House panel presses oversight and data gaps in $680 million Education Tax Credit program

HARRISBURG — Lawmakers at a House Education Committee hearing on Thursday pressed state analysts and agencies for clearer data and stronger oversight of PennsylvaniaImprovement and Opportunity Tax Credit programs that together account for about $680 million a year in foregone state revenue.

The Independent Fiscal Office (IFO) told the committee that its review under Act 48 of 2017 found program features that limit the stateability to determine whether the programs achieve intended outcomes. "Ninety-nine percent of participating firms made two-year commitments and received a tax credit equal to 90% of their contribution," the IFO summarized, adding that statutory data limits prevented the office from measuring changes in student outcomes after scholarship awards.

"We allocate $680 million a year towards this tax credit," the committee chair said in opening remarks, framing the inquiry around whether the Commonwealth is getting a measurable return on that investment.

Officials from the Department of Community and Economic Development and the Department of Revenue described operational steps taken to administer the credits and recent administrative improvements. Jim O'Donnell, director of DCED's Tax Credit Division, told members that demand and allocations have shifted with increases to program caps and that some program buckets — notably Educational Improvement Organizations (EIOs) — have been oversubscribed in recent years.

Department of Revenue staff described reforms to tax processing and outreach to pass-through entities and said one concrete change intended to speed allocations was converting the Rev-1123 allocation form to an electronic filing.

But lawmakers repeatedly returned to the same point: under earlier statute the state had limited access to household- or student-level data that would show whether scholarship recipients moved from public to private schools, whether their academic outcomes improved, or whether awards targeted the neediest families. Panelists said Act 33 of 2023 expanded the state's authority to collect additional data (including district of residence, dollar amount of awards, school attended in the 25-26 school year and disability status) and that those fields will begin appearing in reports for the 2025-26 school year, but they cautioned that demographic or income fields remain constrained by law and privacy rules.

Representative Mary Isaacson pressed the witnesses on the IFO finding that Pennsylvania's household-income thresholds for scholarship eligibility were higher than most states and asked whether lowering thresholds would better target needy students. The IFO reiterated its recommendation that statutes be amended to allow collection of key performance measures and to tighten accountability for dollars not used for scholarships or educational programming.

Lawmakers also asked whether scholarship organizations and special purpose entities (SPEs) that facilitate donor participation could provide anonymized, auditable data to the Commonwealth. Operators told the committee they maintain student-level records and financial audits but that data is often held by scholarship organizations and not currently aggregated for state analysis.

The committee did not vote on legislation at the hearing. Members said they would follow up on the new reporting data and consider whether further statutory changes are needed to align accountability with the program's size and public cost.