The Buzz

SC lawmakers move to ban private school-choice nonprofits

Lawmakers want to ban the most successful – and controversial – nonprofit in the state’s private school-choice program along with other private groups that work to raise money for the $12 million-a-year program.

State budget writers have agreed to ban the Palmetto Kids First Scholarship Program and three other nonprofits from raising money to help students with disabilities pay private-school tuition. Those donations qualify for a state tax credit.

Driving the reforms are questions lawmakers and the state have raised about Palmetto Kids First – the largest and most successful nonprofit, and the subject of a recent Revenue Department audit.

If the proposal becomes law, the state would create a charity fund at the S.C. Department of Revenue to accept donations for the program. The scholarship groups would have to hand over any remaining donations they have as of July 1 and cease operation by Aug. 1.

A five-member board of directors – appointed by House and Senate finance leaders and the governor with input from private school organizations – would run the fund and distribute grants under the proposal.

Supporters of the proposal, which is close to becoming law as part of the new state budget, say the changes will give the program more oversight.

“There were some things that got back to me (about the program’s operation) that were disturbing,” said House Ways and Means Committee chairman Brian White, R-Anderson.

White said schools have called him with concerns about how scholarships were being distributed, adding, “Something has to change for the integrity of the credit (and) the children who need it.”

But some lawmakers say the program is working and changing it could jeopardize money flowing to tuition grants.

“In programs like this, you want to have participants that are aggressive and really are passionate and who are out there finding donors,” said state Sen. Tom Davis, R-Beaufort.

To keep the private-school program running, Davis says he supports the changes. But he would have preferred allowing the nonprofits to continue operating.

“My concern is that we end up not getting as much donations as in years past, and that, in turn, leads to less scholarships available for kids.”

Olga Lisinska, the executive director of Palmetto Kids First, says the changes amount to a government takeover – “a huge blow to our children” that “has thrown families and schools into disarray.”

Palmetto Kids First, a Mount Pleasant-based nonprofit, has dominated fundraising for the program, distributing $17 million in tuition grants since 2014.

Lisinska said she thinks the changes in the program are aimed at eliminating her nonprofit, which the S.C. Department of Revenue recently audited.

The Revenue Department said Palmetto Kids First awarded tuition grants to children whose parents donated to it. That kind of quid-pro-quo arrangement violates the law and could have disqualified the nonprofit from operating, the audit said.

Some taxpayers who donated to Palmetto Kids First also broke tax rules, claiming tax credits when their children also received scholarships, state tax officials said.

Lisinska disagrees with the audit’s findings. But, she added, the nonprofit has addressed “all operational concerns the department has presented,” ending the practice of issuing grants to donors and accepting donations from grant recipients.

But lawmakers say the changes are necessary.

“Students with disabilities and special needs should always receive fair consideration when applying for scholarships,” said House Speaker Jay Lucas, R-Darlington.

“Concerns have been brought to the Legislature’s attention, which raise significant questions regarding the objectivity of our (scholarship granting organizations’) scholarship distribution,” Lucas said, adding the changes will “put these concerns to rest.”

White, the House budget chief, said his goal is to continue providing scholarships to students now receiving them. “We do not want to drop kids off the program that are currently on there,” he said.

White said he also will push to make the program permanent next year – something he said lawmakers, including himself, would not support with the program structured the way it is now.

“For the integrity of the program, which was needed, we felt it was best to ... take over the program.”

Changes in the S.C. private-school choice program

In the budget that starts July 1, lawmakers have agreed to authorize $12 million in tax credits for S.C.’s private-school choice program, including $10 million in credits for donations made to a tuition-grants fund and $2 million in credits for private-school tuition paid by taxpayers. The proposed changes are part of the state budget, which lawmakers are close to adopting. The proposal would:

▪  Eliminate nonprofit scholarship-granting organizations that have been raising money and distributing private-school tuition grants since 2014

▪  Create a charity fund within the S.C. Department of Revenue to collect donations for the program

▪  Create a five-member board of directors, appointed by House and Senate finance leaders and the governor, to oversee the fund, including the distribution of grants

▪  Increase the cap on a tuition grant to $11,000 from $10,000

▪  Explicitly ban a taxpayer whose child receives a tuition grant from claiming a tax credit for the amount of that tuition grant. (The S.C. Department of Revenue says state law already banned taking a tax benefit for a charitable donation if the taxpayer receives something of equal value in return.)