The Educational Choice for Children Act (ECCA) represents a major shift in how federal policy can expand educational opportunity without increasing federal spending.
Passed just this summer, the ECCA has emerged as one of the most significant federal education-policy provisions in decades. Unlike traditional programs that rely on direct federal spending, this tax-credit scholarship program incentivizes giving through the tax code to expand educational opportunity. It functions entirely through private donations — not federal appropriations. The government never writes a check for these scholarships, as the mechanism driving the program is a federal tax credit, not a federal expenditure.
The structure of the ECCA is straightforward. Individuals and businesses donate to federally certified Scholarship Granting Organizations (SGOs) and receive a 100 percent dollar-for-dollar federal tax credit up to $1,700. Donors receive a federal tax credit for their contributions, but the money itself is private. These SGOs, in turn, award scholarships to eligible K-12 students in public schools, private schools, and home education for use toward tutoring, special education services, educational software, tuition, and other qualified expenses established under the existing federal Coverdell Education Savings Account program.
In practical terms, the ECCA simply encourages private giving to student scholarships by offering a tax incentive.
States must “opt in”
Even though the ECCA is now federal law, states still play a gatekeeping role. Students in each state can only participate if their governor (or another state-designated authority) formally opts in. And the consequences of that choice are far from neutral.
If a governor declines to participate, local dollars will still leave the state through taxpayer donations to SGOs in other states, benefitting children elsewhere while that state’s local students lose out on those dollars for their education.
This gives governors significant influence.
North Carolina (Democratic governor), South Dakota (Republican governor), Nebraska (Republican governor), and Tennessee (Republican governor) have stated they intend to opt in to the program when it goes into effect on Jan. 1, 2027.
Why it matters for families
For thousands of families, the ECCA leverages private generosity and civic engagement to open the door to schools or services that students with geographic or income limitations may not otherwise be able to access. The scholarships are designed to help students from low- and middle-income families, children with disabilities, and students who need enrichment or supplemental learning opportunities, to name a few. But the availability of this help now depends entirely on whether state leaders choose to participate.
In states that opt in, SGOs can form partnerships with schools and service providers to deliver new opportunities at no cost to the state budget. In states that opt out, families with school-age children lose out — even if their neighbors, businesses, and community members continue donating to the program anyway.
The policy debate
The debate around the opt-in requirement reflects deeper philosophical divides. Some governors argue that the program could indirectly affect public school funding. Others, including many from across the political spectrum, argue that refusing to opt in hurts local students without protecting public schools, since no state or federal funds would be diverted.
Concerns about tax-revenue loss also get tossed into the debate, and while technically accurate, represent an incomplete fiscal critique of the ECCA. A dollar of foregone tax revenue is not always equivalent to a dollar of federal spending because tax credits aren’t the same as direct spending. A dollar flowing through an SGO is not the same as a dollar flowing through the federal bureaucracy. Scholarship organizations typically have lean administrative structures, and the funds they distribute go directly to families rather than intermediaries.
There is also a long-term economic angle to consider. If these scholarships help improve educational outcomes, the economic returns as a result may outweigh the short-term tax cost. Long-term fiscal returns may include higher lifetime earnings for students, increased tax contributions, lower social-service spending (incarceration, unemployment, welfare), and greater workforce productivity. In addition, consider other large tax expenditures — the mortgage interest deduction, child tax credit, employer health exclusion — that are generally accepted despite huge revenue losses.
Regardless of the politics, the funding reality remains clear: the ECCA is a federal educational initiative built entirely on private generosity. It does not draw money from state coffers, it does not draw money from federal education programs, and it does not force states to contribute anything. Opting in simply allows students within the state to receive the scholarships that private donors are already funding.
The ECCA is built around increasing flexibility for parents and expanding educational pathways without imposing new mandates on states or schools. Whether one views this as an innovative solution or not, the funding of the provision is clear: It is a federal tax-credit scholarship that runs without federal cash.
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Sign American Experiment’s petition urging Gov. Tim Walz to opt Minnesota in to this new education tax-credit program.
