Public Schools First NC warns federal voucher plan could drain public schools

Public Schools First NC is urging North Carolinians to reject a new federal voucher-style tax credit program set to begin in 2027, arguing it will steer public dollars toward private and religious schools with little accountability. The group says North Carolina lawmakers should still opt out in 2028 and press Congress to repeal the law.

Why it matters: - Public Schools First NC says the federal Scholarship Tax Credit program could divert taxpayer-backed money away from public schools and into private education. - The group argues the program weakens civil rights protections, public oversight and fraud safeguards. - North Carolina is already signed up for the 2027 rollout, but the state must opt in again for 2028.

What happened: - On Oct. 1, the U.S. Treasury Department released regulations for the federal tax credit voucher program, called the Federal Scholarship Tax Credit. - The program was included in the “One Big Beautiful Bill Act” and passed through reconciliation. - The North Carolina General Assembly opted the state into the program before final rules were published. - Lawmakers overrode Gov. Josh Stein’s veto to do so.

The details: - The program offers a dollar-for-dollar federal tax credit of up to $1,700 for donations to scholarship-granting organizations. - Scholarship-granting organizations can keep up to 10% of each donation and distribute the rest as educational scholarships. - Families with incomes up to 300% of area median gross income are eligible. - The federal rules do not allow states to impose stricter requirements on scholarship-granting organizations than those in the original statute passed in July 2025. - Under the regulations, scholarship-granting organizations decide which students receive vouchers. - States cannot block money from going to schools with poor fiscal or academic records or discriminatory admissions policies. - States also cannot require public reporting on how funds are used or which students receive them. - States cannot add extra safeguards against waste or fraud. - Public Schools First NC says the program mostly benefits private schools and religious schools, including schools that discriminate. - The group says public schools will receive little, if any, of the funding because the program only pays for services schools already charge for. - Public schools generally do not charge students for instruction, so the group says they would not benefit from that part of the program. - The regulations do allow scholarships for public school students to pay for tutoring or extra special education services that public schools do not provide at no cost. - Public schools cannot receive those funds directly. - Families would have to apply to a scholarship-granting organization, and a separate provider would then receive payment for the service. - Public Schools First NC says that process would be cumbersome and could leave out students who need help. - Treasury has not yet released detailed guidance on which expenses will be eligible or prohibited.

Between the lines: - The organization’s core objection is control: the federal rules appear to put scholarship-granting organizations, not states, in charge of who gets money and where it goes. - The group also sees the program as a path for public tax dollars to support private schooling without the transparency typically expected of public education funding. - If Treasury narrows eligible expenses further, the amount of money that can flow back to public schools could be even smaller than supporters expect.

What's next: - North Carolina lawmakers elected in 2026 will decide whether to opt into the program again for 2028. - Public Schools First NC is urging North Carolinians to press lawmakers and Gov. Stein to stop the program. - The group is also asking members of Congress to repeal the voucher legislation.

The bottom line: - Public Schools First NC says the federal voucher tax credit hands public money to private schools and scholarship organizations while sidelining public schools and weakening accountability.