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A school bus drives along a rural road outside of Kenosha, Wis. The One Big Beautiful Bill Act established a national tax credit scholarship program, but state leaders can decide whether and how to participate (Spencer Platt\/Getty Images).<\/p>\n
When President Donald Trump signed\u00a0the One Big Beautiful Bill Act,\u00a0he\u00a0gave state leaders \u2014 not federal regulators \u2014\u00a0the power to decide whether and how to participate in the first-ever national tax credit scholarship program.<\/p>\n
That decision now looms largest in blue states, where Democratic governors and lawmakers must weigh whether to reject the law outright on ideological grounds \u2014 or try to reshape it into something that reflects their own values.<\/p>\n
\u201cThis isn\u2019t the federal voucher program we were worried about five years ago,\u201d said Jon Valant, a senior fellow in governance studies at the left-leaning Brookings Institution who testified before Congress on earlier versions of the bill. \u201cIt still has serious problems \u2014 but states now have tools to mold it into something they might actually support.\u201d<\/p>\n
The final law gives states wide discretion, he said. They can opt out entirely. They can opt in passively, leaving the program to operate as written. Or, as Valant suggests, they can try to redraw its footprint \u2014 focusing less on private school tuition and more on public school supports like tutoring, transportation and enrichment services in underserved districts.<\/p>\n
\u201cMy hope is that blue states take a hard look and ask: Can this be used to address our own needs?\u201d<\/p>\n
For progressives and education advocates who are wary of school vouchers, the decision is fraught. Opting in could draw criticism for approving what many see as a vehicle for privatization<\/a> of K-12 education. But opting out could mean turning down federal dollars \u2014 education money that states with budding or robust private school voucher infrastructures, such as Arizona and Florida, will gladly take.<\/p>\n \u201cThere\u2019s money on the table, and it can be used for more than just private school tuition,\u201d Valant said. \u201cIf blue states want to keep that money from reinforcing inequality, they\u2019ll have to get creative, and act fast.\u201d<\/p>\n Since 2020, private school choice programs \u2014 once limited to low-income or special needs students \u2014 have rapidly expanded.<\/p>\n In 2023, $6.3 billion was spent nationwide on private school choice programs \u2014 less than 1% of total public K-12 operational spending, according to EdChoice, a nonprofit that advocates for school choice measures. From 2023-24 to 2024-25, participation in universal private school choice programs surged nearly 40%, growing from roughly 584,000 to 805,000 students in just one school year.<\/p>\n By 2026-27, about half of all U.S. students<\/a> will be eligible, according to estimates by FutureEd, an independent think tank at Georgetown University.<\/p>\n These trends, combined with new federal tax credit, could fundamentally reshape the education funding landscape across state governments, experts say.<\/p>\n \u201cStates will need to decide whether to encourage the redirection of funding to support private and religious schools \u2014 either by expanding existing voucher programs or, if they don\u2019t have one, by introducing such a program for the first time,\u201d said Sasha Pudelski, director of advocacy for AASA, The School Superintendents Association. The group opposes the national voucher plan.<\/p>\n <\/strong><\/p>\n \t<\/p>\n As of this May, 21 states operated tax credit scholarship programs with varying degrees of funding and oversight. According to the EdChoice Friedman Index, the states of Florida, Arkansas, Arizona and Alabama rank highest in private school access, with 100% of students eligible for school choice programs.<\/p>\n Some states, like Florida and Arizona, already have extensive tax credit scholarship systems. Others, including Texas, are building new infrastructure such as statewide voucher programs and education savings accounts, known as ESAs.<\/p>\n States with no current programs face decisions about participation, regulation and equity, but without clear federal guardrails, education advocates told Stateline.<\/p>\n The federal policy builds on existing state-level tax credit scholarship programs \u2014 such as Alabama\u2019s \u2014 but significantly expands eligibility, removes scholarship caps and broadens allowable uses to include not just tuition, but also tutoring, therapy, transportation and academic support services. Beginning in 2027, scholarships will be excluded from federal taxable income.<\/p>\n Valant, of Brookings, told Stateline that some of his initial concerns were addressed in the version of the bill signed into law.<\/p>\n \u201cThere was a very realistic scenario in the earlier version of the bill where a small number of very wealthy people could essentially make money off this,\u201d Valant said. \u201cThat was mostly addressed.\u201d<\/p>\n The enacted version eliminates stock donations and caps individual tax credits at $1,700. And with states that opt in having the power to shape their own program, Valant said that gives them the chance to establish their own guardrails, such as income eligibility caps or nondiscrimination policies for participating schools.<\/p>\n The scholarship-granting organizations, known as SGOs, would then be subject to new state regulations about where the money can go.<\/p>\n \u201cStates could say SGOs can\u2019t give money to schools that discriminate based on sexual orientation. \u2026 There\u2019s quite a lot of room here for state regulation,\u201d he said.<\/p>\n Looking ahead, Valant said he\u2019ll be watching how states interpret their regulatory powers \u2014 and how effective scholarship-granting organizations are at fundraising under the new rules, which prohibit large stock gifts and rely instead on millions of smaller donations.<\/p>\n \u201cNow it\u2019s a strange pitch: \u2018Can you front me $300 to give to the SGO? I swear the IRS will give it back,\u2019\u201d he said. \u201cIt\u2019s going to take time to figure out how to sell this to families.\u201d<\/p>\n Concerns over transparency and equity remain. The program allows donors, scholarship-granting organizations and families to direct funds with little public accountability, critics say. And in states without robust oversight, Valant warns that funds could be misused \u2014 or channeled to institutions that exclude students based, for example, on identity or beliefs about sexual orientation.<\/p>\n He also emphasized that early participation is likely to skew toward families already in private schools, particularly in wealthier ZIP codes \u2014 mirroring patterns seen in programs in Arizona, Florida and Georgia.<\/p>\n \u201cOne big risk is that the funds will disproportionately flow to wealthier families \u2014 just like we\u2019ve seen in many ESA programs,\u201d Valant said.<\/p>\n <\/strong><\/p>\n \t<\/p>\n FutureEd studied eight states<\/a> \u2014 Arizona, Arkansas, Florida, Iowa, Indiana, Ohio, Oklahoma and West Virginia \u2014 where 569,000 students participated in school choice programs at a cost to taxpayers of $4 billion in 2023-24.<\/p>\n The FutureEd analysis found significant differences among the states in design, funding and oversight.<\/p>\n Arizona\u2019s ESA program was the first of its kind in 2011, and also the first to shift toward universal eligibility in<\/a> 2022.<\/p>\n Florida operated the largest and most expensive program, with broad eligibility, no caps or accreditation requirements, and a major influx of higher-income families, though it mandated<\/a> some university-led performance reviews. Iowa fully funded ESAs<\/a> and, like other states, saw mostly existing private school families benefit.<\/p>\n Arkansas had a cautious rollout<\/a> due to legal delays and geographic clustering of participants, while West Virginia allowed spending across state lines with no performance reporting.<\/p>\n Newcomer North Carolina began with income-based prioritization but quickly expanded under political pressure or demand, while Alabama and Louisiana will launch ESA programs in 2025-26 using general state revenues.<\/p>\n Utah enacted<\/a> a universal voucher program in 2023, providing up to $8,000 per student for private school or homeschool expenses. A state teachers union sued, arguing that participating schools were not \u201cfree and open to all children\u201d and that the program diverted public school funds. A state court this April ruled the program was unconstitutional.<\/p>\n As the new federal law opens the door for tax-credit-funded tuition support, Texas is building its first universal school voucher program, aided through ESAs to begin in the 2026-27 school year. The program is funded with $1 billion over two years, with $10,000-$11,000 per student \u2014 up to $30,000 for students with disabilities and $2,000 for homeschoolers.<\/p>\n The Texas comptroller will oversee the program, and private schools must be open for at least two years to be eligible for funds.<\/p>\n Voucher programs can drain state budgets<\/a>, and budget wonks predict the cost for Texas could rise to around $4.8 billion by 2030, The Texas Tribune reported<\/a>.<\/p>\n A spokesperson for the Texas comptroller\u2019s office said that details are still being finalized; the state has issued a request for proposals due Aug. 4 to select eligible educational assistance organizations that would help funnel scholarship dollars to schools.<\/p>\n Other states may be more cautious. The Missouri National Education Association filed a lawsuit<\/a> this summer <\/a>to block $51 million in state appropriations to private school scholarships through the MOScholars program. The suit argues that using general revenue rather than private donations violates the state constitution and undermines public education funding.<\/p>\n Stateline<\/a> is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Stateline maintains editorial independence. Contact Editor Scott S. Greenberger for questions: info@stateline.org<\/a>.<\/em><\/p>","protected":false},"excerpt":{"rendered":" A school bus drives along a rural road outside of Kenosha, Wis. The One Big Beautiful Bill Act established a national tax credit scholarship program, but state leaders can decide whether and how to participate (Spencer Platt\/Getty Images). When President Donald Trump signed\u00a0the One Big Beautiful Bill Act,\u00a0he\u00a0gave state leaders \u2014 not federal regulators \u2014\u00a0the…<\/p>\n","protected":false},"author":2,"featured_media":3404,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_kadence_starter_templates_imported_post":false,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3403","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"\nState regulations<\/h4>\n
What do these programs look like across the country?<\/h4>\n