WHITE PAPER | Indiana’s History of School Choice: Attempts to Derail New K-12 Scholarship Program Threaten Decades of Choice

November 28, 2011

Angela C. Erickson and Dick M. Carpenter II, Ph.D.

Institute for Justice

Heather Coffy is a hardworking, single mother who wants to ensure her children receive a quality education. Her oldest son, Delano, was struggling in the public school system. After her complaints to public school administrators were ignored, Heather moved Delano and her other children, Darius and Alana, to a private school where they thrived. To afford tuition, she depends on Indiana’s new Choice Scholarship Program.

This program provides scholarships so eligible families like the Coffys can choose private schools for their children. It was signed into law on May 5, 2011, along with an expansion of Indiana’s School Scholarship Tax Credit program, which enables taxpayers to earn a credit against state taxes for donations to private organizations that offer similar scholarships.

However, on July 1, 2011, national and state teachers’ unions filed a lawsuit challenging the Choice Scholarship Program.  The teachers’ unions argue that the new scholarship program harms public schools and violates a provision of the Indiana Constitution known as a “Blaine Amendment” that prohibits Indiana from using state funds to benefit religious institutions. The purpose of awarding scholarships to children like Delano, Darius and Alana is to benefit them, not the schools they happen to attend. Moreover, the Choice Scholarship Program allows parents like Heather to choose whether to send her children to public, private nonreligious and private religious school—just as numerous other choice-based programs have in Indiana for more than 30 years, helping hundreds of thousands of students with no challenge to their constitutionality.

Indeed, this article shows that voucher and tax credit style programs have helped hundreds of thousands of Indiana students and have long been part of the state’s educational and policy landscape.

Parents Choosing the Best Education for Their Children

While at public school, Delano was not getting the attention he needed.  Yet Heather’s complaints to school administrators went unheeded and Delano continued to flounder.  So she adjusted her budget and moved him to a Catholic school beginning in fourth grade. Four years later, his grades have improved significantly, and Heather could not be happier about her decision.

Because Delano flourished at his school Heather also sent her younger children, Darius and Alana here, even though her family is not a member of the school parish or Catholic.  To do so, Heather received modest scholarships through the Educational CHOICE Charitable Trust—a privately funded scholarship granting organization that is part of the School Scholarship Tax Credit Program.

However, when Delano was ready for high school, Heather faced a problem: The Educational CHOICE Charitable Trust does not award scholarships to high-school students. Enter the new Choice Scholarship Program, which has made it possible for Delano to continue his studies at a Catholic high school. Without this scholarship Heather would have to carry an even heavier financial burden to provide her kids with the education she believes they deserve.

As a mother, Heather wants her children to learn and grow. She knows better than anyone whether her children are reaching their potential in their schools. School choice programs like the Choice Scholarship Program and the School Scholarship Tax Credit give Heather and other parents the power to put their children in schools that meet their individual needs.

Indiana’s Choice Scholarship Program and History of Choice-Based Programs

The new Choice Scholarship Program builds off of the success of similar programs in Milwaukee, Cleveland and Washington, D.C. Unlike those programs, however, Indiana’s is not limited to one city, but extends choice throughout the whole state. It provides funds to low- and middle-income families to use at their choice of an eligible school, public or nonpublic.  Heather’s children are eligible for these scholarships because they are Indiana residents between five and 22 years of age in a household with an annual income less than 150 percent of the amount needed to qualify for the federal free-or-reduced-price lunch program.

Depending on family income, the scholarship is valued between 50 and 90 percent of the average public school spending per pupil in the family’s area. Scholarships are capped at 7,500 and 15,000 students respectively during the first two years while the program becomes established. Beginning in the third year, scholarships will be given to every student who applies and qualifies, with no limitation on the number of scholarships provided. Once it is fully implemented, upwards of 60 percent of Indiana’s families will have access to their choice of public or private schools through this program.

Contrary to claims from opponents, this type of program is nothing new in Indiana. The state currently offers at least 10 scholarship, grant or voucher programs, as well as five tax credit programs, related to the education of its young people, whether they be in pre-kindergarten, college or grades K-12. These choice-based programs give Hoosier parents and students the ability to make the educational decisions that best suit their needs. This article focuses on Indiana’s education-based programs, but there are many other programs including federal and state programs for social welfare, housing and more that allow Indiana residents to either buy services from private or religious organizations using vouchers or to receive tax credits by supporting private or religious organizations. For example, Indiana tax credits totaled more than $1.57 billion—4.03 percent of total taxes due to Indiana—between 1998 and 2005, only a small fraction of which were education tax credits (Sachtleben 2000, 2001, 2002, 2003, 2004, 2005; Walls 2008).

Voucher-Style Programs

The Choice Scholarship is one of many voucher-style programs in Indiana that allow individuals who demonstrate a need for services to receive funding that may be used at their choice of a public or private institution—including a religious institution. The funding for these programs may go directly to citizens or they may go directly to the institutions to defray the costs beneficiaries incur. Either way, education vouchers follow and support children like Delano, Darius and Alana.

In 1966, the State Student Assistance Commission of Indiana implemented its first scholarship program, the Hoosiers Scholars, to help low-income students attend the public or private college of their choice.  A total of 1,828 scholarships were given out that first year to students entering 33 public and private colleges or universities—including religious schools—with $393,000 of aid (Allmon).  This small step paved the way to opening affordable higher education to Indiana’s citizens at the eligible institutions of their choice.

The idea of allowing students to choose the best school for them was further solidified in 1973 with the enactment of the Freedom of Choice Grant Program.  These awards were given specifically to students attending private colleges and universities in Indiana as a way to supplement state scholarships and grants.  Since then, the Freedom of Choice Grant Program has merged with another program to create the Frank O’Bannon Scholars award.

Today, the State Student Assistance Commission of Indiana administers five different scholarship or award programs—Frank O’Bannon Scholars, Twenty-first Century Scholars, Hoosier Awards, Nursing Scholarships, and Minority Teacher and Special Education Services Scholarships—that Hoosier students can use at the eligible school of their choice, including religious and non-religious private colleges and universities. In the 2009-10 school year, more than 75,000 higher education scholarships totaling more than $210 million in annual state-funded aid were given to students choosing their own school. This includes at least $50 million for students attending 27 of Indiana’s religious higher-education institutions (SSACI).

Indiana began offering limited choice to K-12 students in the 1970s through textbook and transportation grant programs for children who attend private or religious schools. The state provides transportation to private school students along the public school bus route. The latest information on transportation assistance is from 1990-2005, during which time 183,319 Indiana students were transported to and from the private school of their parents’ choice (IDE). Indiana also provides assistance for low-income students’ secular textbooks at private schools. Between 2007 and 2011, textbook assistance provided 22,063 students with materials for their private school classes (Ambre 2011).

Choice programs for K-12 children recently expanded further with special education grants that pay for the provision of special education and related services of children with disabilities who have been placed by their parents in nonpublic schools, including religious schools. This program attaches the money to the student, where previously the local school district could spend the funds as they saw fit. As of 2011, the school district must ensure that the funds attached to private school students are going to support that group of students. To give an idea of the financial impact of the program, had it been in effect in the 2007-08 school year the state would have spent more than $11 million to provide services for more than 4,800 special education students parentally placed in private schools (IDE 2008).

Tax Credits

But voucher-style programs are not the only choice-based aid Indiana already provides to its children. The state also offers a series of education-related tax credit programs, which are among more than 40 different tax credit programs in Indiana that promote education, social welfare, economic investment and resource conservation. These programs have allowed individuals and corporations to recognize and support organizations—including faith-based groups—that promote societal well-being.

Individuals and corporations can receive a tax credit—50 percent up to $100 and $1,000, respectively—for donating directly to a public and private Indiana colleges or universities of their choice, including religious schools. Between 1998 and 2005, individuals used $66.8 million in tax credits for giving to Indiana colleges and universities (Sachtleben 2000, 2001, 2002, 2003, 2004, 2005). During that same time, corporations used $1 million in tax credits to Indiana colleges and universities (Walls 2008).

Unfortunately, the Department of Revenue does not individually report these data for the other education tax credit programs–College Savings 529 Plan, Twenty-first Century Scholars Program, Buddy System Project and School Scholarship Tax Credit.

The College Savings 529 Plan allows a 20 percent tax credit up to $1,000 for putting money into an Indiana College Choice 529 Investment Plan for a child. This money can then be used by the student to attend any accredited college, university or technical school, including religious schools. The Twenty-first Century Scholars Program is a combination scholarship from tax-deductible donations contributed by individuals and corporations and money from the state—the state’s share is included in the higher education scholarship totals above. These funds are given to students to use at the eligible Indiana higher-education institutions of their choice, including public, private or religious schools.

The Buddy System Project is a tax credit that encourages individuals and corporations to donate computer equipment to K-12 public or private schools. The School Scholarship Tax Credit is a 50 percent tax credit given to individuals and corporations who donate to qualified scholarship granting organizations like the Educational CHOICE Charitable Trust that Heather has used to help send her children to a private religious school. In 2010, the full $2.5 million of available tax credits were used, and in 2011, this tax credit was expanded to $5 million, allowing far more families to be helped.

What is at Stake?

Indiana’s Choice Scholarship Program builds on the success of Indiana’s current and decades-old scholarship, voucher and tax credit programs. It allows families who are disappointed with their local public schools to be able to access educational pathways that were previously unavailable to them. Yet national and state teachers’ unions have brought a suit against this new program, claiming it violates the state constitution.

But offering assistance to families who choose to place their children in private and religious kindergarten through post-secondary schools has been part of Indiana’s educational culture for decades. Indiana currently spends at least $278 million a year to support choice-based aid for more than 100,000 Hoosier students. Indiana’s taxpayers use at least $11.5 million in tax credits to support private and public schools and parents’ ability to afford their choice of private schools. In giving aid recipients a free and independent choice of public, private and religious institutions, these programs work just like Choice Scholarships. Heather Coffy choosing to send her son to a Catholic high school with a state-funded scholarship is no different than a Frank O’Bannon Scholar electing to attend Notre Dame. Yet Frank O’Bannon scholarships and Indiana’s many other voucher-style programs have never been challenged on constitutional grounds. Apparently, teachers’ unions only see a problem with these types of programs when their monopoly over K-12 educational funds is threatened by parents choosing to go elsewhere with the dollars allotted to educate their children.

A ruling against Choice Scholarships would not only jeopardize these new opportunities that families like the Coffys depend on, but it would put other decades-old scholarship, tax-credit, textbook and transportation programs at risk. This is too high a price to pay in the unions’ attempt to protect their territory.



Allmon, Sue. ISFAA: Creating a Proud Tradition 1935-1985. http://www.isfaa.org/docs/about/history/chapter4.html.

Ambre, Melissa. E-mail to Angela C. Erickson. July 18, 2011.

Indiana Department of Education (IDE). “Composite of Public School Transportation Reports.” http://www.doe.in.gov/safety/sts/pupil_report/.

Indiana Department of Education (IDE 2008). “2007-2008 Special Education Statistical Report.” March 2008. http://www.doe.in.gov/exceptional/speced/docs/07-08-StatReport.pdf.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2000.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2001.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2002.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2003.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2004.

Sachtleben, Philip J. Indiana Handbook of Taxes, Revenues, and Appropriations. Indianapolis, IN: Indiana Legislative Services Agency, Office of Fiscal and Management Analysis, 2005.

State Student Assistance Commission of Indiana (SSACI). “Activity and Program Report for Academic Year 2009-2010.” November 2010. http://www.in.gov/ssaci/files/AnnualReport2009-10.pdf.

Walls, Bob. Email to Dick M. Carpenter II. June 3, 2008



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