Federal HR 1 could cut benefits, change school meal eligibility and introduce new scholarship tax credit, NCSL tells Oregon committee

Emily Katz, associate legislative director for education and human services at the National Conference of State Legislatures, told the House interim education committee on Oct. 1 that the Congressional Budget Office estimates HR 1 would increase the federal deficit by about $3.4 trillion over 10 years, with tax cuts and extensions and changes to major benefit programs driving most of that figure.

Katz said HR 1 would introduce a new state cost share for SNAP benefit payments starting in fiscal year 2028 tied to each state’s payment-error rate: states with an error rate under 6% would avoid the cost share, while states at 6% or higher would face a 5–15% share of benefit costs. Katz also said HR 1 would change the SNAP administrative cost split so states pay roughly 75% of administrative costs rather than the current 50%. She warned those changes, combined with eligibility and work‑requirement changes in HR 1, are expected to reduce SNAP enrollment and could therefore lower the number of students directly certified for free school meals under school nutrition programs.

Katz described additional federal changes affecting education funding and families: HR 1’s alterations to Medicaid eligibility and benefits, which KFF estimates could reduce Oregon’s federal Medicaid funding by about 19% over 10 years; a new federal scholarship tax credit (effective 2027) that would give taxpayers a dollar‑for‑dollar federal credit up to $1,700 for donations to qualifying scholarship‑granting organizations (SGOs); and expansion of 529 plan eligible expenses to include learning materials and tutoring.

On the scholarship tax credit, Katz said the statutory text leaves unresolved whether state legislatures or other state entities must formally opt into the federal program and whether states can impose additional eligibility criteria on SGOs. She noted the statute sets minimum SGO requirements—provide scholarships to at least 10 students who do not all attend the same school, spend at least 90% of revenue on scholarships, and be organized as 501(c)(3) entities—but that Treasury regulations will be needed to clarify implementation questions.

Katz emphasized the short rulemaking window for some provisions and urged states to watch forthcoming Treasury and Department of Education guidance. "We don't have a timeline on regulations," she said, "and many of the interpretive questions will depend on federal guidance."

The committee asked follow‑up questions about how the scholarship credit interacts with existing state credits and about operational timing; NCSL reiterated many answers are pending final regulations.