The Arizona Christian School Tuition Organization (Acsto) is one of the state’s largest voucher-granting groups. From 2010 to 2014 (the latest year recorded in federal tax filings), the group received $72.9 million in donations, all of which were ultimately financed by the state.
Arizona law allows the group to keep 10 percent of those donations to pay for overhead. In 2014, the group used that money to pay its executive director $125,000. His name? Steve Yarbrough. Forms filed by the organization with the I.R.S. declare that he worked an average of 40 hours per week on the job — in addition, presumably, to the hours he worked as president of the State Senate.
Yet the group doesn’t do all the work involved with accepting donations and handing out vouchers. It outsources data entry, computer hardware, customer service, information processing, award notifications and related personnel expenses to a private for-profit company called HY Processing. The group paid HY Processing $636,000 in 2014, and millions of dollars in total over the last decade.
The owner of HY Processing? Steve Yarbrough, along with his wife, Linda, and another couple. (The “Y” in “HY” stands for “Yarbrough.”) According to The Arizona Republic, Acsto also pays $52,000 per year in rent. Its landlord? Steve Yarbrough. In June 2012, Mr. Yarbrough bought a car for $16,000. In July 2012, Acsto reimbursed him the full amount.
Most voucher-granting nonprofits are not run by powerful legislators who pay themselves rent. While Arizona has over 50 loosely regulated voucher organizations, Florida disburses nearly 100,000 tax credit vouchers with just two. In Pennsylvania, private schools can accept tax credit donations and provide vouchers to themselves.
But the fact that an influential politician can both promote and profit from tax credit vouchers shows what can happen when public funding for education is largely removed from public hands.
Both Democratic and Republican lawmakers like tax credits, for several reasons. For some, spending $1,000 directly on a school voucher is government spending, while forgoing $1,000 in revenue to finance a $1,000 nonprofit voucher is a tax cut. Spending is often subject to strict budget limitations, while certain forms of tax credits can face less scrutiny.
Tax credits for vouchers also allow states to circumvent so-called Blaine amendments, legal prohibitions against the direct disbursement of public funds to parochial schools that were added to many state constitutions in the 19th century during a wave of anti-Catholicism.
But the shell-game process of moving money from the public treasury to a donor to a nonprofit to a family to a private school makes it very difficult to account for how well those public dollars are ultimately spent.
Tax credit voucher policies vary among states, but most impose few requirements on the private schools that receive them. By contrast, many of the largest new direct voucher programs, where funds go straight from the government to the school, require private schools to administer the same tests given to students in public schools. That’s how researchers were able to determine that vouchers in some states are driving down student test scores to an unprecedented degree.
Managing the transfers of all that money is also expensive. Arizona’s 10 percent overhead provision is typical, which means that millions of dollars meant for education are being diverted to pay for, at best, pure bureaucracy. If President Trump makes good on his campaign promise of $20 billion for school vouchers by creating a national tax credit scheme, it could vastly increase the amount of bureaucratic waste.
And it’s not clear that states can be relied upon to prevent self-dealing. Mr. Yarbrough’s personal financial interest in tax credit vouchers first received wide attention in 2009, when The East Valley Tribune published an in-depth investigation of Arizona’s tax credit program. Tribune reporters found widespread evidence of abuse. In some schools, parents would “recommend” that their fully refundable donations be used to finance vouchers for neighboring families, who would then reciprocate in kind, a practice Arizona has since banned. Many private schools sharply increased their tuition in response to newly available voucher funds.
Yet in the years since, Mr. Yarbrough has continued to be paid hundreds of thousands of dollars from overhead funds. He also supported the expansion of the tax-credit system. “The impact has been substantial on the number of kids who are getting to go to the school of their parents’ choice,” Mr. Yarbrough told The Republic in 2015. “It’s been better and more successful than even those of us who were enthusiastic from the get-go imagined.”
Some states, like Alabama and Indiana, limit tax credit vouchers to low- and middle-income families, or to students who were previously enrolled in public school. But others, including Arizona, do not, subsidizing private education for the well-off.
Tax credit vouchers also finance approaches to education that diverge from generally accepted academic standards. Northwest Christian School, a 1,300-student private academy in Phoenix, helps parents apply to Acsto for vouchers. Northwest Christian’s elementary science and social studies curriculums were developed by Bob Jones Publishers, a leading provider of educational materials based on creationism.
If the Trump administration moves ahead with a $20 billion tax credit voucher plan, it will have to decide how — or whether — to address issues that have arisen with state tax credits.