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 wan 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 503c 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.

A few months ago, a local bank wrote a $100,000 check to the Northwestern Lehigh Educational Foundation. However, this was not a payment for private-school tuition. Instead, this money, given through Pennsylvania's Educational Improvement Tax Credit program, was designated for approved educational needs in the Northwestern Lehigh School District, including STEAM programs, modern teaching tools and classroom improvements. A few months later the Orrstown Bank made a similar EITC contribution, but this was made to the Lancaster Education Foundation. The School District of Lancaster often uses these sorts of donations as grants for programs that expand learning experiences and provide opportunities beyond what traditional state and federal funding can support. Most importantly, neither example requires a student to leave a public school. Here at FundEDU, we work with both public and private schools across Pennsylvania, because we know that "education tax credits" and "public schools" are not opposites. While Pennsylvania's EITC program does have a scholarship side, it also allows for qualifying contributions to Educational Improvement Organizations. Put more simply, businesses receive tax credits for qualifying contributions, and then the state's approved EIOs provide financial support to public-school districts across the Commonwealth. Now, the upcoming federal Education Freedom Tax Credit is not Pennsylvania EITC copied across the country. In particular, Pennsylvania's EIO structure allows donors to support programs operating in or for public schools, whereas the federal credit will work through scholarships awarded to eligible individual students. However, this is the part public-school leaders anywhere in the country should notice: federal guidance directly includes expenses connected with public schools as eligible. The Department of Education gives examples including tutoring at public schools, services for students with disabilities, equipment or uniforms for career-training programs, and after-school enrichment.

A student needs math tutoring. Another needs equipment for a career and technical program. A third family is paying for additional services to support their child with a disability. Another parent needs an after-school program because the school day ends hours before the workday does. Those are not unusual problems. They are the kinds of expenses public-school families deal with every day. Thankfully, beginning in 2027, some of them may be eligible for scholarship support through the new federal Federal Scholarship Tax Credit. Despite this, that part of the program has gotten surprisingly little attention in national discourse. Instead most of the conversation around existing federal guidance has focused on paying for private-school tuition. That is certainly one use of it, and one that many families and advocates are excited for. But federal law also makes clear that qualified education expenses can be covered by scholarship funds for students who remain enrolled in public schools. Examples include many of the services also fundable at private or charter schools, including: tutoring, disability services, career-training equipment, after-school programming and other eligible educational costs. That matters even more when you consider how many families will be eligible. The program’s income limit is set at 300 percent of area median gross income, a threshold wide enough that advocate estimates put eligibility at roughly nine out of ten K–12 students nationwide. This means that most of the eligible students are, and will continue to be public-school students. A Lesson From PA At FundEDU, we work with a number of public schools in Pennsylvania, where tax-credit-supported education has been part of our educational landscape for decades. Through the state's Educational Improvement Tax Credit program, PA taxpayers are able to support approved organizations providing innovative educational programs to public schools. Education foundations across the Commonwealth have used that structure to bring additional resources into their districts.

This is our video showing how schools can use FundEDU to increase their tax credit scholarship dollars.

@Joe Adams and @Jeff Wilson present on their experience with educational tax credits in central PA.