With the arrival of the long-awaited rules, Democratic governors are under more pressure to say whether they will opt in.
Lauren Lumpkin reports that the Treasury Department released long-awaited rules Thursday governing the Federal Scholarship Tax Credit before its January launch, intensifying pressure on Democratic governors to decide whether to opt in. The program, created by last year’s Republican tax and spending bill, provides a 100% federal tax credit for donations to scholarship-granting organizations that pass money to families—designed primarily to benefit private school students but also usable for public school students’ out-of-pocket costs like tutoring, after-school programs, and special education. Thirty mostly Republican-led states have joined; most remaining holdouts are Democratic-led, facing a tricky call since opting out forgoes federal dollars that could flow to their public schools. The CBO estimates $26 billion in lost revenue over a decade, and under the rules, families earning less than three times area median income qualify (over $490,000 in D.C.), covering an estimated 95% of children.
Lumpkin reports the rules bar states from restricting which schools benefit—meaning funds could go to religious schools that bar LGBTQ students or private schools without certified teachers—and that states opting in for public-school benefit must also allow private-school vouchers. She lays out the divide: AFT President Randi Weingarten urged governors to reject the “poison pill,” while Democrats for Education Reform president Nicole Pollock took the opposite position, writing in an open letter that “the decision to opt into [the FSTC] should be straightforward” to help public schools. The Southern Education Foundation’s Raymond Pierce said his group’s position “evolved” toward helping SGOs direct money to public-school families, particularly Black and low-income students. Lumpkin notes a 60-day comment period, expectations of an explosion of SGOs (Treasury estimates room for 600–700 through 2030), required annual financial reviews, and mixed research—positive results for targeted programs but mostly null or negative effects for larger-scale ones, with a coalition of 20-plus civil rights, labor, and faith groups warning the public-school component is a “sweetener” that affluent families already in private school will dominate.