August 19, 2026
To the Governor,
Over the course of this year, my organization has spoken with dozens of policymakers, agency officials, and education leaders across the country about the new federal scholarship tax credit (FSTC) program. As we have mentioned, FSTC presents an immense opportunity for students across the U.S.
The decision to opt into FSTC should be straightforward. If you opt in, you give your state the opportunity to use the federal taxes that your residents already pay and redirect them so that they benefit K-12 students in your state. If you opt out, the money does not stay in your residents’ pockets; it simply goes either to the U.S. Treasury or to support students in the states that do indeed opt in. The choice comes down to this: do you allow hundreds of millions (and in some cases billions) of dollars to automatically leave your state, or do you try to capture as much of it as possible so that your K-12 students can benefit from it?
In many of those conversations we have had with policymakers, one theme has emerged consistently: states have been waiting for additional guidance from the U.S. Treasury Department before deciding whether to opt in.
Earlier this summer, Treasury gave a preview of the forthcoming regulations. While final regulations will take additional time to complete, Treasury provided meaningful clarity on several of the questions governors and state leaders have been asking most frequently. Importantly, it clarified two issues that have been central to many states’ deliberations: whether public school students can benefit from the program and what safeguards will exist to prevent fraud and abuse.
On the first question, Treasury’s answer is clear: public school students can benefit from this program. Critics have portrayed the FSTC as a program designed exclusively to support private school tuition. Treasury’s guidance makes clear that this characterization is, at best, incomplete. Public school students are eligible to benefit, and scholarship funds may be used to support a broad range of educational opportunities, including tutoring, transportation, services for special needs students, and a number of other uses.
Not only can public school students benefit from this program, but they may ultimately become its largest beneficiaries. In a recent survey in Massachusetts, we asked respondents whether they would be more likely to make a contribution to a scholarship granting organization that served only private schools vs. one that served only public schools. By an almost 3-to-1 margin, respondents said that they preferred to support those that served public school kids.
For years, policymakers across the political spectrum have argued that the nation underinvests in education. The FSTC represents one of the most significant new sources of K–12 funding in years. Governors need not agree with every aspect of the program to recognize the opportunity it presents for students and families.
Treasury’s preview also provided important clarity regarding accountability and oversight. Many governors have understandably raised concerns about potential fraud, misuse of funds, and the need for transparency. In response, Treasury outlined a series of safeguards, including financial and programmatic audits, donor verification requirements, protections against duplicate awards, reporting obligations, and ongoing state oversight.
No accountability system is perfect, particularly in the early stages of a new program. But the framework Treasury described helps address legitimate concerns while striking an important balance: ensuring funds are used responsibly without imposing administrative requirements so onerous that they limit participation or overburden states.
While the draft regulations have not yet been issued, the takeaway should not be that some uncertainty remains; but rather, that there is an opportunity worth building upon. As such, we specifically recommend that you consider “conditionally opting in” in the same way that New York Governor Kathy Hochul did. Gov. Hochul has publicly indicated that she intends to opt New York into the program but has explicitly retained the ability to revisit that decision if the final regulations contain any “poison pills.” That approach strikes a sensible balance. It allows a state to preserve its flexibility should unforeseen concerns arise, and it also sends a message to potential Scholarship Granting Organizations (SGOs) throughout your state that they should begin building the infrastructure to ensure that the resources reach the neediest students.
Given that the program kicks in on January 1, 2027, your state network of SGOs needs to be ready. Particularly if you want to ensure a strong network of SGOs exists that will serve public school students, there is a lot of work that must be done to build the organizational infrastructure among non-profits in your state.
Even under the best of circumstances, this is a tall order. The program is scheduled to begin in less than four months. Between now and then, SGOs must be established and expanded. Families need to learn about the opportunity. Community organizations need to prepare to serve students in new and expanded ways. Awareness must be raised, systems must be built, and partnerships must be formed. Those efforts cannot wait until the final regulations are published.
No law is perfect. No regulatory framework is perfect. But the potential benefits for students and families under FSTC are too significant to allow perfection to become the enemy of progress.
The states that begin preparing today will be the states best positioned to deliver for students tomorrow. If my organization can be helpful in any aspect of this work, we stand ready to assist.
Sincerely,
Nicole Pollock
President, Democrats for Education Reform
