Retirement Systems of Alabama CEO criticizes Alabama’s new school voucher-like law

A logo of the Retirement Systems of Alabama (RSA) seen in Montgomery, Alabama on January 24, 2023. (Brian Lyman/Alabama Reflector)

The head of Alabama’s state retirement systems Tuesday criticized the state’s new school voucher-like law, saying it could impact the teacher’s retirement system and health insurance once fully implemented.

Retirement Systems of Alabama CEO David Bronner said at a meeting of the State Employee Retirement System board meeting the impact from the law may be minimal in the first two years with eligibility limited by income. But Bronner said that once the state opens the program to all Alabamians, the effects could spill over into the state employee retirement system.

“What I’m telling you is in roughly three years and four years, we’ve got a really big problem if things don’t change a little bit,” Bronner said.

The legislation would allow households with school-age children to claim up to $7,000 in tax credits to be spent on certain education-related expenses, including private school tuition, tutoring or education services for children with disabilities.

The program will initially be limited to families making less than 300% of the federal poverty line, or around $75,000 for a family of three, but it would give priority to households with lower incomes. The funds would eventually be made available to all households. The special needs-reserved spots are not limited to the income level.

The law requires the Legislature to appropriate at least $100 million for the program in 2026. It also says the Legislature intends to increase that funding if 90% or more of the funds are spent in a given year. The current Education Trust Fund budget (ETF) is about $8.8 billion.

Bronner said he was concerned that diverting funding from public schools for private education could cause school districts to lose students and, as a result, teachers, which would affect the agency’s funding formula for teacher’s retirement system and health insurance. Bronner said that about a decade ago when the state made changes to the state employee health insurance, the state lost about 5,000 employees.

“[Public Education Employees’ Health Insurance Plan] is so much bigger, if you take people away from public schools, no matter how many you take away, you affect funding for public schools,” Bronner said.

Rep. Danny Garrett, R-Trussville, chair of the House Ways and Means Education fund, said that is not a concern he has. “School choice” has been around for about 20 years, he said, and as more states have been taking up voucher-like programs, there is no indication losing teachers has been an issue.

“We’ve not seen school choice programs in other states lead to mass exoduses that cause problems of that nature, and I don’t see any reason why that would be a concern here,” Garrett said.

Neah Scott, legislative counsel for the Retirement Systems of Alabama, said after the meeting that they tried to look at the potential concern early on, but there isn’t a state that has had a program like Alabama’s running long enough to provide that kind of information.

Arizona approved a similar program last year that will provide up to  $7,000 to all families. It is projected to cost  nearly $1 billion in the upcoming fiscal year.

Scott said that the reporting data has a two year delay, so by the time Alabama is able to analyze another state’s program, Arizona will be into year four of its program.

“We can guess — ‘well, what if funding decreases by this much, what if enough public schools end up closing and you lose this many active education employees’ — but we don’t have any real evidence to kind of back up any of those assumptions,” Scott said.

Sen. Arthur Orr, R-Decatur, chair of the Senate Finance and Taxation Education, did not return a request for comment.

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