,000 students overall potentially eligible.

Meanwhile, in Lakewood, a majority of the 2,500 students served would be students already in private schools, according to the OLS. Lakewood’s inclusion in the program has been controversial, because of the large number of students in religious schools, including dozens of yeshivas in the township.

The OLS “fiscal estimate” — completed earlier this month and conducted for scores of legislative bills — comes at a time that the OSA proposal appears poised for passage by the legislature.

Although there remain some questions as to what exact form it will take and how many districts will be included in the pilot, the bill has passed two committees in the Senate and one in the Assembly, with the possibility of a final vote in both houses this spring. Gov. Chris Christie, a strong backer, is virtually certain to sign.

Yesterday, a chief backer of the bill testified before the Assembly budget committee as part of the annual state budget hearings. Derrell Bradford, director of Excellent Education for Everyone, a school choice advocacy group, cited the OLS report as vindication of the bill’s financial merits and said local districts would ultimately save money in serving fewer students.

“It confirms what we have been talking about for long time and that this would actually be cash-positive for the 13 districts,” Bradford told the committee at its hearing at Montclair State University.

OSA Supporters

Several members of the committee – including Democrats – have already supported the bill. Still, Assemblyman Albert Coutinho (D-Essex) said the measure should be recognized for the tax credit that it is. He specifically pointed to Christie’s high-profile reluctance and even vetoes to approve other tax credits, saying there is no money for them.

“If revenue neutral, so be it,” Coutinho said. “But it would have to become part of the budget. I just want to be consistent.”

The committee’s chairman, Assemblyman Lou Greenwald (D-Camden), said in an interview he would likely support the bill, but only if it is narrowed down to a half-dozen districts where the need is greatest and the options few.

“It should be for towns like Camden, Passaic, Newark, Asbury Park, school districts where there are so many [low-performing] schools that you can’t just move across town to a better one,” he said. “These are places the people are prisoners of their own poverty.”

He said his committee, likely the last hurdle to a final vote, could hear the bill this spring after the formal budget deliberations. That would likely be too late for OSA to take effect for the next school year.