Scholarship program faces tighter rules after abuse allegations

Scholarship system abuse alleged

There was a time when private school seemed out of reach for Patricia Hester’s family.


When she discovered Heritage Academy in Augusta for her granddaughter, it seemed like a perfect fit. But the structure, academic rigor, uniforms and violin classes all came at a price.

The $6,000 tuition would have been a deal breaker for Hester and her granddaughter if not for an initiative created under the 2008 Georgia Tuition Credit Scholarship Program that gives low-income families access to private school education.

Like the majority of students at Heritage, Hester’s granddaughter receives financial aid from the Georgia Greater Opportunities for Access to Learning Scholarship Program, one of 35 student scholarship organizations in the state that provide scholarship money to students from donors, who then receive a dollar-to-dollar tax credit for their contribution.

“I couldn’t imagine her being anywhere else, but without the scholarship it would be a struggle,” Hester said.

The Georgia General Assembly passed an expansion to the state’s tax credit scholarship program last month, which increased the amount of available tax credits from $52 million to $58 million. The bill came with stricter transparency guidelines for the state’s student scholarship organizations, or SSOs, which was largely demanded by critics alleging severe abuses in the system.

In the program, individuals can contribute up to $1,000 and married couples $2,500 to an SSO and receive their full donation amount back as a credit against their owed income taxes.

The new legislation allows for corporations to receive up to $10,000 in tax credits for a donation.

When SSOs donate money to private schools for scholarships, the law requires them to consider the financial needs of student applicants and file an independent audit with the Department of Revenue. As a result of allegations of abuse, SSOs are now prohibited from awarding a scholarship to students chosen by a donor and from promising a scholarship to the child of a parent in return for that parent’s contribution to the SSO.

Katherine Dunn, a program officer for Southern Education Foundation, which asked the Department of Revenue in January to investigate abuses in the system, said the new legislation is encouraging but not complete.

“We definitely think it was baby steps in reform, but it’s definitely not as strong as it could be,” Dunn said.

The law asks SSOs to consider the financial status of the scholarship applicant, but it doesn’t require scholarships to go to low-income students.

Dunn said she fears SSOs will still award scholarship money to well-to-do children of parents who made the donation to the SSO – essentially getting free tuition. “A lot of SSOs even advertise this give-and-get back scheme,” Dunn said.

GOAL President Lisa Kelly said the reform should be comforting for donors who want more transparency from the organizations where they were sending money and might root out SSOs that are abusing the system. While not all SSOs were as forthcoming, GOAL voluntarily published all financial data on its Web site before the legislation change.

In 2012-13, GOAL awarded more than $11 million in scholarships to students across Georgia whose families had an average adjusted gross income of $26,601.

“The beauty of this thing is taxpayers can participate in providing better educational options needed,” Kelly said. “Taxpayers are taking advantage of that in a very creative way.”

David Brown, the executive director of Grace Scholars, an SSO that serves 900 students in the Augusta area and 17,000 in Georgia, said he hopes the new transparency encourages more individuals and businesses to donate to a child’s private education.

Like GOAL, Grace already targets low-income families and publishes its financial data to the public voluntarily. However, he has seen evidence of abuses when donors call his office to ask whether they can contribute to their own child at a particular school and then receive a tax credit.

“They tell me or imply they hear that happening, and I told them ‘No, that’s illegal,’ ” Brown said. “I hope more organizations being on the up-and-up on transparency will remove some of the perceived abuses out there.”

Valanda Davidson, who has two children receiving the GOAL scholarship to attend Heritage, said she hopes the tax credit scholarship law does not stop here but grows to offer more options for more families.

She said even those who aren’t completely opposed to public schools should still have access to a private education, regardless of their income bracket.

“They’re so well prepared education-wise and morally,” Davidson said of her children at Heritage. “We feel blessed. When I drop them off in the morning, I can just breathe.”

Private school tax break faces time limit