Greater Harrisburg's Community Magazine

Waiting Game: Contributions withheld from nonprofits, schools in state budget impasse

The Pennsylvania state budget impasse is preventing millions of dollars in corporate contributions from getting to nonprofit groups and schools.

Kathy Anderson-Martin wants the state to pass a budget.

Since the summer, Anderson-Martin, director of philanthropy at the Salvation Army of Harrisburg, has watched weeks turn into months as the state legislature delays approving a budget for the 2017-18 fiscal year, which officially began on July 1.

Lawmakers have already adopted a spending plan but can’t agree on a revenue package. Until they reach consensus, millions of dollars in tax-deductible corporate donations are on hold, too.

That’s because the budget impasse has stalled approvals for the Education Improvement Tax Credit program, which qualifies businesses for tax credits if they donate to scholarship organizations, educational improvement organizations or pre-K scholarship funds.

Local schools and nonprofits, including the Salvation Army, say that the delayed approvals have paralyzed their planning for future programs and scholarships.

“We can’t receive almost $200,000 in gifts because that program is on hold,” said Anderson-Martin.

According to Anderson-Martin, the Salvation Army of Harrisburg uses EITC dollars to fund its summer youth enrichment program. Last year, the program served 400 children, 130 of whom were in their care all day, every day, for nine weeks while their parents worked, she said.

David Smith, communications director at the state Department of Community and Economic Development, said that the EITC allocations will be approved as part of the state’s final budget agreement.

If partisan gridlock delays that agreement any longer, Anderson-Martin says the Salvation Army might have to scale down its summer plans.

“We can’t wait until January to decide what we’re going to do in June,” she said. “We have to start planning how many kids we’ll serve this summer, and, if that money isn’t there, we have to serve fewer children.”

EITC dollars also fund scholarships to private and religious schools across the commonwealth. The Joshua Group, a nonprofit in Allison Hill, relies on EITC funding to provide low-income Harrisburg students with scholarships to local private schools.

Joshua Group director Kirk Hallett criticized lawmakers for using the EITC program as a “political toy,” and said that the delay could limit Joshua Group’s ability to serve more students.

“The immediate impact is fear,” Hallett said. “This is very frustrating to us, that all this politics ends up affecting our kids.”

Mary Anne Bedhar, principal at Bishop McDevitt High School in Harrisburg, said that “everything is on hold” in the school’s scholarship office until the EITC funds are approved.

If the budget impasse continues through the end of the calendar year, it’s possible that businesses will withdraw their applications for tax credits, thereby reducing the total amount of EITC distributions. Bedhar and Hallett said that’s what happened in 2015, the last time the state endured a long-term budget impasse.

Bedhar reported that Bishop McDevitt lost $200,000 in donations that year, the result of fewer businesses applying for tax credits. She said that the school hasn’t fully recovered from the loss.

The Joshua Group lost about $100,000 in scholarships as a result of the 2015 budget impasse, according to Hallett. He and his staff were able to maintain their operations by approaching private donors, but they weren’t able to take on any new students during that period, he said.

Smith said that businesses withdraw EITC applications every year and declined to draw a connection between application withdrawals and the last budget impasse.

Even so, the program has been perennially popular among businesses. Smith said that the DCED expects to maximize the program allocation this year, just as it did last year when the program budget was $125 million.

The EITC program was signed into law in 2001 by former Gov. Tom Ridge. Companies can apply to give a maximum of $750,000 to an eligible educational organization and receive a tax credit equaling 75 percent of their contribution or 90 percent if they pledge contributions for two years.

Democrats and Republicans have supported expansions to EITC since its inception, according to reporting from PennLive. This May, the House voted 166-26 to pass a $100-million-dollar expansion to the EITC program and a similar program called the Opportunity Scholarship Tax Credit.

Critics of EITC say that it promotes school choice, and fear it could lay the groundwork for a school voucher program by directing more students out of public schools.

Hallett, however, doesn’t see the scholarships funded by EITC dollars as a public-versus-private school matter. His organization views education as an anti-poverty program, and he says that jeopardizing its funding will only harm vulnerable students.

“The bottom line is it affected the poor once again,” Hallett said, referring to loss of EITC funding in 2015. “This is me talking on Allison Hill, but, sometimes, I just don’t know what the guys on Capitol Hill don’t get.”

State lawmakers will return to Harrisburg today for a week of negotiations and closed door meetings, according to the AP.

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