In May, New York Gov. Kathy Hochul announced her intent for the Empire State to opt into the Education Freedom Tax Credit (EFTC) program, provided that there were no “poison pills” in the eventual rules.
Those proposed rules were published earlier this month and revealed no poison pills, leading Gov. Hochul to officially opt the state into the program.
The program allows donations to approved scholarship granting organizations (SGOs) to count toward a new federal tax credit. All individual taxpayers, no matter what state they reside in, can receive a dollar-for-dollar federal tax credit of up to $1,700 per year if they donate to SGOs operating in participating states. A couple can claim up to $3,400 if each spouse made their own qualified gifts of up to $1,700. The program starts on January 1, 2027.
While individual federal taxpayers from all states can claim the tax credit through eligible cash contributions to any eligible SGO, only students in some states will get the money.
Students in each state can receive the scholarship money donated through the program from SGOs identified as eligible to operate in the state. State leaders (either the governor or another individual or agency designated by state law) can “opt in” the state by providing a yearly list of eligible SGOs to the IRS.
As the newly released Treasury rules clarify, states cannot add SGO requirements that are more stringent than federal guidelines. That means that participating states can’t bar from participation SGOs that disburse scholarships to qualifying students with particular school expenses (like private schools) or particular student types. While the vast majority of eligible students are public school students, the inclusion of private schools has sparked a bitter political fight in some states.
Regardless, the decision was easy for Gov. Hochul. She has said, “I’m not going to leave money on the table when it could help our kids.”
While the decision was easy, Gov. Hochul’s political pathway was not. The heavy teacher’s union presence in New York fought the program tooth and nail, running ads and organizing rallies. The Fordham Institutes’s 2026 union strength ranking puts the state at #10, with high union political involvement. Gov. Hochul’s choice to stand firm for students against union interests demonstrates her desire to send more money to students at all types of schools, instead of rejecting student scholarships to make a political point.
Many other states have come to the same conclusion. As Danyela Souza Egorov has pointed out, New York is the 31st state to opt in and Hochul the second Democratic governor to do so, behind Gov. Jared Polis of Colorado. Given the drumbeat of EFTC support kept up by organizations like Democrats for Education Reform, it’s possible that a blue wave of opt-ins is nigh.
Minnesota needs to pay attention. The North Star state is one of just three states (Minnesota, Wisconsin, and Oregon) that has rejected the EFTC program. Gov. Tim Walz said in March that an opt-in is “never going to happen” and proposed an end to longstanding nonpublic student aid in exchange for an opt-in, which was an obvious nonstarter.
Union opposition to the plan plays a heavy role in Minnesota. But if New York (#10 nationally in union strength) could say yes to student scholarships, then so could Minnesota (at #11).
Minnesota taxpayers will be able to give $1,700 apiece to scholarship granting organizations in Iowa, North Dakota, or South Dakota very soon. There are essentially no reasons for them not to do so. As my colleague Catrin Wigfall has written,
According to a new dashboard published by the America First Policy Institute, even modest participation by Minnesota taxpayers could send hundreds of millions of dollars out of state over the next few years. If just 10 percent of Minnesota single filers earning $75,000 or more donate the maximum creditable amount ($1,700) from 2027-2029, over $463 million could flow out of Minnesota instead of supporting students here. If participation ticks up slightly, say 12 percent in 2028 and 14 percent in 2029, now we are looking at roughly $500 million over three years.
Will the next governor, whoever that may be, continue to leave millions of dollars for Minnesota students on the table? Let’s hope not. Gubernatorial candidate Lisa Demuth has indicated her readiness to opt into the program, while candidate Amy Klobuchar has withheld an answer. The eventual governor can opt the state in, and, alternatively, legislators can once again put forward a bill that would do the same. Minnesota has likely missed the January 1 deadline to opt into the program for this year, but the annual opportunity will come again.
November’s election will make the path forward more clear. Hopefully, it’ll bring strong opportunities for students.