New federal school choice law is a historic breakthrough for children

Note: This is a joint op-ed with Peter Murphy (Invest in Education Coalition).

The old saying that states are the “laboratories of democracy” was apt in the passing of the new federal school choice law as part of the “One Big Beautiful Bill” enacted in early July.

The school choice provisions in this landmark legislation will generate private charitable contributions from individual taxpayers to fund scholarships for children in private, religious, public or charter schools. This legislative design is modeled after nearly two dozen states with such tax credit donation incentives and precludes potential government entanglement in school autonomy and religious liberty.

The result of this law, effective in January 2027, will mean more private dollars funding scholarships for use in K-12 education, thereby expanding existing opportunities in more than 30 states with school choice, and filling voids in the 17 states with no private school choice options for families.

This new federal school choice law contains an income tax credit equal to 100 percent of a donation to a qualified not-for-profit scholarship granting organization (SGO). The amount a taxpayer donates, up to a maximum of $1,700 annually, will reduce federal taxes owed by the same amount, without having to itemize tax returns.

As important as this federal law is to expand education opportunity, the final version was the product of last-minute legislative sausage-making that warranted a proverbial R-rating. To comply with U.S. Senate Budget Reconciliation rules, known as the “Byrd” rules, two key changes had to be made to the school choice provisions: the amount of the maximum annual donations by a taxpayer was lowered to $1,700, and each of the 50 state governors was given the choice whether their state would participate in the law. That means governors get to decide if their own state’s children will have access to school choice opportunities.

To take effect in a state, governors have to “opt in,” as this provision is informally described, by annually submitting a list to the U.S. Treasury Department of the SGOs in their respective states that “meet the requirements” of the federal law. There has been some confusion that legislatures need to pass a law designating a state SGO. That isn’t necessary. Existing entries can be designated as a qualifying SGO by governors.

Though Governors have the option of not opting in by doing nothing, this would send the message to nearly all their state’s schoolchildren to buzz off.

Yes, all schoolchildren in a state stand to benefit from this federal school choice law because it allows SGOs to serve children in private, religious, charter and public schools. That is because SGOs can award scholarships for tuition and a range of other education expenses such as tutoring, online courses, special needs services, school supplies, software and more – meaning students could remain in a public school and benefit from a scholarship to meet supplemental needs.

Importantly, when governors determine whether to opt in, the federal law is clear that it’s an all-or-nothing decision; that is, governors must list the SGOs that “meet the requirements” of the federal law, regardless of the SGO's mission, philosophy or choice of eligible expenses covered by its scholarship awards to children. In other words, a governor can’t list their favorite SGOs and exclude others, nor can governors impose extra-legal requirements on SGOs as a condition to be listed.

For a state like Washington, which has few school choice opportunities, the federal tax credit would enable families with limited means to access private and religious schools and supplement instruction and resources for students at district public schools. For those states with existing choice options like Idaho, Montana and Wyoming, opting in would supplement existing state choice options and reach more students while not spending a dime of state tax dollars.

States participating in this federal tax credit is a “win-win” scenario that provides students scholarship opportunities to pursue the public or private education model that fits their learning needs at no state cost. Governors should choose to help all the children of their states with greater private resources for K-12 education. The choice is obvious.

Peter Murphy is Senior Advisor at Invest in Education Coalition. Jason Mercier is Vice President and Director of Research of Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming.