Understanding the Opportunity Scholarship Act

Education, Policy — By Paul Tyahla on January 31, 2011 at 11:28 AM

Landmark school choice legislation is advancing through the New Jersey Legislature. The Opportunity Scholarship Act would provide tax credit scholarships to up to 40,000 low-income students in chronically failing schools that can be used at participating public and non-public schools of the student and their family’s choice. The bill (S-1872/A-2810) has been approved by two committees in the New Jersey Senate and is scheduled to be considered by an Assembly panel on Thursday, February 3rd.

To help New Jerseyans better understand the legislation, the New Jersey School Choice Alliance has answered some Frequently Asked Questions,

The Opportunity Scholarship Act (OSA) Pilot Q&A

What is the OSA?

The Opportunity Scholarship Act (OSA) is a pilot corporate tax credit scholarship bill that will fund scholarships for low-income students attending the state’s lowest performing, chronically failing public schools. The scholarships would enable students to attend out-of-district public schools, or non-public schools anywhere in the state, that choose to participate in the program.

How is the OSA funded?

Corporations eligible to pay the corporate business tax (CBT) in New Jersey would be allowed to take a 100% tax credit against their CBT obligation for donations made to the OSA scholarship fund.

Who is eligible to receive a scholarship?

A low-income student attending a chronically failing public school in one of the pilot districts as defined by The Act. There are 130 such schools in the bill’s 13 pilot districts. Low-income is defined as no more than 2.5 times the federal poverty level, based on family size. For example, a family of four to be eligible to participate, their income could not exceed $55,000 annually. 25% of the scholarships are also available to low-income students attending non-public schools in the 13 pilot districts.

Is the NJ State Budget affected by the loss in State revenue from the tax credits granted to participating corporations?

NO. The program is revenue neutral to the state and revenue positive on a per pupil basis to the pilot districts. The total tax credits allowed under the program will be offset by a reduction in total state aid to the pilot districts for the costs of the program, and (The Office of Legislative Services estimates that) over $340 million will be returned to these districts for 30,000 students they no longer have to educate.

Are there programs like the OSA in other states?

The OSA is modeled on Pennsylvania’s highly successful Educational Improvement Tax Credit program. The program is oversubscribed by businesses annually, with over 2,300 companies contributing $260 million to date, allowing 33,000 Pennsylvania children over the life of the program to attend participating schools of their parent’s choosing. Other states with such programs are Arizona, Rhode Island, and Florida.

Additionally, states like Ohio and Florida have also passed scholarship programs targeted at students in chronically failing schools. Over 80,000 students are currently enrolled in Ohio’s EdChoice scholarship program.

Are there other programs like the OSA in New Jersey?

Both in New Jersey and nationally, there is a well-established history of government funding for students to attend public or non-public schools of their own choosing. In New Jersey, children can attend preschools, special education providers, and colleges chosen by their families and paid for by the state.

Additionally, New Jersey has a long history of tried-and-failed urban education reforms. The children in the state’s worst schools, and those who attend the 130 in the pilot districts, should not have to wait one more day to gain access to functioning schools, wherever they may be.

What districts with Chronically Failing Schools are identified in the OSA pilot?

Thirteen districts have been identified for the OSA pilot. They are Asbury Park, Camden, East Orange, Elizabeth, Jersey City, Lakewood, Newark, Orange, Passaic City, Paterson, Perth Amboy, Plainfield, and Trenton.

How are the chronically failing schools in these districts performing?

A chronically failing school is one where 40% or more of students failed both the state’s math and language arts assessments for the last two years, or 65% or more of students failed either of these same tests for the last two years. There are 130 of these schools in the pilot districts.

Is government aid to private and religious schools constitutional?

Such aid is constitutional because it is not given to a nonpublic school, but instead to parents themselves, in order to make a free choice about their child’s education. In the 1996 US Supreme Court decision in Zelman v Harris, the provisions of the Cleveland, Ohio, school choice program were upheld using this same reasoning. The OSA is consistent with this principle.

Since the inception of the Elementary and Secondary Education Act in1965 under President Johnson, federal aid has been given to nonpublic school students in the form of compensatory education, computers, and other services and materials. Successors of ESEA (currently the No Child Left Behind Act) have maintained this aid. The Individuals with Disabilities Education Act (now known as IDEA) created a “proportionate share” for nonpublic school pupils, with the restriction that the dollars not be an entitlement but rather aid that could be used for one, many, or all classified nonpublic pupils in a district.

State services to nonpublic school students in the form of transportation, compensatory education, aid to classified students, textbooks, and nursing services have been provided for 30-40 years (depending upon the program), using the federal guidelines for administration of the services. No money is ever given to the school because the school serves only as the conduit to facilitate these services to the student.”

In addition, New Jersey’s Tuition Aid Grants (TAG) program also allows students to select non-public and religious colleges and universities with public funding.

How is the program managed locally?

The OSA provides for the creation of Scholarship Organizations (S.O.). A board with one member appointed by the Governor, one by the President of the Senate, and one by the Speaker of the Assembly will choose the S.O.s There will be three S.O.s, one in the north, one central and one in the southern region of the State, with one being designated the lead S.O. to handle the allocation of scholarship funds. The S.O. will be responsible for a variety of tasks related to the implementation of the OSA program including:

(1) managing the scholarship application process for the pilot school district;
(2) reviewing and verifying the residence and income of a scholarship applicant;
(3) compiling an inventory of vacancies in participating schools available for potential scholarship recipients;
(4) conducting necessary student selection lotteries;
(5) monitoring the enrollment of scholarship students in eligible schools and allocating scholarship funds to those schools.

What assurances are in the OSA to guarantee equal access and student civil rights?

The OSA specifically prohibits any discrimination on the basis or race, academic ability, disability, or athletic ability during the admissions process. In fact, participating non-public schools are held to the same standards as traditional public schools in this regard. The OSA does, however, allow for single-gender schools to admit students based on their gender.

What if more students apply for scholarships than there are spaces in their grade levels available at a participating school?

In the event that more children apply for admission under the pilot program than there are openings at a participating school, a lottery will be used to determine which children are selected for admission, except that preference for enrollment may be given to siblings of students who are already enrolled in the participating school. This process is the same as NJ Charter Schools must follow.

How much are each of the scholarships worth?

At a minimum, scholarships are worth the audited cost to educate a student at a participating school. At a maximum, scholarships are worth the higher of a percentage of the average per-pupil costs in all pilot districts with chronically underperforming schools, or $8,000 for students in grades K-8, and $11,000 for high school students.

What if the actual tuition is more than the amount of the scholarship?

Participating public and non-public schools must accept the scholarship as payment in full. The OSA forbids participating schools from charging families any more for tuition than it receives from the program’s scholarships.

Can students already enrolled in non-public schools participate?

No more than 25% of scholarship dollars can be used by low-income students who live in the pilot districts and attend participating non-public schools. The remaining 75% will provide scholarships for students currently attending chronically failing public schools in the pilot districts. If there are any scholarship funds remaining after public school students in chronically failing schools have applied, any low-income student residing in a district with a failing school may apply for a scholarship.

How will we make sure there are no “fly-by-night” schools participating in the OSA pilot?

Bill sponsors have added extensive language to the legislation to define the quality of participating nonpublic schools:

(1) the school has been in operation for at least five years, and has sufficient financial reporting;
(2) the school was founded within the prior 12 months by an operator of an existing school that qualifies; or
(3) the school is a current member of the New Jersey Association of Independent Schools.

b. The NJDOE Commissioner may grant approval to a school that does not meet the requirements of subsection a. of this section if the nonpublic school submits an application containing the following information:

(1) a statement of the school’s objectives and a written strategy for meeting those objectives;
(2) information that demonstrates the school’s financial viability;
(3) a list of faculty that includes information regarding each individual’s educational attainment and relevant work experience;
(4) a statement regarding the adequacy of the school’s facilities and equipment;
(5) documentation that the school has been determined by the federal Internal Revenue Service to be qualified as a tax-exempt organization pursuant to paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.501); and
(6) a list of current board members, their affiliations, and terms of service.

c. As a condition of receiving approval to enroll a scholarship student, a nonpublic school shall require a criminal history record check of final candidates for employment in accordance with the procedures established pursuant to P.L.1989, c.229 (C.18A:6-4.13 et seq.).

d. A nonpublic school shall submit the results of the most recent assessment administered by the nonpublic school of its students to the Commissioner of Education. The commissioner shall establish performance criteria that must be met by the nonpublic school students in order for the school to be approved to enroll a scholarship student. The commissioner shall not approve a nonpublic school to receive a scholarship student if the nonpublic school does not administer an assessment to its students.

Will there be a study or report done on the effectiveness of the OSA pilot program?

Yes. The OSA provides for a study to be performed by researchers with expertise in urban education, exploring such topics as:

(1) the academic achievement of scholarship recipients based on test results and other educational indicators;
(2) the impact of the pilot program on achieving savings for State taxpayers;
(3) the impact of the program on student enrollment patterns; and
(4) parental satisfaction with the pilot program.

Are there any admissions tests required at participating private schools?

No. Participating private schools are forbidden from using entrance exams to determine school admission. However, these schools may assess students at their time of entry to determine their educational levels so they may be better served academically.

Will the participating private schools have to give standardized tests like the public schools?

Yes. Under the OSA, any participating, non-public school must administer the same tests given by the New Jersey Department of Education to scholarship receiving students that they give to students currently enrolled in public schools. Students who are currently enrolled in nonpublic schools who participate must take a State assessment in the first 30 days so their growth can be measure in the first year.

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