Updated state-by-state projections reflect joint filers and show up to $172 billion a year nationally; states that opt in can put millions to work for their own students
WASHINGTON, D.C. – Education Reform Now (ERN) today released its updated projections for the Federal Scholarship Tax Credit (FSTC). The new analysis finds that states can capture over $172 billion a year to support K-12 students with tutoring, tuition, school supplies, and other academic supports. Without FSTC, those funds would automatically flow to the IRS.
The update reflects Treasury’s proposed rules, which let married couples filing jointly claim up to $3,400. ERN identifies 67.2 million tax returns whose filers likely owe enough federal income tax to claim the full credit: 33.2 million non-joint filers at $1,700 and 34.0 million joint filers at $3,400. ERN calls them “Redirectors.” For them, a gift to an SGO costs nothing; the only question is whether their tax dollars go to the IRS or to students.
The stakes are large in every state. Redirectors in California owe up to $20.8 billion a year that could go to students instead of the IRS; in Illinois and Pennsylvania about $7.0 billion each. Even in Rhode Island, one of the smallest states, the figure is over $600 million. The decision before governors is how much of those dollars will they recapture and keep in-state to support their students.
“This data shows the sheer scale of what’s at stake: a massive influx of resources to help kids catch up and deliver on the promise of public education,” said Jorge Elorza, CEO of Education Reform Now. “Nearly nine in ten American kids go to public schools, and FSTC should be put to work for them through tutoring, summer learning, and extra help in reading and math. The federal law has already passed and the money will be spent. The only question before governors is whether the money will benefit K-12 students in their states or elsewhere. The program launches in less than three months; we urge governors to opt in now.”
“Our estimates are intentionally on the low end of what’s possible here,” said Matthew Braun, Ed.D., Senior Manager, Innovation & Choice at Education Reform Now. “We count only taxpayers likely to owe the full credit, and we assume everyone else gives nothing. That’s a big reason why our figures come in below other published estimates. If elected officials, employers, tax preparers, and community groups help spread the word to increase participation, we are talking about the potential for hundreds of millions of dollars a year in each state. That would be a substantial boost for K-12 students.”
State tax credit programs see participation of roughly 2% to 3%, in part because many let a few wealthy donors carry the load. Illinois, for example, allowed single gifts of up to $1 million under a $75 million program cap. FSTC only allows much smaller contributions per person ($1,700 for non-joint filers; $3,400 for joint filers), so SGOs will have to raise money from the broad general public. That design, plus the reach of a national program, gives FSTC room to grow well past state participation rates.
Elorza added: “To the governors still weighing this: judge FSTC on its merits and on the chance it gives you to transform how your state supports kids. Opting in gives you a chance to raise awareness of the SGOs that align with your priorities and shape the program so that the money reaches the kids and families who need it most. For governors who opt out, they will have to explain to parents why they left hundreds of millions of dollars on the table that could have helped their kids catch up.”
Read the full projections here: FSTC PROJECTIONS
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Education Reform Now (ERN) is a non-partisan, nonprofit think tank and advocacy organization that promotes increased resources and innovative reforms in K-16 public education, particularly for students of color and students from low-income families. We seek forward progress in public education—at the federal, state, and local level—developing and advocating for new, bold ideas and mutually reinforcing policies in elementary, secondary and post-secondary education.