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New federal tax‑credit scholarship program raises questions for Connecticut advocates and lawmakers
Summary
Panelists and legislative members discussed HR1/OBBBA’s new federal tax‑credit scholarship program, which permits donors to receive a federal tax credit for contributions to scholarship organizations; education advocates warned it could funnel resources away from public schools and said significant regulatory details remain unresolved.
The recent federal omnibus bill (commonly referred to in testimony as HR 1 or the OBBBA) created a federal tax‑credit scholarship program that would allow donors to receive a dollar‑for‑dollar federal tax credit for contributions to scholarship‑granting organizations (SGOs) that distribute scholarships to eligible K‑12 students.
Under the federal law, states must opt into the program on a January 1 annual schedule; donors may receive up to a $1,700 federal credit in a tax year, and eligible students are limited to households with incomes below 300% of area median income. The program can cover private school tuition and other education expenses, and has a planned federal start in 2027 with donors possibly able to make qualifying contributions in 2026 for tax purposes.
Panelists from the Connecticut Association of Public School Superintendents and AFT Connecticut urged caution. “We have seen them rolled out in other places... that program... often benefits donors and organizations with the capacity to raise funds rather than primarily the students most in need,” said a superintendent panelist summarizing the associations’ concerns. AFT Connecticut urged Connecticut leaders to “Trump‑proof” the state education system and dissuaded adoption of policies that could divert public resources.
School finance analysts told legislators many operational details remain undefined and will be set by Treasury regulations, including whether states may restrict SGOs or limit eligible education expenses. Several panelists urged deeper review before any state opt‑in decision.
Legislators asked whether Connecticut could opt in as a near‑term response to federal funding reductions; analysts and union representatives said the program’s likely effect is to deepen private school vouchers and channel funds away from public systems unless tightly regulated, and urged consideration of alternatives to stabilize public funding for high‑need districts.
