Pennsylvania still on the fence about federal school choice tax credits

The Federal Scholarship Tax Credit program, or FSTC, also known as the Education Freedom Tax Credit, was created by Congress in 2025 through the Working Families Tax Cuts Act as part of the One Big Beautiful Bill. 

It establishes a new federal tax credit of up to $1,700 for contributions made by an individual to Scholarship Granting Organizations, or SGOs – nonprofits that accept qualified donations and use the funds to provide scholarships for education-related services at private or public schools. 

Should Pennsylvania opt out, residents could still claim the credit by contributing to an eligible SGO in a participating state, but those contributions would fund scholarships in that state rather than in Pennsylvania. 

Supporters argue that participation will allow Pennsylvania to tap into millions of dollars of private funding and point to polls indicating broad public approval. 

Conversely, groups like AFT Pennsylvania have historically opposed tuition tax credits and voucher programs, arguing that such measures siphon resources and attention away from traditional public schools. 

The Commonwealth Foundation has long advocated for changes to Pennsylvania’s education funding system and greater school choice. 

Rachel Langan, the organization’s senior policy analyst, told The Center Square that the federal scholarship tax credit opt in is a “no brainer” for Pennsylvania. 

“It’s truly a win-win: students access more educational opportunities, and at no cost to the state or school districts,” she said.

Langan said the program is truly life-changing, covering everything from tutoring and textbooks to special needs assistance, after-school programs and summer programs. She estimated that approximately 1.8 million Pennsylvania students – attending both public and private schools – are eligible for scholarships to afford things like supplemental education programs.

She said Pennsylvania already has much of the necessary infrastructure in place through its existing successful programs, so it would require minimal lift to get these new federal dollars flowing throughout the state.

“Families want more options. We have tens of thousands of kids on waiting lists for better educational options that would benefit if Gov. Shapiro opts in. If he doesn’t, donor dollars will only go to the 30+ states that are participating.  The choice could not be simpler: Pennsylvania must opt in,” Langan said. 

A spokesperson for the Shapiro administration said the governor is “awaiting federal guidance" to address key questions about how this program would work, including which students will be eligible, how this federal initiative will interact with existing programs, and more.”

The U.S. Department of the Treasury and the Internal Revenue Service expect to issue proposed regulations by the end of September. The program becomes available January 1, 2027, when participating states are required to have submitted their lists of qualifying SGOs. 

Shapiro’s delay has prompted a bipartisan group of state lawmakers to propose legislation that would require the state’s participation. 

Sen. Anthony Williams, D-Philadelphia, has joined five of his Republican colleagues in the effort. He told The Center Square there’s no reason not to support this program, given the fact that it doesn’t take any money away from public education or impose any cost to taxpayers. 

Williams said the FSTC is another option that could help households that may not otherwise have the means to secure additional educational support for their children. “While it’s not a solution, it’s certainly part of a menu of options and resources that can help a family that may be struggling to support their child’s educational experience.”

Williams sees no downside to participating. “It doesn’t intrude upon our existing tax credit program…and most importantly, it doesn’t raise taxes, doesn’t cost any money, so I would hope the governor would see the benefit for so many households that need this kind of support,” he said. 

Thirty-one states have either opted in or announced plans to participate: 23 Republican-trifecta states, three Democratic-trifecta states, and five with divided governments.

Pennsylvania has a divided government, with a Democratic governor and Democratic-controlled House and a Republican-controlled Senate. 

Six states have either said they do not plan to participate or have seen legislative efforts to require participation fail: Hawaii, New Mexico, and Oregon, all Democratic-trifecta states, and Arizona, Wisconsin, and Minnesota, which have divided governments. 

New York Gov. Kathy Hochul said she intends to participate but is also waiting for additional federal regulations to be released.

AFT Pennsylvania did not respond to our request for comment in time for publication.