Children wearing protective face masks sit in classroom for the first day of classes of the new school year at the GuthsMuths elementary school during the coronavirus pandemic on Aug. 10, 2020 in Berlin. (Photo by Maja Hitij/Getty Images)
The state of Montana risks losing $16 million of American Rescue Plan Act funds during the next four years if House Bill 279 becomes law, according to the Montana Federation of Public Employees.
Amanda Curtis, president of the federation, offered that analysis during the most recent hearing on HB279, a “school choice” bill to raise the cap on a scholarship tax credit from $150 to $200,000 per contributor.
“For Montana to receive our fair share of federal funding under the state and local fiscal recovery fund, I believe — MFPE believes — that we should steer clear of any expansion of tax credit programs this session and next session,” Curtis said at the hearing Friday.
The Montana Department of Revenue is still awaiting instruction from federal officials as to how ARPA should be implemented. In an email Tuesday, the DOR said the status of the $16 million remains an open question.
The bill passed 62-37 in the House earlier this month and was heard Friday in the Senate Finance and Claims Committee, where Gov. Greg Gianforte’s policy director Glenn Oppel urged its support. Chair Sen. Ryan Osmundson, R-Buffalo, said the committee would likely take executive action on HB279 on Wednesday.
The legislation offers an unusual 100 percent tax credit for donations to a private school scholarship fund or a program to support innovative public school programs. At the hearing, the Department of Revenue’s Lee Baerlocher characterized the scope of the credit in response to a question.
“It’s a big one with this bill, the $200,000,” Baerlocher said. “Dollar for dollar credits are rare. I don’t know if we have much in the way of a dollar for dollar, 100 percent credit. I can’t think of one right now.”
The 100 percent credit means the DOR is projecting both programs hit their caps. That means the total credits claimed for each are estimated to be $1 million in 2021, $2 million in 2022, $2.4 million in 2023, and $2.88 million in 2024. That’s roughly $16 million total for both during the next four years.
In her testimony in opposition to HB279, the MFPE’s Curtis pointed to a post about ARPA by the Center on Budget and Policy Priorities. In it, senior vice president for state fiscal policy Nicholas Johnson points to this portion of the federal American Rescue Plan Act:
“A state or territory shall not use the funds provided under this section or transferred … to either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.”
Johnson could not be reached Tuesday to comment on how the tax credit increase in HB279 might be interpreted to affect federal recovery funds headed to Montana. However, in his post, he said the Treasury Department will issue guidance on how the provision will operate in the coming weeks.
At the hearing, proponents of the bill said it would give students who drop out of public schools in Montana a chance to get a private education. Ross Izard, of ACE Scholarships, said students in Montana who are scholarship recipients of the program have a 100 percent graduation rate, whereas the graduation rate in public school is near 88 percent.
He also estimated the capacity of private education in the state to be 3,200 more seats, or 1 percent to 2 percent of current public school enrollment. Currently, ACE gives scholarships to 800 students across 72 schools in Montana, he said, but it’s hard to fund them because of the low cap on the tax credit.
“That $150 contribution limit makes it extremely challenging to raise money,” Izard said.
Sponsor Rep. Seth Berglee, R-Joliet, said he planned to amend the bill so that only cash donations are allowed and not other contributions, such as stocks. That way, he said people won’t be able to use the state to launder money.
Berglee argued the state would actually save money with the bill, because every student who leaves public school for a private education means an estimated $3,800 less the state has to pay for their education. The average ACE scholarship is $2,100, he said, so parents have skin in the game because that amount doesn’t cover tuition.
Berglee also said he didn’t believe a ton of people would donate the $200,000 maximum.
“If they do, it’s a win for the kids in my mind,” Berglee said.
Representatives from the Montana Rural Education Association, Montana Quality Education Coalition, School Administrators of Montana, and Montana School Boards Association were among those who testified against the bill.
In a phone call this week, Lance Melton, head of the School Boards Association, disputed the idea taxpayers save money if a child walks away from public school. He said the one-to-one savings don’t compute if a child in a public school classroom heads to private school because the cost of education hasn’t been reduced a commensurate amount.
“We’re stalling the inevitable breakdown that’s the result of an inadequately funded public education system,” Melton said.
Our stories may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0. We ask that you edit only for style or to shorten, provide proper attribution and link to our web site. Please see our republishing guidelines for use of photos and graphics.