Last week on Tax Day, 30 Democratic Senators, including Senators Schumer and Gillibrand from New York, introduced the Keep Public Funds in Public Schools Act to repeal the Federal Scholarship Tax program approved as part of the Big Beautiful Bill. A more appropriate name for this bill would be “Keep Public Funds out of Parents’ Hands” because the goal of killing the federal tax credit is to keep our tax dollars under the control of unionized district schools, not parents.
Beginning next year, the Federal Scholarship Tax program allows taxpayers to deduct $1,700 from their federal taxes and donate it to support low-income kids through scholarships, tutoring, or other educational expenses. It not only benefits students who attend tuition dependent private schools but also traditional and charter public school students who cannot afford various, increasingly critical expenses like after-school programs, books, and extra instruction.
New York’s low-income families desperately need this help. New York Times journalist Troy Closson, in a recent article titled, “Rising Costs and Competition at Top N.Y. Schools Have Parents on Edge”, wrote that “more than 125 [public school] parent associations reported bringing in more than $100,000 last year,” in family and other contributions, including one Upper East Side public school that “recommends families donate $1,700 per enrolled child.” That is on top of the more than $42,000 taxpayers already pay per pupil to fund New York City public schools each year.
The same piece also prominently featured Cristo Rey Brooklyn HS, a Catholic secondary school in Brooklyn that serves families of all faiths with limited financial resources. On average, families only pay “about $1,700 a year” per child in tuition, even though the school receives virtually no public funding.
The Times observes that, “the risks for the future are clear. The crushing costs of living are often the top factor when parents choose whether to remain in New York City. But access to a quality education is often at the top of their minds, too, surveys show.”
As independent schools like Cristo Rey serving lower and middle-income families dwindle in number and size due to a lack of financial resources, Mayor Mamdani imposes a freeze on new charter schools, and public school students’ academic results remain well below proficiency. At the same time, expenses soar. What can one do other than vote with one’s feet? Are affordability and academic excellence really mutually exclusive for most New York students and families, especially those lacking resources or flexibility to relocate?
Not necessarily! According to Ray Domanico, senior fellow at the Manhattan Institute, “the [Federal Scholarship Tax] program will divert money from federal coffers through Scholarship Granting Organizations (SGO) to needy families, who can use the scholarships to pay for tuition in private schools of all types, or to cover educational services like tutoring and remote-learning programs.” It requires only Governor Hochul’s approval to take effect in New York beginning next year.
Thanks to the program’s design, it nullifies two common, though questionable, objections to earmarking public resources for private alternatives. First, traditional and charter public school students are eligible to participate to help defray costs for services like those mentioned above. Second, the program imposes no costs on New York. It does not change or reduce per-pupil funding for public schools. In fact, it could even increase it.
The downside is that if Governor Hochul does not opt in, it could cost the state millions. If New York does not participate, residents can still contribute to an SGO in another state and earn the credit, with those funds forever lost to New York students and schools.
Whether this program is a true game changer or merely a game starter is uncertain and ultimately dependent upon a variety of factors. But Domanico estimates that even if only 20% of New York State tax filers with an annual income over $200,000 donated to the program, the credits would total nearly $500 million annually. With this level of incremental resources possibly available, is it any wonder Colorado Democratic Governor Jared Polis said months ago it was a no-brainer for his state to take advantage of the program, describing it as “a real boom of investment in kids… It supports donors to give more money to our schools. I mean, I would be crazy not to.”
The real wonder is why are NY’s political leaders working against the interests of economically disadvantaged children in New York. Why has Governor Hochul yet to announce her support? Why are New York’s federal senators together with more than two dozen of their Democratic colleagues advocating repeal of this program? Are they afraid low income and working parents just might make a different, and better, decision on behalf of their children than politicians, bureaucrats and union leaders?
William Henson is the president emeritus of Cristo Rey Brooklyn High School and a former senior investment banker. Danyela Souza Egorov is a Fellow at the Manhattan Institute.