The costs, opportunities, and limitations of the expansion of 529 education savings accounts

The Brookings Institution Doesn't like the tax losses involved so downplays the benefits

EXECUTIVE SUMMARY

The Tax Cuts and Jobs Act substantively changed 529 college savings plans. In an effort to promote school choice, the Act expanded the list of eligible 529 expenses to include K-12 private school tuition. This federal change in the definition of qualified expenses will impact many states, particularly those that offer 529 tax deductions and credits.

In this paper, we examine the potential impact of the 529 expansion on the distribution of benefits across families, on the promotion of private school choice, and on possible fiscal implications for individual states. Our overall assessment of the likely impact in these three areas is that the 529 expansion to private K-12 schools will primarily benefit affluent families, produce limited incentives for promoting private school choice, and come at a nontrivial cost to states.

We discuss some ways that states might respond to promote progressive tax policy and expand private school choice. A simple roll-back of state tax breaks, and/or direct investment in school choice end up as the most straightforward ways to achieve these goals.

OVERVIEW

The key benefit of 529 plans is that earnings on contributions are not subject to federal taxes when withdrawn to pay for tuition and other select college expenses. When earnings from 529 contributions accrue over long time periods as they do, for example, when parents establish and fund a 529 plan when their child is young and begin to draw it down when that child enters college, the financial benefit of exemption from federal taxes can be substantial.[1] However, the time period between putting money into a 529 plan and withdrawing it for K-12 tuition will typically be far shorter.  The Joint Committee on Taxation (JCT) estimates the loss to the Federal Treasury will be a modest $600 million over 10 years.[2]

The federal tax code defines 529s and the expenses they may be used for, but states run the plans. All but two states, Washington State and Wyoming, offer 529 plans. Most importantly, more than 30 states offer state-level tax deductions or credits, which can be claimed on each year’s state tax return, for those who put money into the plans. These immediate state-level tax benefits are what will almost certainly draw more people who are paying private school tuition into 529 accounts – any family paying private school tuition in a state offering 529 tax benefits would be foolish, financially speaking, not to make use of them. The rub is that as more families start claiming the benefits, state revenues will decline.

More than two months after the passage of the TCJA, many states are still uncertain as to how they will accommodate this federal change in definition of qualified expenses. Most states will have to respond in some way—by changing state regulations or laws to block or welcome the expansion and by communicating those options to account holders. At last count, of the 34 states with 529 deductions or credits, eighteen automatically conformed or have passed legislation to conform to the federal 529 change, while sixteen have either argued that their state 529 incentives cannot be used for K-12 expenses, despite the federal change, or have yet to determine their course.[3] For some of these states, this could include new legislation that constrains the state tax benefits in their own specific 529 plan

The real question for states is whether they wish to use their own tax systems to support spending on private K-12 education through the vehicle of 529 plans. The answer to this question will clearly vary, depending on the political complexion of a state government, financial implications, and broader attitudes towards school choice. We focus on the fiscal implications for states (the cost to tax payers), distributional consequences for families (who will financially benefit most), and the potential for promoting private school choice. Our overall assessment of the likely impact in these three areas is that it will hit state revenue, largely help affluent families, and have only a limited positive impact on private school enrollment.

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Student Journalist Says Discipline Policies Weakened School Safety Before Parkland Shooting

While the media continues to focus on gun control in the wake of the Marjory Stoneman Douglas High School shooting in Parkland, Florida, one area student has dug into his school’s policies and found them wanting.

Kenneth Preston, a 19-year-old student journalist who attends high school in Broward County, Florida, has done an in-depth investigation of the superintendent and school board.

Preston’s thorough report, released on Tuesday, says that Broward Superintendent Robert Runcie and the school district failed to spend over $100 million of federal money intended for school safety upgrades.

Runcie once worked under former Obama Secretary of Education Arne Duncan in the Chicago Public Schools system.

Preston’s report says that the school had been sitting on this money since 2014, and that only about 5 percent of it had been spent.

“The findings of our investigation is [sic] two-fold. First off, a $100 million which superintendent and the school board had access to. Since 2014, roughly 5 percent of that money has been spent,” Preston said in an in-depth interview with Sirius XM host David Webb.

Preston said that Runcie gave him a “long-winded runaround” about what happened to the money.

In addition, Preston has called into question the school district’s use of the PROMISE program.

This program was aligned with a 2014 Obama-era federal initiative, which aimed at ending the “school to prison pipeline” as well as racial disparities in discipline by focusing on counseling and “restorative justice” instead of using law enforcement to correct on-campus misbehavior.

Preston spoke at a Broward County School Board meeting on Tuesday, but said during his remarks that just before the meeting started, his allotted time to speak was cut to three minutes.

The seven panelists Preston had lined up were removed from the schedule.

On the day before the hearing, Preston said he was forced to attend a two-hour meeting with the superintendent and the families of the victims to discuss his report.

“I was denied the right to have an attorney present. I was refused the opportunity to record the meeting, and I was told this was because the superintendent wouldn’t have any representation of his own,” Preston said.

He said that when he arrived at the meeting, it was “stacked with 10 district officials in addition to the superintendent.”

Preston continued: “It makes me wonder how committed to transparency and truth you are when I was denied the right to have an attorney present as well as the opportunity to record the meeting while the superintendent was allowed to bring 10 district officials who work for him and attempt to re-educate me.”

“Something doesn’t smell quite right in Broward, and this school district is the epicenter,” Preston said.

The Obama administration had touted the Broward school discipline program as a model of success.

But after a Parkland student went on a murderous rampage at the school, many wonder how an individual expressing so many red flags could have fallen through the cracks.

As the Manhattan Institute’s Max Eden wrote, Broward County’s discipline policies pressured Parkland officials “to post lower statistics on school-safety problems. This climate of disengagement could have allowed [Nikolas] Cruz to slip through the cracks in the system.”

Runcie, who was also at the school board hearing, reiterated previous statements from the school district, saying, “Contrary to what people believe or may have heard, Nikolas Cruz was never a part of the PROMISE program, he never had any infractions that would have made him eligible for the PROMISE program.”

However, a recent report in RealClearInvestigations noted that the school’s official discipline policy lists “‘assault without the use of a weapon’ and ‘battery without serious bodily injury,’ as well as ‘disorderly conduct,’ as misdemeanors that ‘should not be reported to Law Enforcement Agencies or Broward District Schools Police.’”

The RealClearInvestigations report also said:

A repeat offender, Cruz benefited from the lax discipline policy, if not the counseling. Although he was disciplined for a string of offenses—including assault, threatening teachers, and carrying bullets in his backpack—he was never taken into custody or even expelled. Instead, school authorities referred him to mandatory counseling or transferred him to alternative schools.

The lack of criminal record allowed Cruz to purchase an AR-15, according to the report.

At the hearing, Runcie essentially called criticism of the school’s discipline policies fake news.

“Connecting PROMISE to this horrific tragedy is truly unfortunate, I think it’s reprehensible, and we’re not going to dismantle a program in this district that is serving and helping kids appropriately because of news that is not fact-based,” Runcie said.

Runcie worked closely with the Obama administration on its school discipline policy, according to the Washington Examiner.

“Runcie was invited to the White House in 2015 for a Rethink Discipline summit, while the district received a $54 million federal Teacher Incentive Fund grant in October 2016 that was based in part on its efforts to keep high-risk students in school,” the Examiner reported.

While the school district maintains support of the controversial program, it has a growing list of detractors, including the deputy sheriff and president of the Broward Sheriff’s Office Deputies Association, Jeff Bell.

“If I have a weapon or even ammunition on school grounds, and I have certain things in my past, I could be arrested for that, but Mr. Cruz just gets off scot-free,” Bell said, according to the Examiner. “And that’s the thing. If he had gotten arrested just once for disorderly conduct or trespassing or something like that, that would have shown up on his criminal record, and could have sent up some red flags before he was ever allowed to buy a firearm.”

There have also been calls for the Department of Education to rescind the Obama-era school discipline guideline, which is being reviewed by Secretary of Education Betsy DeVos.

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Australia: 'Is graffiti an art form or a criminal offence?': Schools accused of dumbing down English lessons with tests on STREET TAGS

English teachers  being asked to teach students to 'read graffiti' in Queensland

The sample assessment, detailed on the Queensland Curriculum and Assessment Authority website, asks students to engage, examine and evaluate graffiti.  

Images of graffiti are provided to the students who are asked to explain, 'How do you know about the graffiti? Who produces the graffiti? Is graffiti an art form or a  criminal offence?'

The exercise even provides examples of student responses to the graffiti images, with answers including 'I have seen graffiti on the way to school' and 'It is mainly done by young people'.

Queensland's Education Minister refused to comment, while the curriculum authority described the assessment as an 'optional resource' for teachers, according to the Courier Mail.

'Decisions around the use of assessment items and contexts for learning are made at the school level,' he said.

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