Tax credit benefits PAFE donations

SANDPOINT — As a political lobbyist, local attorney and Panhandle Alliance for Education board member Bill Berg is batting a thousand. True, he admits, he has only lobbied for a total of one bill, but that legislation passed overwhelmingly, helped along by the fact that it was hand-carried to Idaho lawmakers by a unified front that included Rep. George Eskridge, Sen. Shawn Keough and Rep. Eric Anderson.

House Bill 665 and its accompanying legislation, House Bill 630, revisit the state’s existing tax laws and make it possible for donors to receive state income tax credit for money they give to the Panhandle Alliance for Education — an independent foundation that helps fund scholastic programs and educational activities in the Lake Pend Oreille School District.

According to PAFE Executive Director Marcia Wilson, Idaho’s education cuts have made it increasingly necessary for schools to get support from foundations and the new bills recognize the importance of these organizations in helping to balance revenue shortfalls.

“Now more than ever — with more than a million dollars in budget cuts in our district alone — our schools need help,” Wilson said.

The two house bills had their genesis in a conversation between a potential donor and his accountant, when the question arose about whether or not money given to PAFE qualified for Idaho tax credits. The Idaho Tax Commission said “no,” referring to language that required donations to be channeled directly to school districts through “their foundations” in order to make the grade.

In what Berg described as a Clintonesque, “what is the meaning of ‘is’” bit of language parsing, he tackled the word “their” in the existing bill, arguing that organizations such as PAFE function in precisely the same way as district-administered foundations and so should receive the same tax credits.

“It’s our money — as an independent organization, we get to do what we want with it — but we coordinate with the school district on how we spend it,” Berg said. “So I went to George and Shawn and they were immediately supportive.”

The bill — co-sponsored by Eskridge, Keough and Anderson — sailed through the Revenue and Taxation Committee and won resounding approval from legislators. Additionally, an accompanying bill doubled the amount of money corporations can donate to schools and ratcheted up individual donations by five times under the new tax credit rules.

As an example, Wilson showed a chart listing a $2,000 donation from a married couple in the 25 percent federal tax bracket filing jointly.  After a $500 federal tax deduction, a $156 state tax deduction and a $1,000 state tax credit made possible by the new legislation, the actual cost for the $2,000 donation becomes $344.

“If you’re a corporation that gives $10,000, half of that — $5,000 — would qualify for the deduction,” Berg said.

Just as important, he added, is the donor’s ability to steer that money toward a cause of his or her choice.

“We rarely get to tell the government how to spend our tax dollars,” Berg said. “This is the one chance where the taxpayer can say, ‘Here’s where I want my money to go.’”

As a founding member of PAFE, Berg has watched donations ebb and flow — mostly flow — as individuals and businesses attended the group’s fundraisers and answered calls for financial assistance. Lately, however, a troubled economy has taken its toll on the size of those contributions.

“In the 2006-2007 period, I used to say that money would be falling out of wallets at fundraising events,” Berg said. “That just isn’t the case any more. It’s not because the community is any less generous, it’s just a sign of the times.”

“That’s why the timing is opportune for these tax credits,” Eskridge said. “And it’s also a good time to remind those folks who do have the means that this is a good way to go.”

PAFE was formed in 2003 with $10,000 in seed money. By last year, community donations helped the organization create an endowment fund valued at approximately $1.5 million. Since it was founded, the group has invested more than $1.3 million in Lake Pend Oreille School District classrooms and programs that support student achievement.

One of those programs — Ready! for Kindergarten — has helped to close what PAFE calls the “readiness gap” by training the parents of children who are about to enter school. Of the approximately 200 kindergarten students entering the district this school year, 54 of them were “Ready!” graduates. Of those, one student was promoted to first grade, 41 tested above grade level and nine tested at or near grade level.

On a broader level, Wilson said that all district schools continue to show improved performance in most academic areas.

“And I think people should be proud of that report card,” the executive director added, “but it’s going to take their continued support to keep it going.”

It is PAFE’s hope that the expanded tax credit language will make it easier for individuals and businesses to justify that support in a rugged economic climate. According to Eskridge, the governor’s recent address to legislators hinted strongly that what is being described as a “lean session” could very well mean additional cuts for public education in the near term. Consequently, the tax credit revision can help to compensate for shortfalls if schools once again come under the budget-cutting knife.

“Recognizing that we are having problems with revenues, this was a way for us to say, ‘Citizens,  you now have a greater opportunity to help our schools,’” Eskridge said.

“What we did with this new bill was to clear up an ambiguity,” the state representative added. “This was a good example of how legislation moves through the process and this is really the way legislation gets passed — somebody notices a discrepancy and asks us to take a look at it. Now it’s fixed and we don’t have to worry about it.”

For more information about HB 665 and HB 630, visit: www.legislature.idaho.gov and search under the “Prior Sessions” tab at the top of the page for a list of 2010 legislation.

For more information on the Panhandle Alliance for Education and its programs supporting the Lake Pend Oreille School District, visit: www.panhandlealliance.org