Education tax credit to expand in new Pa. budget

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Posted: Friday, June 22, 2012 5:30 am

Associated Press | 3 comments

HARRISBURG, Pa. (AP) — A nearly $27.7 billion state budget taking shape in the Pennsylvania Capitol includes a substantial expansion of a tax credit available to businesses whose contributions can be used for scholarships to private schools, top state Republican lawmakers and legislative aides said Thursday.

The Educational Improvement Tax Credit, which is popular with the school choice movement, will potentially double to $150 million from the $75 million set aside in the current year's budget. It would be one of the largest expansions of a discretionary program from the budget that's in force now.

The exact amount available for the fiscal year that begins July 1 is still being decided on by budget makers, said Senate Majority Leader Dominic Pileggi, R-Delaware.

Many details of the spending plan agreed to Wednesday evening by Gov. Tom Corbett and his fellow Republicans who lead the state Legislature remain under wraps while work is finished on it behind closed doors. But the approximately $400 million increase in spending is largely attributable to rising costs for health care and public employee pension costs.

But Republicans are making more room for the tax credit at the same time that they are planning to hold public school funding level and eliminate a decades-old cash benefit that provides $200 a month for poor adults who are disabled and temporarily unable to work. Business taxes also would be cut by $275 million.

Senators are pressing to include an additional $50 million to help schools nearing financial collapse, although that money may be in the form of zero-interest loans, rather than the traditional school aid that a school district is not asked to repay.

The expansion of the tax credit, not to mention the entire 2012-13 budget, must still be approved by the full House and Senate. Expanding the tax credit is being viewed as a compromise among Republicans over a school voucher bill that was supported by Corbett, but collapsed in the House after narrowly passing the Senate in October.

Some of the extra money would go toward expanding the tax credit program to help students in the state's worst-performing schools, a concept similar to the theme of the school voucher bill.

"The goal would be to try and reach a $50 million limit for this pool of funding that would be dedicated to the children trapped in the worst performing schools," Pileggi said.

Eligible schools would be those whose student test results were among the lowest in the state, mostly in Philadelphia, Pittsburgh, Allentown, York, Harrisburg, Chester and Reading. Both private and public schools that have room to accommodate new pupils and are willing to participate would grant the scholarships to the children, who would receive aid on a first-come, first-served basis.

It's not clear how many children would be served under the program, and budget makers have made no final decision on how to define the worst-performing schools or the income limits for the families of scholarship students, Pileggi said.

The credit is applied against the tax liability of a business for the tax year in which the contribution was made. It is generally worth up to 90 percent of the philanthropic contributions by businesses to eligible nonprofit groups that provide scholarships and grants to private and public schools.