BIRMINGHAM, Ala. — The Alabama Accountability Act K-12 tax-credit scholarship program appears to have recovered momentum after a three-year pandemic slump, according to reports filed by the organizations distributing those scholarships.
Both the number of scholarships given and their average amounts have risen.
About 3,600 students used tax-credit scholarships during the 2023-24 school year with payouts totaling $25.8 million, the reports show. All but 14 of those scholarships were used to attend private schools.
That’s up from 2,900 scholarships awarding $19.7 million the previous year, but down from the program’s high of more than 4,000 scholarships. Yearly tuition payouts have ranged from $14.4 million to $26.8 million over the nine years of the program’s existence.
Reports show the average per student scholarship amount paid among all 119 participating schools last year was $5,907, up from $4,899 among 154 schools in 2015-16.
Nationwide, 220,000 students in 20 states attend school using a tax-credit scholarship, according to EdChoice, a nonprofit organization that advocates for school choice.
The Alabama Accountability Act tax-credit scholarship program, the state’s first school choice program, allows eligible K-12 students to get scholarships to use for eligible educational services using money donors contribute to scholarship granting organizations in exchange for donors getting a dollar-for-dollar state income tax credit, up to a certain cap.
The AAA was passed in 2013. It was initially branded as a way to allow low-income students – currently defined as students whose families earn no more than 250% of the federal poverty level – to escape “failing” public schools, as they were initially called, but was revamped to become a school choice program. Scholarships can only be used to pay for tuition and fees for eligible students.
The AAA program ran into many roadblocks along the way, including lawsuits testing its constitutionality and federal tax law changes that made donating less attractive than it previously had been. And then came COVID, which negatively impacted donations and thus fewer scholarships were available.
Scholarships for Kids is the largest of the seven scholarship granting organizations in Alabama. The SGOs distribute scholarships directly to participating schools. Prior to the pandemic, during the 2019-20 school year, it awarded more than 2,100 scholarships. That number dropped to 1,600 during the 2020-21 school year.
While a number of students did return to public school in 2020, in many cases, the private schools where students were enrolled made adjustments so the students could stay. In some cases, schools reduced tuition to keep students enrolled, Scholarships for Kids Executive Director Stephen Bridgers said.
“When we were able to increase our fundraising again, we were able to get a lot of those students back to (the amount of scholarship money) where they were,” he added.
The law has been changed multiple times since 2013: increasing the total amount of tax credits available, adding reporting requirements and expanding eligibility to include students with disabilities.
In 2023, the “failing” school group – which annually identified around 75 schools whose students scored in the lowest 6% of all schools – was replaced with the “priority” school group. A priority school is one that earns a ‘D’ or ‘F’ on the state’s report card. Alabama had more than 200 schools in that group in 2023. Eligible students zoned to priority schools are first in line for scholarships. If SGOs have any scholarship funds available after June 30, those scholarships can go to students not zoned for priority schools.
This year, Sen. Rodger Smitherman, D-Birmingham, sponsored a bill to require priority schools in Birmingham to alert families of other public educational opportunities, including magnet schools, before they leave for private schools. It did not pass. School officials are already required to notify parents of students in priority schools of their options.
Now, as lawmakers consider possible changes to how public schools funding is distributed, he’d like to see the Accountability Act funding in the mix, particularly as it could target priority schools.
In 2022, Gov. Kay Ivey announced a $15 million Turnaround Schools Initiative to help 15 struggling schools. An additional $10 million was allocated for the current year. Two of the turnaround schools are in Smitherman’s district and he said the additional state funding and focus is making a difference.
That program should be expanded to help the other priority public schools, he said.
“We need to find a way to put additional resources into these schools that need it to put them up to where they need to be,” Smitherman told Alabama Daily News.
Opponents of tax-credit scholarship programs like the AAA say the program hurts existing public schools because tax credits mean less money coming in for income tax revenue – the pool that the majority of state school funding comes from. Less money in income tax receipts means less money to spend on traditional public education.
The total amount of tax credits available started at $25 million in 2013, then rose to $30 million in 2015 and stayed at that level until 2023, when it rose to $40 million. That cap on the available tax credits limits the number of scholarships that can be given in any one school year.
With the current per student scholarship amount capped at $10,000 per student, $40 million can furnish a maximum of 4,000 scholarships.
Proponents of tax-credit scholarships claim that beyond offering school choice to families, the state saves money because it costs the state less on a per student basis to give a tax credit than it does to fund public school students.
The table below shows the average scholarship amount given to AAA-participating schools and the average total state funding among school districts for each public school student. Click here if you are unable to see the table.
The AAA law also includes a provision that allows parents to claim a tax credit on their income tax returns if they incur costs transferring their child from a priority school to either a private school or a qualifying public school outside of their zoned school district. The income tax credit available to the parent equals 80% of the state-funded portion of student funding. The other 20% is allocated to the priority school the student leaves.
Parents claimed a total of $99,000 in income tax credits under this provision in 2023 according to the Alabama Department of Revenue, down from $143,000 in 2022.