Press Release

Tax credits for special-needs students would help North Carolina

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RALEIGH – North Carolina could save millions of dollars, improve student performance, and boost parent satisfaction by adopting new education tax credits for special-needs students. That’s the conclusion of a new John Locke Foundation Spotlight report.

Click here to view and here to listen to Terry Stoops discussing this Spotlight report.

The report arrives as legislators consider the merits of House Bill 388 and Senate Bill 2059, which would create a refundable special-needs education tax credit. “Our public schools are struggling to provide a quality education to thousands of special-needs students,” said report author Terry Stoops, JLF Education Policy Analyst. “A new tax credit would help parents choose the best options for those students. The result would be good news for the students, their parents, and the taxpayers.”

The state’s public schools are spending $960 million this year in state and federal tax funds for students with physical, emotional, or educational disabilities, Stoops said. “Almost 70 percent of that money comes from state taxpayers,” he said. “The General Assembly’s budget for special-needs students has grown from $501 million to $663 million in the past six years, even though the number of special-needs students has declined since 2004. The state serves 3,700 fewer special-needs students today than it served four years ago.”

Despite the growth in state funding, special-needs students fare much worse in public schools than their peers, Stoops said. “For the 2006-2007 school year, less than half of high school students with disabilities graduated within four years,” he said. “And that’s no one-year aberration. The 49.5 percent graduation rate was nearly the same percentage as the year before.”

Special-needs students also score much lower than their peers on standardized tests, Stoops said. “Only 40.7 percent of elementary and middle school students with disabilities were proficient in math, while 57.6 percent were proficient in reading,” he said. “The gap in proficiency between students with disabilities and students with no disability was a staggering 29.5 percent in math and 32 percent in reading.”

Parents also support the option to send their special-needs children to the school or facility of their choice, Stoops said. “In a May 2008 poll of 521 likely North Carolina voters, 76 percent favored a tax credit that allows special-needs children to go to the school of their choice, and 80 percent supported the special-needs tax credit legislation recently proposed by state legislators,” he said. “Similarly, 74 percent of respondents favored a scholarship for special-needs children. Overall, there was very strong support for tax credits and scholarships for special-needs children, and that support was consistent across political party lines and among various demographic groups.”

Last year, a bipartisan effort to promote special-needs education tax credits led to House Bill 388, Stoops said. “The four primary sponsors are two Democrats and two Republicans,” he said. “Seven Democrats and seven Republicans are co-sponsoring the bill. Those 18 sponsors represent districts across the state with a wide range of political perspectives. The credits appeal to people across the political spectrum.”

This year, 10 senators representing both parties have signed on to Senate Bill 2059.

The proposed legislation would offer a refundable tax credit of up to $3,000 per semester for the amount the taxpayer paid for tuition and other educational and therapeutic expenses. Parents would qualify if their students enrolled in a public school for at least two semesters and have an individualized education program that requires at least daily special instructional or therapeutic services received outside the regular classroom.

“The General Assembly’s Fiscal Research Division says that as more parents of special-needs students take advantage of the tax credits, the state would save more money,” Stoops said. “Once at least 5 percent of public school special-needs students transfer to a private provider or facility thanks to these tax credits, the state would save at least $3 million a year. Savings are greater as more public school special-needs students take advantage of the credits.”

Thousands of students across North Carolina would benefit from a special-needs tax credit, Stoops said. “As special-needs students struggle in North Carolina’s public schools, it’s regrettable that parents have little choice but to continue to send their children to educational environments that are not designed to meet their needs,” he said. “After all, if a one-size-fits-all public school is an unproductive environment for mainstream children, it is even more detrimental for students who require an alternative or adapted educational environment.”

Terry Stoops’ Spotlight report, “Special-Needs Tax Credits: Giving parents a choice in education,” is available at the JLF Web site. For more information, please contact Stoops at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].

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About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.