Beginning next year, public school districts in at least 31 states could begin receiving tens of millions of dollars in taxpayer donations that would fuel scholarships for students to access expanded district services.
But, unlike with state and federal formula dollars that flow directly to schools, this money will take a more circuitous path—and require more legwork on districts’ part to take advantage of it.
That includes partnering with a scholarship-granting organization—a local, regional, or national nonprofit certified by the state to accept donations that make taxpayers eligible for dollar-for-dollar credits up to $1,700 per year and $3,400 for married couples.
Big-city districts like Denver have already started down that path—even as leaders deal with lingering misgivings about the tax credit program writ large.
“This probably wasn’t really designed for public school districts,” said Chuck Carpenter, the chief financial officer for the 90,000-student Denver school system. “There are some hurdles that districts are not used to in terms of making it work.”
Those include determining which students meet income-eligibility requirements, complying with unfamiliar IRS regulations, figuring out how they can charge fees for certain services that scholarships can cover, and keeping administrative costs down even as paperwork burdens grow.
“Once you figure that out, you may have a great revenue source that may even attract more kids to public schools,” Carpenter said.
Some districts are closer to reaching that point than others. To get a window into the still-unfolding development of a public school initiative under the federal program, Education Week spoke with Rena Shown, the executive director of the Fort Wayne Community Schools Foundation, which is now preparing to serve as the SGO partner for the Fort Wayne school district, Indiana’s largest, with more than 28,000 students.
Here are the steps she’s taken so far—and the challenges she’s faced along the way.
1. Creating an SGO
Shown took over the foundation in June as its sole full-time employee. She’s been working diligently ever since to set up the foundation’s Opportunity Fund, which will accept individual taxpayer donations and give out federally backed scholarships to the district’s students. The foundation proper will focus on partnerships with corporations and other foundations to offer grants outside the federal program for initiatives like new science labs and equipment.
“We’ve been identifying resources that help complete the funding picture for the district and fill in some gaps from where we’re seeing cuts occur at every level,” Shown said.
2. Seeking state certification
Each state has until Feb. 15 to submit to the Internal Revenue Service a full list of SGOs accepting donations that will be rewarded with tax credits for 2027. That means, between now and then, SGOs have to get certified with their respective states.
But some states are further along than others. Education Week found nine states that have publicly posted solicitations for SGO applications: Alaska, Colorado, Idaho, Indiana, Iowa, Kentucky, Montana, Oklahoma, South Carolina, and South Dakota.
Indiana just published its callout for SGOs last Friday. Shown and a lawyer are now working on their application and plan to submit it soon.
3. Soliciting donations
Shown’s career background includes time at the nonprofit United Way, where she worked on several campaigns in which employees donated to other community organizations through payroll deductions.
Now, she’s envisioning a similar model for employers in Fort Wayne. Employees—including the district’s own—would select the SGO, and then their donations would automatically flow out of their paycheck.
“There’s a lot of corporations that are used to payroll deduction,” Shown said. “All they really have to do is allow our SGO to be one of the entities that they include.”
There’s one catch—federal regulations the Internal Revenue Service released this month would require SGOs to keep careful track of who’s donating. That might require the SGO to request more detailed information from participating employers than they’re used to providing for other donation setups.
4. Estimating revenue
If 10% of the district’s 5,000 employees opt for the payroll deduction and contribute the full $1,700 for which they can get a tax credit, the district would take in roughly $850,000 next year, Shown said.
Some donations could also flow in from outside the payroll-deduction model—including from donors in states where SGOs aren’t certified to operate at all. Shown is reaching out to the district’s alumni associations in the hopes that former students, as well as extended family members of current students, might be inclined to direct their donations to the district.
“I think millions is what we can expect, year over year, once we start to get established and more community partners come alongside us in this,” Shown said.
The district’s current annual operating budget is roughly $420 million.
5. Developing programming
Once the donations come in, and scholarships are awarded, the next question will be what to do with the money students bring in to spend.
Shown has worked with district leaders on several possibilities, including extended-day programming and therapies for students with disabilities. In both cases, she’s thinking about the potential for the funds to simultaneously help students and support local nonprofits that contribute to the district’s operations.
Families currently spend roughly $450 a month on before- and after-school programming from the local YMCA, Shown said. The foundation’s scholarships could help cover those costs and also make it possible for the YMCA to offer services to a larger number of families at the district’s schools.
Similarly, students with disabilities who need occupational, speech, or physical therapy could get it from a local nonprofit.
“Maybe you should be getting therapy three times a week at school and you’re only getting it one,” Shown said. “However that looks, we could offer scholarships to cover those expenses.”
6. Scrutinizing forthcoming guidance
Some of the district’s ideas for spending the scholarship funds may not be feasible—but it’s impossible to know for sure, because the IRS has yet to finalize guidance detailing the expenses scholarships can cover.
This past year, the Fort Wayne district began charging a $100 fee for parents to enroll their children in the district’s pre-K programs, amid funding challenges that arose from state cuts.
The federal law governing the scholarship program makes several references to “elementary and secondary education.” But some districts still aren’t sure whether pre-K programs offered within elementary schools would qualify.
“I think that they should look at expanding the allowable expenses to be more inclusive of support that the district can alleviate some pressure points that exist,” Shown said.
The district and its SGO do have some time to work out these details: The regulations don’t require them to make awards with the 2027 donations they receive until December 2028, though Shown said they’ll probably start giving out scholarships well before that.
7. Marketing the district
Shown is apprehensive about the potential for politicians to point to the scholarship program as justification for further cuts to public education funding.
At the same time, she also believes foreclosing on the potential for these funds to help would be a mistake.
“If it seems overwhelming to comply to all of the regulations, you’ve really got to get comfortable with it, I think,” she said.
She’s also envisioning the potential for the district to use successes from the program as a marketing tool to boost future enrollment—and state funding to boot. Roughly 900 students currently take advantage of the YMCA offerings, for instance, but hundreds more families have expressed interest and would likely benefit if more spots were available, she said.
“Instead of the programs being cut, we found a funding source that families can afford to send their kids to this program and [we can] hopefully grow it,” she said.
