What the Federal Voucher Program Means for Southern Schools

Date Published: April 3, 2026

By Nikkolette Hunter and Qubilah Huddleston

Across the South, states aren’t waiting on the sidelines when it comes to the new Federal Voucher Tax-Credit (FVTC) program. Eight of ten Southern governors (1) have opted in, and legislatures are already pushing to codify their state’s participation and define how the program will operate. This includes major decisions about how funds will flow and which schools and students can access them. These rapid actions are unfolding even as the federal guidelines are still taking shape, with the U.S. Department of Treasury yet to release regulations with key details. 

Despite common narratives about the FVTC expanding opportunity for students and potentially benefitting public schools, the program is likely to harm public schools and the students they serve. In the South, where per-student funding and average teacher salaries have consistently lagged the national averages, and many legislatures are expanding costly state voucher programs, the FVTC adds another mechanism that takes public resources away from public schools.

There is still time to shape how this plays out. Even in states that opt in to the program, state leaders have choices to make about implementation and guardrails. For resource equity advocates, this creates several meaningful windows for engagement. 

Understanding how the program works, the risks it poses, the key decisionmakers involved, and the timelines for action will be critical for mitigating harm and pushing for stronger protections for public education.

The One Big Beautiful Bill Act established the FVTC as an unprecedented, dollar-for-dollar tax credit that allows individual donors to be fully reimbursed for their donations to scholarship granting organizations (SGOs) up to $1,700 beginning January 1, 2027.

As the first federal program of its kind and with no cap on tax credits donors can claim, the FVTC could reduce federal revenue by tens of billions annually. Some estimates show that the FVTC could result in up to $51 billion lost in federal tax revenues every year, depending on how many people claim a credit. Figure 1 compares that cost to the largest federal K-12 funding streams supporting students from low-income backgrounds and students with disabilities. 

Figure 1. Total Spending on Federal Voucher Tax Credit Would Far Outpace Federal Investments for Underserved Students.

Sources: ITEP, EdWeek.

State-level voucher programs without participation or spending caps send a clear warning about ballooning voucher costs. This legislative season, budget battles have been unfolding across Southern states like Louisiana and Alabama, where policymakers are pushing voucher expansions their budgets cannot sustain. In Arizona, uncontrolled growth of their Empowerment Scholarship significantly contributed to a $1.4 billion deficit. To close the budget gap, legislators cut funding for essential infrastructure and education programs, including scholarships for low-income college students.

While the program is framed as “free money” it is far from it. 

For every dollar that donors claim in tax credits on their federal tax returns, that’s one less dollar in tax revenue that could be invested in public programs, including public schools.  While the law says that families can use funds on various public and private school education costs, it is more likely to function as a large-scale expansion of private school vouchers. 

To learn more about the mechanics and eligibility requirements of the FVTC program, check out this memo from the National Coalition for Public Schools.

The FVTC introduces several key risks for public school funding and education equity. 

• Evidence from state voucher programs shows that these policies disproportionately benefit higher-income families, families outside of rural communities, students already in private schools, and white students. The FVTC will not only fail to benefit underserved students, it will likely increase racial and socioeconomic segregation. For example, recent data on Alabama’s voucher program show that 70% of applicants are white, and almost 50% of applicants are currently enrolled in private school.  Students with additional needs, such as English learners, and students with disabilities, are often underrepresented in voucher programs and in private schools due to selective admission policies that allow private schools to pick and choose which students they admit.  As vouchers expand, many private schools raise tuition, further limiting access for students from low-income backgrounds.
• The FVTC could contribute to further public school enrollment declines (see Figure 2). Although vouchers tend to go towards students already in private schools, some students will leave public schools especially as the FVTC increases voucher availability  and more private schools open in response. When public school enrollment decreases, budget challenges follow as many schools–especially rural schools where declining enrollment trends are more harmful–will have to make do with less funding. 

• The FVTC will likely require minimal transparency for private schools, meaning limited accountability for academics, spending, and student protections. Few states have rigorous accountability and oversight mechanisms for voucher programs; the FVTC will likely amplify this problem. Additional federal regulations for recordkeeping, reporting, and student eligibility verification are expected this spring, but there are already signs that the regulations will be barebones and likely restrict how much discretion state lawmakers have in overseeing participating SGOs and holding them accountable.

To engage effectively, advocates need a clear picture of their state’s current voucher landscape and how their leaders are approaching the FVTC. Undoubtedly, the FVTC will expand private school vouchers–even in states where voters rejected them. Additionally, several states operating state-level tax credit programs already have accountability and transparency requirements in place, though they vary in quality. Advocates must understand their own ecosystem and learn from neighbors to protect students and public dollars while helping inform meaningful state oversight and accountability for SGOs. 

The table below highlights where Southern states currently stand on the FVTC, including existing voucher programs, opt-in decisions, and recent legislative activity.

For many education advocates, vouchers are a familiar topic. But now, with the introduction of the unprecedented and large-scale divergence of taxpayer dollars via FVTC, the next step may feel less clear. Below are a few practical actions for advocates.

Promote accurate information about the FVTC

There are several misconceptions about the FVTC ranging from the program benefits public schools to “free money” arguments. Advocates must counter misinformation with facts. Despite the unprecedented nature and delayed rulemaking, advocates are experts in their state context. Becoming well versed in the FVTC program, data, and state context is crucial to equip policymakers for student-centered decisionmaking. 

 Work with your state partners to engage in rulemaking

Even with Southern states opting into the FVTC program, the country is still awaiting key details from federal rulemaking. Each state will need to develop the processes to oversee the program. This is an opportunity for advocates to work with state leaders to shape the program and define eligible students, SGOs, and schools. States will have to submit a list of SGOs to the federal government before 2027. Advocates must engage before then to ensure their voice in shaping the program and protecting public schools is heard.

Advocate for guardrails to ensure accountability and transparency

While EdTrust and Southerners for Fair School Funding believe that fairer funding comes when public dollars fund public schools exclusively, there are also other important elements of a fair funding system. For instance, part of funding students appropriately in the wake of the FVTC means protecting rural students, whose districts suffer from high enrollment declines and tend to have few private schools, from being left out. Advocates should also start demanding SGO accountability and program transparency from state leaders now, before the Treasury releases regulations. Communities deserve to know how their tax dollars are being spent. That starts with the selection, oversight, and auditing of the SGOs who manage the funds and continues through public reporting.

Consider mitigating threats to the entire public funding ecosystem

The FVTC is one additional component in a state’s funding system. While the FVTC alone will harm public funding for public schools, advocates can help by continuing to weaken other threats to fair funding. Universal voucher programs, unstable revenue, inequitable funding formulas, and more impact public school funding at the state level. Advocates should continue to monitor and act against these threats in addition to FVTC to help mitigate harm to the whole system. Check out the State Ratings Rubric to see how effectively your state funds public schools.

While we await regulations from Treasury, there is still a lot more we can do to be informed about the program and what it may mean for students and families.  Check out these additional resources below: 

•  EdTrust | What The Federal Voucher Program Means for Students in Your State (July 2025)
• EdTrust |  EdTrust Comment Urges State Discretion, Strong Transparency and Accountability for New Federal School Voucher Program (December 2025)
• Public Funds Public Schools | Bill Tracker & Advocacy Resources
• National Center for Public Education |  About the Federal Tax Credit Voucher Program 
• EdTrust-Tennessee |  What Tennessee Advocates Should Know About the Federal Tax-Credit Voucher (March 2026)
• EdChoice |  Federal Tax Credits for Scholarships (FTCS) Income Levels (FY25) – Infogram 

Questions? Reach out to fundsouthernschools@edtrust.org. 

(1) Southerners for Fair School Funding focuses on ten Southern states: Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, and Virginia.

(2) Kentucky data only spans from 2019 to 2025 while other states span from 2015 to most recent data (either 2025 or 2026).