FL’s school choice scholarship program is far cry from a ‘moneymaker’

FEA Vice President Joanne McCall
FEA Vice President Joanne McCall

Florida Education Association Vice President Joanne McCall has an obvious motive to discredit the nonprofit that administers a scholarship program she is suing, but her recent claims about its spending practices are nonsensical. Since they also track a growing teacher union narrative suggesting misappropriation in the tax credit scholarship programfor low-income students, they’re worth addressing.

First, the new claim. Asked to respond to a full-page advertisement in the Tallahassee Democrat from a diverse coalition of faith, community and education leaders that urged FEA to drop its lawsuit, McCall told SaintPetersblog: “About 3 percent of that scholarship money is being used to do this media campaign, and I’m not sure that taxpayers want their money used for that.”

The money for the scholarship, now in its 13th year and serving nearly 69,000 underprivileged students, is raised and distributed almost entirely by Step Up For Students, the nonprofit that also co-hosts this blog. So the implication is that Step Up is robbing from scholarship students to support a newspaper advertisement or media campaign that, by her math, would cost $10.7 million this year.

Since my own paycheck is from Step Up, I, too, have an obvious motive to try to discredit. But SaintPetersblog editor Peter Schorsch beat me to it. The claim was so preposterous that he apparently gave McCall the opportunity to edit her own quote. She declined, sparking Schorsch to call her “reckless” and “desperate.”

Unfortunately, it’s also becoming par for the course.

To set the record straight, the advertisement was financed by a group called HCREO, or Hispanic Council for Reform and Education Options. The ad was placed by a top-drawer communications consultant, Sachs Media Group, that is being paid by the Alliance for School Choice, a national education advocacy group that is fighting the lawsuit. In other words, neither the ad nor the Sachs contract is being financed by Step Up.

The 3 percent, though, is not a number McCall pulled from thin air. Under Florida law, state-approved scholarship organizations that operate for three full years with clean audits are then allowed to keep up to 3 percent of the tax-credited scholarship contributions in subsequent years to pay for administrative expenses. Given that the scholarship program this year is $357.8 million, that administrative allowance is now $10.7 million.

The FEA has likened that allowance to a management fee or even a profit. At its announcement of the lawsuit in August, FEA attorney Ron Meyer went so far as to call the program “a moneymaker for scholarship funding organizations.”

If Meyer’s assertion were true, Florida would have nonprofits lined up to get a piece of the action.

As in other states with tax credit scholarships, Florida allows any qualified nonprofit to apply and serve. Georgia has 30 such organizations, Arizona has 48, and Pennsylvania more than 200. Yet Florida has two (AAA Scholarship Foundation this year raised $600,000). The difference in Florida is that the law asks much more administratively of its scholarship organizations and provides them with much less.

Every other state scholarship law provides at least a 10 percent administrative allowance, except for Alabama with 5 percent, and none requires non-profits to operate for three years with no compensation. Step Up operated for six years with no allowance, and has raised more than $17 million from private foundations and philanthropists to supplement the state allowance, including $500,000 this year to kick off Personal Learning Scholarship Accounts for students with special needs (the Legislature provided no funding for participating scholarship organizations).

The administrative work of delivering and monitoring scholarships is labor intensive, and Step Up currently employs 97 full-time staffers and 27 seasonal workers. It must verify the income and household size of every family every year; assure that all participating schools have received state approval; verify attendance of each student four times a year; submit a full audit; receive a full audit by the State Auditor General; post a surety bond to cover scholarship outlays; review financial reports submitted by every school that receives more than $250,000 in scholarships; coordinate the collection of standardized test scores each year; and raise the scholarship money from corporations that receive 100 percent tax credits for their contributions.

The size of the workload is also driven by the growth in student enrollment, which this year would rank the program as the state’s 11th largest school district – not including the 1,100 students on PLSAs. That means, for example, that in 2013-14, Step Up received 94,104 student applications, handled 119,455 calls in its three-language contact center, processed tens of thousands of pieces of mail, and distributed roughly 250,000 checks.

Step Up makes for a convenient villain for a union that hesitates to demonize the poor children who benefit from the scholarship. But the notion that the scholarship is a moneymaker for nonprofits is quite a stretch.

(NOTE: For those who want greater detail, Step Up’s most recent IRS tax return is here and its audit here.)

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BY Jon East

Jon East is special projects director for Step Up For Students. Previously, he was a member of the editorial board and the Sunday commentary editor at the St. Petersburg Times, Florida’s largest daily newspaper, where he wrote about education issues for most of his 28 years at the paper. He was also a reporter and editor at the Evening Independent and Ocala Star-Banner. He earned a journalism degree from the University of North Carolina at Chapel Hill.