Gov. Gavin Newsom must decide whether California will join 31 states in a new multibillion-dollar school choice program, funded by private donations, that President Donald Trump included in his One Big Beautiful Bill. The program, also known as the Education Freedom Tax Credit, promises to greatly increase full or partial scholarships to private and religious schools, while potentially paying for auxiliary services in public schools, like tutoring.
The law’s broad language has made it contentious, with contrasting scenarios for how the Federal Scholarship Tax Credit program will play out. Under the program, an individual taxpayer can donate up to $1,700 annually to a qualifying grant-making organization, up to $3,400 for couples, and then receive a federal tax credit that lowers their taxes by the full amount.
How the Program Works
Nonprofit organizations designated as scholarship-granting entities pool these contributions and distribute funds either to families for private school tuition or to public school districts.
Although it was not their main intent, Republicans included public schools in the law. One nonpartisan analyst, Marguerite Roza, director of the Edunomics Lab at Georgetown University, predicts that public schools will eventually become the biggest beneficiary, once they figure out how to tap into it. “Given that anyone and everyone can donate without it costing them, it’s like a cost-free donation,” she said.
Critics, however, view the initiative as a strategy to weaken public education systems, which are already seeing enrollment declines in states traditionally opposed to voucher programs. One opponent described it as ‘a Trojan horse meant to introduce privatization’s instability into Democratic-leaning areas.’
Others say the program will primarily subsidize existing private school parents, not help low-income families trapped in their neighborhood schools. The law’s free-market focus, its lack of oversight, and failure to require civil rights protections will reinforce inequities and lead to abuse, according to Jon Valant, the director of Brown Center on Education Policy at Brookings.
Concerns and Criticisms
Opponents also blame Congress for restricting governors’ flexibility. The law prevents them from imposing additional oversight or favoring certain scholarship organizations over others, such as those supporting public schools. Once a governor opts in and submits a list of approved groups, their role in the process ends.
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SGOs must check students’ income eligibility and audit the money, but they’re not required to monitor programs or keep school achievement records. Thomas Toch, founding director of FutureEd, an independent education policy institute at Georgetown University, said Congress should have learned from the No Child Left Behind Act of 2001, which provided billions of dollars for parents in low-performing schools to obtain tutoring from contractors who were often unvetted, inexperienced, and unmonitored.
The American Federation for Children, a leading advocate for the tax credit, estimates that 51.7 million children—covering 90% of all public and private school students—could qualify for assistance.
Lance Christensen, a policy expert at the California Policy Center who has worked on school choice proposals, dismisses the Brookings analysis as overly pessimistic. He notes that even if just 100,000 Californians, less than 1% of the state’s 17 million taxpayers, contributed the maximum $1,700, it would generate $170 million for scholarships.
Two Californians with differing motivations are urging Governor Newsom to participate. Rachel Elginsmith, CEO of the BASIC Fund, the state’s largest secular scholarship organization, has distributed over $200 million in partial aid to 30,000 students since 1998, primarily benefiting low-income families attending private schools.
Evan Marwell, a San Francisco-based entrepreneur, previously founded EducationSuperHighway to improve school internet access and co-created Ignite Reading, an early-grade tutoring program. Now, he plans to transform EducationSuperHighway into a national scholarship organization, allowing taxpayers to direct credits toward first-grade reading support.
Federal projections indicate that by 2030, over 11 million taxpayers could donate $26 billion to scholarships and educational grants. With the January 1 opt-in deadline approaching, Newsom risks backlash regardless of his decision, as teachers’ unions and the National Education Association would condemn him for either supporting or rejecting the program.
New York Gov. Kathy Hochul said in her October 9 announcement, “I’m not going to leave money on the table when it could help our kids.” Newsom’s decision will have significant implications for the state’s education system, and the clock is ticking, with the deadline for states to submit their participation in the FSTC program looming.
