It’s no secret that the District of Columbia faces a challenging fiscal climate, one that poses threats to the District’s ability to continue to sustain key investments and programs residents rely on. In this context, you wouldn’t expect District leaders to leave education funds on the table—particularly when those funds would come out of federal coffers at no additional cost to D.C. taxpayers. So why hasn’t D.C. opted into a new Federal Scholarship Tax Credit (FSTC) program that could bring millions in new funding to support students in D.C.’s public, charter, and private schools?
Here’s some context: Among the many tax changes and provisions of HR 1, passed by Congress in 2025, the legislation authorized a new credit against federal taxes for taxpayers who donate to a “Scholarship Granting Organization” or SGO. SGOs receive donations from individuals and use donated funds to award scholarships to students to support educational expenses.
HR 1 stipulates that, in order for students in a state to use scholarships funded by FSTC-eligible donations, their state’s Governor must “opt in” to the program (taxpayers in a state that doesn’t opt in can still take the credit by donating to a fund in another state, but their donations will benefit children in the other state). So far, 31 states with both Democratic and Republican Governors have done so. As of now, Mayor Bowser, who holds the responsibilities of a Governor for DC, has not. In her remaining time in office, she should. And her successor-elect, Janeese Lewis George, should call for or avidly support such a decision, because it would help advance some of her stated goals and make it easier to solve some challenges her administration will need to address.
What are FSTCs and how do they work?
A quick primer on how these tax credits work: A taxpayer makes a donation to a state-recognized SGO. That taxpayer then receives a dollar-for-dollar, nonrefundable credit against federal taxes of up to $1,700 for each dollar they donate ($3,400 for married couples filing jointly). This means that taxpayers can essentially choose to redirect a dollar of their money away from federal taxes to scholarships for kids at no cost to themselves. (This may be particularly appealing to taxpayers who disagree with some of the current administration’s spending priorities.)
SGOs then use the funds they receive from donations to award scholarships to eligible students. Under the statute and regulations, an eligible student includes a child who is eligible to enroll in public elementary or secondary school and has a household income no higher than 300% of the area median income (just under $500,000 for a family of four in DC, which captures about 86% of DC students). While students receiving scholarships must be eligible to enroll in public school, they can be enrolled in a public, private, charter, or home school. Scholarships can cover costs for private school tuition but can also cover a wide variety of other eligible educational expenses, including tutoring, other supplemental education programs, specialized services for children with disabilities, books, supplies, and education technology and equipment (with some limitations) for students in private, traditional public, or charter schools.
Tax Credit Scholarships and SGOs were originally created to support private school choice, and 18 states currently have some form of state education scholarship tax credits and SGOs that award scholarships for children to attend private schools. For this reason, some local and national organizations that oppose private school vouchers also oppose the FSTC program. But, crucially, the statutory language of HR 1, and proposed regulations released by the U.S. Treasury Department last month, do not limit FSTCs to supporting private school scholarships.
Equally important, a taxpayer taking the FSTC cannot direct their donation to a specific student, and eligible SGOs may not limit their scholarships only to children at a single school. This prevents wealthy taxpayers, or schools, from using the FSTC primarily to benefit themselves, their own or closely related children, or their children’s school. But beyond these parameters, there is considerable flexibility to design SGOs for a variety of purposes. HR 1 and Treasury regulations do not allow states to impose restrictions on eligible SGOs beyond federal requirements. But there’s nothing to prevent an SGO from choosing to focus on a specific type of schools (e.g. charter schools or schools within a particular school district) or students (e.g. English language learners, low-income children, or children with disabilities).
Prominent national advocates and education finance experts have argued that, because of how the FSTC program is designed, it presents a potentially promising new source of funding for public schools, and have urged states to opt into the program to allow their schools to tap this new source of funds. I’m not as sold on some of these arguments as they are, but I do think that, done well, the FSTC could provide a tool to help support DC students and solve some of the challenges DC now faces.
What could FSTCs mean for DC schools and students?
If every eligible DC taxpayer donated to an SGO and took the maximum credit, that would generate more than $427 million. That level of uptake is highly unlikely, though: In the initial years of new tax benefits, take-up rates are closer to 2-3%. Even that relatively low take-up, though, would generate $8-12 million annually for DC students, and concerted outreach from SGOs, participating schools, and tax providers could result in higher amounts.
A key factor in considering the likely impact of FSTCs is the strength and focus of the SGOs that are likely to operate in a state. Standing up an SGO takes time and work, particularly since these organizations need to be pretty narrowly focused on granting scholarships. Private school scholarship granting organizations, which already exist to administer purely private or state tax credit scholarships in some states, have an early mover advantage here.
That’s a potential concern in DC, because the District already has another, federally funded, private school scholarship program: The DC Opportunity Scholarship Program, created by Congress in 2004 and authorized under the Scholarships for Opportunity and Results Act (SOAR), currently provides $17.5 million in funding for private school scholarships for low-income (ie, less than 185 percent of poverty) D.C. resident K-12 students . The program is administered through an intermediary, Serving Our Children, which supported 1,409 students to attend private schools in 2024-25 (the most recent year for which Serving Our Children has released data). If D.C. opted into the program, Serving Our Children could be well-positioned to administer additional FSTC scholarships. Historically, demand for OSP has fallen short of available vouchers (in part because the program may only award scholarships to private schools in D.C. and in part because families who receive a scholarship must apply and be admitted separately to the private school of their choice). In recent years, however, the number of applicants for the program has exceeded those it could fund, and the increased income cut-off for the FSTC scholarships could expand the pool of families eligible.
However, private scholarships wouldn’t need to be the only game in town: Multiple existing SGOs and national organizations have launched or are working to launch SGOs designed to award scholarships to public and charter school students across multiple states. For example, the Future School Fund, founded by former DC State Superintendent of Education Deborah Gist, partners with states, public schools (including charter schools), donors, and families to provide scholarships for public school students, working with school districts and charter management organizations to identify educational opportunities that best meet the needs of their students, particularly tutoring and before/after school programs, and to connect eligible students with scholarships for those opportunities. If D.C. opted into the FSTC program it could also choose to partner with an SGO (or SGOs) with a focus on public and charter schools to support outreach, engagement, and administration of scholarships to DC donors, schools and families. Because the Mayor has control over DCPS, she could also work with DCPS leadership to ensure they are positioned to work with partner SGOs so that the program benefits DCPS schools and students.
Done thoughtfully, this approach could address a number of needs in D.C.:
High-impact tutoring: From 2022-2024, D.C.’s Office of the State Superintendent of Education used federal COVID relief funds to stand up an implement a district-wide high-impact tutoring (HIT) program to accelerate learning for students during the pandemic recovery. Although many states and districts invested in tutoring post-COVID, DC’s approach has been uniquely well designed and effective; an evaluation by Stanford University found that students who received the tutoring improved reading and math scores and attendance. Despite this, public funding for the program has been curtailed dramatically since COVID relief funds expired. Private philanthropy, organized through the CitySchools Collaborative, has been able to fill the gap. But sustaining HIT investments over the long term and ensuring they reach all students who need them will require additional funding sources. Opting into FSTC and partnering with a public school-focused SGO would enable D.C. to expand access to effective tutoring for more students. Even the low end estimate of likely funds generated by the FSTC for D.C. would come close to what OSSE spent on the HIT program in its first three years.
Before, after, and summer care: Beyond high-impact tutoring, finding and paying for out of school time care remains a major challenge for many D.C. families. D.C. provides funding for before, after, and summer care through a dizzying array of funding streams, and DCPS and charter schools also cover parts of the costs of some programs. But supply is still not adequate to meet all families’ needs, and some families can’t afford the costs, particularly now that D.C.’s child care subsidy program, an important source of before/after care funding for some families, is under a waitlist. FSTC funds can support scholarships for before, after, and summer care for students enrolled in DCPS and charter schools, helping to close this gap. As I’ve argued elsewhere, if funds were sufficient, DC could also partner with an SGO to direct subsidy-eligible families to access FSTC-funded scholarships for before- and after-care, allowing the District to prioritize child care funds for infants and toddlers.
Mixed Delivery PreK: Children’s eligibility to receive FSTCs is conditioned on their being eligible to enroll in a public elementary and secondary school. In D.C., 3- and 4-year-olds are eligible to enroll in public school, which means that, as I read the statute and recent draft regulations, those from families with incomes below 300% of area median income should also be eligible for scholarships funded with FSTC funds. This could provide a useful tool to address some gaps in D.C.’s otherwise strong preK program and enable more community-based child care providers to offer publicly funded preK. Most states provide preK through a “mixed delivery system” that includes both public schools and child care programs that meet certain standards. That’s also the case in D.C., where our mixed delivery includes charter schools as a robust third sector. However, the vast majority of preK slots are in DCPS and public charter schools, with less than 1,000 out of about 14,000 preK slots in community-based programs. Community-based child care programs that meet preK requirements can receive funding through the PKEEP program, administered by OSSE. But that program has faced cuts in recent years, in response to District fiscal pressures, and as a result OSSE has not funded new community-based providers to offer public preK slots. A consortium of private child care providers could band together to create a new SGO that would offer scholarships for preK students enrolled in child care centers that meet high standards of quality. This could provide more families the opportunity to keep their child in the same early childhood setting until kindergarten, stabilize the financial operations of child care providers who have struggled financially without preschool students, and address gaps in preK supply in some parts of the city, such as Capitol Hill and Ward 3. It would also provide a potentially more stable source of funding for current PKEEP grantees than local funding, which has been subject to annual budget battles for the past several years.
These are some of the benefits D.C. could realize from opting into the FSTC program, and there are likely others. Given that DC already has a federally funded private school choice program, and there are a variety of other provisions in place in federal law to prevent wealthy families from using FSTCs to self-deal, the potential downsides of participation are low. Moreover, if D.C. decides not to opt in, that doesn’t mean local taxpayers won’t use the credit—it just means their donations will flow to children in other states.
Earlier this year, when I asked officials affiliated with the Bowser administration what the District was planning to do regarding opting into the FSTC, I was told that they were waiting to see the regulations. Well, now the regulations are out, and since they make clear that public and charter school students can still benefit from FSTC’s there’s a lot of good reason to opt in. At a time when D.C. faces fiscal pressures that limit our ability to invest in the educational supports our students need, we just can’t afford to leave this money on the table.