House tax reform could cripple innovative education model aimed at low-income families

A nationwide network of Catholic prep schools offered exclusively to low-income families is warning that the House version of tax reform contains provisions that could devastate their funding model, and could spell the end of an educational program that has graduated tens of thousands of low-income children in America’s inner cities.

Although Catholic, the Cristo Rey Network of college preparatory academies is open to low-income children of all faiths, and operates in 21 states and the District of Columbia using what’s called a “Corporate Work Study Program.”

“In lieu of tuition, every student works one day a week at an entry-level professional job thereby earning what would otherwise be tuition, to provide a portion of the cost of education,” Elizabeth Goettl, CEO of the Cristo Rey Network, told the Washington Examiner.

What also sets this model apart is that the students assign their wages to the school, but the wages are not taxed either when the student earns it, or when it’s passed on from the company to the school.

However, the portion of the tax code that allows for these “educational assistance programs” is on the chopping block from the House version of tax reform that’s expected to see a floor vote on Thursday.

“We’re concerned about the tax liability for the student, his or her family, and the school,” Goettl said.

“I don’t know that I would have not gone to college, but I sure know that I would not have been able to achieve the success that I have, had it not been for the network,” said Jose Madrid.

Madrid graduated from the network’s Arrupe Jesuit High School in Denver in 2010. He has since gone on to graduate from Georgetown University in 2014, and is currently in his third year taking Georgetown Law’s evening classes. In his day job, he’s the litigation manager for the University’s office of general counsel.

Born to blue-collar immigrants, he freely attributes his current station in life to the Cristo Network.

“Without the support that I had, and continue to have even years after I graduated, I would have not pursued my dreams. I definitely would not have applied to my dream school, which was Georgetown, and I wouldn’t have had the experience and the growth that I had at such a young age,” Madrid told the Washington Examiner.

The first Cristo Rey school launched 21 years ago in Chicago, and since then, has expanded to cities as diverse as Brooklyn, Kansas City, Birmingham, and Portland. Thirty-two schools are in the network currently, and more are in the pipeline. There are over 11,000 students enrolled in the network currently, and counts over 13,000 graduates in the overall history of the program.

The average family income of a student in the Cristo Rey Network is $37,000, according to the network’s own statistics.

Goettl says the work-study model defrays about 50 percent of the total cost of the schools, and says she believes they are the only network of prep academies of this kind in the nation.

The network is aggressively reaching out to Republican members of the House Financial Services Committee, and is also trying to enlist lobbying support from Education Secretary Betsy DeVos, and former Florida Gov. Jeb Bush, who has been a supporter of the network’s goals.

But about the outreach, Goettl says they’ve had no “conclusive” reaction to their contacts.

Emails to the Department of Education from the Washington Examiner have not been returned.

“I don’t think there would be a possibility of another financing model,” Goettl said. “For some of our schools, the economic impact would be sufficient that they wouldn’t be able to continue to operate. It’s just too much of a shoestring operation.”

“For some of our families, we worry it would impact their scholarship and aid as our students apply to college. Our expectation is that 100 percent of our students go on to college. So when they’re completing their FAFSA [financial aid forms], if this work-study revenue had to be reported as income, it could significantly impact their aid, therefore their opportunity to go to college.”

While the Republican effort at tax reform has — as one would expect — purposefully taken aim at some liberal sacred cows like eliminating the state and local tax deductions, the outcry from the Cristo Rey Network shows that any broad reform of the tax code is likely to snare some projects close to the heart of conservatives, in this case, educational reform that breaks away from the traditional public schools model.

After the Republican failure to pass several iterations of healthcare reform earlier this year, the GOP is now pinning its hopes on tax reform as the signature legislative achievement of 2017 while controlling all the levers of power in Washington.

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House tax reform could cripple innovative education model aimed at low-income families

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