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concerned, these schools simply do not exercise that authority often enough to account for the difference in median achievement rates. Their use of expulsion is quite rare, in fact, and many schools do not expel any child in the course of a school year. And expulsion is not the prerogative of the private schools; public schools exercise de facto, if not de jure, expulsion simply by ignoring students they consider troublesone-hence, their astonomical absentee and dropout rates.

Third, the superior achievement of private school students in the inner city can be attributed, to some extent, to deliberate selection of the school by parents with greater academic ambitions for their children. But this cannot be a substantial reason. There are many public schools in inner-city neighborhoods in which there are no private schools. Where are the children of the more supportive parents in these areas except in public school?

Furthermore, national survey data report that parents of inner-city public school children put great emphasis on the importance of education for the success


1. Trude W. Lash, Heidi Sigal, and Deanna Dudzinski, Children and Families in New York City: An Analysis of the 1976 Survey of Income and Education (New York: Foundation for Child Development, February 1979), pp. 44-45.

2. The proportion of the loss of white families attributable to their flight to the suburbs has been extrapolated from calculations made by Milton Bins and Alvin H. Townsel for the Council of Great City Schools of the components of the rise in the proportion of minority group residents in New York City's population between 1950 (9.8%) and 1970 (22.8%). They found lower birth rates among whites to be almost equally as important as white outmigration. Lower white birth rates reduce both white family size and the number of white families with school-age children; hence, outmigration must play a relatively large role in the absolute decline in the number of white families.

Milton Bins and Alvin H. Townsel, "Changing/Declining Enrollments in Large City School Systems," in Susan Abramowitz and Stuart Rosenfeld, eds., Declining Enrollment: The Challenge of the Coming Decade (Washington, D.C.: National Institute of Education, U.S. Government Printing Office, March 1978), pp. 136-37, Table 4.4.

3. Ibid., p. 138. Consistent evidence of migration related to school age has been reported by Harry H. Long and Paul C. Glick, "Short Paper: How Racial Composition of Cities

of their children. They put more emphasis, in fact, than middle-class parents do. The explanation cannot be that public schools lack sufficient numbers of parents who support education strongly.

And, of course, the fact that the most ambitious inner-city parents would choose private schools-even if true-must be surprising. Inner-city private schools typically spend 25% to 33% of the amount spent per pupil by public schools. (In one inner-city neighborhood, we found a private school operating on 10% of the budget of the nearby public school and still outperforming that school.20) Not only do they spend less, but elementary private schools also have a higher pupilteacher ratio in New York City, 32:1 compared with the public system's 25:1. And most have austere settings, virtually no special equipment, and a relative scarcity of library books. On their face, most private schools would not be the obvious choice of parents seeking a superior education for their children.

Still, inner-city private schools have a reputation for performing well. Exam

Changes," Land Economics, August 1975, Pp. 258-67.

4. Lash et al., Children and Families in New York City, p. 30, Table 1-3.

5. Ibid., p. 106, Table IIIb-1a.

6. Bins and Townsel, "Changing/Declining Enrollments," p. 140, Table 4.6.

7. William H. Frey, "Class-specific White Flight: A Comparative Analysis of Large American Cities," Institute for Research on Poverty Discussion Papers, No. 507-78 (Madison: University of Wisconsin, October 1978), p. 1.

8. Janet Rothenberg Pack, "Determinants of Migration to Central Cities," Journal of Regional Science, 13, pp. 249-60.

9. The author wishes to acknowlege the valuable suggestions of tax consultants Harry A. Skydell, C.P.A., of Skydell Shatz and Co., and Warren Lieberman, C.P.A., of Louis Lieberman and Co. Any errors in this discussion are solely the author's responsibility.

10. The council's estimate of current federal aid to private schools was incorrect. New York City's public school system receives direct federal aid of almost $300 per pupil; private schools receive no direct aid.

Most recent federal education aid programs,

ining a matched sample of public and private school students in the inner city, Greg. ory Hancock found that the average private school child entered first grade with a slightly lower I.Q. than his public school counterpart, but by the sixth grade he was reading one and a half to two years ahead of the public school pupil. 21

There is no argument that private schools could or should replace public schools in the inner city or elsewhere. But the New York City Board of Education should recognize that many private schools do offer the educational quality, especially in the inner city, that it is the board's responsibility to provide for public school children. It seems wasteful to let the inner-city private schools close because they cannot be financed, without fighting for tax measures that would alleviate their financial plight. It is an odd position for the champions of quality education for the least advantaged in our city to oppose the single piece of federal legislation most likely to preserve many of the best inner-city schools.

including ESEA Title I (compensatory education), follow a child-benefit approach by which students are entitled to receive aid regardless of the type of school they attend. However, the federal funds for these programs are given to the public school systems, not the individual private schools. The public system hires the teachers, plans the programs, and delivers the services to the private school students. Private schools have no direct control over funds, teachers, or programs. In most cases, it is as if the private school students were enrolled in a public system's afterschool program. So it is misleading to attribute the total value of services delivered to individual private school students as "aid to private schools."

Furthermore, the $60 figure is not even an accurate estimate of the value of services delivered to private school students. The U.S. Department of Health, Education, and Welfare cannot state in any systematic fashion the dollar value of services actually being delivered to private school students. In three states, authorities have refused to deliver any services to private school students.

11. U.S. Bureau of the Census, Survey of Income and Education, as reported in the Congressional Record-Senate, March 20, 1978, pp. S4158-60, Table 1B.

12. National Center for Education Statistics, The Condition of Education, 1977, Vol. 3, Part 1 (Washington, D.C.: U.S. Government

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The Subcommittee on Taxation and Debt Management Generally of the Senate Committee on Finance has scheduled a hearing on April 27, 1979, on the tax-exempt status of private schools.

This pamphlet has been prepared by the staff of the Joint Committee on Taxation to provide background information in connection with the hearings. The pamphlet includes a description of the revised Revenue Procedure proposed by the Internal Revenue Service for determining whether certain private schools discriminate racially and, therefore, are ineligible for tax-exempt status. In addition, related legislative proposals and issues presented by both the proposed IRS guidelines and the legislation are outlined.

Tax-exempt schools


The Internal Revenue Code provides tax-exempt status under section 501 (c) (3) for organizations which are "organized and operated exclusively for religious, charitable, . . . or educational purposes.' Exempt organizations are entitled to receive contributions which are deductible by their donors under section 170. Both the Internal Revenue Service and the Federal courts have required that schools be racially nondiscriminatory in order to qualify as tax-exempt organizations under section 501(c)(3) and as charitable donees under section 170 (b).

In 1971, a 3-judge Federal district court panel issued a permanent injunction against the Internal Revenue Service requiring it to deny tax exemptions to private schools which discriminate racially with respect to students. Subsequently, the Internal Revenue Service's procedures were challenged by the Green plaintiffs as inadequate for determining whether private schools discriminate racially and, thus, inadequate for fulfilling the injunction's requirements. The IRS itself decided that existing procedures were insufficient and that more effective ones were necessary.

Proposed revenue procedure

On February 9, 1979, the Internal Revenue Service issued, in proposed from, a Revenue Procedure containing guidelines for determining whether certain private schools discriminate racially and therefore are ineligible for tax-exempt status.2 The procedure would apply to two categories of private elementary and secondary schools. The first group consists of adjudicated schools, which have been found to be racially discriminatory by a Federal or State court or by a Federal or Štate administrative agency. The second category contains reviewable schools. A reviewable school generally is a school whose formation or substantial expansion was related to public school desegregation in the community and which lacks significant minority student enrollment. The proposed guidelines would require that determinations about whether schools have racially nondiscriminatory policies with respect to students be based on all applicable facts and circumstances. An administrative "safe harbor" would be established so that schools whose minority enrollment is 20 percent (or more) of the percentage of minority school age population in the community ordinarily would not be reviewable. The guidelines also would provide a non-exclusive list of factors tending to show whether a school's formation or expansion was related to public school de


1 Green v. Connally, 330 F. Supp. 1150 (D.D.C. 1971), aff'd per curiam sub nom., Coit v. Green, 404 U.S. 997 (1971).

* This proposed procedure is a revision of a proposal published in the Federal Register on August 22, 1978.

segregation, as well as whether a reviewable school should be taxexempt because it has made a good faith effort to attract minority students. The guidelines set forth procedures for handling revocations of exempt status, new applications for tax-exemption, and IRS National Office review of adverse determinations.

Legislative proposals

Several legislative proposals have been introduced in response to the IRS guidelines on tax-exempt schools. One bill (S. 103) would bar implementation of the proposed procedure, as well as any similar regulations, rulings, or guidelines. Another bill (S. 449) would amend section 501 with a new statutory provision finding that tax-exempt status under section 501(c)(3) and the deductibility of contributions to a section 501(c)(3) organization, such as a private school, shall not be construed as the provision of Federal assistance.


In addition to questions of administrative authority and feasibility, the proposed guidelines and the legislation introduced in their wake involve issues of Constitutional significance. Because many private schools are religious or church-affiliated, First Amendment issues arising under the Free Exercise and Establishment clauses confront the constitutional guarantees of racial equality. Because the guidelines were developed in the context of a Federal court injunction, the doctrine of the separation of powers under the Constitution also may be relevant.

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