Committee weighs whether Vermont should opt into federal scholarship tax‑credit program; experts warn of cost and accountability risks

Senate Finance devoted significant time to S161, a bill that would enable Vermont to participate in the new federal scholarship tax‑credit program (created in the 2025 federal budget). Committee counsel and witnesses outlined tradeoffs between acting quickly so local scholarship‑granting organizations (SGOs) can accept donations for afterschool and summer learning in tax year 2027, and waiting for Treasury/IRS rulemaking that could limit state discretion.

Legislative counsel and Agency of Education counsel described the federal framework: donors receive a federal dollar‑for‑dollar tax credit for contributions to qualifying SGOs, which in turn provide scholarships or support to students. Kirby, legislative counsel, said the statute permits the governor or a designated state entity to elect participation; several senators questioned whether the Legislature should retain that authority. Emily Simmons, general counsel for the Agency of Education, told the committee AOE favors targeted funding for economically disadvantaged students for afterschool, summer learning and tutoring but stressed the department lacks final federal regulations and clarity about how states can enforce limits.

Witnesses from education advocacy groups urged caution. Ken Fet and Greg Hughes of Friends of Vermont Public Education urged delaying state action until proposed federal regulations are released; they argued past voucher programs show sharp growth in state costs and the risk of diverting public resources away from public schools. Patrick Kreman of the Education Law Center testified that evidence from state voucher programs shows large and growing fiscal impacts, weak accountability and potential civil‑rights gaps; he recommended declining participation while federal rules are unsettled.

Committee members discussed pragmatic concerns: if Vermont does not authorize SGOs, Vermonters could still donate to out‑of‑state SGOs and claim the federal credit (routing the benefit out of Vermont). Proponents urged that legislative action would allow Vermont SGOs to receive the funds and direct them to public school afterschool and summer programs. Opponents stressed that federal rules (expected as proposed regulations in spring/summer 2026) may override state restrictions and that the governor’s authority to opt in could shift policy across administrations.

No committee decision was made. Members requested additional briefings from the tax department, program administrators and the governor’s office to assess administration, verification and equity safeguards before moving forward.