A record number of low-income families participated in Florida’s scholarship tax credit (STC) program this year.

According to the Florida Department of Education’s latest report, the number of scholarship recipients grew by 10,827 students from 40,248 in 2011-12 to 51,075 in 2012–13, an increase of 26.9 percent. More than half of the scholarship recipients are in grade 3 or lower, indicating that the program will continue to grow over time.

Florida’s sole scholarship organization, Step Up for Students, focuses aid on the families that are most in need. Florida’s STC program requires that the families of first-time scholarship-recipients earn less than 185 percent of the federal poverty line ($43,568 for a family of four), but the average scholarship recipient’s family income is only about 106 percent of the federal poverty line ($23,579 for a family of four). 

Scholarship recipients are much more racially diverse than Florida’s general population. Scholarship recipients are 25 percent non-Hispanic white, 33 percent non-Hispanic black and 35 percent Hispanic compared to 78 percent non-Hispanic white, 17 percent non-Hispanic black, and and 23 percent Hispanic in the general population.

According to Jon East, spokesperson for Step Up for Students, there are still more than 10,000 students on the waiting list due to the program cap. This is consistent with the demand for STC programs in other states. For example, just one of Pennsylvania’s roughly 250 scholarship organizations, the Children’s Scholarship Fund Philadelphia, had to turn away 104,500 of 115,000 scholarship applicants over the last decade due to the state’s program cap.

Florida’s STC program is allowed to grow to meet demand over time because the law contains an “escalator” provision that automatically raises the cap whenever the program grows to at least 90 percent of the cap. While STC programs in Arizona and New Hampshire contain similar provisions, most do not. That’s unfortunate, since the caps limit the program’s ability to expand education options to low-income families.

Not only do the program caps restrict educational options for low-income parents, they also limit the amount that taxpayers could save from the program. Since the scholarships are worth much less than the state’s average public school per pupil expenditures, taxpayers save money when students who would have attended public school instead participate in the STC program. Program caps limit the number of “switchers,” thereby limiting the positive fiscal impact. The Florida legislature’s nonpartisan Office of Program Policy Analysis and Government Accountability (OPPAGA) estimated that Sunshine State taxpayers saved $1.44 for every dollar of revenue reduced by the tax credits.

Program caps can also reduce the effectiveness and stability of the STC program. Every year, scholarship organizations hit Rhode Island’s pitifully low $1 million tax credit cap on the first day that the credits are available. The state holds a lottery to determine which businesses will receive the credits and therefore which scholarship organizations will receive the donations. In addition to turning away scores of would-be donors, the lottery wreaks havoc on the financial stability of the scholarship organizations, which often have to dramatically decrease either the size of scholarships or the number of scholarship recipients or both if the lottery does not favor their organization that year.

Parents want more education options, donors want to support them, taxpayers benefit when students switch out of government-run schools, and both scholarship recipients and public school students benefit from the expanded choice and competition. STC program caps limit the benefit to all these stakeholders. It is understandable that policymakers may still want to limit the program’s speed of growth to give the public school system time to adjust. In that case, automatic escalator provisions like Florida’s are an appropriate compromise.