NTF Issue Paper: legwatch95.doc. 1-18.

Congress offered Sec. of Education Betsy De Vos, a champion of school choice, a big victory by including in the new federal tax bill a provision to expand the 529 college savings plan to include private and parochial K-12 schools, covering tuition, books, and tutoring. Parents can withdraw up to $10,000 annually tax-free from their 529 savings accounts to use for these public, private, or religious elementary or secondary school expenses. This legislation represents a policy shift in Washington, D.C., from currying favor with the public education monopolists to parents and families who crave and demand education choice.

Conservative Sen. Lydia Brasch introduced LB 804 on behalf of State Treasurer Don Stenberg. State law currently offers favorable tax treatment for NEST accounts only if used for qualified expenses at colleges, universities, community colleges, technical schools, or graduate programs. LB 804 would align state law with the new federal provisions. Until the Legislature adopts authorizing legislation, Nebraskans cannot use their 529 accounts for tax benefits at elementary or secondary schools. Because the legislation effective date is Jan. 2020, no fiscal impact on the state budget in the present biennium. The Brasch bill would create tax relief by allowing parents to directly invest dollars to promote our state economic future.

More people will save to find the very best options for the education of their children from kiddiegarden through college. Accountants and financial advisers will recommend participating to their clients. Families considering sending kids to private or parochial schools will see this new law as a tipping point in their decisions. Parents with kids who have learning disabilities could pool money to send children to private schools that would serve them better. Parents might wish that public school systems would improve curricula or teaching staff to meet the needs of different students, but, until such occurs, parents applaud lawmakers expanding use of 529 plans. In Nebraska, NEST 529 plans continue to grow in number as young couples bear children. Accounts now stand at $4.8 billion. Balances have over doubled since Dec. 2010, and the number of active accounts has risen about 40% since then to 355,000. Approximately 15% of NE families now participate, compared to 11% in 2010. About 11% of NE school age students enrolled in non-public schools in the 2016-17 school year, more than the 10% figure nationally (National Center for Educational Statistics, 2017). Although the $10,000 withdrawal limit would not cover full tuition payment at several private schools, multiple accounts for individual students could provide sufficient funding. Understand that parent paychecks and investment returns will supplement 529 accounts. Robert Enlow, the president and CEO of EdChoice, a school choice advocacy group, said the law might allow more flexibility for private schools to offer scholarships and financial aid.  As wealthier families save over the years, they can cover the cost of private school tuition. Therefore, more scholarships available for the middle class and poor at private schools. No bureaucratic federal government supervision or oversight necessary. This federal change will have no impact on state tax policy. The alteration to 529 plans does not force state senators to change our tax system or how much they spend on education. Taxpayers can keep more of their own dollars.

Public school boards and teacher unions claim that diversion of money will mean less state revenue and therefore less state aid for public schools. Understand that those who send their kids to private schools still pay local property taxes and state sales and income taxes that subsidize public education. In all except 4 states, the estimated tax revenue lost from all 529 users deducting their private school tuition totals less than 1 % of state school aid (Nat Malkus, New York Times, Dec. 19, 2017).

Contact your state senator today to support and vote for LB 804, a bill to break the crushing monopoly of our public school systems. NE parents and families deserve the privilege to choose and finance the educational environment they believe best suits their children. Email netaxpayers@gmail.com for state senator contact information.

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