ATLANTA (CN) - Georgia's tax credit program "drains much-needed funds away from Georgia's public schools" by allowing taxpayers to donate scholarship money to private religious schools, four taxpayers claim in court.
Lead plaintiff Raymond Gaddy, whose children attend public school in Chatham County, claims the state has failed to give enough money to its underachieving public schools for years, but allows tax money to fund private, often religious, education.
Georgia "enacted a scheme in which funds from the state's treasury are redirected to pay tuition at private schools in the state," Gaddy claims. "Individual taxpayers in Georgia, as well as corporations, receive dollar-for-dollar tax credits for donations and contributions made to private Student Scholarship Organizations ('SSOs'). The SSOs then take the redirected tax funds and use them to provide scholarships for students to attend private schools," according to the lawsuit in Fulton County Superior Court.
Gaddy claims the scholarship organizations, which are not state-regulated, administer state tax money in violation of the Georgia Constitution.
"Absent the constitutionally required state administration, the SSOs and the private schools that receive their funds are free to do virtually as they please," the complaint states. "The abuses that can follow from such unfettered discretion are many. For example, private schools receiving tax-funded tuition payments can deny students admission based on the schools' individual admission requirements, in contrast to Georgia public schools, which must admit any student wishing to attend.
"In this regard, although supposedly intended to benefit underprivileged children, the SSOs and private schools receiving the funds can, and generally do, award scholarships to students who already can afford private schools.
"Also, because the majority of private schools in the state are faith based, many enrollment decisions are conditioned on commitment to specific religious beliefs and practices."
Gaddy and his three co-plaintiffs, who live in DeKalb and Fulton Counties, claim taxpayers have no way to assess whether the program helps underprivileged students. What's more, they claim, it allows schools to deny admission unfairly to students who need financial aid based on the schools' admission requirements.
Student scholarship organizations are private charities exempt from federal income taxes. Such organizations are easily registered by filling in and signing an "annual notice of participation" on the state's department of education website. They may use up to 10 percent of revenue for their own unregulated purposes, while the rest goes toward scholarships, according to the lawsuit.
The plaintiffs claim the scholarship organizations have generated considerable donations since Georgia enacted the program in 2008.
As of 2013, one of the largest scholarship organizations, Georgia GOAL Scholarship Program, had raised more than $69.2 million in contributions, and awarded 12,259 scholarships, according to the lawsuit.
The plaintiffs say scholarship organizations often let donors choose the private schools that receive their redirected tax funds, instead of selecting scholarship recipients and letting parents choose the school.
Georgia students who attended a primary or secondary public school for at least six weeks before receiving the scholarship are eligible for the program. It is also open to students eligible to enroll in a qualified first grade, kindergarten or pre-kindergarten program, even if they never intended to attend public school.
Participating Georgia private schools must be accredited, must comply with state rules for private schools and adhere to the Civil Rights Act of 1964.
The plaintiffs say tax credits are prohibited if the taxpayer designates education expenses for the benefit of a particular student.
They claim they have to shoulder, directly or indirectly, a greater portion of Georgia's tax burden because other taxpayers receive illegal tax credits under the program.
From 2008 to 2013, the state redirected $226.9 million in tax revenue to private schools, but failed to meet the basic amount needed for public schools by more than $5 billion, according to the lawsuit.
The plaintiffs say the scholarship organizations, many of which are religiously affiliated, openly encourage donors to support religious education, rather than pay taxes to the state. Some of the religious schools that receive scholarship money discriminate against gay students, which would not be tolerated in a public school, the plaintiffs say.
What's more, most students attending private schools in Georgia come from households with higher-than-average incomes, therefore low-income students do not benefit from the program, the lawsuit adds.
The plaintiffs seek a declaration that the program violates Georgia's Constitution and tax code, and want the state enjoined from redirecting tax money.
They are represented by William Whitner with Paul Hastings.