Amended schools tax credit bill advances

A bill that pushes up a tax credit limit for donations to schools from $150 to $200,000 advanced Thursday in the Senate Finance and Claims Committee, albeit with a couple of amendments.

“You’re giving to an opportunity to help educate students all through Montana with this bill,” said Sen. Dan Salomon, R-Ronan.

After it was amended, committee members voted 12-7 to support House Bill 279, one of several “school choice” bills the Montana Legislature has considered this session. HB279 increases the cap on a tax credit for private school scholarships and for innovative programs in public schools.

One amendment the committee approved aims to prevent the state of Montana from losing American Rescue Plan Act money. A provision in federal law notes states cannot use coronavirus recovery money to directly or indirectly offset decreases in net tax revenue that result from a change in law. During the course of four years, the tax credit from HB279 could mean a $16 million hit to state coffers for both programs.

With the amendment, the state budget director will have the discretion to revert to the original $150 tax credit limit if it looks like the bill would compromise recovery money heading to Montana. Another change ensures donations must be in cash, not assets, which sponsor Rep. Seth Berglee, R-Joliet, earlier said would prevent people from using the credit to launder money. 

The other amendment approved Thursday makes it so that donors who want to contribute to innovative programs in public schools can give to a specific district and not see their funds spread across schools in a region.

Proponents of the bill have said it will allow them the ability to raise money for private school scholarships because it’s difficult to raise a meaningful amount at $150 a pop. They also argue it helps a slim number of students who don’t fit in public school complete an education in a private program.

Opponents have criticized the bill as taking a significant bite out of state revenue because the aggregate amount allowed increases with an escalator cap. They also note the deal is an anomaly because it offers a dollar-for-dollar tax credit.

For each program, the bill sets a $1 million cap in the first year, $2 million cap for the second year, and then allows for a 20 percent cap increase through 2029.

The House approved the bill 62-37, and Gov. Greg Gianforte’s policy director, Glenn Oppel, earlier urged lawmakers to support it. Legislators did not discuss the bill at length Thursday, but a couple of them explained their support and opposition to the legislation.

Sen. Janet Ellis, D-Helena, said she was against the bill because of the substantial increase in the size of donation that’s allowed through 2029. Ellis also pointed to the dollar-for-dollar credit as problematic.

“The fiscal note is very significant long term, and it keeps going up,” Ellis said.

Salomon, though, said the state has funded education, and it’s on the expense side of the state budget. He said the tax credit is on the other side of the equation, and the governor’s budget has accounted for it.