House panel approves increasing school tax breaks

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PHOENIX (AP) -- An Arizona House committee voted Monday to allow bigger tax breaks for private school scholarship donations while also requiring new accountability measures.

The House Ways and Means Committee adopted the measure on a 4-3 party-line vote. It is the first step toward implementing changes recommended in December by a special House committee that was convened following newspaper investigations that found minimal oversight of the program.

The measure now goes to the full House following a legal review. It increases the current tax-credit limits of $500 for individuals and $1,000 for married couples to $750 and $1,500. The credit provides a dollar-for-dollar income tax savings.

Since 1997, Arizona has offered the tax credits to people who make donations to organizations that provide scholarships for students attending private schools.

Committee Republicans, who control the panel, supported the bill, saying the program gives parents who couldn't otherwise afford it the option to send their children to private schools.

They said it saves the state money because Arizona spends more per student on public schools.

"In this most difficult time, we need to keep looking at ways to save the state money," said Debbie Lesko, R-Glendale.

Committee Democrats opposed the bill, saying too many scholarships go to wealthy parents who would send their children to private school anyway.

"Very wealthy people who are sending their children to private schools no matter what, are getting the benefit of tax credits no matter what," said Rep. Tom Chabin, D-Flagstaff.

The bill would require organizations that give private school scholarships to conduct a financial audit or review every year.

Current law prohibits parents from donating for scholarships earmarked for their own children. The bill approved Monday would prohibit earmarked donations and make it illegal for taxpayers to swap donations.

Taxpayers would still be allowed to recommend that their donation benefit a particular student, but scholarship fund managers would only be allowed to consider the recommendation along with other factors.

Chabin proposed requiring scholarship funds to ignore donors' recommended recipients and to limit their scholarships to low-income families, but his amendments were rejected.

"I think the program has operated reasonably well," said Rep. Rick Murphy, R-Glendale. "I don't believe the initial intent of the program was to limit it exclusively and only to poor families."

The committee tabled a bill that would make similar changes to the law allowing corporate tax credits for private school tuition due to time constraints.

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