Education Opportunity Account Program
- Tax-Credit Education Savings Account
- Enacted 2021
- Launched 2021
Kentucky’s Educational Opportunity Account Program is an education savings account (ESA) that allows eligible parents to use money donated to account-granting organizations (AGOs) to pay for private school tuition or other educational expenses, including tutoring, individual public school classes and extracurricular activities, instructional materials, technology, transportation, therapies and higher education courses. Individuals and businesses may receive tax credits for donations to AGOs, nonprofits that administer Education Opportunity Accounts (EOAs).
We do not administer this program.
Kentucky’s First School Choice Program
Nation’s First Tax Credit-Funded Education Savings Account
of Families Income Eligible in Applicable Kentucky Counties
Maximum Account Value as a Percentage of Public School Per-Student Spending
Percent of Kentucky students eligible for the Education Opportunity Account Program
Students may use Education Opportunity Accounts (EOAs) for private school tuition fees or a variety of a la carte educational services, including public school classes and non-athletic extracurricular activities, instructional materials, technology, transportation, school uniforms, testing fees, summer and after-school programs therapies, and higher education courses.
For private school students, EOAs are worth the lesser of tuition and fees or financial need to attend the school as assessed by an independent organization approved by the Kentucky Department of Education.
For those intending to use EOAs for services other than private school tuition, funding is equal to the lesser of the cost of services or the previous year’s base per-pupil funding amount (about $4,700 in 2020-21) minus one-fourth of the percentage by which the family’s household income exceeds the federal threshold for free and-reduced-price lunch (FRL) ($49,025 for a family of four in 2021–22). For example, if a family of four had a household income of $60,000, they exceed the threshold for reduced price lunch by about 24 percent. A quarter of that percentage is about 6 percent, so the base EOA funding amount of about $4,700 would be reduced by 6 percent, or about $282, for a total of about $4,418. Parents may roll over unused EOA funds each quarter until a student graduates or turns 21.
Students must come from families earning no more than 175 percent of FRL ($85,794 for a family of four in 2021–22). Previous EOA recipients and siblings of EOA recipients are also eligible.
If a student’s family’s household income rises over 250 percent of the income threshold for the federal reduced-price lunch program ($122,563 for a family of four in 2021–22), that student is ineligible to receive further state deposits in their EOA. Only families residing in counties with populations over 90,000 may use EOA funds for nonpublic school tuition. Currently, these include Jefferson, Fayette, Kenton, Boone, Campbell, Hardin, Daviess and Warren counties.
EdChoice Expert Feedback
Kentucky’s Education Opportunity Account Program is the country’s first tax credit-funded ESA and has the potential to help thousands of Kentuckians obtain the educational services that best fit their needs. However, policymakers could do more to expand educational opportunity.
Eligibility for the ESAs is limited to students from families earning up to 175 percent of the federal free-and-reduced-price lunch program (the equivalent of 323.75 percent of the federal poverty line), and only those currently living in the state’s eight largest counties may use EOAs for private schools. This limitation hampers potential growth of educational options in rural areas of Kentucky.
The value of each ESA is only about $4,600 at most and declines as income rises. That’s less than one-third of the average expenditure per student at Kentucky’s district schools. Moreover, the program provides only $25 million in tax credits for donations to the account-granting organizations. At most, the program will be able to serve only about 5,000 students, or about 0.8 percent of Kentucky’s K–12 student population.
To expand access to educational choice, Kentucky policymakers should increase the ESA amounts to be comparable with the per-pupil spending at district schools and expand eligibility to all students. The tax credits for the donations that fund the ESAs are also set to expire after 2026. The Kentucky legislature should work quickly to make the ESA policy permanent. Additionally, the program does not allow private school students to use funds to fully customize their education, and potentially funds them at a lesser amount than other students.
Kentucky’s ESA program generally avoids counterproductive regulations. Administration of the program is overseen by nonprofit account-granting organizations, which should give ESA families a voice to ensure that the program is run effectively.
Rules and Regulations
- Income Limit: 175 percent of the federal reduced price lunch income threshold ($85,794 for a family of four in 2020-21)
- Prior Year Public School Requirement: No
- Geographic Limit: Statewide (County for Private School Students)
- Enrollment Cap: None
- Account Deposit Cap: $4,700
- Testing Mandates: None
- Credit Value: 95 percent (97 percent for multi-year pledges)
- Per Donor Credit Cap: $1 million
- Total Credit Cap: $25 million
- Must be certified by the state
- Responsible for determining amount for which a student is eligible
- Responsible for implementing a payment system for transactions from EOAs to providers
- Use at least 90 percent of contributions for EOAs
- Have an outside financial audit conducted and provide an annual report to the state
On October 8, 2021, the Franklin County Circuit Court in Council for Better Education v. Johnson and the Commonwealth of Kentucky found that Education Opportunity Accounts, a tax-credit funded education savings account program (ESA), is unconstitutional. The court held that the ESA wrongfully targets only particular locales and that the law must have a provision allowing for a vote of the people to accept or reject this new legislation. The program is enjoined; it cannot be implemented until a higher court overturns this ruling. This case was filed by an association of almost all public school districts in Kentucky against the first in the nation tax-credit-funded ESA, named Education Opportunity Accounts (EOA). This ruling has been appealed directly to the Kentucky Supreme Court. Pending. Council for Better Education v. Johnson and the Commonwealth of Kentucky, Franklin Circuit Court, Div. 1, Civil Action No. 21-CI-00461