Nebraska Would Fund Private K-12 Scholarships Under New Proposal

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LINCOLN — The author of Nebraska’s new Opportunity Scholarships Act says she knows that the state tax credit for funding students attending private K-12 schools risks being rejected by voters in November.

That’s why State Sen. Lou Ann Linehan of Omaha and other supporters of the school choice law drafted several bills this year to preserve the heart of the program regardless of the election outcome. Each proposal would offset the cost of a private K-12 education with state tax dollars.

Recently, Linehan settled on Legislative Bill 1402 as this session’s vehicle for the changes. She originally designed the bill to shift the scholarship program created by the Opportunity Scholarships Act to the State Treasurer’s Office and away from nonprofit scholarship-granting groups.

Her latest amendment to LB 1402 — Amendment 3016 — clarifies that school choice supporters intend to directly allocate state funds for private school scholarships instead of steering them to outside scholarship organizations, essentially eliminating the middlemen.

Public school advocates call Linehan’s push an effort to stifle voters’ voices. The advocates contend Nebraskans don’t want public funds spent on private schools, whether through a tax credit or directly. They say the latest amendment would start a voucher program that could cut into state funding for public schools or other priorities even faster than the Opportunity Scholarships Act.

Options for kids or funding grab?

Linehan and other private school advocates say the scholarships give low-income students and their families more options. One of the largest scholarship-granting organizations, Opportunity Scholarships of Nebraska, said Monday it had received 915 applications.

The group said it expects as many as 2,500 applicants by the April 30 deadline. Spokeswoman Lauren Garcia Gage said it had received calls from the families of more than 5,000 interested students, including many from families of students already attending private schools.

Linehan’s 2023 school choice law created a dollar-for-dollar tax credit for donors to scholarship-granting groups that fund tuition help for low-income students to attend private K-12 schools.

Public school advocates, including Stand for Schools Nebraska, have argued the tax credit favors the rich at the cost of the state treasury. Linehan and others say they have worked in recent years to add more funds to state aid to K-12 public schools, adding a new baseline of state aid and proposing additional aid.

Amendment 3016 would create a new program that would stand even if voters reject the original law. It does so by cutting the role of scholarship-granting organizations and donors.

“I’m trying to make sure all parents in Nebraska have school choice,” Linehan said. “Not just wealthy. … Not just those who are lucky enough to have grandparents help them.”

Linehan said she doesn’t have the $10 million she thinks she would need to fight the opposition to the Opportunity Scholarships Act at the ballot box. She pointed to opposition from deep-pocketed donors such as philanthropist Susie Buffett. Linehan said she won’t try to match public school supporters in raising funds.

“I am not going to go around raising $10 million to try and beat that when we’ve got 15 open legislative seats, and if we don’t win, then they’ll come back in and repeal it in the Legislature,” she said.

What the amendment does

Under the amendment, state funds per student would be capped at the cost of education but could not exceed 75% of the statewide average of what the state spends per student in general funds on public K-12 education.

The amendment allocates a baseline of $25 million a year and allows for annual increases of up to 25% a year, based on the total scholarship funding awarded each year, up to an annual cap of $100 million.

Taxpayers would fund the full $25 million from the beginning, at a time when the Legislature is running short of cash for other new programs. The Opportunity Scholarships law, by contrast, requires private parties to donate funds in order to receive the state credit.

People familiar with fundraising for scholarship organizations told the Examiner that demand has outstripped donations thus far. Many donors have to be told about the tax credit, organizers said.

Linehan confirmed last week that her amendment would pull private money out of the process and would fund the private school scholarships with an appropriation of public money, like school voucher programs do in other states, including Iowa.

If voters chose to retain the Opportunity Scholarships Act this fall, the state could be on the hook for both programs, the tax credit and a separate allocation of money for scholarships. (A different related bill would sunset the original program if a new version passes.)

Most political observers expect the ballot measure to fail because Nebraskans have rejected voucher programs in the past, and opponents of the new law are planning a campaign that will include heavy rotations of advertising.

Court fight likely

Linehan acknowledged the amendment could make a court fight with Stand for Schools and others more likely. But she said school choice advocates have case law and a conservative U.S. Supreme Court on their side.

Linehan and the school choice advocacy group Keep Kids First have said courts have allowed similar programs in other states that have similar constitutional prohibitions.

Keep Kids First, which advocates for school choice in Nebraska, has ties to the American Federation for Children and Betsy DeVos, a major political donor and former education secretary under then-President Donald Trump.

Anthony Schutz, a University of Nebraska-Lincoln law professor, is one of several legal experts who argued previously that the tax credit program might run afoul of the Nebraska Constitution. He and others said the new amendment might be even more problematic.

“Since last year, we’ve wondered whether or not we have an appropriation to a non-public school,” Schutz said.

Now, he said, “We’ve got a bill that clearly appropriates money.”

Under AM 3016, the State Treasurer’s Office would have the responsibility for overseeing the scholarship program, much like it does with Nebraska’s college savings plans. The office would have the authority under the amendment to hire a private vendor to do so.

The amendment would place the state closer to providing public money to a private school, Schutz said.

‘Shell game’ gone

Dunixi Guereca, a legislative candidate speaking for Stand for Schools, said the legal point of the scholarship-granting organizations was to create a shell game filtering public money to private schools through a third party.

Schutz said courts have thrown out constitutional provisions in other states prohibiting private school funding, ruling that those restrictions encroached on religious freedoms.

Constitutions in those states prohibited state funds from being spent on religious education.

Nebraska’s Constitution, by contrast, prohibits spending on all private schools, he said, including secular schools.

Article VII, Section 11, of the constitution says, “No appropriation or grant of public funds or property shall be made to any educational institution which is not owned and controlled by the state or a governmental subdivision thereof.”

Linehan’s amendment to LB 1402 would allow access to scholarships for families earning up to 300% of the federal poverty level, or up to $93,600 for a family of four.

Families earning less would get first dibs, including families already on means-based scholarships and those earning up to 185% of the poverty level, meaning $57,720 for families of four.

Other students prioritized for scholarships under the amendment include those on individualized education plans (IEPs) and students fleeing bullying or violence in school.

Critics point out that private schools still can refuse to educate students of their choosing, with a handful of exceptions under federal law, including a student’s race or gender.

Stand for Schools, in an internal analysis of the amendment, wrote that tying the measure to this federal law would let private schools discriminate based on a student’s disability or sexual orientation.

Annual reports

AM 3016 would require the Treasurer’s Office to file a report with the governor each  Dec. 1 starting in 2025 that spells out how the scholarships can be pursued.

The report would include the number of students receiving scholarships the previous year, the number of students wait-listed or denied scholarships and the reasons they were denied.

It would also list the demographics of scholarship recipients, including income level, grade level and location.

Observers said that similar reports have been used in other states to justify the expansion of school choice scholarships or voucher programs. It’s a way to gauge demand and popularity.

Stand for Schools says research in school choice states found that more than 70% of those who apply for such scholarships or vouchers already attended private schools or intended to do so.

Linehan and Keep Kids First have argued that means nearly a third of students who accept scholarship funds might not otherwise have been able to attend a private school of their choosing.

The amendment would let the Treasurer’s Office spend up to 7.5% of the appropriated funds on administrative costs, including on internal managers providing oversight to private contractors.

The amendment limits the state’s ability to control or influence the governance of any “qualified” school accepting the money. It cannot force the schools to keep educating scholarship students.

It includes an emergency clause, meaning it would go into effect immediately if passed by the Legislature and signed by the governor.

Who’s applying

Opportunity Scholarships of Nebraska says more than 40% of its early applicants are students of color, more than half are from outside Omaha and Lincoln and 40% are at or below 185% of the poverty level.

Jeremy Ekeler, the group’s executive director, said the new law “is already giving hope to hundreds of students.”

“We hear every day from families who aren’t eligible but wish they were. Nebraskans are recognizing what the rest of the country has already discovered: Once parents have educational opportunity, their desire for options only increases,” he said.

Nebraska Examiner is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Nebraska Examiner maintains editorial independence. Contact Editor Cate Folsom for questions: info@nebraskaexaminer.com. Follow Nebraska Examiner on Facebook and Twitter.

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