Gop’s Education Tax Credit Puts Democratic Governors In A Bind

Democratic governors eyeing a tax incentive created by the GOP’s “big, beautiful” bill have one big reason not to sign up: teachers unions hate it.

The GOP’s domestic policy law established a tax credit that is projected to infuse billions of dollars into the education system through scholarships that will pay for expenses such as private school tuition, tutoring, test preparation and after-school programs.

Republican states quickly signed up for the federal program. But most Democratic governors have stalled as they find themselves in the middle of a tug of war between powerful teachers unions and a coalition of faith-based schools, public education leaders, local chambers of commerce and other groups who want the cash to flow.

Teachers unions argue that opting into the program would betray the promises Democrats have made to protect public schools. A blue state governor's decision on participating in the program is a “values test” heading into the 2028 presidential election cycle, said Melinda Person, president of the New York State United Teachers union.

“If they’re willing to cross this line, it starts to beg the question of where is that commitment in any of our elected officials?” Person said.

But these governors are also under pressure from parents who want the funds, which they can use to get extra help with their children's education or allow students to attend the school of their choice. Organizations pushing governors to opt in say it could provide additional money for education without adding to already-stressed state budgets.

Colorado Gov. Jared Polis, who is term-limited and has characterized the credit as “free money,” is the only Democratic governor to opt in so far. But 10 Democratic governors are up for reelection this year, including New York Gov. Kathy Hochul, who said in May she was supportive of the credit for her firmly blue state, bucking New York’s famously strong teachers unions.

Maryland Gov. Wes Moore, who is viewed as a potential Democratic presidential contender and also up for reelection, in a speech to members of the American Federation of Teachers this month called the new federal credit a “tax scheme” and said it “takes public funding and steers it towards private schools.”

Despite his fighting words in front of teachers, Moore told reporters after the speech that he hasn’t made a decision about his state’s participation, saying he needs more information.

“We're going to support our public school students, and we think it's important that we have avenues and approaches to be able to do that,” said Moore, standing next to AFT President Randi Weingarten on the sidelines of the union’s convention. “We're still asking questions, but I don't have a response to something that I don't even know what it is.”

The federal tax credit incentivizes individuals to donate to scholarship-granting organizations that support education. Donors would receive a dollar-for-dollar tax credit of up to $1,700 for their contributions that direct money toward a range of educational initiatives.

Opting into the program would allow governors to keep their constituents' federal tax dollars within their state. But if a state hasn’t chosen to participate in the program, donors can make contributions to organizations outside the state to receive a tax credit. Donors can begin claiming the credit in January.

“For governors that opt out, they're going to have to answer to constituents — and in a way that makes sense to the average person — why they chose and why they preferred for their state's dollars to leave the state and support kids in other places,” said Jorge Elorza, the Democratic former mayor of Providence, Rhode Island, who is now CEO of Democrats for Education Reform, a group focused on education policy in the Democratic Party.

Roughly 30 mostly Republican states have elected to participate in the program, according to the Internal Revenue Service. The GOP-controlled legislatures in North Carolina, Kansas and Kentucky overrode vetoes from their Democratic governors to opt their respective states in. And former Virginia Republican Gov. Glenn Youngkin opted the state in before Democratic Gov. Abigail Spanberger assumed office earlier this year.

Supporters see Democratic governors in Pennsylvania, Massachusetts and Maryland as potential blue-state leaders who could support the credit.

But state and national teachers unions argue that while the credit may create some trickle-down gains for public school students, private school students would be the main beneficiary of scholarships provided by the tax credit. The credit, they say, would contradict the fact that the Democratic National Committee’s 2024 platform opposed school vouchers, tuition tax credits, opportunity scholarships and “other schemes that divert taxpayer-funded resources away from public education.”

“There may be some crumbs for public school kids along the way, but the biggest winners we believe will be those that are trying to privatize public education,” Person, the New York state union leader, said.

Weingarten and National Education Association President Becky Pringle have denounced the tax credit as a “Trojan Horse” and a voucher program, which sets aside public funding to pay for private school tuition. Weingarten argues that even if public school students get some money from the credit, private schools would benefit more, putting funding streams for public schools at risk.

Treasury officials have said public school students will be able to receive scholarships as part of the tax credit, previewing proposed regulations expected to be released by September. The size of the award would be determined by the nonprofit granting the scholarship money and the money can be used by public school students for a range of educational purposes as determined by the nonprofit. A school district could set up a nonprofit organization, or work with an existing one that serves public schools, to direct scholarships that prioritize specific needs, tax credit advocates say.

A survey from the National Parents Union, an education advocacy organization, found that about 78 percent of public school parents want their state to participate in the program, and most parents said they would apply for scholarships if their child were eligible.

Advocates of the tax credit say that in meetings with governors and their staff, there’s still confusion about the structure of the program, whether public school students stand to benefit and how much oversight states will have. It’s confusion supporters of the credit say is being stoked by teachers unions.

“The narrative from teachers unions that this is no more than a voucher program that's going to gut public education and cut funding — all of that is not only hyperbolic, but it is, I believe, intentionally misleading,” Elorza said.

But Princess Moss, the incoming president of the National Education Association, the largest teachers union in the country, rejected the idea that the unions were exaggerating.

"It takes away money from public schools,” she said. “We're telling the truth. ... If you really cared about our public schools, you would be putting resources into our public schools, and I really take issue with folks trying to find these alternative methods simply for the fact that pretty much they do not believe in a free and public education for every student.”

But Sydney Atfield, CEO of Teach Coalition, the education advocacy arm of one of the nation’s largest Orthodox Jewish organizations, said both public and private school programs can benefit from the program at the same time.

“We can keep funding our public schools at the highest rates,” Atfield said. “We can keep having a federal tax credit like this — and having public school students use it, having private school students use it. And we can all benefit from it instead of making it a zero-sum game of only one can benefit and not the other.”

Among the Democratic governors weighing whether to participate in the tax credit, Pennsylvania Gov. Josh Shapiro’s past openness to some school choice programs is seen as a positive sign. Shapiro’s office has previously said the governor is awaiting regulations from Treasury to make a decision, as is Massachusetts Gov. Maura Healey, according to a spokesperson.

Hochul is waiting to review federal rules for any “poison pills.” And Moore said the state has “heard nothing” from Treasury as Maryland seeks more information from the federal government. Moore said he has questions about how much say states have over the program.

“There are governors, Democrats and Republicans around the country, who have basic questions that are still not being heard nor answered by this federal administration,” he said after his speech to AFT.

A Treasury Department spokesperson said Moore’s office was invited to participate in a stakeholder roundtable previewing implementation guidelines for the new tax credit. The spokesperson said a Maryland state education senior official attended the preview.

“We welcome and encourage the Governor's engagement as we work to expand educational opportunities for students in every state,” the spokesperson said in a statement.

More than 10,000 organizations in the Bay State, including the Alliance of Massachusetts YMCAs, the Massachusetts Alliance of Boys & Girls Clubs and several local chambers of commerce, are part of the Massachusetts Educational Opportunities Coalition urging Healey, who is running for reelection, to opt in.

“The opportunity outweighs any of the political challenges,” said Katie Everett, who is spearheading the coalition. Everett is executive director of the Lynch Foundation, a Massachusetts-based family foundation supporting education and social services. “The reason why we are so divided is that we are not putting our citizens first in some regards. We're making decisions based on one side versus the other, and that has been incredibly divisive.”

Isa Domínguez contributed to this report.