Nebraska Proposes Funding Private K-12 Scholarships

LINCOLN — The architect behind Nebraska’s recently enacted Opportunity Scholarships Act recognizes the potential voter backlash looming in the upcoming November election against the state tax credit supporting students enrolled in private K-12 schools.

State Sen. Lou Ann Linehan from Omaha, along with other proponents of the school choice legislation, have crafted multiple bills this year to safeguard the essence of the program regardless of the election’s outcome. Each measure aims to offset the expenses associated with a private K-12 education using state tax funds.

Most recently, Linehan has centered her efforts on Legislative Bill 1402 as the primary avenue for implementing the proposed adjustments. Originally devised to transfer the scholarship program established under the Opportunity Scholarships Act to the State Treasurer’s Office away from non-profit scholarship-granting organizations.

Through her latest adjustment, Amendment 3016 to LB 1402, Linehan reinforces the intention of school choice proponents to directly allocate state resources for private school scholarships instead of channeling them through external scholarship entities, effectively eliminating any intermediaries.

Public school advocates view Linehan’s initiatives as an attempt to silence public opinion. They argue that Nebraskans oppose the allocation of public funds towards private schools, whether through a tax credit mechanism or direct appropriations. Concerns arise that the revised amendment could instigate a voucher system, potentially diminishing state allocations for public education or other essential priorities more swiftly than anticipated under the Opportunity Scholarships Act.

Choices for students or financial maneuver?

Linehan and other proponents of private schools emphasize that scholarships offer economically disadvantaged students and their families additional educational options. One of the major scholarship-granting entities, Opportunity Scholarships of Nebraska, disclosed on Monday that it had received 915 applications.

Anticipating up to 2,500 applicants by the April 30 deadline, the organization shared that inquiries from families of over 5,000 interested students have been received, including many from households with students already enrolled in private schools.

Linehan’s 2023 legislation on school choice introduced a dollar-for-dollar tax credit for contributors to scholarship-granting organizations supporting low-income students in attending private K-12 institutions.

Contrarily, public school advocates, such as Stand for Schools Nebraska, argue that the tax credit disproportionately benefits the wealthy at the state treasury’s expense. Linehan and her allies contend that they have steadily increased state aid to K-12 public schools in recent years, establishing a new baseline of state assistance while proposing additional aid increments.

Amendment 3016 lays the groundwork for a novel program that would remain operational even if voters oppose the original law. By reducing the involvement of scholarship-granting groups and donors, the amendment aims to ensure sustained funding for private school scholarships.

“I am committed to ensuring that all Nebraska parents have access to educational choices,” Linehan affirmed. “Not just affluent families… Not just those fortunate to receive assistance from grandparents.”

Expressing concern over the financial scrutiny likely to confront the Opportunity Scholarships Act, Linehan acknowledged a potential funding shortfall for combating opposition in the upcoming November election. Notably, affluent donors like philanthropist Susie Buffett have emerged as formidable adversaries. Linehan emphasized her disinclination to engage in extensive fundraising endeavors to counter public school proponents, citing the significance of securing legislative seats to safeguard the law from potential repeal.

Implications of the amendment

Under the amendment, state funding per student would be capped at the educational cost, limited to a maximum of 75% of the statewide average expenditure per student from public K-12 general funds.

Establishing a baseline annual allocation of $25 million, the amendment permits annual increments of up to 25% predicated on the total scholarship funding disbursed annually, with an upper limit of $100 million per year.

Conversely, taxpayers would shoulder the initial $25 million appropriation burden as the Legislature contends with dwindling reserves for new programs. While the Opportunity Scholarships Act mandates private contributions for eligibility for the state credit, reports suggest a disparity between the demand and donations garnered thus far.

Linehan confirmed that Amendment 3016 envisions diverting private capital from the process to sponsor private school scholarships through public appropriations, akin to school voucher programs implemented in other states like Iowa.

If Nebraskans opt to preserve the Opportunity Scholarships Act during the impending election, the state might find itself obligated to support both programs concurrently, encompassing the tax credit initiative and a distinct scholarship funding allocation. A parallel bill would phase out the original program should a revised version be endorsed.

Expectations lean towards the ballot measure’s defeat given Nebraskans’ historical aversion to voucher initiatives, with opponents strategizing an intensive advertising campaign to sway public opinion.

Likelihood of legal conflict

Linehan acknowledged the heightened prospects of legal confrontation with entities like Stand for Schools resulting from the amendment’s implementation. Despite the anticipated legal tussle, Linehan underscores court precedents and the conservative tilt of the U.S. Supreme Court in favor of school choice advocates.

Linehan and the school choice advocacy group, Keep Kids First, assert that court rulings in other states have validated analogous programs intertwined with constitutional restrictions. Coupled with affiliations to the American Federation for Children and Betsy DeVos, Keep Kids First upholds the efficacy of such programs in aligning with constitutional provisions.

Legal experts, including University of Nebraska-Lincoln’s law professor Anthony Schutz, have previously raised concerns regarding the tax credit system potentially conflicting with the Nebraska Constitution. The latest amendment introduces further complexities, positing a fundamental shift in fiscal appropriations.

“There has been speculation since last year regarding potential appropriations to non-public institutions,” Schutz commented.

Elucidating the amendment’s implications, Schutz delineated the State Treasurer’s Office’s expanded oversight mandate to manage the scholarship program analogously to Nebraska’s college savings plans, potentially engaging private contractors for implementation.

Restructuring funds flow

Dunixi Guereca, articulating Stand for Schools’ standpoint, characterizes the scholarship-granting organizations as conduits for channeling public funds to private schools through indirect means, likening it to a ‘shell game’ operation.

Previous judicial rulings in other states have invalidated constitutional clauses barring private school funding under the premise of infringing on religious liberties.

In Nebraska, the constitution explicitly prohibits the allocation of public funds to any private schools, inclusive of secular institutions.

According to Article VII, Section 11, public funds or property appropriations to educational institutions not owned or regulated by the state or its subdivisions are impermissible.

Linehan’s amendment to LB 1402 extends scholarship eligibility to families earning up to 300% of the federal poverty standard, equivalent to $93,600 for a family of four.

Prioritized for scholarships are families falling below the 185% poverty threshold, encompassing recipients of means-based scholarships and those earning up to $57,720 for a family of four.

Additionally, students with individualized education plans (IEPs) and those seeking refuge from school-related bullying or violence are also earmarked for scholarship opportunities under the revised amendment.

Critics flag the continued discretion of private schools to deny enrollment based on specific criteria, subject to federally approved exemptions like a student’s race or gender.

Periodic assessments

AM 3016 mandates the Treasurer’s Office to submit an annual report to the governor commencing December 1, 2025, outlining the scholarship program’s operational framework.

The report will encompass data on scholarship recipients in the preceding year, including wait-listed or rejected applicants and rationales for application denials.

Demographic details pertaining to scholarship beneficiaries, such as income profiles, grade levels, and geographical locations, will be included in the report for accountability and transparency.

Illustrative of similar practices in other states, these reports serve as a foundation for evaluating the efficacy and popularity of school choice scholarship or voucher programs, gauging public demand and interest.

Stand for Schools underscores research affirming that over 70% of scholarship or voucher applicants in school choice states were already enrolled in or intended to enroll in private schools.

Contrasting perspectives argue that a significant portion of scholarship recipients who might not afford private school education otherwise could benefit from expanded access to educational choices.

The amendment earmarks up to 7.5% of appropriated funds for administrative expenses by the Treasurer’s Office, including internal oversight managers monitoring private contractors’ performance.

Crucially, the amendment imposes constraints on state intervention in the governance of ‘qualified’ schools receiving funds, preserving their autonomy in student selection and educational administration matters.

Additionally, the amendment features an emergency clause, ensuring immediate implementation pending legislative approval and gubernatorial endorsement.

Applicant demographics

Opportunity Scholarships of Nebraska discloses that early applicants reflect a diverse demographic profile, with over 40% represented by students of color, encompassing a broad geographical distribution beyond Omaha and Lincoln and a significant proportion falling below 185% of the poverty threshold.

Jeremy Ekeler, the organization’s executive director, lauded the transformative impact of the new law, offering tangible hope to hundreds of aspiring students.

Ekeler remarked, “Nebraskans are beginning to realize what the wider nation has long embraced: Empowering parents with educational choices fosters a perennial desire for expanded opportunities.”

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