Thursday, January 23, 2003
RE: Cost Impact of Tuition Tax Credit

CONTACT: Mike Jerman, Vice President, 972-8814 or 808-8814 (cell)
Utah School Boards Association’s Study Inadvertently Supports Tuition Tax Credits
“The Utah School Boards Association’s recent analysis of the impact of a tuition tax credit is a major victory for those who support tuition tax credits, although that was not the intent of the USBA report”, said Mike Jerman, Vice President of the Utah Taxpayers Association.”
The USBA’s analysis clearly demonstrates that the variable cost per student, which is approximately $2,500 for a typical suburban Utah school district and is funded almost entirely by non-federal sources, is greater than the proposed tuition tax credit amount, $2,132. In other words, when a student leaves the public system, the forgone costs of educating the student are greater than the forgone revenue from the tuition tax credit. This creates a net savings to the public education system which increases per student spending.
However, even though USBA correctly identified that a significant portion of education costs are variable, USBA arrived at the wrong conclusion regarding the impact of tuition tax credits. USBA mistakenly compares the variable cost per student with the revenue each district receives for each student. To determine the actual savings, the appropriate comparison is the variable cost per student and the amount of the tuition tax credit. If the variable cost is higher than tuition tax credit amount, then the available per student funding increases even though the aggregate spending decreases.
“USBA acknowledges that not all education costs are fixed, in contrast to what opponents of tuition tax credits have been maintaining for years,” Jerman said. In fact, the USBA methodology for determining variable costs is similar to the method used by the Utah Taxpayers Association. Some costs, facility maintenance for example, are primarily fixed, especially in the short term. Other fixed costs include debt service, but these are paid with property taxes and are not impacted by income tax credits and student enrollment. However, instructional costs are variable, as the USBA’s analysis confirms, and are greater than the amount of the proposed tuition tax credit.
Fortunately, the USBA’s analysis does away with the “one-student” argument, frequently used by opponents of tuition tax credits, which states that there are no savings associated with one student leaving the system. The tuition tax credit proposal is not about one student but rather thousands of students choosing alternatives outside the public system. When thousands of students leave the public system because of a tuition tax credit, the savings are real.
Tax credit opponents have claimed that students using a tuition tax credit must all come from the same neighborhood so that a school can be closed. However, the USBA analysis refutes this claim, noting that instructional costs are variable which means that fewer instruction personnel are needed as enrollment declines.
“Comparing the variable cost per student to the tuition tax credit amount demonstrates that tuition tax credits are financially beneficial to public education, but even this is a worst case scenario because this assumes that students using the tuition tax credit will come from base enrollment” Jerman said. In reality, most students using the tuition tax credit will come from student growth which means that actual savings will be even larger. To accommodate enrollment growth entirely within the public sector, taxpayers will have to build 170 new schools and hire at least four thousand new teachers and spend nearly $6,000 per student per year to do this. “If a portion of the anticipated enrollment growth can be diverted to the private sector with a $2,100 tuition tax credit, taxpayers will save nearly $4,000 per student” Jerman added.
“The opposition to tuition tax credits ultimately has nothing to do with dollars as demonstrated by the lack of opposition to charter schools” Jerman said. Charter schools, which compete against existing public schools, receive more dollars per student than parents of private school students will receive from a tuition tax credit.
“In the interests of Utah’s children, parents, employers, and taxpayers, the legislature and Gov. Leavitt need to approve a meaningful tuition tax credit bill this year” Jerman said.