Democratic Dilemma: Federal Scholarship Tax Credit Program

Democrats and school advocates face a year-end decision about a Republican proposal. This program may help public school families with tutoring and summer school. However, it might also divert taxpayer dollars to private schools.

The Dilemma

Jared Polis, the Democratic governor of Colorado, was the first to join the Federal Scholarship Tax Credit. This initiative is being promoted by the Trump administration as a nationwide school choice program. Polis supports it for its potential to increase donations significantly. “I want Colorado kids to benefit,” Polis told NPR. He believes other governors share this sentiment, though not all agree.

Minnesota’s Democratic governor, Tim Walz, outright rejected the idea. “We are not doing it,” he stated, referring to opting into the program for 2027. Meanwhile, 15 other Democratic governors and the mayor of Washington, D.C., remain undecided. They need to make their decisions by January 1 to participate next year.

“This is really hard because the policy tries to create political wedges,” said Jessica Levin from the Education Law Center. She explains the dilemma governors feel about potentially missing out on public school benefits.

Some view this as a Trojan horse. Though promoted as beneficial to public schools, private schools might end up benefiting more, says Levin.

How the Tax Credit Works

Starting in January, taxpayers can donate up to $1,700 to scholarship-granting organizations (SGOs). These donations are converted into vouchers covering education costs such as private school tuition, tutoring, summer school, and new computers. Donors receive a tax credit equal to their contribution.

More than 138 million people qualify for this tax credit, stated the Institute on Taxation and Economic Policy. The U.S. Treasury Department estimates the program could generate nearly $26 billion in donations by 2030. For comparison, Title I funding was $18 billion in 2023.

Among 31 states signed on to this program, most have Republican governors. Democratic Gov. Kathy Hochul of New York also joined, while others in Kansas, Kentucky, and North Carolina were overridden by Republican legislatures.

For a state’s taxpayers to benefit from donations and scholarships, the governor must opt in. Even if they do not, taxpayers can donate and receive tax credits, but families will not qualify for scholarships.

The Opposition’s Strategy Shift

Groups supportive of public education in states opting in face a tough choice. They can oppose the program or pivot to ensure public schools benefit. The Southern Education Foundation (SEF), focusing on ensuring education for all since its founding, has chosen the latter.

SEF’s Fred Jones Jr. says that despite fighting against the program, circumstances led them to encourage public school families to take advantage of it. They are now launching an alliance of SGOs to aid public school students. “Tutoring, afterschool programming, and summer learning could make a big difference for students,” Jones said.

Similarly, Deborah Gist, former superintendent of Tulsa Public Schools, founded the Future School Fund for public education. She noted that public schools were explicitly included in the program’s language.

Established organizations and newly created ones like SEF and Future School Fund will seek to catch up with existing private school-focused SGOs.

Challenges for Public Schools

Marguerite Roza from Georgetown University emphasizes public schools must determine services they can legally charge for to benefit from the tax credit. Traditional educational services must remain free, but schools might charge for field trips, assemblies, and aftercare.

Levin calls this approach “wrong and dangerous.” Public education should not charge for services just to benefit from privatization efforts, she argues.

Public schools interested in embracing the program need partnerships with SGOs. Additionally, they should persuade local employers to incorporate donation options into payroll systems.

Implications and Inequities

Wealthy public schools are already positioned to benefit more thanks to existing infrastructure. Jon Valant from the Brookings Institution warns that this pattern could mean lower-income schools will struggle to benefit unless they receive donations from wealthier communities.

The program is also broad, allowing a significant percentage of students nationwide to qualify, including those from affluent families.

As the program’s potential becomes clearer, the path forward remains unclear for undecided Democratic governors. Fred Jones Jr. recommends opting out, despite SEF’s pragmatic pivot in states where opting in is already a reality.