Mayoral hopeful Williams' hallmark law most widely used by his supporters
Charitable donors who got tax breaks through a program co-sponsored by state Sen. Anthony H. Williams also gave money to a nonprofit run by a top aide.
STATE SEN. Anthony Hardy Williams' legislative capstone - the state's educational tax credits program - has generated scholarships for tens of thousands of children across the state in the past 14 years, including 53,000 in 2013-14.
Yet it remains a controversial program. School-choice proponents - like Williams and his political backers - say it gives generous corporations an incentive to donate to charities that help children escape struggling public schools through scholarships and other financial aid.
Critics say the credits divert tax money away from public schools. Gov. Wolf has described the credits as "a backdoor voucher system" that "diverts public tax dollars from our public schools" - even though his own company has donated through it and received tax credits.
The program has also created some interesting relationships among Williams, his staff and the billionaire partners at the Susquehanna International Group, strong school-choice advocates who collectively are the biggest users of the program and have bankrolled Williams' political ambitions.
Williams' campaign manager and political adviser, Dawn Chavous, runs a scholarship nonprofit that received large donations from the SIG partners.
So does Janine Yass, the wife of one of the SIG partners, Jeff Yass.
Janine Yass is a fervent supporter of the well-regarded Boys' Latin Charter School, a school she co-founded that serves underprivileged children in Southwest Philadelphia.
Jeff Yass gave his wife's charity, Choice Academics, a $375,000 donation through a Florida company he controls. For his gift, Pennsylvania granted his business about $337,000 in tax credits, according to state records. The charity, in turn, has donated hundreds of thousands of dollars to Boys' Latin.
Graphic of Williams' charity and politics network (click image to view):
The partners' donations similarly helped Chavous' charity. In 2012, legislation supported by Williams greatly expanded the program and created new scholarship-granting charities that could also benefit from the tax credits. That same year, Chavous registered such an organization, which then received $1.3 million in tax-credit donations from the SIG partners, accounting for nearly all of the $1.5 million in revenue it reported in 2012.
None of this violates any laws or regulations, and the SIG partners say they have no hidden agenda. Their participation in the program and their support for Williams is driven only by their belief in school choice.
Last year, the program reached $127 million - despite little detailed oversight, regulatory loopholes and little proof of its effectiveness in Pennsylvania.
Loophole defeats cap
The program was designed to generate scholarships up to $8,500 per year ($15,000 for special ed students) for low-income qualifying students to pay tuition at a private or parochial school. The donations are made directly to schools, or to scholarship organizations that disburse them.
In return, the businesses get between 75 and 90 percent of the value of the donations cut from their state tax bill. That's a much better return than the typical deduction that businesses get for charitable donations.
The principals behind the Bala Cynwyd-based Susquehanna International Group: Yass, Arthur Dantchik and Joel Greenberg, have given increasing sums of money - now totaling close to $21 million - through the program, in part, by taking advantage of a loophole that allows company affiliates to file separately.
Caps on the program limit the amount of credits an individual company can claim to $1.7 million a year, but do not limit claims by affiliated companies.
Although thousands of companies across the state file for the credits each year - and many of them, including Comcast, take advantage of the affiliate loophole - all pale in comparison to the SIG partners in the size of donations.
In 2013, four companies affiliated with SIG officials: Yass' Philadelphia Trading Inc.; Greenberg's JKG Florida Business Corp.; Dantchik's Artay Inc.; and a fourth associated with SIG managing director Mark Dooley, donated more than $4.8 million through the tax-credit program, according to state records.
It was Yass' Florida affiliate that donated to Janine Yass' Choice Academics, according to that group's tax filing. The filing also lists her as the only board member and shows $420,000 paid out to support after-school programs at Boys' Latin, including a beekeeping club and underwater robotics, according to documents provided by the school.
At least $375,000 of that money came from a 2012 donation by an affiliate, Philadelphia Trading Inc., a corporation registered to an accountant's office in Boca Raton, Fla., that lists the SIG offices as a mailing address and Jeff Yass as its principal.
In 2013, Jeff Yass donated another $200,000 to his wife's charity and received a $180,000 tax credit from the state. Public information is not yet available detailing how that money was spent.
The Department of Community and Economic Development could not clearly explain why state-mandated limits on donations exist if entities' affiliate companies are allowed to give separately.
Charities and recipient schools cheer the support.
"Charter schools don't have a tax base, and a lot of schools can't raise money," Boys' Latin chief executive officer David Hardy said. "This is one way of schools being able to raise money that doesn't hurt people and can really help the school."
Janine Yass did not respond to a request for comment.
In 2014, the three affiliates had put more than $2 million into the program until a state law temporarily eliminated caps on the tax credits altogether for a two-month period. During that time, the three SIG partners donated an additional $10 million in return for a 90 percent tax credit.
Which organizations received that money will not be clear until the state releases required reporting at the end of the current fiscal year. Even then, that information is not obtainable without a Right-to-Know request.
A total of $127 million in educational tax credits was approved in in the 2013-14 fiscal year - with more than 3,000 companies filing with the DCED for the credits, according to state budget documents. The DCED said that money led to 53,000 scholarships for children across the state, a number that would constitute the second-largest school district in Pennsylvania. And yet the program is extremely opaque - the DCED acknowledged that until 2012, it did not keep digital records for hundreds of millions of dollars worth of educational tax-credit applications filed on paper.
Graphic of educational tax credit claims on the rise (click image to view):
Ina Lipman, executive director of the well-regarded educational nonprofit Children's Scholarship Fund Philadelphia, said the merits of its work exemplifies the good produced by the tax-credit program.
"Our goals are pretty consistent with the goals of the state program, which is to provide [scholarships] to families most in need," she said.
SIG's Greenberg says he and his partners have no hidden agenda.
"We have no interest in running a chain of charters, or privatizing the system for our own benefit," he said. "There's all those false stories out there; similar to stories that somehow we benefit from providing educational scholarships. And anyone who says that we, or other firms - like Comcast, PNC or the thousands of other companies in Pennsylvania - that participate in these programs are somehow benefiting, is either misguided or has a malicious intent, or both."
Some observers remain troubled, however.
Stephen Herzenberg, executive director of Keystone Research Center, a union-funded think tank, in 2011 studied the impact of the program as the Legislature debated expanding it.
Herzenberg found state oversight lacking, with little to no available data documenting how the charities and schools spent the money or how the children who received their support fared. His research was hamstrung by a law passed in 2005 that expressly limits what information educational charities are required to report.
"When it comes to how the money from public schools is used, there's enormous amounts of accountability and scrutiny, and people want to make sure taxpayers are getting a good return for their investment in education," Herzenberg said. "Well, we have exactly as much reason for being concerned that we're getting a good return on these tax credits that go toward education."
DCED spokeswoman Lyndsay Kensinger said the state requires nonprofits to submit annual monitoring reports.
"The information the department is authorized to request from participating nonprofit organizations allows DCED to successfully monitor each of the programs on an annual basis," she said in an email.
Philly.com obtained copies of a few charities' monitoring reports. The two-page reports listed only basic information - an amount of donations received and the number of scholarships awarded.
The DCED said that in the 14 years since the program's inception, it had not conducted any research into the effectiveness of the tax credits or their educational impacts.
Williams, however, has consistently pushed to expand the program. He co-sponsored a 2011 Senate bill that sought to both expand the program and loosen restrictions on the tax credits and supported 2012 and 2014 bills that cemented many of those changes, as the SIG partners' use of the programs - and their political donations to Williams - increased.
Between 2012 and 2014, Students First, a PAC funded almost exclusively by the SIG partners, gave $255,000 to Williams' authorized campaign committees, $34,500 to the Williams-affiliated Believe Again PAC and $306,000 to the Make a Difference PAC, which has supported Williams. The trio had previously flooded Williams' campaign committees with money, notably in 2010, when they contributed more than $5 million for a failed gubernatorial bid.
The partners have repeatedly said that their political donations are simply intended to encourage their school-choice ideology, which is advanced by programs like the tax credits.
"We're committed to trying to get Sen. Williams elected," said Greenberg. "He's the only candidate committed to school choice; he's the important voice that's speaking for kids trapped in failing, oftentimes violent, schools."
Gov. Wolf, whose company has participated in the program, pledged during his campaign that he'd re-examine the effectiveness of the tax credits.
Kensinger, of the DCED, said in an email, "The administration is constantly reviewing all of the state's tax-credit programs to ensure that all programs are executed efficiently and effectively."
Despite a growing deficit in state educational funding, legislation introduced earlier this month in the state House would increase the annual pool of educational tax credits from $150 million to $250 million.
When Williams voted to expand the programs in 2012, he broke ranks with other Philly Democrats, but the expansion sailed through both chambers by wide margins. The increased Republican majority in the state House today makes passage of another tax-credit expansion a near certainty.
For more on Williams' campaign manager Dawn Chavous and her scholarship organization, and the donations it received from the SIG partners totalling more than $1 million, read the sidebar here: Williams' adviser runs charity supported by his donors.