The Seven States Least Likely to Opt-In to the Federal Tax-Credit Scholarship Program

I have authored several list-driven blog posts over my dozen years here at EdChoice. They can be fun to create, and they are a simple way to showcase information. Although I do my best to abstain from pareidolia, I realized a possible connection earlier this week:

Could states that do not allow K–12 tuition to be claimed as eligible expenses for 529 purposes be less likely than their tuition-allowing peers to have a private school choice program?

Odds point to yes, since seven out of 12 states with a state-sponsored 529 plan (sorry, Wyomingites) that do not allow K–12 tuition to be claimed as eligible expenses for 529 purposes also do not have a private educational choice program.

Now, I’m going to make what I deem to be a reasonable assumption that if a state (1) does not already have its own private educational choice program and (2) explicitly excludes K–12 tuition to be claimed as eligible expenses for 529 plans, then it is in the group of states least likely to opt-in to the Federal Tax Credits for Scholarships (FTCS) program.

The seven states are (in alphabetical order):

1. California

2. Colorado

3. Hawaii

4. Michigan

5. Nebraska

6. New Mexico

7. Oregon

(click here for an interactive version)

I think it is safe to say that those seven states in the numbered list are the least-choice-friendly states for private educational choice. If you also layer on a variable for not having a public charter school law, then Nebraska could be viewed as the least-choice-friendly state overall (this is honestly not what I expected to write when I started this post, but here we are).

In addition to those seven states, Illinois should get honorable mention here. While they do have an individual tax credit program, we at EdChoice said in 2024 the biggest setback for the educational choice movement was Illinois eliminating their state-level tax-credit scholarship program. We’ll see if the thousands of families who participated in that program can get in the ear of their state leadership to allow them to participate in a federal tax-credit scholarship program. Also, Illinois is one of only two states that does not permit public school students to transfer districts, along with North Carolina.

Vermont should also get honorable mention for the reasons my colleague John Kristof points out, in addition to being another of the five states without a charter school law.

Hopefully the public officials in those blue states deciding whether or not to opt-in their state to the FTCS program listen to people like Jorge Elorza with Democrats for Education Reform and Jon Valant with Brookings. Dr. Valant points out the USTCS might be a program “worth opting into for red and blue states alike.” Mr. Elorza said earlier this month at a Democratic Governors Association meeting that opting into this program is “a no-brainer,” adding “this is literally free money that is broadly supported by the majority of voters who have steadily drifted away from the party. It just makes sense.”

Personally, I see the FTCS program as the most sector-agnostic approach to school choice since Nevada’s education savings account that never got off the ground. Unlike Arizona’s cobbling together of tax-credit scholarships for private education and a public school tax credit, this is a single tax-credit scholarship program open to students in private, religious, or public schools.

As long as a student is (1) eligible for public school, (2) lives in a household under the income cut-off, and (3) lives in a state that decides to opt-in to participate, the only barriers to participating in the program will be the amount of donations raised and the geographic coverage of participating SGOs. It doesn’t matter if they attend their zip-code assigned public school or choose to attend a different traditional public school in their district or a different district, a magnet school, a charter school, a private school, or any other type of educational environment that meets the letter of the law.

The FTCS program has the potential to benefit students in all schooling sectors in all states!

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529 Plans

Operated by a state or educational institution, with tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training, or (as of 2018) for up to $10,000 in annual tuition expenses in connection with enrollment or attendance at an elementary or secondary public, private, or religious school. Earnings are not subject to federal tax and generally not subject to state tax, and many states offer at least a partial credit against state taxes for contributions.

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Federal Tax Credits for Scholarships (FTCS) Program

Starting January 1, 2027, every individual taxpayer in America can donate to a scholarship granting organization (SGO) and receive up to a $1,700 dollar-for-dollar tax credit on their federal taxes, and married couples filing jointly may claim up to $3,400. SGOs must them spend at least 90 percent of income on scholarships for eligible students – those who are eligible to enroll in a public elementary or secondary school and are members of a household making less than 300 percent of the area median gross income the prior year to participate. Qualifying scholarship expenses include elementary and secondary school tuition, curriculum and curricular materials, books or other instructional materials, online educational materials, computer technology, uniforms, transportation, supplementary items and services (including extended day programs), tuition for tutoring or other classes outside of the home, fees for standardized tests, fees for dual enrollment, and educational therapies for students with special needs. This credit is not available to corporations.

This was originally published to our Substack.