S1607

An Act establishing the Urban Enterprise Zone Jobs Scholarship Pilot Program in the Department of the Treasury and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.).

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the “Urban Enterprise Zone Jobs Scholarship Act.”

2. The Legislature finds and declares that:

a. The economic vitality of the State is intrinsically tied to its workforce, and a well-educated workforce is the key to economic competitiveness;

b. The State has historically taken vigorous action to address issues of unemployment and economic distress in its urban centers, most notably through the creation of urban enterprise zones;

c. Efforts to revitalize some areas designated as urban enterprise zones, however, have been impacted by the low achievement levels of students who reside within those municipalities and the concern that the well-educated workforce necessary to spur the investment of capital and the location of new industry within that municipality may be lacking;

d. Despite the fact that the National Center for Education Statistics ranks New Jersey first in the Nation in education spending per pupil, over 70% of the most recent high school graduates who enroll in this State’s county colleges require remediation in at least one subject area;

e. It seems clear that the current educational system is not working for all children, that children vary in their interests and educational goals, and that each child is unique in terms of the educational environment in which he will thrive;

f. A parent is most suited to select the educational environment that will best nurture the intellectual potential of a child and foster the child’s pursuit of educational excellence;

g. It is an undeniable fact that parents of limited means are less able to provide educational options for their children, even in those instances in which the parent feels that the public school is failing his child, and to select the learning environment that might best meet the needs of the child;

h. In light of New Jersey’s interest in the economic revitalization of urban enterprise zone municipalities, as well as its constitutional commitment to ensuring educational justice for every child, regardless of the relative wealth or poverty of a child’s parents, it is appropriate that the State initiate a tax credit scholarship program on a pilot basis to assess its impact on the educational opportunity and achievement of low-income students who reside in urban enterprise zone municipalities and on the development of the well-educated citizenry that is necessary to attract and retain business and industry.

3. As used in this act:

“Authority” means the New Jersey Urban Enterprise Zone Authority created pursuant to section 4 of P.L.1983, c.303 (C.52:27H-63).

"Eligible school" means an out-of-district public school or an in-district or out-of district nonpublic school located in this State offering a program of instruction for kindergarten through 12th grade, or any combination of those grades that:

(1) is open to all students who are eligible to participate in the pilot program established pursuant to section 4 of this act on a space-available basis and does not discriminate in its admission policies or practices on the basis of intellectual or athletic ability, measures of achievement or aptitude, status as a handicapped person, proficiency in the English language, or any other basis that would be illegal if used by a school district; however nothing shall prohibit the authority from establishing regulations which permit an eligible school to limit admission to a particular grade level or to areas of concentration of the eligible school, such as mathematics, science, or the arts; and,

(2) is in full compliance with all federal, State, and local laws.

"Household income" means income as defined for the purposes of determining eligibility for a free or reduced price lunch pursuant to the State School Lunch Program.

"Low-income child" means a child from a household with an income that does not exceed 2.50 times the official federal poverty level based on family size, established and adjusted under Section 673(2) of Subtitle B, the "Community Services Block Grant Act," Pub. L.97-35 (42 U.S.C.s.9902(2)), for the school year preceding the school year for which an educational scholarship is to be distributed.

"Scholarship organization" means an organization that has been determined by the federal Internal Revenue Service to be qualified as a tax-exempt organization pursuant to paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C.s.501) and that:

(1) requires that any tax-creditable contributions accepted by it be designated by the contributor at the time of contribution as a contribution pursuant to this act;

(2) distributes not less than 95% of the tax-creditable contributions that it accepts pursuant to this act as educational scholarships to low-income children;

(3) requires that a child receiving an educational scholarship from the organization is a resident of, and is eligible to enroll in, a public elementary or secondary school in Camden, Elizabeth, Lakewood,Newark, Orange, Paterson, or Trenton;

(4) distributes individual scholarships that (a) for elementary school grades K-8, are equal to 40% of the average comparative cost per pupil for the pilot school districts in the prior school year as reported in the Department of Education’s Comparative Spending Guide, and (b) for high school grades 9-12, are equal to 59% of the average comparative cost per pupil for the pilot school districts in the prior school year as reported in the Department of Education’s Comparative Spending Guide;

(5) ensures that a child receives in any school year no more than one scholarship pursuant to the provisions of this act; and

(6) has complied with such other requirements as the Director of the Division of Taxation in the Department of the Treasury the authority may require.

4. a. Beginning in the first State fiscal year following the effective date of this act, the Director of the Division of Taxation in the Department of the Treasury, in consultation with the New Jersey Urban Enterprise Zone Authority, shall establish a five-year pilot program to provide tax credits to corporations which contribute funding for scholarship organizations which provide educational scholarships to help low-income children residing in, and eligible to enroll in, a public elementary or secondary school in Camden, Elizabeth, Lakewood, Newark, Orange, Paterson, and Trenton pay tuition at eligible schools. The goal of the pilot program shall be to allow low-income children in these cities to choose an educational model suited to their individual needs.

b. Subject to the restrictions established pursuant to subsection d. of this section, a taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, in an amount equal to 100% of the contributions made by the taxpayer for a scholarship organization during the privilege period; provided that the taxpayer shall designate at the time the contribution is made that the contribution is made pursuant to this act.

c. The order of priority of the credit allowed under this act and any other credits allowed by law shall be as prescribed by the director. The amount of the credit applied under this act against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). An unused amount of credit shall expire at the end of the privilege period.

d. In aggregate, the total tax contribution of all participating corporations shall not exceed $24,000,000 the first State fiscal year, $48,000,000 the second State fiscal year, $72,000,000 the third State fiscal year, $96,000,000 the fourth State fiscal year, and $120,000,000 the fifth State fiscal year. If the sum of the amount of tax credits authorized pursuant to this section in a State fiscal year exceeds the aggregate annual limits established pursuant to this subsection, tax credits shall be allowed in the order that contributions are made until the limit is reached.

5. There is hereby established in the Department of the Treasury a separate fund entitled the “Corporate Tax Credit Scholarship Fund.” The fund shall be maintained by the Treasurer separate and apart from any other funds. The fund shall be credited with contributions made by taxpayers for scholarship organizations pursuant to section 4 of this act. All interest or other income or earnings derived from the investment or reinvestment of moneys in the fund shall be credited to the fund. The moneys in the fund are specifically dedicated to help low-income children residing in Camden, Elizabeth, Lakewood, Newark, Orange, Paterson, and Trenton pay tuition at eligible schools.

6. a. The New Jersey Urban Enterprise Zone Authority shall select one scholarship organization in each of the counties in which the pilot school districts are located to administer the scholarship funds made available through contributions received pursuant to section 4 of this act and on deposit in the Corporate Tax Credit Scholarship Fund.

b. The authority, in consultation with the State Treasurer, shall allocate funds on deposit in the Corporate Tax Credit Scholarship Fund to the selected scholarship organizations. The total funds available for scholarships for each school year shall be allocated to the scholarship organization selected in the county in which a pilot school district is located as follows: the pilot school district’s K-12 resident enrollment divided by the total K-12 resident enrollment of all pilot school districts and the result shall be multiplied by the total funds available for that school year. In the case of a county in which there is more than one pilot school district, the allocation for the scholarship organization shall be determined by adding the funds as calculated above for each of the pilot school districts in that county. Allocation of scholarships for pilot school districts in that county shall reflect the percentage that each pilot district’s K-12 resident enrollment is of the total K-12 resident enrollment for the pilot districts in that county. No more than 25% of a pilot school district’s scholarship allocation in any school year shall be used to provide scholarships to students enrolled in nonpublic schools on the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. The authority shall commission an independent study of the pilot program. The study shall be conducted by an individual or entity primarily identified with expertise in the field of urban education. The individual or entity shall design a comprehensive study of the pilot program which shall include, but not be limited to, consideration of the following:

(1) the academic achievement of scholarship recipients based on test results and other educational indicators;

(2) the impact of the pilot program on achieving savings for State taxpayers;

(3) the impact of the program on student enrollment patterns; and

(4) parental satisfaction with the pilot program.

d. On or before January 1 of the fifth school year of the pilot program, the authority shall submit a report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the implementation and results of the pilot program. The report shall be based on the annual reports submitted by the scholarship organizations pursuant to subsection b. of section 7 of this act and the independent study conducted pursuant to subsection d. of this section. The report shall include a recommendation on whether the program should be reauthorized on a pilot or Statewide basis.

7. a. A scholarship organization selected by the authority pursuant to subsection b. of section 6 of this act shall require that an eligible school which admits a child receiving an educational scholarship under the pilot program:

(1) accept the scholarship as payment in full for a child's tuition and any other costs of attendance payable to the school;

(2) in the event that more children apply for admission under the pilot program than there are openings at the eligible school, determine through a lottery which children are selected for admission, except that preference for enrollment may be given to siblings of students who are enrolled in the eligible school; and,

(3) if the eligible school is a nonpublic school, administer an annual test to scholarship recipients that is aligned with the core curriculum content standards.

b. A selected scholarship organization shall:

(1) manage the scholarship application process for the pilot school district;

(2) review and verify the residence and income of a scholarship applicant;

(3) compile an inventory of vacancies in eligible schools available for potential scholarship recipients;

(4) conduct necessary student selection lotteries in accordance with the requirements of paragraph (2) of subsection a. of this section;

(5) monitor the enrollment of scholarship students in eligible schools and allocate scholarship funds to those schools; and,

(6) prepare a report to be submitted to the Treasurer and the authority by December 1 of each year that includes, but is not limited to, the following information for the prior school year: the amount of scholarship funds received by the scholarship organization from the Corporate Tax Credit Scholarship Fund; the administrative costs of the scholarship organization; the amount of scholarship funds dispersed on behalf of scholarship recipients to eligible schools that are public schools, and a listing of those eligible schools; the amount of scholarship funds dispersed on behalf of scholarship recipients to eligible schools that are nonpublic schools, and a listing of those eligible schools; and the number of scholarship applications which exceeded available scholarship funds.

The authority shall make the annual report available to the parents or guardians of scholarship recipients and to members of the public.

8. The New Jersey Urban Enterprise Zone Authority, in consultation with the Director of the Division of Taxation, shall publicize the pilot program to the parents of children attending public schools in Camden, Elizabeth, Lakewood, Newark, Orange, Paterson, and Trenton.

9. The Director of the Division of Taxation, in consultation with the New Jersey Urban Enterprise Zone Authority, shall adopt regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to implement the provisions of this act.

10. This act shall take effect immediately.

STATEMENT

The purpose of this bill is to address issues associated with the development of the well-educated workforce that is necessary to attract business and industry to urban enterprise zone municipalities, by fostering the ability of parents to select the educational environment in which their child will most likely thrive in the pursuit of educational excellence.

The bill directs the Director of the Division of Taxation, in consultation with the New Jersey Urban Enterprise Zone Authority, to establish a five-year pilot program to provide tax credits to corporations which contribute funding to nonprofit organizations that provide scholarships to help low-income children residing in Camden, Elizabeth, Lakewood, Newark, Orange, Paterson, and Trenton pay tuition at out-of-district public schools or in-district or out-of-district nonpublic schools located in the State. Under the pilot program a tax credit will be equal to 100% of the contribution a corporation makes to a qualified scholarship organization. While there is no limit on the amount that can be contributed for credit, a corporation may not apply the credits to reduce its tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162; and the total tax credit of all participating corporations is capped at $24,000,000 the first State fiscal year, $48,000,000 the second State fiscal year, $72,000,000 the third State fiscal year, $96,000,000 the fourth State fiscal year, and $120,000,000 the fifth State fiscal year. If the sum of the amount of tax credits authorized in a State fiscal year exceeds the aggregate annual limits, tax credits will be allowed in the order that contributions are made until the limit is reached.

The bill establishes the Corporate Tax Credit Scholarship Fund to be credited with contributions made by taxpayers to nonprofit scholarship organizations. The bill directs the Urban Enterprise Zone Authority to select one scholarship organization in each of the counties in which the pilot school districts are located to administer the scholarship funds and, in consultation with the State Treasurer, to distribute those funds to the selected scholarship organizations.

The scholarship organizations selected under the bill must require that an eligible school which admits a child receiving a scholarship under the pilot program:

(1) accept the scholarship as payment in full for the child’s tuition and other costs of attendance;

(2) in the event that more children apply for admission to that school under the pilot program than there are openings, that students will be selected through a lottery; and

(3) in the case of an eligible school that is a nonpublic school, that the school administer an annual test to scholarship students that is aligned to the core curriculum content standards.

The scholarship organization selected in each county will manage the scholarship application process for the pilot school district; review and verify the residence and income of scholarship applicants; compile an inventory of vacancies in eligible schools; conduct necessary student selection lotteries; monitor the enrollment of scholarship students in eligible schools; and prepare an annual report to be submitted to the Treasurer and the authority that provides information on the program for the prior school year.

The bill directs the authority to commission an independent study of the pilot program by an individual or entity with expertise in the field of urban education. The study will consider issues such as the academic achievement of scholarship recipients, the impact of the pilot program on achieving savings for State taxpayers, the impact of the pilot program on student enrollment patterns, and parental satisfaction with the program.

On or before January 1 of the fifth school year of the pilot program, the authority is directed to submit a report to the Governor and the Legislature on the implementation and results of the pilot program. The report will include a recommendation on whether the program should be reauthorized on a pilot or Statewide basis.