Public Dollars, Private Control: How the Federal Voucher Tax Credit Works

Who is in charge of the scholarship program?

Scholarship Granting Organizations, or SGOs, authorized under the federal private school tax credit law, are responsible for administering the program. These organizations receive taxpayer contributions, process the tax credits, convert the funds into scholarship dollars, determine scholarship amounts, set eligibility criteria, and independently select scholarship recipients.

The law prohibits earmarking scholarships for specific students. However, students who receive a scholarship are given priority in subsequent years, and their siblings receive the same priority.

The Internal Revenue Service and the Department of the Treasury are currently developing rules and regulations for the program. They have already indicated they intend to limit state authority, particularly by prohibiting states from imposing their own requirements or guardrails on SGOs.

Even the strongest regulations cannot change a fundamental fact. The statute is deliberately designed to direct taxpayer dollars to private and religious schools.

• According to the Urban Institute, approximately 90 percent of households nationwide would meet the program’s income requirements. This makes clear that the program is not narrowly targeted to low income families. It is broadly available.

• States are not permitted to limit the number of SGOs operating within their borders.

• SGOs may retain up to 10 percent of donated funds for administrative purposes. That amount is roughly ten times higher than what Title I programs are allowed to use for administration.

• There are no statutory requirements for fiscal transparency, public oversight, or meaningful accountability for SGOs. This lack of guardrails makes the program a magnet for bad actors. Millions of taxpayer dollars are likely to flow directly into SGO administrative budgets.

For example, in 2023, the president of a large Florida SGO earned nearly $350,000 in total compensation. That is more than six times the salary of the average public school teacher in Florida. That same organization has already created a section of its website dedicated to the federal voucher program.

• SGOs are not required to ensure that participating private schools comply with federal civil rights laws or the Individuals with Disabilities Education Act, known as IDEA. The law also explicitly prohibits any government entity from mandating, directing, or controlling any aspect of a private or religious elementary or secondary school.

---

This federal voucher tax credit scheme represents a structural shift in how public education funding operates. It expands eligibility far beyond low income families, limits state oversight, allows unusually high administrative retention, and directs taxpayer dollars into institutions that are not required to meet the same transparency, civil rights, or accountability standards as public schools.

Public education operates under constitutional guardrails such as open meetings laws, public records requirements, nondiscrimination protections, financial audits, and democratic oversight. This program is intentionally structured to operate outside those guardrails.

This is not simply a policy debate about school choice. It is a fundamental reallocation of public funds into a parallel system that is insulated from public control.

When public dollars flow without public accountability, the long term consequences extend far beyond individual scholarships. They reshape the structure of education governance itself. Once those structures shift, rebuilding transparency and oversight becomes far more difficult.