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State To NEO: Give More Scholarships To Public School Students

The Department of Revenue Administration has released a memo clarifying the rules surrounding a controversial education tax credit scholarship. The memo makes clear that the state’s largest scholarship organization will have to change how it operates next year.

The Network for Educational Opportunity will have to give 70 percent of its scholarships to individual public school students. This year it’s giving 70 percent of the funds to just 13 public school students. That’s the lion’s share of the funds going to just 12.6 percent of scholarship recipients.

However, the state won’t be penalizing them for the mistake. “As this was the first year of the new tax credit program, the Department will not deny scholarship organization applications for the 2014 program year in instances where the scholarship organization’s only issue of non-compliance relates to misinterpreting” this part of the law.

Kate Baker, Executive director of the NEO says "we've been complying all along with their interpretations of the Education Tax Credit law, and we've in constant communication with [the state],” which could help explain why no penalties have been issued.

“While this might seem surprising,” says Baker, “in the first year of a program it makes sense for them to clarify how the law should work.”

Next year scholarship organizations may need to seek out many more public school students in order to successfully give out all their dollars. This spring a superior court ruling barred them from giving money to students for the purpose of attending a religious school, which greatly reduced the supply of public school students the NEO had to draw upon.

The program gives businesses a tax credit for donating to scholarship organizations which then help parents sending their students to private schools. Businesses who donate to the scholarship fund a tax credit. It has been a lightning rod since before it began, as opponents called it functionally equivalent to a school vouchers program, and a suit attempting to derail the law was brought in the first months of its existence. 

**Correction: A previous version of this article stated that Kate Baker had said the NEO had used a mistaken formula. Mrs. Baker contends the mistaken interpretation of the law came from the DRA, and the NEO was merely complying with it**

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