Lawmakers Adopt Income-Tax Credits For Tuition in Iowa
Iowa lawmakers--in a major victory for supporters of private education--passed legislation last week that will provide families with income-tax credits and deductions for private- or public-school expenses.
The move, which escaped the attention of most national education groups and leaders, will make Iowa only the second state to adopt such a law. Gov. Terry Branstad, who supported the bill, is expected to sign it this week.
The measure is patterned on Minnesota's program of tax deductions for tuition and other expenses at private and public schools. The U.S. Supreme Court upheld the constitutionality of that program in a landmark ruling in 1983.
Spokesmen for national organizations that oppose state aid to private and church-affiliated schools immediately attacked the Iowa measure and threatened to challenge it in court. Supporters of such aid, meanwhile, applauded the state's lawmakers for backing the concept of greater parental choice in education.
And in Iowa, members of a coalition of groups that fought against the proposal leveled harsh criticism against the state's National Education Association affiliate, which they claim backed out of the battle at a crucial point. The teachers' group was chided for supposedly diverting its lobbying efforts to win passage of a bill to raise teacher salaries.
Under the new program, Iowa parents will be allowed to claim an income-tax credit of 5 percent on the first $1,000 spent, per child, for tuition and textbook fees in a private or public school--in effect, up to $50 per child.
Or, if the parents itemize their income-tax deductions, they could deduct from their tax liability up to $1,000 per child for such expenses. Families with adjusted gross incomes above $45,000 would not be eligible for either of the tax breaks.
The Iowa Planning Agency estimates that the new credits and deductions will cost the state a total of $3.2- million in fiscal 1988. The deductions will cost $1.5 million; the credits will cost $1.2 million for parents of private-school students, and $546,000 for parents of public-school students.
In a provision similar to Minnesota's income-tax deduction, the program will allow parents of public-school students to claim credits or deductions for tuition, if their children attend a school in another district, and fees for textbooks.
However, James E. Mitchell, deputy superintendent of the state education department, noted that the state's schools charge few such fees.
"It's not going to have much effect for public-school students,'' he said.
On the other hand, the tax change will provide substantial benefits to the families of the 50,000 students who attend nonpublic schools in Iowa--approximately 10 percent of the state's school-age population.
In Des Moines, tuition in Roman Catholic schools averages about $500 a year at the elementary level and $1,120 at the high-school level, according to a spokesman for the city's archdiocese.
The new tax credits and deductions are "the opening wedge that will lead to millions of dollars of support for parochial schools,'' predicted Joseph L. Conn, a spokesman for Americans United for Separation of Church and State, one of the groups that opposed the measure. "It is a very poor public policy that comes at a time when public schools need more funding.''
Mr. Conn said his group would consider filing suit in federal district court in an effort to have the measure declared an unconstitutional state establishment of religion.
Other opponents said the program would cause an exodus of students to private schools, would drain state aid from public schools, and would disproportionately benefit relatively wealthy families.
"It's $3 million that won't be available for public schools,'' said Wayne Beal, spokesman for the Iowa Association of School Boards.
The state's League of Women Voters estimated that the tax changes would save the average low-income family with children in public schools about $2.25 a year in income taxes, while families with children in private schools and incomes between $30,000 and $40,000 would save an average of $140 a year.
In addition to Americans United, the state school-boards group, and the Iowa League of Women Voters, the coalition that fought the plan included the American Civil Liberties Union; the Des Moines Urban Mission Council; the Iowa Federation of Labor, A.F.L.-C.I.O.; the Iowa Parent-Teacher Association; the Iowa State Education Association; the National Association for the Advancement of Colored People; and the Presbyterian and United Methodist churches.
The bill's supporters, meanwhile, cheered the legislature for its support of parental choice in education.
"What it does is support parents in their right to choose education for their children,'' said Sister Jude Fitzpatrick, superintendent of schools for the Roman Catholic Archdiocese of Des Moines. "It's not a big-ticket item for any one family, but it gives them moral support.''
Sister Fitzpatrick also challenged predictions that the availability of the tax breaks would encourage many families to switch from public to private education.
"I would be surprised if this creates a major shift in attendance patterns,'' she said. "People who have chosen our schools typically have not done so for financial reasons.''
"It's a good step that will increase the educational opportunity for Iowa's students and their parents,'' said Robert L. Smith, executive director of the Council for American Private Education.
Mr. Smith was one of several national education officials who said last week that they had been unaware of the tax proposal in Iowa.
U.S. Secretary of Education William J. Bennett, who in a speech last month criticized state lawmakers nationwide for "squelching'' plans to expand parental choice, was unavailable for comment.
His spokesman, Loye W. Miller, said the Education Department had not been aware of the Iowa measure and had no official comment. However, he said, "I don't think anybody [here] would be critical of the Iowa plan [because] it does provide greater parental choice.''
'A Bitter Battle'
The tax-break measure, which was attached to a $1.8-billion appropriations bill, provoked what one participant called "a bitter battle'' and held up the close of the legislature's 1987 session by more than two days, until the early-morning hours of May 11.
The debate over the plan began in late March when Governor Branstad announced his support for the proposal. Mr. Branstad, a Roman Catholic who sends his children to a church-affiliated school, said he backed the plan "as a matter of fairness'' to parents who make financial sacrifices to send their children to private schools.
The proposal won an easy victory in the Senate, where it was attached to an appropriations bill that covered about a third of the state's budget. The House, however, deleted the amendment on a voice vote after more than five hours of debate. A conference committee reinserted it into the bill after including the $45,000 income restriction, and sent it back to the House at midnight on May 10. At 3:35 A.M. on May 11, the House passed the bill on a 51-to-42 vote.
Lobbyists who opposed the measure said its success was a result, in large part, of the fact that lawmakers were reluctant to cast votes against the appropriations bill. "The tax credit never would have passed on its own merits,'' contended Donna M. Stuhr, a lobbyist for the Iowa PTA.
Ms. Stuhr and other opponents also alleged that the Iowa State Education Association backed away from the fight in the closing days of the session to concentrate its efforts on winning $92.1 million in salary increases for teachers next year.
The teachers' association "caved in at the last moment because there was a major teacher pay raise'' at stake, Mr. Conn of Americans United said.
"The teachers turned against us,'' Ms. Stuhr said.
Bill Sherman, a spokesman for the teachers' union, denied that the group had ended its opposition to the bill. But, he added, the tax measure was less important than the salary increases that the legislature passed.
"The salary bill was far more significant than the tax credit,'' he said. "I don't think [the tax measure's] effect will be dramatic.''
Despite some opponents' arguments to the contrary, Mr. Mitchell of the state education department predicted that the program would have little impact on public-school funding. "The state will have some loss of revenue, but it won't lower foundation aid directly,'' he said.
Under Iowa's school-finance system, the legislature does not directly appropriate funds for schools, but may change districts' entitlements by redefining components of the funding formula. Changes in the formula this year will set state school aid at $843 million in the upcoming fiscal year, about $5 million less than the formula called for. Mr. Mitchell said the reduction was unrelated to the tax changes.
Opponents of the Iowa tax measure said they thought it was ironic that the Minnesota plan on which their state's bill was modeled had been targeted for elimination by that state's Governor.
Earlier this year, Gov. Rudy Perpich of Minnesota proposed eliminating the state income-tax deduction for school expenses in order to bring the state's taxes into conformity with the revised federal tax code.
Lawmakers in both chambers of the Minnesota legislature, however, have voted to keep the deduction, said Dan Loritz, assistant director of the Minnesota Planning Agency.
A state commission that studied tax reform also said the measure was one of the few deductions that could be maintained easily in the wake of the overhaul of the federal tax code, Mr. Loritz said.
In the session that ended last week, the Iowa legislature also approved:
- A $2.4-billion overall state budget for fiscal 1988.
- The teacher-salary bill lobbied for by the teachers' union. It will provide $9 million to increase beginning teacher salaries to a minimum of $18,000 next year. About $38.5- million will be used to give raises to veteran teachers, and $44.6 million will be given to school districts that submit plans for performance-based pay or additional teacher training.
Lawmakers stipulated that the performance-based pay funds could be cut if state revenues fall short.
- A measure that would require public schools to appoint citizens' panels to recommend whether sex education should be taught in the schools.
Governor Branstad has threatened to veto the measure.