Differences in tax donations raise worries for poor schools in Arizona

• Taxpayers donated nearly $51 million in tax credits to district and charter schools in 2014
• Schools use the funds for extracurricular activities, with about 30 percent going toward athletics
• Schools vary widely in how much they collect, with some getting hundreds per student and others receiving nothing.
• The state is inching toward letting schools use the funds in the classroom, raising concerns about the inequity in donations among schools

Tax donations are a huge driver of extracurricular activities in Arizona's schools, but the vast difference in contributions between affluent and poor schools raises concerns as the state inches closer to letting schools use the money in the classroom.

Statewide, taxpayers contributed nearly $51 million to public schools in 2014, about the same amount as the year before, according to data released by the state Department of Revenue. That works out to about $45 per student.

But a handful of schools — usually those with small numbers of low-income students — collected enough donations to average more than $400 per student, while others got little or none. One Arizona school received nearly $900,000 in a year.

Under the tax-credit program, donors can direct a portion of their state income tax to a public school and get a dollar-for-dollar credit. It's a popular way for parents to pay the fees for their child's activities such as athletics or band.

The program has traditionally required the money be spent on extracurricular activities rather than directed to the classroom to avoid giving an unfair academic advantage to rich schools. State data show an inequity in tax-credit donations, which means schools that collect few dollars scale back activities or supplement them with money that could go to the classroom. Schools receiving higher donations can fully fund their sports or other activities without dipping into their operating budgets.

But the Legislature expanded the tax-credit program this year to allow parents to use tax credits to pay fees for college-preparatory tests, such as the SATs or the end-of-year Advanced Placement exams. Lawmakers considered but didn't pass other bills to allow spending the money in the classroom.

Critics said expanding tax-credit spending even more — such as for supplies or books — could further widen the divide for poor schools.

Andrew Morrill, president of the Arizona Education Association teachers' group, called the program "a shaky, questionable policy."

"Nobody faults parents or taxpayers for taking advantage of something that seems to offer them a financial break once a year. But our policymakers should not be building the funding system for our public schools on this kind of gimmick," Morrill said.

But Janice Palmer, the lobbyist for the Arizona School Boards Association, says her group believes expanding tax-credit eligibility is a good idea.

"It's a balance, but districts have done a great job of getting the community to invest in them, and why not be able to use those resources for kids in the classroom?" she said.

Rich schools, poor schools

Schools collect tax-credit donations either by parents paying fees or community members deciding to donate.

The state's largest schools and districts are historically among the biggest collectors of tax credits because of their sheer numbers. The Mesa, Scottsdale, Chandler, Gilbert and Tucson districts received the most money in 2014. Their combined total of $14.8 million accounted for 30 percent of donations while their combined enrollments total 20 percent of public-school children.

A closer look at per-pupil contribution rates shows the disparity. Schools that collect the highest amounts have lower percentages of low-income students than the statewide average.

Fountain Hills and Tucson's Catalina Foothills high schools are both in suburban enclaves with high median incomes.

Each received enough donations to average more than $500 per pupil. Catalina Foothills collected the most of any school in the state — $889,102.

Both schools have low percentages of students who qualify for free and reduced-price lunches. In Fountain Hills, 25 percent of students qualify and at Catalina Foothills, 12 percent. Statewide, 55 percent of students qualify.

Of the 20 schools that collected the most in the state, 11 have fewer than 20 percent of their students qualify as low income.

The inequity also exists among charter schools.

Of the 20 charters that received the most donations in the state, 12 averaged more than $200 per student. Tempe Prep averaged $622 per student and Horizon Community Learning Center in Ahwatukee Foothills averaged $491. Many charter schools don't participate in the National School Lunch Program, so their rates of students in free or reduced-price lunch are not calculated.

Those top 20 charters collected a total of about $2.8 million in donations — about 5.5 percent of all the donations in the state. Their combined enrollments total about 1 percent of all public-school children in the state.

At the other end of the spectrum, 57 schools in Arizona received no donations. Many of them are alternative or online schools with few extracurricular options.

But not all.

South Ridge High School is an "A"-rated charter school in south Phoenix that received no tax-credit donations last year. Principal Melissa Rivers said most students come from low-income families.

"While we certainly welcome donations to help enhance our programs for our students, we understand that many of our families may not be able to contribute financially," she said.

In districts with a wide variation in numbers of low-income students among schools, tax-credit donations trended the same way. Schools with the highest percentage of students who qualified for free- and reduced-priced lunch collected the lowest amounts of tax-credit donations.

• The Paradise Valley Unified School District has 44 schools. At the combined K-6 campus of Palomino Primary and Palomino Intermediate, 95 percent of students qualify for free and reduced-price lunch. That campus averaged $30 per student in tax-credit donations. Wildfire Elementary School has the lowest percentage of free and reduced-price lunch students, at 5 percent, and averaged $101 per student last year.
• Among the five high schools in the Scottsdale Unified School District, the percentage of free- and reduced-price lunch students ranges from 74 percent at Coronado, which collected $95 per student, to 6 percent at Chaparral, which got $192 per student.
• In the Cartwright Elementary School District in Phoenix, about 90 percent of students qualify for free or reduced-price lunch. That district received $135,000 in tax-credit donations, or about $7 per pupil.
• In the Phoenix Union High School District, the 16 schools range from 60 to 82 percent free and reduced-price lunch students, and that district averaged about $14 per student last year.

A family of four would need to earn at least $36,400 annually to qualify for a tax-credit donation after deductions. That's a threshold that many families in the Phoenix Union district don't meet, according to spokesman Craig Pletenik.

Parents paying for sports

Tax contributions often defray schools' cost for extracurricular programs like sports and music, allowing districts to spend more money in the classroom. That can mean schools with fewer contributions have to use money from their operating budgets to fund their programs.

Nearly a third of Arizona tax-credit money in 2014 went toward athletics. That's because parents can use the credits to pay their child's activity fees and many schools charge higher fees for sports than for other programs, such as music or Spanish club.

The rest of the 2014 funding was spent this way: field trips, 21 percent; band, orchestra, choir, drama and other fine and performing arts, 17 percent; other clubs, 15 percent; extended-day kindergarten and after-school enrichment, 10 percent. The remaining 7 percent went to character education, driver's education and academic competitions such as speech and debate.

In both Fountain Hills and Catalina Foothills, three-quarters of the donations were directed to sports, band and other music programs, according to Department of Revenue data.

Cactus Shadows High School in Scottsdale collected $337,007 in 2014, and half of the money went toward athletics.

Cactus Shadows Principal Steve Bebee said that the school's sports program, which charges a $310 fee, is fully funded by tax credits, and the Cave Creek Unified School District spends none of its operating budget on high school athletics.

At Catalina Foothills, 60 percent of the donations are from parents paying their students' fees, according to district Superintendent Mary Kamerzell.

She said the district spent about $80,000 of its $37 million budget on athletics. Years ago, Catalina Foothills spent $400,000 on sports but has been able to reduce that thanks to tax credits.

Phoenix Union collected $383,000 in 2014, the most ever, but the district had to spend $1.5 million of its budget on athletics, Pletenick said.

"We feel it's very important to maintain those programs for our students," he said, noting that the district charges only a $3 participation fee for sports.

Schools that reap big amounts of tax credits often have active campaigns to solicit donations as well as parent groups that have the manpower and resources to reach out to the community.

Tom Brennan, principal of Fountain Hills, said the school uses newspaper ads and the automated parent phone and e-mail system as reminders to give. Teachers who run the student clubs also get the word out that the credits can be used to cover the fees, he said.

Like many other districts, Fountain Hills opened its offices on New Year's Eve to lure donors before the Dec. 31 deadline — a move that won't be needed next year because the deadline has been changed to April 15 to match the private-school program.

At Lake Havasu High School, which collected more than $375,000, an administrator reaches out to local businesses, encouraging them to ask employees to donate through payroll deductions, according to Principal Scott Becker.

Some schools have no choice but to get donations from the community.

Rachel Bennett Yanof is chief executive of Phoenix Collegiate Academy charter school. About 97 percent of students are eligible for free and reduced-price lunch.

Over a few years, she noticed that only one parent was making a tax-credit donation.

"So we talked to parents about it," Yanof said. "And we had parents say, 'We'd love to pay you but if we do, we can't pay our electricity bill next month.'

"We decided to stop asking."

Last year, Phoenix Collegiate's governing board stepped up its outreach, with each member setting a goal of 20 donations. They held cocktail hours and other events for young adults and retired people to promote the school's mission and point out the disparity in donations between rich and poor schools.

"That resonates with people who care about justice and equity," Yanof said.

The school more than tripled its donations, collecting nearly $67,000 last year, which was used to take students on field trips to colleges.

"We know that if we're talking about a population where only 10 percent are headed to college and we expose them to that opportunity, college starts being something that's for them and not just for someone else," she said.

Spending in the classroom

Public-school tax credits began in 1997 as a way to get skeptical legislators to vote for a similar program for private schools.

Several laws were proposed this year to expand the use of tax credits in the classroom. One would have required schools that collected more than $350,000 to turn some of the money over for distribution to poor schools. Another would have allowed some undesignated money to be spent on classroom supplies.

Neither of those bills advanced, but lawmakers did vote to allow spending on college tests and to change the deadline.

Dean Packard, the outgoing principal of University High School in Tucson, welcomes the use of credits for tests. Nearly half of his students qualify for free and reduced-price lunch.

"It's going to be huge for our school," he said.

"For a lot of our kids, when you're looking at taking multiple tests, if you're not low income, you're in the middle range, and it's a challenge to afford them."

Palmer, of the Arizona School Boards Association, said she believes the Legislature will increase spending flexibility as schools have lured more donations.

"I think the Legislature is looking at that as an opportunity to try to free the hands of districts to use the money in a more meaningful way," she said.

Because the donation amounts are so varied, allowing the money to be spent in the classroom could raise a legal challenge.

But Chris Thomas, director of legal and policy services for the Arizona School Boards Association, said he thinks such a change would be legal.

"It's not the state providing different money or a different scheme that results in inequity," he said. "The state has provided the opportunity.

"The fact is that individuals in certain communities are more willing or have the means to provide the funding."

Palmer said the association is surveying districts now and will decide in September whether to push for more expansion of tax-credit spending.

Palmer noted that the original intent of the program in 1997 included funding for lab equipment.

"By design, some type of curriculum expenditures were contemplated," she said.

Even with the inequity, being able to spend the money for classroom supplies still would be a help because state funding cuts have been so steep, according to Sherry Celaya, business manager for the Cartwright district.

"Allowing tax-credit funds to be used for classroom materials will create a larger inequity between districts," Celaya said. "But flexibility with use of this funding is needed and desired."

Not everyone believes using the money in the classroom is a good idea. Yanof, of the Phoenix Collegiate Academy, says the funding formula needs to change:

"I'm of the fundamental belief that the reorganization of our education-funding system needs to happen and the more we solve it with Band-Aid solutions or solutions that aren't equitable, I get nervous."