Bill to increase tax credits for education clears House
With support from the Gianforte Administration, a bill that bumps up the ceiling for a couple of dollar-for-dollar education tax credit programs to an initial $5 million passed third reading in the House on Tuesday.
With a clause that allows that ceiling to bump up over the years, Rep. Jim Hamilton, D-Bozeman, calculated in committee the $5 million credit in 2024 could hit more than $11 million by 2029, when it’s set to sunset.
“This is my nomination for the worst bill ever — or at least this session,” Hamilton said during floor debate Monday. “It’s very outrageous tax policy, with apologies to the majority leader because of course she didn’t design the bill, so this is not aimed at her.”
Republicans have touted House Bill 408 as a win for students in both public and private schools, but Democrats argue it’s poor tax policy, with the dollar-for-dollar credit, and lacks educational accountability. It passed 69-31 on third reading Tuesday.
In a debate on the floor Monday, sponsor and Majority Leader Sue Vinton, R-Billings, told Democrats the sky was not falling, and she said the legislature was addressing separate problems they raised, such as low teacher salaries, in other bills. The bill offers credits for private education scholarships and for innovative public school programs, each with the $5 million limit in 2024.
“This bill is about kids. It’s about our students in both private schools and in public schools,” Vinton said during debate. “And that is why we should all be supporting this bill.”
In 2021, the Montana Legislature approved a bill that increased the limit on single donations for the tax credit from $150 to $200,000, and it also increased the overall cap for total contributions to $1 million for each program, with an escalator clause.
The credits have been popular, and during one hearing this session, Dylan Klapmeier, education policy advisor in the Governor’s Office, estimated demand to be closer to $9 million than the current $2 million cap.
“There are still low- and middle-income families that can be served,” Klapmeier said.
The credit is a deal for taxpayers who want to donate. A taxpayer making a $1 donation toward private school scholarships or public education programs receives a full $1 credit — a problem for opponents and a welcome rate for private school proponents.
“You’re essentially allowing people to divert their entire tax bill to the issue of their choice,” said Erik Burke, with the Montana Federation of Public Employees, against the bill.
He said in taking advantage of that credit, donors were opting out of paying for other public services, such as prisons or health care.
But Vinton, in response to a question in committee from Hamilton, said she herself is a taxpayer, so she should have some say about what her money supports.
“I pay taxes, and having the opportunity to direct more specifically where those taxes go gives me an opportunity to do so,” Vinton said.
The bill includes an escalator clause so if a program hits 80% of its allowed limit in aggregate donations one year, the total allowed in credits goes up 20% the next year, each year until 2029.
In committee, Hamilton blasted the bill, as he did on the floor, describing it as the “most outrageous tax policy ever,” and with a bad fiscal note to boot. He described it as a “thinly disguised effort” to shift taxpayer money from public schools to private education and criticized the 100% credit.
“We didn’t even put a price on the product. We made it free,” Hamilton said.
Normally, if a credit gets gobbled up quickly, he said the rate would be lowered, and he figured donors would still give to education for a 50% credit. He said with the exception of Florida, Montana has the most generous tax credit for student scholarships.
His diatribe against the bill and the underlying policy persuaded Rep. John Fitzpatrick, R-Anaconda, to oppose it in the House Appropriations Committee as well — and comment on Hamilton’s punchy delivery.
“(I was) just kind of wondering if you had been nipping at Representative Yakawich’s flask,” Fitzpatrick said of notoriously animated Rep. Mike Yakawich, R-Billings.
On the floor debate, Rep. Melissa Romano, D-Helena, said the bill essentially put more money into a separate educational system that had no accountability. She said those who receive scholarships don’t have to meet any accreditation or testing requirements, for example.
“They don’t need to meet any educational standards,” Romano said.
In committee, addressing a question from Chair Rep. Llew Jones, R-Conrad, Ross Izard of Ace Scholarships said the organization does have standards and expectations for schools it partners with, but not strict ones. Izard, who supported the bill, said ACE tends to be flexible because different private schools offer different models and approaches.
On the floor, Rep. Mark Thane, D-Missoula, said he appreciated the sponsor put some sideboards on the public program to try to spread out the wealth and ensure one single affluent school district wasn’t the only recipient of donations.
However, Thane, who opposed the bill, said similar sideboards should be placed on the private scholarships side too.