The Trump administration took a major step Thursday toward launching the nation’s first federally funded school voucher program, set to steer billions of tax dollars to private schools — but also, perhaps, to public school students.
The Treasury Department released long-awaited rules that will govern the first-of-its-kind effort before it’s implemented in January. States must decide whether to participate, and many Democratic governors had said they would wait for the regulations before making a decision.
It’s a tricky call. Most of these governors oppose voucher programs, which direct public money to private schools. But in this case, the program is funded entirely with federal money, so if they don’t participate, they will be passing up an opportunity to funnel additional dollars into their states’ public schools.
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The voucher-like program, called the Federal Scholarship Tax Credit, was created by last year’s giant Republican tax and spending bill. It provides a 100 percent tax credit for donations to scholarship-granting organizations (SGOs), which will pass along the money to families. It was designed to primarily benefit students attending private schools, but SGOs may also be set up to help pay out-of-pocket expenses for public school students, further complicating the politics for Democrats.
Governors have until Jan. 1 to opt in. Thirty mostly Republican-led states have already joined. Most of the remaining states that have not rejected the plan are led by Democrats.
The proposed regulations include income limits for eligible families, protections for scholarship funds, and details on how the funds can be used. States cannot restrict the types of schools that benefit, Treasury and Education department officials said, meaning public funds could go toward a religious school that bars LGBTQ students or a private school that doesn’t have certified teachers.
There will be a 60-day public comment period on the proposed rules.
The program allows taxpayers to get reimbursed up to $1,700 for every dollar they donate to SGOs. The donations will be entirely reimbursed as a credit when donors file their federal taxes — dwarfing tax incentives for giving to churches, hospitals and other charities.
Essentially, taxpayers will direct money they owe in taxes to SGOs, rather than the government.
The Congressional Budget Office estimates the program will cost the federal government $26 billion in lost revenue over 10 years.
Though the funds can be used to pay private school tuition, unlike similar tax credit programs that exist in 18 states, the money can also go to public school students for education-related costs such as tutoring, after-school programs, special education services, supplies and more.
This aspect of the program has put Democratic governors in a bind. Many Democrats argue vouchers siphon students and funding away from public schools, which serve the vast majority of children. And unlike private schools, public schools must educate all children regardless of gender, ability or religion.
Governors must approve all SGOs that meet the rules. States that want to opt into the program for the benefit of public school students will have to allow private-school vouchers as well, and vice versa.
Randi Weingarten, the president of the American Federation of Teachers union, is urging governors to reject the federal program.
“This is a poison pill for the 90 percent of American children who attend public schools,” Weingarten said in a statement. “For every precious public dollar funneled to private schools under this scheme — money that could be spent on instruction, lowering class sizes, modern buildings or new books in the library — public school parents will be hunting for stray pennies on the floor.”
Nicole Pollock, president of the advocacy group Democrats for Education Reform, has taken the opposite position, urging leaders to join the program to help public schools.
“The decision to opt into [the Federal Scholarship Tax Credit] should be straightforward,” Pollock wrote in an open letter.
In September, the Southern Education Foundation, an advocacy group focused on low-income families and children of color, announced an effort to assist new and existing SGOs that want to direct money to public school families.
“Our position has evolved as we have learned more about this law,” Raymond C. Pierce, its president and chief executive, said in a statement. “This is an opportunity to bring additional resources to students, particularly Black students and students from low-income communities who have historically had less access to educational opportunity while also bringing evidence and accountability to how those resources are used.”
Under the proposed rules, families who earn less than three times their area median income can qualify for the program. That’s more than $490,000 in D.C. or $337,000 in Phoenix. Treasury Department officials estimate 95 percent of children fall within these limits.
The rules also detail how officials plan to ensure that the money is properly spent. Officials said SGOs will be required to undergo an annual independent review of their finances. They added that there will be procedures for removing scholarship providers that fall out of compliance.
With the rules in place, experts expect an explosion of new SGOs. “The law keeps requirements for SGOs fairly minimal,” said Sarah Raybon, vice president of business development at ClassWallet, which runs payment platforms for voucher programs.
The Treasury Department and Internal Revenue Service estimate the program can accommodate between 600 and 700 SGOs through 2030.
“While the SGO pool is going to be really big, I think SGOs focused on quality, SGOs focused on student outcomes, leveraging data, those types of things, I think we’re going to see those SGOs rise to the top,” Raybon said. “I think donors want to see that.”
Backers assert that studies of voucher programs show clear positive results. Several early studies of targeted voucher programs have shown positive results on standardized tests, and some research shows positive impacts on other metrics such as college enrollment. But most research over the past decade or so shows either no effect or a negative impact on test scores for larger-scale programs.
Other research suggests the biggest beneficiaries of voucher programs are families who were already sending their children to private schools. A group of more than 20 education, civil rights, labor and faith-based organizations have blasted the federal program for that reason.
“We know that including public school students in the federal voucher program is simply a sweetener to entice states without vouchers to let the camel’s nose slip under the tent,” a letter from the group said. “If the federal program is anything like current state voucher programs, more affluent families that have already chosen private education will corner the voucher market.”
Laura Meckler contributed to this report.
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