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Right now Gov. Kathy Hochul has a chance to open up a critical new source of financial support for local families with school-age children, at no cost to New York state.
But she’ll have to defy the teachers’ unions to accept it.
A provision in President Donald Trump’s One Big Beautiful Bill Act will soon trigger a gusher of K-12 scholarship money for students nationwide.
Starting in 2027, taxpayers will be able to reduce their federal tax bill by up to $1,700 ($3,400 for couples filing jointly) if they donate to scholarship-granting organizations that assist students from low- and middle-income families.
It’s a one-to-one credit, not a tax deduction — so every dollar contributed up to the limit comes off the donor’s federal tax bill.
Essentially, the program will divert money from federal coffers through SGOs to needy families, who can use the scholarships to pay for tuition in private schools of all types, or to cover educational services like tutoring and remote-learning programs.
The credit is federal, so taxpayers in every state can take advantage of it.
But individual states must affirmatively join the scholarship program for kids in that state to benefit.
Simply put, for taxpayers to earn the tax credit, they must contribute to a scholarship organization operating in a state that has “opted in.”
If your state chooses not to participate, you can still contribute to an SGO in another state and earn the credit.
That means blue states like New York face a dilemma.
Any Democratic governor who chooses to participate in the program will likely draw the wrath of those who oppose public support for private and religious schools — the teachers’ unions, in particular.
So far, Colorado Gov. Jared Polis is the only Democrat brave enough to take that step.
If Hochul opts New York in, taxpayers can contribute to a New York-based scholarship organization and substantially reduce their federal tax burden, while helping families in New York.
But if Hochul does not allow New York state SGOs to participate, New York taxpayers can get the credit anyway — just by contributing to an SGO in a state whose governor opts in.
How much scholarship money for needy New York families is at play here?
A huge amount — surely hundreds of millions of dollars a year, and likely between $240 million and $500 million annually.
Based on federal data, if just 10% of New York state tax filers with an annual income over $200,000 participated in the program, the credits would total $244 million.
If 20% of them participated, it would come to $488 million annually.
That’s a lot of money that should benefit families in New York — but might flow out of state, unless Hochul allows New York’s SGOs to participate.
Worse yet, if Hochul refuses to join the federal program, she risks harming successful local organizations like the Children’s Scholarship Fund, which has provided over $375 million over the years to low-income families in New York City alone.
Contributors to the fund can still take a tax deduction for their gifts — but that deduction is a fraction of the tax credit triggered by the new federal program.
Some contributors to admirable programs like the CSF will likely stay loyal, but many others may well direct their donations to SGOs in other states to earn the federal credit.
New York families need this support: According to state Education Department data, more than 383,000 students were enrolled in private or religious schools in the last school year.
Over 45% of those students were enrolled in Jewish schools, some of which are locked in a multi-year court battle with the state over their allegedly insufficient curriculum standards.
The federal program could provide a solution to the impasse: Hochul could let SGOs provide scholarships to parents who choose those schools, so they can purchase tutoring services for their children and comply with state curriculum mandates.
Aside from the Jewish schools, more than 45% of New York students in private and religious schools are non-white.
Because the federal tax credit can only be used for scholarships to students below certain income limits, we can be sure that money would be directed to families who are least well-served by the public-school system.
The ball is in Hochul’s court.
She can choose to accept money for New York’s families at no cost to Albany — or stand by and watch those funds flow out of state to needy students elsewhere.
Ray Domanico is a Manhattan Institute senior fellow.