How Scholarship Tax Credits Will Help KY Students – Sen. Ralph Alvarado

As a parent, I know that each of my children has a different learning style and speed. And this is true for parents across Kentucky. Some students need more personalized attention while others need a fast-paced environment that keeps their mind moving at a rapid pace, and that’s okay! With that reality in mind, Kentucky must ensure all students are given the opportunity to learn in an environment that helps them succeed. Scholarship tax credits can help make this opportunity a reality for students across Kentucky.

As I work to make this program a reality in Kentucky, people ask questions like: What are scholarship tax credits? How do they work? Who benefits? All of these are important questions as we move forward on this initiative

Let’s begin with the basics- Scholarship tax credit programs are a form of school choice that allow donors – businesses and individuals – to receive a state tax credit in return for their contribution to a qualified Scholarship Granting Organization (SGOs). SGOs use donated funds to award scholarships to low– and middle– income students who need an alternative to traditional public education. Scholarships can be used for tuition, and basic educational needs, at a non-public school of the family’s choice. Scholarship Tax Credits also benefit developmentally disabled students who can use the funds for school choice and other educational needs.

Under the current proposal, SGOs will be established as 501(c)(3)’s and distribute at least 90% of tax credit eligible contributions to student scholarships. Scholarships are awarded on a needs-basis. Students will be eligible to receive a scholarship if their family’s income does not exceed 200 percent of the guidelines needed to qualify for the reduced-price lunch program. Developmentally-disabled students will be eligible if their family’s income does not exceed 250 percent of the guidelines needed to qualify for the reduced-price lunch program.

The program will be capped at $25 million in the first year and will increase by 25% the following year if 90% of the tax credit is used in the first year. 25 of 28 studies show that scholarship tax credit programs save states money. The 3 remaining studies show a neutral impact on state budgets.

Most important to this issue is how it benefits students. A scholarship tax credit program is all about the kids! This proposal is about investing in the lives of students who are at a disadvantage because of their socioeconomic status. Scholarship tax credits are not about public vs. private schools. Public schools have and will continue to serve students across the state, but for those students who might get lost in the shuffle we need an alternative that will help them grow!

I am proud to support this measure that puts the needs of individual students first! I hope you will continue to learn about the benefits of a scholarship tax credit program. EdChoice KY will continue to release explainers answering questions on the subject. Stay Tuned!

– Ralph Alvarado