Jeff Wilson, FundEDU Founder & President
There is a version of the Education Freedom Tax Credit argument I keep hearing that sounds simple enough: a taxpayer gets a $1,700 credit, a scholarship organization gets the contribution, and a public school must be $1,700 poorer.
That is not how the program works.
Beginning in January 2027, an eligible taxpayer can receive a federal income-tax credit of up to $1,700 for a qualified donation to a Scholarship Granting Organization (SGO) operating in a participating state. That federal credit reduces what that taxpayer otherwise owes in federal income taxes. What it does not do is reach into a school district’s local property-tax collections. This means it does not reduce a state education appropriation, or any other state funding stream, by $1,700.
Now, in terms of the bigger picture, there can still be a discussion about the financial impact of the program. A federal tax credit means the federal government collects less revenue, in this case estimated to be approximately $24 billion a year, than it otherwise would from the taxpayer claiming it. Reasonable individuals can believe that Congress should collect that money and spend it somewhere, even if it isn’t on education.
But that is a different argument from saying the money comes out of local funding and the difference matters because leaders across the country are making and influencing decisions about this program. With that in mind, I want to highlight that a state’s participation does not require the governor to move money out of the state education budget. Instead, the state identifies qualifying 501(c)(3) organizations as approved SGOs. Donors freely contribute and claim the federal credit. SGOs then award scholarships to eligible families.
The best part? The students receiving those scholarships can remain exactly where they are!
Federal guidance specifically contemplates tutoring at public schools, support services for students with disabilities, career-training equipment and uniforms, and after-school enrichment. We can start with the simplest example. A student stays enrolled in her local middle school and receives a scholarship from a private organization to pay for after school math tutoring. Nothing in that scholarship transaction deducts the tutoring cost from the district’s state or local allocation. The student simply has another educational and financial resource to make sure her unique needs are served.
Pennsylvania is useful here, not because our state EITC and the federal program are identical, but because Pennsylvania has lived with the tax-credit-versus-public-school argument for decades! Even as recently as this summer, the state continues to operate its education tax-credit programs while also making substantial direct appropriations to public education. In the 2026–27 budget, Pennsylvania increased Basic Education Funding, Special Education Funding and its Ready to Learn Block Grant.
None of this prevents anyone from arguing that Pennsylvania should spend still more on public schools. Plenty of people do. But these examples do prove that no one can say that maintaining an education tax-credit program makes direct public-school investment impossible. Pennsylvania is currently doing both, and students are benefitting in countless ways all around the state.
Nonetheless, as we approach January 2027, there are legitimate questions that public school leaders need to be asking: Which SGOs will serve public-school students? Which expenses will they prioritize? How will families learn scholarships exist? Will scholarship supply come close to demand? What safeguards will the final rules require?
Those are the questions that determine if the EFTC program improves the lives of public-school families, or if it remains the tuition-only program that so many mistakenly believe it to be. In other words, if public-school leaders don’t participate in the conversation because they assume the money belongs to somebody else, the program won’t go away.
SGOs will still be formed. Donors will still choose if and where to contribute. Scholarship programs will still decide which expenses and students fit their missions. But public-school families will have fewer people at the table thinking about, advocating for and planning for them and their needs.
Personally, I would rather see districts, education foundations, tutoring providers, CTE programs and organizations serving students with disabilities asking how this program could support the students they already serve. Doing so does not require pretending the program is perfect, or has no tradeoffs. It just requires describing the tradeoffs accurately, and planning around them.
But the starting point is knowing that the $1,700 credit is at the federal level. It is not a deduction to your local school district’s budget. Once we make that distinction clear, we can start having the more important conversations: how can our public-school students benefit from the educational opportunities that the EFTC can provide?
