Since 2013, some parents of Alabama K-12 kids have enjoyed a broader range of school choice options than in the past, thanks to the creation of a tax credit scholarship program, as well as the introduction of refundable tax credits for those whose children attend underperforming public schools. 

Created after the passage of the Alabama Accountability Act of 2013, nonprofit scholarships granting organizations (SGOs) like the Alabama Scholarships for Kids program have been working directly with private schools — including those in Cullman — to drive tax-free donations for the program. 

But thanks to a wrinkle in federal tax policy that closed during the 2019 tax year; one that resulted in fewer donations overall, the number of available local scholarships has diminished as students head back to school in 2020. That one-year slowdown will likely be exacerbated for at least an additional year, as would-be donors grow more hesitant amid the volatile economy created by the coronavirus pandemic.

“We had to do a little belt-tightening this year,” explains Warren Callaway, an administrator for the Birmingham-based Scholarships for Kids nonprofit. “We didn’t grant any new scholarships this year, and statewide, some of the schools had to take some pretty serious cuts. That means either cutting some kids loose this year, or taking cents on the dollar for partially-funded scholarships that at least allow a student to remain at their chosen school.”

The largest of the state’s seven SGOs, Scholarships for Kids currently works with both St. Bernard Preparatory School and Sacred Heart School to award scholarships from the donor-driven program. In years past, statewide donations have fully filled the coffers of the legally-capped $30 million pool of funds available for scholarships. But the 2019 dip left $14 million of that tax year’s funds unused, and Callaway says this year’s extraordinary economic circumstances, fueled by erratic employment numbers related to the coronavirus pandemic, could spell a similar fate for next year.

“There’s such a distraction for donors because of the economic disruption we’re in right now, and I’m very concerned that the 2020 tax year may be equally bleak,” he explains. If it is, it’s really going to hurt the program overall. For that reason, I’m really trying to go harder to drive corporate donations, even though, in the past, we’ve kind of built our fundraising on individual donors.”

The Alabama Accountability Act certainly offers a strong incentive to donate, for both individuals and corporations.  “It’s absolutely a net zero contribution for the donor,” says Callaway. “A donor can give up to 50 percent of his state income tax liability, up to a maximum of $50,000. And a corporation could give up to 50 percent of their state income tax liability, but without a cap. In other words, if a company wanted to donate $1 million, $500,000 of that would be clear from any income tax liability.”

While each SGO goes about the process of raising and awarding funds differently, Scholarships for Kids aims to return as much scholarship money as it can back to the communities where the money was originally raised.

“Under the law, we can’t assure a dollar-for-dollar placement of every scholarship,” says Callaway. “But what we try to do, and what I tell potential donors, is that if they’re passionate about St. Bernard or another school that we work with, we’ll work hard to keep the money in the community where it came from. When we raise money from Cullman County, we try to make sure that’s where it ends up.”

Even in a good economic year, $30 million might sound like a lot of money — but it’s comparatively small when viewed against the state’s annual schools budget, which this year eclipsed $7.2 billion from the Education Trust Fund. By virtue of his position alone, Callaway would of course be an advocate for school choice. But he believes there’s real value in what the scholarships program does, regardless of whether it’s funneled through his nonprofit. 

“This is a program for below-average income families, and it gives them some of the same school choice opportunities as middle and high-income families, if their children need a different setting,” he says. “There are a lot of children who don’t thrive or fit in a public school for any number of reasons, whether it’s learning issues, bullying issues, or just the need for a smaller classroom environment. 

“And I believe that it’s cost-effective: the State of Alabama, according to the Department of Education Website, spends about $10,000 per year on each student, and we’re sending 2,200 kids per year to private schools all over the state for an average per-child cost of $6,400 per year. I think our program is an exceptional bargain for the taxpayers of Alabama, and I certainly don’t believe that diverting what amounts to half a percent of income tax revenue that would go into the Education Trust Fund is doing any overall harm to public education.”

Callaway hopes the scholarships program will bounce back from the current phase of diminished donations, and stresses what he feels is a win-win proposition — both for givers, as well as the students who end up going to the school of their choice. 

“This program has been around for eight years now. Some of those early kids who’ve come through it are graduating and going on to college — often in circumstances where, otherwise, that simply wouldn’t have been an option,” he says. 

“I just see the fruits of this program literally changing the trajectory of kids’ lives. $30 million can fund about 4,000 scholarships a year — not just for our organization, but all of the state’s SGOs. And if you’re a donor, you get it all back…and in our case, you get to see it come back to Cullman County.”

Benjamin Bullard can be reached by phone at 256-734-2131 ext. 234.