Proposed regulations circumvent state and local control, hand over education decisions to private actors and investors, invite discrimination, and harm local public schools. The new rules also double the disproportionate benefit to wealthy families at the expense of everyone else.
For months, governors across the country have been weighing whether to opt into Trump’s Federal Scholarship Tax Credit (FSTC), with many waiting for official guidance on how the tax credit works. On Oct. 1, the U.S. Treasury released that guidance, and the picture it paints for public schools and students is bleak.
What is the FSTC?
The FSTC is a large-scale school voucher scheme with the same DNA as voucher programs that have already eroded K-12 education in states across the country. Look at the top-ranked education states (Connecticut, Massachusetts, New Jersey) versus the lowest-ranked (Alaska, Oklahoma, West Virginia), and you’ll see a through line: no vouchers in states with high-quality public education; vouchers in every state at the bottom of the list.
The Federal Scholarship Tax Credit takes school vouchers and privatization to a whole new level.
At every turn, the U.S. Treasury’s regulations uphold the program’s fundamental design as a private school funding mechanism, feeding scholarship granting organizations (SGOs) for private schools and private equity-owned services as they scale across the country. The FSTC will pour tens of billions of dollars into SGOs every year, providing reliable cash flow to private equity brokers that would be better spent supporting public schools, which educate 90% of students in Connecticut and nationwide.
But FSTC dollars are available to public school students—aren’t they?
Not exactly.
This program will not serve public schools or their students in any meaningful way, because its regulations are structured primarily to fund private school expenses for services that public schools must provide for free under state law.
Even if SGOs are created with the intent of serving public school students, they will face layers of structural disadvantages, including limits on expenses they may fund and more limited donor pools. At the same time, the program will undermine funds like Title I and IDEA as well as public school foundations that benefit all students.
On the other hand, existing SGOs will largely be able to spend these funds as they see fit—including limiting them to religious, private, or sectarian schools. SGOs can also use “digital wallets” that enable them to steer funds to private tutoring companies or special education providers. Under the regulations, states are not allowed to establish guardrails providing equal opportunity, ensuring money goes to students in financial need, or preventing SGOs from discriminating.
States that opt in will also surrender any authority to shape education policy in their own jurisdiction.
While the regulations specify that SGOs must be “located in the state,” that’s not technically true. SGOs require only legal authority, not a physical presence, to operate in a state. Economies of scale guarantee that under this program, multi-state SGOs are not just permitted but structurally advantaged.
What’s more, states that opt in are subject to federal regulations but bear the entire cost and burden of preventing fraud, waste, and abuse. They have no discretion when it comes to limiting SGO certifications yet shoulder all the responsibility for holding those SGOs accountable to law. Rampant fraud and abuse have been the calling card of similar voucher programs already operating in several states. Brookings education scholar Jon Valant puts it this way: “Trump’s voucher program will be the greatest source of waste, fraud, and abuse that we have seen in our lifetimes in K-12 education.”
States that were waiting to see if they can craft the FSTC program to fit their priorities now have their answer: they can’t. Those that opt in will be required to certify SGOs that pay private school tuition, fund schools that discriminate, steer funds to private unaccountable companies, and skim 10 percent in administrative fees.
Additionally, the proposed rules double the tax credit from $1,700 to $3,400 for households. This not only shifts even more benefit to high-income families, it leaves the federal budget in deeper deficit, and as a result, everyone else with higher interest and mortgage rates. The FSTC is welfare for the wealthy.
Given this reality, Connecticut should publicly and firmly reject the federal voucher program.
Tell the governor to SAY NO to the federal voucher scheme.
