Playing Politics With Scholarships Fails Families

By: The Editors, Bloomberg
The Editorial Board publishes the views of the editors across a range of national and global affairs.
March 16, 2026
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States rarely turn down financial aid from Washington. But several Democratic governors are now doing just that, and others may join them. What’s going on? Not surprisingly, the answer involves special-interest politics.

Last year’s omnibus spending bill included a tax credit for donations made to nonprofit organizations that grant scholarships to K-12 students. Such donations are already tax-deductible. Beginning in 2027, instead of reducing taxable income, they’ll reduce total tax bills by up to $1,700, further encouraging giving. Households making up to 300% of their area’s median income will be eligible for the scholarships, provided their states opt in.

And there’s the rub: Teachers unions are pressing governors to not participate.

Union leaders argue that the tax credit will drain money from public schools, but in fact it doesn’t touch state budgets. It only adds money to the overall education system. If anything, per-pupil public education spending may increase, because states are often slow to reduce school budgets, even when head count falls.

In addition, the credit will likely increase the money that flows to local districts, which can establish scholarship funds to pay for extra tutoring, books, supplies, transportation, technology or other needs. Public schools, not just private ones, will benefit financially.

The larger problem with the unions’ argument is what it elides: Too many public schools are failing to deliver a high-quality education, and the biggest obstacle isn’t funding. It’s a lack of accountability, which the unions routinely block.

The solution to failing public schools shouldn’t be preventing students from attending high-quality alternatives. It should be overriding the unions’ objections to basic standards, including ending social promotion, intervening in poorly performing schools, rewarding great teachers, and making it possible to remove teachers and principals who aren’t making the grade. Until more elected officials embrace such reforms, demand for private, charter and other alternative schools will continue to rise.

Some Democratic governors say they’re awaiting a rulemaking from the Treasury Department that will clarify governance of the program, including whether states will be permitted to have any role in determining eligibility standards for scholarship granting organizations and the academic services they support. For instance, do summer and after-school programs qualify? And will states have the authority to exclude groups that fail to follow the rules?

To be sure, governors should press for safeguards to be included in the rulemaking. Without proper oversight, waste, fraud and abuse are highly likely. Yet they shouldn’t use those concerns as a cover for union kowtowing.

It’s also fair to question whether this new tax expenditure is affordable. The estimated cost to the federal government is about $2.5 billion annually in lost revenue. At a time of ballooning deficits, that shouldn’t be dismissed. But governors who don’t opt into the program won’t be doing much to reduce its costs, since their residents can still receive the credit by donating to an out-of-state scholarship organization. All they’d be doing is depriving parents in their state of financial aid — a political gift to Republicans who are working to reclaim the mantle of “affordability.”

Colorado’s Jared Polis is one of the few Democratic governors who have announced their states’ intention to opt into the program, calling the decision a “no-brainer.” He’s right — both on the merits and the politics. More of his colleagues should join him.

—Editors: Frank Barry (fbarry5@bloomberg.net), Timothy Lavin (tlavin1@bloomberg.net).

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