House Bill 344

Tax Credits for Children

with Disabilities

North Carolina General Assembly: 2011-2012

Benefits of Providing Parents with Choice

Representative Paul Stam

Slide

Order

Understanding

the Bill

Voters’ positions

on this issue

Support from

all Backgrounds

Fiscal impact

of tax credits

Allocation of

education funds

Fiscal impact

of tax credits

Next Slide

Comparable

Programs

Programs in

FL & AZ

Who will

qualify?

Case Study #1

Case Study #2

Select a slide

to view or

click Next

Slide to begin

show

Case Study #3

Who will not

qualify?

HB 344 gives parents of children with disabilities the ability to choose

which school is best for their child.

The bill creates an individual nonrefundable income tax credit for part

of the expense of each eligible child who is educated in a home

school, private school or in a public school that charges tuition. The

education expenses credit is equal to the amount paid for tuition and

other educational and therapeutic expenses, not to exceed $3000 per

semester. If requested, the parent must provide supporting

documentation to the Department of Revenue. The credit would

apply to semesters for which it is claimed beginning on or after

July 1st, 2011.

Using the annual state funds that are saved as a result of these tax

credits, the bill also creates a new Fund for Special Education and

Related Services. This fund, under the control of the State Board of

Education, will be used for special education and related services for

children with disabilities in the public schools and to help reevaluate

children who receive the tax credit to determine continued eligibility

every three years.

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Understanding the Bill

Voters’ positions on this issue

Parents for Educational Freedom

in North Carolina

January 2011 Pulse Opinion Research

Statewide Survey of likely Democratic Voters

“The state of Florida has a

special needs scholarship that is

provided to families with children

who have special physical or

learning disabilities to attend a

private school that will meet their

needs. Would you favor or

oppose such a scholarship or tax

credit program in North

Carolina?”

Favor 82%

Oppose 12%

Not Sure 6%

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82%

12% 6%

Favor Oppose Not Sure

Very

Favorable

Somewhat

Favorable

Somewhat

Unfavorable

Very

Unfavorable

Neutral/

Unsure

49% 27% 13% 8% 2%

If a private school offered the

best education available for a

child with special needs, would

you favor allowing parents to

claim a tax credit to send their

child to that private school?

According to a Public Policy Polling May 2008 Statewide Poll, “Cutting

across all demographics – gender, race and party lines –

80% of North Carolinians polled are in favor of a bill

allowing tuition tax credits for parents of special

needs children.”

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Voters’ positions on this issue

Parents for Educational Freedom in North Carolina

76%

23%

0%

20%

40%

60%

80%

Favorable Unfavorable

According to a Public Policy Polling May 2008 Statewide Poll, “Cutting

across all demographics – gender, race and party lines –

80% of North Carolinians polled are in favor of a bill

allowing tuition tax credits for parents of special

needs children.”

Voters’ positions on this issue

The North Carolina legislature is

currently debating a bill that would allow

parents of children with special

educational needs to claim a tax credit

for sending their children to a private

school. Would you say that you are

personally favorable or unfavorable to

this approach of allowing parents of

children with special needs to send their

children to the school of their choice?

Very

Favorable

Somewhat

Favorable

Somewhat

Unfavorable

Very

Unfavorable

Neutral/

Unsure

52% 28% 11% 6% 3%

Parents for Educational Freedom in North Carolina

80%

20%

0%

20%

40%

60%

80%

100%

Favorable Unfavorable

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Determining whether allowing tax credits for parents of

children with special needs is an economically feasible

option requires answering key questions:

Is the tax credit less costly than educating the student

in public school?

What percentage of eligible students will take

advantage of the tax credit?

Will North Carolina state and local governments save

money by giving parents educational options?

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Fiscal impact of tax credits

Legislative Fiscal Note

Fiscal impact of tax credits

NC General Assembly Fiscal Research

Previous Next Menu Legislative Fiscal Note

2011-12*****

Eligible Student Pool*

Usage Percent

Tax Credits Granted**

Cost of Tax Credits (lost State Rev.)

Tax Credits Carried Forward***

State Exp. Per Eligible Student

Reduced Public School Expenditures****

Transfer OUT of General Fund

Transfer IN to Special Education Fund

Transfer out to LEAs for Reevaluations

Net Fiscal Impact on State

LEA Exp. Per Eligible Student

Reduced LEA Expenditures****

Cost of Reevaluations

Reimbursement from Special Ed Fund

Net Fiscal Impact on LEAs

*Grows by 1.37% per year to reflect the 10-year average growth in allotted ADM

**For FY11-12, number of tax credits granted is discounted by 50% to account for limited public awareness of program.

***Assumes turnover rate of 15%.

****Because allotted ADM is based off of the higher of projected ADM or prior year actual ADM, savings from reduced expenditures are not realized until the 2012-13 school year.

*****Assumes average tax credit in FY11-12 is $1,350. Assumes tax credit in all future years of $2,700.

($1,084,500)

$0 ($405,000) ($910,935) ($1,014,705)

$0 $0 $921,750 $1,084,500

($306,000)

N/A $4,054,000 $4,110,000 $4,167,000 $4,224,000

$306,000

$1,931,000 $3,914,137 $3,968,205 $4,023,239$0

1,000 2,027 2,055

($1,350,000) $2,282,100 $9,159,135

$1,931 $1,931 $1,931

$0 $0 ($921,750) ($1,084,500) ($306,000)

$8,160 $8,160 $8,160

$0 $0

$8,160 $8,160

130,000 131,781 133,587 135,417 137,272

2,084 2,112

($1,028,768)

($5,548,500)

$9,044,145 $9,964,193

Estimated Fiscal Impact on State and LEAs -- MIDPOINT ESTIMATE

2012-13 2013-14 2014-15 2015-16

($5,625,450) ($5,702,400)

($4,224,000)

$1,931 $1,931

1.5% 1.5% 1.5% 1.5% 1.5%

($1,350,000) ($5,472,900)

N/A $8,160,000 $16,540,320 $16,768,800

($4,054,000) ($4,110,000) ($4,167,000)N/A

($921,750)

$17,001,360

N/A $1,931,000 $3,914,137 $3,968,205 $4,023,239

$4168.19

A child with special needs is devoted about $3,000 more in state and local

base funds than a child without special needs.

When other funding requirements are brought into consideration, such as

additional funding to students falling behind grade level achievement, the

actual cost to educate a child with special needs in our public school system

can soar to more than $14,500/year, over twice what a child with no additional

needs requires at $6,937/year.

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$4909

$8296

Allotment of educational funds

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

State and Local Base Funding Discrepancies

Average Child inSystem

Special NeedsChild

$10,091

$6,937

Legislative Fiscal Note

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The most recent estimates by Fiscal Research show that, after

the first two years, a tax credit will save the state of North

Carolina about $9.1 million per year and will save counties

about $3.9 million per year, a net gain to state and local

governments of approximately $13 million per year.

Using the middle range of estimates, about 2,055 students with

special needs will be provided alternative education through this

program. The public school system will be able to save time,

energy and resources. In addition, taxpayers will see their tax

dollars more efficiently spent.

The new “Fund for Special Education and Related Service” will

be used for special education and related services for special

needs children in the public schools. It will be funded at the end

of each fiscal year (after the first year) with $2000 for each

credit given that year. Revenues from this fund will also be

used to reimburse LEAs for revising IEPs and reevaluating

students every three years to determine continued eligibility for

the tax credit.

Fiscal impact of tax credits

Legislative Fiscal Note

$8,160 is the predicted operational “savings” to the State that

results from each student with an IEP transferring from the public

schools, with $1,931 saved in local expenditures.

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Fiscal impact of tax credits

The number of eligible students participating in the program will

determine how much state and local governments will save each

year. As more parents take advantage of the program the long

term savings will continue to increase.

Legislative Fiscal Note

Public School Studentwithout IEP

Elligible Public SchoolStudent with IEP

Participating Studentwith IEP

We currently fund nearly 172,000 children with special needs

in our schools. This headcount leaves out a number of

children with special needs who are not in the public school

system. The state has an obligation to assist these children

who have a right to be enrolled in public education.

Allowing tax credits for children with disabilities will provide a

small reprieve for those children whose circumstances have

drawn them away from a public school system to which they

are entitled.

This bill will assist parents who are not able to easily afford

alternative means of education. If a family is struggling

financially, the family may be able enroll their child in a public

school for a year before transferring them to a school that is

better equipped to suit their child’s needs.

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Fiscal impact of tax credits

Legislative Fiscal Note

Other States with

comparable programs

Florida, Ohio, Utah, Arizona and Georgia all have programs that

provide scholarships for children with special needs.

Ohio’s Autism Scholarship Program, Utah’s Carson-Smith

Special Needs Program, Arizona’s “Lexie’s Law” Program and

Georgia’s Special Needs Scholarships Program provide

scholarships, vouchers or tax credits ranging from $2,000 to

$20,000.

Programs allowing school choice have been so successful that

nearly 30 states have considered school choice legislation within

the last several years.

Allowing parents the freedom of school choice is proving to be

an effective way to address the needs of the exceptional students

in our country.

Florida’s program stands out as one of the most effective and

best performing and is similar to the proposed North Carolina

tuition tax credit.

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The McKay Scholarship Program for Students with Disabilities

Any student with an IEP is eligible for the scholarship. Of the 370,000

eligible students, 21,054 are participated during the 2010-2011 school year.

The scholarships range from $4,500 to $19,000.

The average McKay scholarship in 2010-2011 was $6,627, just $627 more

than the proposed tax credit for special needs children in North Carolina.

47.1% of McKay students are eligible for free or

reduce-priced lunches.

McKay November 2010

Quarterly Report

Florida’s Scholarship Program

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The McKay Scholarship Program for Students with Disabilities

School choice opponents claim that minority students are not served by these

programs. The McKay Scholarship Program shows the fallacy of this argument.

53.3% of McKay students are Black/African American,

Hispanic/Latino or of other nationality and decent.

McKay November 2010

Quarterly Report

Florida’s Scholarship Program

Arizona’s “Lexie’s Law” program provides scholarships to

students with disabilities and foster care children. Enacted in

2009, it is a combination of two previous school choice

programs.

The scholarship provided under this program is equal to the

the “base support level” of state funding that would go to the

student if they remained in public school. However, the value

of the scholarship cannot exceed the actual tuition and fees

paid to the private school.

The average scholarship for special needs students in 2008

was $8,238.

Like the proposed North Carolina plan, students are eligible

only if they have been enrolled in public school for the

previous school year and have an IEP.

Arizona’s Tax Credit Program

Previous Next Menu ABCs of School Choice

Lexie’s Law Corporate Tax Credits

Georgia’s School Choice Program

Previous Next Menu ABCs of School Choice

Georgia Dept. of Education

Special Needs Scholarships

Georgia’s Special Needs Scholarship program was enacted in

2007. The awarded scholarship is equal to the cost of the

educational program the student would have received in public

school.

Just like the proposed eligibility requirements for North

Carolina, an eligible student must have an IEP and is required

to attend public school for one year.

In the 2010-2011 school year, 190 private schools participated

in the program.

Of the 199,500 eligible students in the state, 2,550 students are

enrolled in private schools with an average annual scholarship

amount of $6,271.

Individual scholarship range from $2,453 to $14,287.

*An IEP specifies:

the services the student will receive

modifications the student requires for classes or testing

whether the student needs alternate assessments

which regular education classes the student will take

how much of each school day the student will spend with non-disabled peers

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These requirements must be met in order to qualify for the

North Carolina tax credit:

The student must be certified with an IEP* (Individual

Education Plan)

Must receive special education or related services on a daily basis

Must have been enrolled in public school the previous year (i.e. Fall

Semester then Spring Semester or Spring Semester then Fall

Semester) OR have been receiving special education or related

services through the public schools as a preschool child with

disability

Must be under the age of 22.

Must receive a revised IEP and be reevaluated to determine

continued eligibility every three years

Who will qualify?

Who will not qualify?

A student will be ineligible to receive the North

Carolina tax credit if:

They have graduated from high school prior to the end

of the semester

They have been placed in a nonpublic school or facility

by a public agency at public expense

They have spent any time enrolled as a full-time

student taking at least 12 hours of academic credit in a

postsecondary educational institution

They were 22 or older for the entire semester

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A young adolescent male from Charlotte is having difficulty getting

along with students in his class at school. He was diagnosed with

Oppositional Defiance Disorder (ODD), is on medication for his

condition and has to see a behavior specialist daily. Being prone to

behavioral problems, he is often unable to cooperate with his

teachers and fellow students, and is frequently removed from the

classroom because the teachers do not know how to handle his

temperament.

His parents are concerned that he is not learning to his grade level,

and that his problems cannot be addressed in the classroom.

With a tuition tax credit his parents could afford to send their child to

a school that understands his specific needs.

Within their county is The Keys of North Carolina School, designed

to address behavioral deficiencies in adolescents. If the parents

were able to afford this option, their son would have already been

enrolled. With a tuition tax credit they will finally be able to enroll

their son in a school where he will be understood.

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Program Beneficiary – Case Study 1

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The Smith family in Raleigh has a daughter who has recently

been diagnosed with autism. Like one out of every 73 children

in North Carolina, she suffers from the effects of this disability.

Their daughter was enrolled in first grade last year in a public

school. They are worried about keeping their daughter in

public school after hearing about a number of cases where

autistic children were bullied and were unable to keep up in

their classes.

In Cary, North Carolina, Mariposa School recently opened.

Mariposa’s service is dedicated specifically to autistic children.

After learning about the tuition tax credit, they are excited

about the possibility of enrolling their daughter in a school

where her special needs will be directly addressed. This

would allow them to avoid placing their daughter in a

classroom with special needs students who require vastly

different treatments.

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Program Beneficiary – Case Study 2

Parents of special needs children like the Petruks in

Charlotte are examining their educational options and are

finding out that they have very few. Their son’s placement in

a classroom with 23 other special needs children leaves little

time for the one-on-one instructional needs that are

necessary for his specialized learning requirements.

He has an average IQ but has difficulty learning when there

are more than a handful of people in a room. It is

disheartening for their family to know that there are non-

public educational opportunities and services that are

structured specifically for their child’s particular disability but

they are unable to enroll their child because of financial

limitations. The price is simply too high.

With the proposed tax credit the Petruk family, along with

potentially hundreds of other families, will be provided the

freedom to choose the best educational environment for their

son.

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Program Beneficiary – Case Study 3

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Contact Information

Rep. Paul Stam House Majority Leader

North Carolina House of Representatives

2301 Legislative Building

Raleigh, NC 27601-1096

(919) 733-2962

Paul.Stam@ncleg.net

Christin Danchi Legislative Assistant

Office of Rep. Paul Stam

(919) 733-2962

stamla@ncleg.net