The Pennsylvania House of Representatives has voted to overhaul the state's school-choice tax credit programs.
Democrats say the changes would ensure that taxpayer funds diverted to private and parochial school scholarships primarily benefit students from economically disadvantaged backgrounds. The bill requires scholarship-granting organizations to disclose more information to the state about how their funds are distributed.
Rep. Nikki Rivera (D-Lancaster), who sponsored the legislation passed this week by the House, said that would allow lawmakers to better measure the impact of the state's Educational Improvement Tax Credit (EITC) program.
"A $680 million annual scholarship tax program should be transparent and include detailed reporting," Rivera said. "This bill would ensure that everyone can see how well EITC programs are working, whom they are helping, and whether students in private and parochial schools are receiving tuition relief."
EITC incentivizes businesses to donate to school scholarships and education nonprofits by offering a near dollar-for-dollar tax credit. It's a model largely mirrored by President Donald Trump's new federal education tax credit, which will offer similar tax relief to individuals donating to eligible school scholarship and enrichment organizations beginning in January 2027.
States must opt into the federal program in order to pass these additional diverted dollars to local schools and scholarship organizations. As of this month, 27 states have announced their intention to participate.
During a virtual roundtable with private school leaders and advocates last week, U.S. Department of Education Secretary Linda McMahon said the federal program would "supercharge what already works" in Pennsylvania.
"This federal tax credit builds directly on Pennsylvania's state-level tax credit programs, which for years have opened doors to education freedom for thousands of families in Pennsylvania," the secretary said.
But critics of both programs warn they lack the accountability and transparency measures needed to ensure scholarship dollars are going to the students who need them most.
A 2022 report by Pennsylvania's nonpartisan Independent Fiscal Office found that the legislation authorizing the state's EITC expressly limits what data officials can collect from scholarship organizations.
"Key data necessary to thoroughly evaluate the program," IFO officials wrote, "are not available."
Who qualifies for Pa. scholarships?
IFO noted that, as of 2022, the income limits set on families qualifying for EITC-funded scholarships were higher in Pennsylvania than in other states offering similar private school vouchers.
To qualify for the Pennsylvania program, a family's household income must not earn more than 500% of the federal poverty level. For a family of four, that's no more than $165,000 in 2026.
A recent Associated Press analysis of education-choice programs in such states as Texas, Alabama and Arizona found students who are already enrolled in a private or home school are most likely to take advantage of these funds.
In Arizona, which has long offered taxpayer-funded scholarships for students attending private school or studying at home, voucher participation in high-income zip codes is nearly three times higher than in low-income zip codes.
While scholarship recipient data, such as household income, aren't publicly available for Pennsylvania's school-choice programs, the advocacy and research organization EdChoice reports the share of students utilizing options such as EITC statewide has more than doubled during the past decade.
But at less than 5% of students statewide, it remains a relatively small sector in Pennsylvania. The share of students attending traditional public schools, meanwhile, has fallen from 77.5% in the 2015-2016 school year to 75.1% in 2025-2026.
Drawing upon data for the 2019-2020 school year, IFO also pointed out that the average EITC scholarship was just $2,120, meaning that money to cover the remaining tuition balance had to be found elsewhere.
Leaders with Crossroads Foundation, a Pittsburgh-based scholarship fund partnering with six local Catholic high schools, say additional financial aid for students often comes from the schools themselves.
Esther Mellinger Stief, Crossroads' executive director, said her organization would be able to leverage even more support for students if Pennsylvania opted into the forthcoming federal tax credit program.
Crossroads is one of 28 state-approved scholarship-granting organizations in Allegheny County, and one of nearly 200 statewide. Most are affiliated with religious or independent private schools.
"The reason that EITC is important and that this new federal tax credit is such a great opportunity is that we can't meet the demand for students who want to be in our program [now]," Mellinger Stief said, adding that Crossroads funds less than 30% of the scholarship applications it receives.
"And that's simply because we don't have the resources to support them all," she said.
Crossroads commits four years of funding to the roughly 45 rising 9th-graders accepted into its program each year. In addition to tuition assistance, the organization provides summer enrichment and tutoring opportunities to help prepare students for their new schools.
Mellinger Stief said her program prioritizes families earning less than 300% of the federal poverty level. Most students, she said, qualify for free and reduced-priced school meals.
"EITC is benefiting, through Crossroads, the families and the students who are most vulnerable," she said. "They are students who would, for whatever reason, fall through the cracks were it not for our program and were it not for the financial support that we provide."
But Crossroads also requires that scholarship applicants score at or near grade level on their standardized tests, meaning students who are behind may not qualify for assistance. Roughly 40% of students accepted into the program already attend private Catholic elementary and middle schools, often with EITC support.
The other 60% attend a mix of traditional public and charter schools, Mellinger Stief said.
Public school benefits?
During a debate on the House floor this week, Republican lawmakers overwhelmingly opposed Democrats' proposal to reform the EITC program. Just three Republicans — Representatives Thomas Mehaffie, Joe Hogan and Kathleen Tomlinson — voted for the bill, while Democrats were unanimous in their support.
Much of the criticism was tied to concerns that the expanded accountability measures would put an uneven burden on private schools, and that efforts to streamline funding within EITC would result in some kids missing out.
Following the vote, leaders at the Commonwealth Foundation, a conservative lobbying firm based in Harrisburg, called on lawmakers in the Senate to reject the proposal. They urged Gov. Josh Shapiro to opt into the federal tax credit program in the same breath.
" ...[F]amilies need more educational options," CEO Andrew Lewis said in a statement. "To deliver them, however, Gov. Shapiro must get off the fence on educational opportunities like the federal scholarship opt-in."
The federal program will award individuals a dollar-for-dollar deduction off their federal taxes, up to $1,700, for donating to private school scholarships. U.S. Treasury Department officials say the scholarships could also be spent on "additive academic tutoring and special needs services" at traditional public and charter schools, too.
But some policymakers and public school advocates have voiced skepticism that public schools will be able to compete with private schools for donations.
"It is, I think, folly to believe that there are incredibly wealthy people who are going to choose to take their tax liability and direct it to public schools that educate students who are living in poverty," said Susan Spicka, executive director of the advocacy group Education Voters of Pennsylvania.
"The idea that this is going to create equity in Pennsylvania in our education system is an absolute lie," Spicka continued. "It is going to enrich those who already have, and it is going to leave those who have not enough with even less."
Governors in more than half of U.S. states — including neighboring New York, Ohio and West Virginia — have announced their intention to participate. Shapiro and other blue-state governors of New Jersey and Delaware say they have yet to decide.
Maryland Gov. Wes Moore told reporters at the Education Writers Association's annual conference in Baltimore this month that he's waiting to understand whether state leaders will have "jurisdictional authority" to restrict funding to public school districts or schools that promise to follow state antidiscrimination laws.
"If you give me flexibility to be able to think about those things, then I'm very interested," Moore said. "But if you just simply tell me that, if I take this money, that you're then going to decide what curriculum looks like and what books my kids can read, then no, that's not something I'm interested in."
Although officials with the U.S. Treasury Department say detailed regulations won't be ready before September, the department released preliminary guidance earlier this month. It specified that states may not impose more stringent requirements on scholarship-granting organizations than outlined under federal statute.
A Shapiro spokesperson told WESA that while the administration "appreciates the new information from the federal government" released this month, officials are "continuing to review" the new program before making any final calls.
States have until the end of the year to opt in.
The Associated Press contributed to this report.
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