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While education choice advocates have fought, and reconciled, over the concept and implementation of what is now the Federal Scholarship Tax Credit for almost a decade, the policy 鈥� which enshrines in the federal tax code a $1,700 tax credit to individuals contributing to Scholarship Granting Organizations (SGOs) starting Jan. 1, 2027 鈥� is new to many state politicos and education policy advocates.

As momentum for participating in the program (which in most cases requires governors to opt their states in) grows, Democratic governors in particular are now caught between a Scylla and Charybdis of policy choices. Signing on provides a new revenue stream for enrichment, tutoring and other public school activities. But some children may use the credit to attend private schools, and opting out 鈥� as teachers unions advocate 鈥� won’t necessarily prevent money from flowing toward such purposes across state lines. 

What are governors, and advocates, to do?

颁辞濒辞谤补诲辞鈥檚 Jared Polis, a Democrat, has been a leader on the issue, opting the Centennial State in to the program, and several of his Blue State colleagues have at least signaled they are willing to examine the opportunity, primarily for the benefits it offers their states鈥� public school families.

The political and financial realities of a program that turns taxpayers into philanthropists are quickly dawning on education reformers as well, both those who opposed it and those who simply weren鈥檛 paying attention. And with billions of new dollars in charitable donations potentially in play, conversations are now being held in earnest about how to implement the credit at the state level. By implement, what I really mean is regulate the program in a fashion that accomplishes traditional education reform goals in the best cases, or that blocks private school participation in the most cynical.

While the motivations in the former instance are laudable, they show a misunderstanding of what the program actually is and what can and cannot be 鈥渞egulated鈥� as a result.

First, the tax credit scholarship is not education policy and is not regulated by any educational entity. It is tax policy, regulated by the Internal Revenue Service, that accomplishes a charitable purpose tied to education. Some have that donations should be treated as the federal government treats education dollars it distributes to states. But the mechanisms are dissimilar, and there are no provisions for this in the law, which instead only structures the eligibility and use of the credit, the types of organizations that can collect it and the kinds of students (by income) and activities (fees, supplies, equipment) it can be used for. In fact, the program is more like the widely supported Child Tax Credit, which gives families broad discretion, than education tax credits that exist in most states. 

Secondly, while states must opt in (and 28 have at the time of writing), contributions are not state money; they are a credit to individual taxpayers who may or may not give them to a scholarship-granting organization, be it public or private, in their home state or another. Members of the Colorado legislature, ironically and perhaps tellingly, have proposed regulating the program as if they are its arbiter and fiduciary. Moreover, under the guise of non-discrimination, they seek to enforce uniform public school rules on a diverse set of charitable actors. While those who support school choice know such language is often used to make participation unpalatable to private schools (which feature communities built on choice and voluntary association, not zip code and compulsory attendance), this language would potentially also prohibit public schools from building affinity programming to support marginalized communities. Additionally, Colorado (and all states) already have rules that govern individual charitable contributions. If those have historically eluded such regulation, why should this credit be treated differently? 

While these issues are resolved, many advocates who focus on student achievement are left with an interesting question to answer: How could tax policy be regulated to ensure children receive high-quality opportunities, given the absence of traditional policy levers, like authorizing or similar criteria, for SGO participation? This is a new question that requires novel thinking, but it is not impossible to do. And currently, there are three tools at the disposal of advocates and politicos worth considering to accomplish this goal.

The first is the bully pulpit, specifically state executives. Governors, when opting in to the program, have the opportunity to assert their priorities for it, including whom they think it should prioritize (such as low-income students), how they鈥檇 like to see it measured (i.e. state assessments) and what kinds of SGOs, or even which ones specifically, they believe are worth contributing to. Governors can do this with their state’s entire communications apparatus at their disposal. This is a megaphone of the highest and loudest order.

The second is brands, which signal quality in all areas of life including education. Here, trusted community organizations and, of course, school districts themselves have the opportunity to set the market for what is possible. District of Columbia Public Schools, for instance, could start a Summer Enrichment SGO to provide extended learning opportunities for the city鈥檚 students, as could the Boys and Girls Club or an established charter network such as Success Academy. A current example of this is Bloomberg Philanthropy鈥檚 program, which pairs philanthropists and charter schools across the country to deliver high-quality summer programming and tutoring to students. The tutoring and enrichment camps of and 颁辞濒辞谤补诲辞鈥檚 are also worth emulating.

Lastly, states can build their own SGOs. Arizona鈥檚 pandemic summer effort, AZ On Track, which sought to catch kids up after COVID school closures, was one such example. And while started by philanthropy, the state-funded nonprofit , which delivers high-impact tutoring for K-8 students and now runs on both state education funding and charitable donations, is another. Together, they show how states can lead the way or partner to found an aligned SGO.

The Federal Scholarship Tax Credit provides new challenges for political actors and advocates, but also new opportunities for families, nonprofits, districts and others to support the country鈥檚 children. As a new revenue stream with lots of flexibility, it creates a rare chance to do both more and different things across the nation鈥檚 education landscape. Governors shouldn鈥檛 waste that opportunity. Advocates shouldn鈥檛 either.

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