The school funding story almost everyone’s missing

Scheduled to come online in January, the Federal Scholarship Tax Credit program (FSTC, aka EFTC, aka F-25) is widely misunderstood by parents, educators, and journalists alike.

There’s lots of awareness of how the program could generate vouchers for private schools, and whether Democratic governors will opt in or not.

What most people don’t seem to understand yet is that there’s a lot of money on the table for public schools.

Yes, public schools.

The total number is highly dependent on how many states ultimately opt in, but Edunomics Lab estimates that the program could ultimately generate $1,000 annually per public school student.

That’s good news at a time when many districts face budget gaps resulting from expiring COVID relief funds and declining enrollment.

But the additional funding—and the value it could bring to public school students — is too often left out of discussion.

How did we get here? By all accounts, the architects of the law had their sights on a national private school voucher model. Early drafts made that clear.

But somehow in the final hours of negotiations and bill drafting, the language of the law got changed. What came out of the DC lawmaking sausage machine was something quite different.

The currently signed law-of-the-land is a program whereby each taxpayer can direct $1,700 of their federal taxes to support students who attend private OR PUBLIC schools.

Bam.

It’s a confusing, convoluted way to generate cash for school districts, and unlike any federal program we’ve seen before.

Taxpayers send the money to an intermediary (a “scholarship granting org”) who then pays for scholarships or fees for students. Scholarships can go to public schools or vendors for fees charged to students.

To make it work, public schools will have to craft an allowable fee for all students, and then turn to the intermediary to collect those fees. It’s doable but messy. We get into the details on how it could work here and here.

A story about tens of billions in unexpected new money coming for public schools seems like big news, but thus far, media has been relatively thin.

A handful of outlets including the NYT, The 74, Baltimore Banner, and most recently the Hechinger Report (republished in the Washington Post) have all published helpful pieces, and there’s coverage on whether various governors will opt in. But the story about new cash for public schools doesn’t seem to be breaking through.

Compare this story to the widespread coverage of canceled mental health grants—grant sums that go to less than 2% of districts and amount to less than $10 per K-12 student.

I think it is fair to say that tax credit scholarships have received a fraction of that attention despite the potential to impact every district and generate 100X that per pupil.

It looks like most states will ultimately opt it (Who turns away cash for public schools?).

In a matter of months, some 100 million taxpayers could be eligible to direct a portion of their taxes as part of this program.

But how many have any idea that this is coming?

Marguerite Roza is the Director of the Edunomics Lab and a Research Professor, at the McCourt School of Public Policy at Georgetown University.

Related resources

A new source of cash. Will public schools go after it? (Edunomics Lab)

Trump Law Would Also Direct Voucher Money to Public Schools (NYT)

‘A Sea Change’: Public School Supporters See Potential in New Tax Credit (The 74)

The case for why public schools will or won’t benefit from the EFTC (Ballotpedia)

Want Federal Tax Credit Money for Public Schools? Here’s What to Do Now (The 74)

Q&A: Deborah Gist on Federal Tax Credit Scholarships and Public Schools (Future Ed)

How the Federal Tax Credit Scholarship Program May Affect States (ECS)