The Coming K-12 Education Bonanza for Students

The federal scholarship tax credit law taking effect in 2027 will be the biggest financial opportunity for K-12 students in perhaps 60 years since the enactment of the Elementary and Secondary Education Act during the Lyndon Johnson administration. Already, 30 states have opted to participate — which this federal law requires — while families in the remaining states await a decision by their governors.

When the law goes into effect, parents in participating states will be more financially empowered with potentially billions of dollars in scholarship opportunities to direct their children’s education in any school setting, public, charter, private or religious.

The new program encourages private charitable giving — not public tax dollars — to expand educational opportunities for students. Taxpayers who contribute to eligible scholarship granting organizations can receive a 100 percent federal tax credit, reducing their federal income tax liability dollar-for-dollar, for up to $1,700 yearly.

In practical terms, taxpayers can choose whether a part of their federal tax dollars supports educational opportunities for students through scholarships or goes to the federal treasury. For any individual who owes federal income taxes, it represents a unique opportunity to directly support K-12 education while reducing their tax liability.

One major caveat in this law is that governors — or another state officer or entity pursuant to a state law — must decide whether their state participates for their resident students to benefit from the new scholarships. Thus far, 30 states have opted in.

Among the 20 states that have not decided, several governors have indicated they are waiting for the Department of the Treasury to issue rules and guidance on the new program, which is expected in September.

This is not a hard decision for governors. Either resident children will benefit educationally or they won’t — it’s up to governors. Taxpayers residing in states that do not participate can — and surely will — donate to scholarship granting organizations in states that opt-in to this federal program and thereby help students beyond their borders.

In May, at an “Empowering Parents” event in Denver, Gov. Jared Polis of Colorado, the only Democratic governor who has opted in, said, “If there’s any states that don’t opt in, we’re going to go after their donors for Colorado.”

Conservative estimates suggest the state-to-state transfer of scholarship dollars for students will be staggering.

According to federal income tax data compiled by Education Reform Now, if less than one-third of taxpayers in current non-participating states who owe federal taxes each donated the maximum $1,700 to scholarship granting organizations in the 30 opt-in states, at least $12.6 billion could transfer to out-of-state students. That amounts to more than three-fourths of federal Title I education funds spent on all 50 states last year.

An even larger dollar amount in scholarships would be forgone in those 20 states since a sizable number of the remaining taxpayers not donating out-of-state also would not be contributing to scholarships for in-state children.

To quote the late Sen. Everett Dirksen of Illinois: “A billion here, a billion there, and pretty soon you’re talking about real money.”

As governors await regulations by the Treasury Department, which last month provided an encouraging preview, opponents of this federal tax credit opportunity claim it will harm public schools. In truth, since more than 85 percent of students attend public schools, scholarship dollars will overwhelmingly flow to those students to access goods and services such as high-impact tutoring, special needs services, extended day programs, computers and much more.

Recently, Gov. Kathy Hochul of New York publicly said she intends to have the Empire State participate in the federal scholarship tax credit program, pending the issuance of federal regulatory guidance. She understands the mathematics of the issue and the benefits to nearly all her K-12 students.

For states seeking to help more students in every school get additional educational opportunity, the federal scholarship tax credit program is the obvious way forward and the biggest chance in decades to make a difference for the better. To the governors who drop the ball on this by not opting in by year’s end, it’s their own resident children who stand to lose.

Reprinted with permission from DC Journal by Peter Murphy.

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.