As Opportunity Scholarship ‘crisis’ fades, potential for repeat looms

18 August 2023

Hope has been restored to mother Itaybe Arias. 

Last Wednesday, Democratic lawmakers on the Interim Finance Committee voted as a bloc to reject the use of federal COVID aid money to shore up the Opportunity Scholarship school choice program. It quashed a move by Republican Gov. Joe Lombardo that — advocates argued — would have ensured students like her son, William, could continue to receive financial assistance to attend private schools.  

Almost two full days later, Lombardo’s office announced a temporary solution — one that had been suggested by several legislative Democrats just that week.

AAA Scholarship Foundation, the largest scholarship granting organization (SGO) in the program, volunteered to support students who were potentially at risk of losing their scholarships by using its $13 million of reserves. It was a move that came only after Lombardo’s request, though in a statement released last Friday, the governor also praised AAA’s “eagerness” to agree to a “short-term solution for this crisis.” 

“However, unless legislative Democrats work with us on a long-term solution, children will be forced out of their schools and back into the very schools that failed to meet their unique educational needs,” Lombardo’s statement said.   

But Lombardo’s call for aid from AAA came after Democrats had — without any legal authority over the private nonprofit SGOs — also demanded such a move on Wednesday, a call that came as they excoriated AAA and characterized the entire episode as a “manufactured crisis.” 

“Governor Lombardo was willing to allow an out-of-state organization to hoard millions of Nevada taxpayer dollars, instead of putting them to work to help children,” a statement from Nevada Senate Democratic Caucus read. “Only after Democrats on the Interim Finance Committee held both the Lombardo Administration and AAA accountable are we now seeing them do the right thing.”

The news of the support from AAA brought relief to Arias, who had feared she would have to pull her son out of Mountain View Christian Schools near downtown Las Vegas since she couldn’t afford to pay the school’s tuition without the scholarship assistance. Prior to Lombardo’s announcement, she was looking at other schools she could move her son to if nothing was done to help families like hers. 

“I’m feeling calmer now,” she said in Spanish during a phone interview. “But we were hoping for a better outcome.”

The road to an emergency stopgap 

Created in 2015, the scholarships are funded by donations from businesses made out to scholarship grant organizations, third party organizations tasked with distributing the funds. Those businesses, in turn, receive a one-to-one amount of tax credits from the state that can be used against the state’s modified business tax (MBT), also known as the payroll tax. 

During the 2023 legislative session, Democratic lawmakers were vehemently opposed to adding more funding to expand the program as the governor had proposed. While Democrats didn’t bring forward any legislation to reduce the tax credits available to the program every year, an additional $4.7 million in funding that the program had come to rely on had expired, bringing the program to its original funding cap of $6.6 million annually for the first time.

Concerns over scholarship availability crystallized this summer after SGO leaders realized that AAA had claimed the entire $6.65 million of tax credits available this year in the state’s first-come, first-serve process. Though the Opportunity Scholarship law is not written to prevent the distribution of all available tax credits to a single organization, the move still left nothing for the other scholarship granting organizations with much smaller reserve balances to use in exchange for donations to support their students. 

Silver State Scholarships, the second largest SGO that issued scholarships to nearly 500 students, said this meant it could only fund scholarships to about 50 students this year using leftover funds from last year. 

“This thing was mishandled and it turned into a mess for everyone concerned,” said Silver State’s Executive Director Michele Morgan.   

In an emailed statement to The Nevada Independent, AAA Executive Director Kim Dyson said AAA has always followed the guidelines and processes put in place by the state. She explained that the applications for the tax credits have always been approved on a first-come, first-serve basis, and, AAA like the other SGOs, were informed that this year the Nevada Department of Taxation would begin accepting the applications in-person or by mail beginning June 15. Email applications would not be accepted as they were in previous years as part of COVID rules. 

“Accordingly, we and various other SGOs submitted the MBT credit applications at the NV DOT office at 8:00 am on 6/15/23 as instructed,” Dyson said. “We had no special knowledge of how the (department) would decide to prioritize the granting of credits to applicants.”

Advocates of the program were quick to blame Democrats’ unwillingness to increase funding though it’s unclear whether anyone was aware this would occur. 

Democratic legislative leaders fired back by pointing to the more than $13 million in reserves held by AAA, as SGOs are legally allowed to carry that money forward for up to five years from when the contribution was made. SGO leaders told The Nevada Independent that the arrangement allows flexibility for students to continue receiving scholarships even if contributions (or the political landscape) change. 

Democratic lawmakers fixated on that detail during the IFC meeting last week, and argued that even if the cap had been raised, because of the way the program is set up, one SGO could still come in and claim everything. 

“There is a failure in the process that we must fix,” said Assemblywoman and IFC chairwoman Daniele Monroe-Moreno (D-North Las Vegas).

In the meantime, AAA has reopened its application period for students who were caught in the middle. The deadline to apply for a scholarship through AAA is Sept. 11. 

“We have agreed to use our legally allowed scholarship reserves to fund the gap created by an oversubscription in the scholarship program while Governor Lombardo and the Nevada Legislature work together on their shared commitment to the current scholarship students that they will continue to have access to scholarship funding for the duration of their K-12 education,” the organization said in an Aug. 12 statement. 

Mountain View Christian Schools Principal Raymond LeBoeuf estimates 45 percent of the school’s 200 students receive financial assistance from the Opportunity Scholarship program. Of those students, about 35 were affected by the situation this year. He said the school is offering flexibility for the families of those students as they wait for a response back from AAA.

“We don’t want a family sent to another school right before school starts,” he said. “We didn’t want to have that kind of upheaval for any families.”

As the worst-case is avoided — will it happen again? 

While the so-called crisis was averted, advocates say the cycle may be repeated next year unless state leaders work to improve the program, including by allocating more funding to the program. 

“I have repeatedly said that the one-time increases and political threats to end this program have made the program unstable,” said Valeria Gurr, a senior fellow with the American Federation for Children. “This amount of back and forth, will they get a scholarship or not, definitely isn’t sustainable long-term for families. We need to make a commitment to fund this program at the appropriate level and for perpetuity.”

In addition to increasing funding, Silver State Scholarships’ Morgan said state leaders need to create a “fair and equitable” system to allocate the tax credits so one single organization can’t claim it all on behalf of its business donors and instead allot the tax credits based on each organization’s needs.  

AAA, which also operates scholarship programs in Arizona, Florida and Georgia, suggests looking at setting up a randomized submission progress.  

Sen. Scott Hammond (R-Las Vegas) was the architect of the now-mothballed Education Savings Account school choice program (a more expansive universal program that was blocked in the courts over its funding mechanism), and for years a key player on school choice efforts in Carson City — though he was less central to this year’s efforts by Lombardo to expand the program. 

In an interview, Hammond told The Nevada Independent that lawmakers not only ought to reexamine reporting requirements “to get a handle on where the money is,” but that an SGO-based solution for the funding hole “actually creates more of a problem later on.” 

“Because you’re funding them, but then now AAA doesn’t have the money that they may need for the future when they’re talking about getting those students through,” Hammond said.

Policy becomes politics

What comes next for Opportunity Scholarships remains an open political question, likely to be decided as much by the next election as any other key issue. 

Inside of public meetings on the issue, legislative Democrats have routinely railed against school choice broadly and Opportunity Scholarships specifically. During the legislative session, they raised questions over the need to divert any amount of state funding — even tax credits — toward private schools when public K-12 funding remained below the levels recommended by the Commission on School Funding. 

After the session, they have since raised repeated questions over the transparency and reporting requirements of the programs, pressing for change over how information — especially the amount of money carried over each year by SGOs — is reported to the Education Department and the Legislature. 

At a press conference ahead of the IFC vote, Assembly Speaker Steve Yeager told reporters that debates over appropriate funding levels had always superseded transparency fixes — “certainly we could have shone a light a little bit brighter on that program,” he said.  

Still, he teed up the potential to revisit new SGO requirements in the 2025 session at the same press conference, before adding: “Although I will say private schools have largely been unwilling to agree to that sort of thing.”

But amid an ongoing stalemate between the state’s largest school district and its largest teachers union — a fight that has vacuumed what little political winds still blow in the summer before an election year — the Democratic campaign apparatus has stayed away from publicly downplaying school choice efforts. 

By contrast, the Lombardo campaign apparatus has made the issue a load-bearing column. 

Both before and after the IFC vote, the Lombardo-linked Better Nevada PAC had levied a barrage of social media attacks against legislative Democrats, using tweets about free school lunches and the Las Vegas A’s stadium bill as springboards for attacks on school choice, imploring users to “remember their names.” 

The barrage has also laid out a map of the Republican campaign target list, including not only the two Democratic leaders — Yeager and Senate Majority Leader Nicole Cannizzaro (D-Las Vegas) — but also a handful of swing-district rank-and-file members — Las Vegas-area Assemblywomen Michelle Gorelow and Shea Backus, as well as Reno-area Assemblywoman Serena La Rue Hatch. 

But the likelihood that Democrats jump at the chance to address Opportunity Scholarships in the legislative interim remains small. Democrats blocked Lombardo’s initial Opportunity Scholarship proposals and interim maneuver through a near 2-to-1 advantage in the Legislature, a supermajority in the Assembly and just one seat shy in the Senate. 

In 2024, Democrats have widened their Senate hopes, already targeting the Washoe seat of outgoing Sen. Heidi Seevers Gansert (R-Reno) after a 2021 redistricting process that saw the state party maximize the number of competitive seats. 

And when the prospect of a special session for just such a debate was raised during last week’s IFC meeting by Lombardo Chief of Staff Ben Kieckhefer, Democrats appeared reluctant. 

Sen. Dina Neal (D-North Las Vegas), pressed Kieckhefer on why the issue did not emerge in either of the two special sessions called back-to-back in June. “The truth is, the governor called us into two special sessions and did not deal with Opportunity Scholarships [and] did not put money forward, cash or credit,” she said. Monroe-Moreno, likewise, downplayed the potential for a third special session. 

Kieckhefer responded then that the specials were highly specific — tailored narrowly around the state’s last budget bill and the A’s stadium bill. But for Republicans more broadly, the roadmap remains less clear, even if the goal to expand private school access remains the same. 

Hammond, for instance — who will term out of the Legislature next year — told The Nevada Independent that he would push for the return of the “escalator,” or a legal provision that automatically increases funding for the program annually (and one that was excised from the law by legislative Democrats in 2019). 

But more than that, he lamented attempts to end the program altogether when the number of students enrolling in it demonstrated a good “return on investment.” 

“I’m just afraid that every time we have a discussion, it turns into ‘how do we get rid of the program?’” Hammond said. “That’s what I worry about every time, and then it seems like that’s what happens every time.”

The post As Opportunity Scholarship ‘crisis’ fades, potential for repeat looms appeared first on The Nevada Independent.

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