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Study Released on Tax Credits for Scholarships

Oklahoma City University’s economic research center released a report today on its impact study of the state’s Equal Opportunity Scholarship Tax Credit.

The Opportunity Scholarship Fund commissioned the study from the Steven C. Agee Economic Research and Policy Institute, a research center operated out of the Meinders School of Business at OCU.

The Oklahoma Equal Opportunity Education Scholarship Act, which became effective in 2011, offers state income tax credits in exchange for qualifying donations that provide private school opportunities to primarily low-income K-12 students.

Jacob Dearmon, director of the Center for Data Analytics in OCU’s economic and research policy institute, and Russell Evans, executive director of the institute, led the study. Their team followed a research approach that was used by a similar study conducted in Florida.

“The fiscal impact to the state is determined by the tradeoff of foregone tax revenue and foregone per pupil expenditures,” Dearmon stated in the report. “The purpose of the program is not to avoid education expenditures. Rather, the purpose is to provide support to those Oklahoma families for whom small scholarships tip the balance of opportunity and allow them to pursue what they judge to be a better education for their student. Any fiscal savings are secondary to, but an important by-product of, the program’s primary objective.”

Among its many findings are that the fiscal savings of the program to the state budget are estimated to be $1.24 for every $1 of tax credit issued. A review of donations and scholarships showed that 396 scholarships were distributed in the 2013-14 school year with an average award of $154. The program grew sharply through the 2016-17 school year, which counted 1,459 scholarships with a $1,012 average.

Catholic-affiliated scholarship granting organizations, which in part sponsored the study, learned that they accounted for 29 percent of scholarship donations. Donors can direct their donations to specific schools, but not to specific students.

Oklahoma is one of several states that have a tax credit scholarship program. Under Oklahoma’s program, a tax credit of 50 percent is offered for one-time donations and 75 percent is offered for equal pledge amounts for two years. Credits are capped at $100,000 for qualified business donors, $2,000 for taxpayers filing a joint tax return and $1,000 for individual tax filers. The entire report is available for review at http://www.okcu.edu/uploads/Fiscal-Impact-Study_Scholarship-Tuition-Tax-Credit.pdf.