Panel Members Eye Transparency, Income Tests

Members of a legislative task force starting a review of an income tax break provided for donations for private school scholarships said Monday they want to instill accountability in the program and focus it on helping students who aren't wealthy.

"We need grater transparency so that citizens of Arizona can see what's being done with these funds," said Rep. Rich Crandall, a Mesa Republican who is a certified public accountant and a former school board member.

The bipartisan task force formed by House Democrats met Monday for the first time, hearing presentations on the 12-year-old income tax credit for individuals' donations to groups providing scholarships.

The program provides a dollar-for-dollar state income tax credit for donations to Arizona nonprofits that provide scholarships to students attending private schools.

Arizona's first-in-the-nation program was enacted in 1997 after school-choice backers were unable to win approval for voucher proposals. A state corporate income tax version for businesses' donations was created in 2006.

Proponents told lawmakers in 1997 that the program would help provide low-income children with more options for education, and the task force's chairman said Monday there appears to be consensus for installing scholarship eligibility standards based on students' financial need.

"It was intended to help affordability," said Rep. David Schapira, D-Tempe.

House Democratic leaders recently formed the task force after two newspapers published investigative reports that revealed what one lawmaker referred to as "troubling aspects" associated with the program.

Those included findings that school tuition organizations permit individuals to earmark donations for specific students, scholarship groups are not being required to consider financial need of students, and minimal oversight by the state.

"Basically, public dollars demand public accountability," said Rep. Nancy Young Wright, a Tucson Democrat who is a former school board member.

The individual income tax credit law disallows credits if a donation is designated for a scholarship to a dependent of the donor, but some groups permit other relatives, friends, business colleagues and others to make donations designated for particular students.

An expert on the law said at least some of those designated donations could jeopardize a scholarship's nonprofit status because the donor would be receiving something in return for the donation. Such donations should be barred, said Lawrence Mohrweis, a Northern Arizona University accounting professor and the volunteer head of a Flagstaff-based STO.

The task force met amid a measure of controversy, with a lobbyist for a group of scholarship groups saying Monday the organization would work with an official House committee recently announced by House Speaker Kirk Adams, R-Mesa, but not the unofficial, Democratic-led effort.

Democratic lawmakers in the past suggested amendments "to gut the bill, not improve the program," said Sydney Hay. "So they removed themselves from the table. We long for the day when school choice is not a partisan issue."

"I'm not one of those folks," Schapira said when asked about Hay's criticism. He said he hadn't sponsored any amendments on the program.

The task force is not out to repeal the tax-credit program, Schapira said. "But at a bare minimum, we would like to see some reforms."