Democratic governors face decision on new federal school choice program

Democratic governors face a critical January 1, 2027 deadline to join the Federal Scholarship Tax Credit, a novel federal school choice program approved in 2025. While Colorado's Jared Polis has opted in and New York's Kathy Hochul has expressed willingness, potential 2028 presidential contenders like Gavin Newsom, JB Pritzker, and Josh Shapiro face intense pressure from teachers unions to reject the program, which critics argue will privatize education and divert students from public schools.

Federal Scholarship Tax Credit

• ▪The Federal Scholarship Tax Credit, approved by Congress in 2025, creates a new federal school choice program based on private donations to nonprofit scholarship granting organizations.
• ▪The Federal Scholarship Tax Credit offers donors a dollar-for-dollar federal tax credit up to $1,700 for contributions to scholarship granting organizations.
• ▪The Federal Scholarship Tax Credit program allows families earning up to 300% of their area's median income, or over $500,000 in parts of New York, to qualify for scholarships.

Democratic governors opt-in decisions

• ▪New York Governor Kathy Hochul has announced a willingness to participate in the Federal Scholarship Tax Credit program, contingent on the final rules released in late September.
• ▪Massachusetts Governor Maura Healey is being urged by a coalition of advocacy groups to opt into the Federal Scholarship Tax Credit program.
• ▪Democratic governors face a January 1 deadline to opt their states into the Federal Scholarship Tax Credit program for the 2027 calendar year.

Public school funding effects

• ▪The American Federation for Children estimates that if 2% to 5% of eligible taxpayers participate, the Federal Scholarship Tax Credit program would raise $3.8 billion to $9.4 billion annually.
• ▪Public school districts must establish and staff their own scholarship organizations to solicit donations and vet applicants to benefit from the Federal Scholarship Tax Credit program.

Presidential contenders political risks

• ▪Illinois Governor JB Pritzker has questioned the Federal Scholarship Tax Credit program's benefits, citing concerns over funding private schools that may discriminate against LGBTQ individuals.
• ▪Pennsylvania Governor Josh Shapiro previously supported a Republican plan for private school scholarships before removing it under pressure from legislative Democrats.
• ▪Democratic Governors Gavin Newsom, JB Pritzker, and Josh Shapiro face political pressure regarding the Federal Scholarship Tax Credit program as they contemplate 2028 presidential campaigns.

Teachers unions opposition

• ▪A coalition of 33 state teachers union presidents sent a letter to Democratic governors urging them to reject the Federal Scholarship Tax Credit program.
• ▪Opponents of the Federal Scholarship Tax Credit program, including the School Superintendents Association and UnidosUS, argue the program will accelerate public school enrollment declines.

State participation status

• ▪Minnesota, Oregon, and Wisconsin are three Democratic-led states that have already decided to reject participation in the Federal Scholarship Tax Credit program.
• ▪Colorado Governor Jared Polis became the first Democratic governor to officially opt into the Federal Scholarship Tax Credit program in late 2025.
• ▪Thirty-one mostly Republican-led states have already agreed to participate in the Federal Scholarship Tax Credit program.