NCPA - National Center for Policy Analysis

Arizona Scholarships Save Taxpayers Money

February 6, 2004

Six years ago, Arizona policymakers created a revolutionary school choice program with a $500 dollar-for-dollar income tax credit for contributions to organizations that give students scholarships to attend private elementary and secondary schools.

  • Since the program's inception, taxpayers have donated $83.5 million to 47 nonprofit organizations that helped send thousands of students to schools of their choice.
  • Most scholarships were distributed based on financial need to students previously enrolled in private schools.
  • Although the exact portion of the more than 19,000 students currently using scholarships who otherwise would have attended public school is unknown, it is likely that 2,000 to 4,000 students would return to public school without the scholarship tax credit.
  • The state lost $26.3 million in revenue through use of the credit in 2002.
  • Yet the savings incurred by transferring students offset much of that loss, leaving the total revenue loss between $7.5 and $13.4 million.

As donations increase, it is likely that a greater portion of scholarships will be used by students newly transferring into private school from public school. Therefore, it is probable that future savings will fully offset the revenue loss, eventually saving taxpayers money. In general, policymakers should consider ways to improve and expand the program to help more families send their children to private schools of their choice.

Source: Carrie Lips Lukas, "The Arizona Scholarship Tax Credit: Providing Choice for Arizona Taxpayers and Students," Policy Report 186, Goldwater Institute, December 11, 2003.


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