Governor Pillen Signs Order Opting into Federal Scholarship Tax Credit

By Gordon Hopkins Monday afternoon, September 29, Governor Jim Pillen signed an executive order indicating the state’s intent to opt into the Federal Scholarship Tax Credit. Signed into law by President Donald Trump this summer as part of the One Big Beautiful Bill Act (OBBBA), this program provides grants for students attending private schools in 2027.Surrounded by students, staff, parents and members of Nebraska’s congressional delegation, the signing and a press conference was held at St. Teresa Catholic School in Lincoln, one of the private schools that will benefit from the new law.The Federal Scholarship Tax Credit allows individual taxpayers to direct up to $1,700 to a qualified scholarship granting organization (SGO) in exchange for a 100 percent dollar-for-dollar credit on their federal income taxes. SGO’s will send donated funds to families to be used for eligible K-12 education expenses, including costs associated with attending private school. SGO’s can retain up to 10 percent of the donations for administrative costs. Opting in is just one requirement of the program. In addition, participating students must be eligible to attend a public school, and families must earn no more than 300 percent of their area median income (AMI). The U.S. Department of the Treasury is expected to provide additional regulation around the program moving forward.School choice programs are controversial because opponents claim they will take taxpayer funds away from public education.In 2023, the Nebraska Legislature passed LB753, the Opportunity Scholarships Act, which created a tax credit program for donations made to SGOs. In 2024, that legislation was repealed by lawmakers and replaced with LB1402, which created a state-appropriated $10 million program managed through the State Treasurer’s Office, to direct funds to private school scholarships for low-income, special needs and other students. Later that same year, Nebraska voters bypassed the legislature and repealed the law at the ballot box.“The teachers union has tried at every turn to thwart the efforts of our lawmakers to deliver any measurable support for school choice at the state level. And ultimately, that cost has come at the expense of our most vulnerable students,” said the governor. “This federal program marks a significant step forward in providing them with that educational freedom, at no cost to the state.” What Supporters Say“This program is a game-changer for Nebraska students and their families, generating funds that will help send students to the school of their choice,” said Governor Pillen. “When it comes to educating our kids, we need to ensure that every student is in an environment that allows them to succeed. This program provides that opportunity, and I’m pleased to say that Nebraska will take part.”“Through this program, up to 90 percent of K-12 Nebraska students in any educational setting could qualify for scholarships for high-quality resources,” said U.S. Representative Adrian Smith, member of the Ways and Means Committee.“Our students are our future, and I championed inclusion of this legislation in the Working Families Tax Cut package to empower parents with greater educational opportunity for their children. Thanks to Governor Pillen’s intention to opt-in to the program, Nebraska families can benefit from potentially billions of donated dollars leveraged by this program,” Smith added.“Whether it’s a public school, private school, home school, or a hybrid of these options, parents have a right to direct the upbringing and education of their kids. The Working Families Tax Cut bill, which I supported earlier this year, included the first major nationwide school choice program,” added U.S. Representative Mike Flood. “Thanks to Congressman Smith for championing this measure over the years and to Governor Pillen for opting our state in so Nebraskans can access more educational opportunities for their kids.”Sarah Schinstock grew up in Lincoln, attending St. Mary’s School. Of her seven children, six attend St. Teresa Catholic School. Her oldest daughter, who is disabled, attends public school. Schinstock said sending her kids to a faith-based school was an important choice for her and her husband, but it would not have been possible without scholarship assistance. Schinstock said, “Opting in to the federal school choice program will help us tremendously. It will provide more lasting scholarship money to aid us with tuition. Now, we will be empowered with the help we need to make the best educational decisions for our children.”The next step is to produce a list of qualified SGOs for the Treasury Department to consider, prior to January 1, 2027. The governor indicatedhis administration will work with school choice advocates to produce a list. What Opponents SayOpenSky Policy Institute, a nonpartisan think tank based in Lincoln, released a preliminary fiscal analysis in response to the governor’s announcement.“Prioritizing unmitigated spending like this through the tax code is risky, and the administration’s eagerness for Nebraska to participate is perplexing amid well-documented headwinds facing the state,” said Dr. Rebecca Firestone, Executive Director of OpenSky Policy Institute. “Nebraskans care about our young people, but wiser, research-backed options to provide for a brighter future certainly exist that would better serve our state. For instance, expanded Child Tax Credits, maintaining and expanding food security programs, health care access and high-quality public education starting at birth—all have proven benefits. Saddling the next generation with unsustainable debt that will have widespread economic impact runs in stark contrast to the ‘opportunity’ that OBBBA and this scholarship program claim to promote.”According to a press released from OpenSky, “As written, the program has no caps on the number of individuals or joint filers who can claim the tax credit, nor the total amount of tax revenue that can be forgone for this purpose. This could put significant strain on the federal budget, which provides critical funds to states for programs like special education, Medicaid, and food security. In Nebraska, more than a third of the state’s total operating budget comes from federal funds, at about $6 billion.”OpenSky also expressed concerns over transparency, “OBBBA leaves guardrails for the program to the states, with no required transparency, quality control or accountability measures. This creates a wide runway for waste, fraud and abuse.” What Local Educators SayFairbury Public Schools Superintendent Dr. Devin Embray told FJN, “I believe families deserve choices in their children’s education, and I respect that some will consider private options. At the same time, I am very proud of the work we do in Fairbury Public Schools to serve the needs of our students. Our teachers and staff work hard every day to meet the needs of all students, and I believe we provide excellent opportunities for the vast majority of families in our community.”“My concern with the new federal scholarship tax credit program is that, with eligibility set at 300 percent of the Area Median Income, it could make full-tuition scholarships widely available in ways we haven’t seen before. If many students take this path, it could impact enrollment and resources in our district,” Embray continued. “Our focus in Fairbury must remain on strengthening our schools and ensuring every student has the opportunities and support they need to succeed.”Diller-Odell Superintendent Mike Meyerle was blunt in his assessment of who this decision most benefits, “In my opinion, it will most likely be better for people who choose to send their kids to private schools. Personally, I oppose any tax dollars (Federal or State) going to assist in students attending private schools. I think this will just create more momentum of state tax dollars assisting private schools.”Brian Rottinghaus, Superintendent of Tri County Public Schools, does not find issue with the program as long as it takes no money from Nebraska public schools, “I believe Nebraska public educators have generally been opposed to Nebraska public tax dollars being diverted from public education to support private education. My understanding from Governor Pillen is that no Nebraska public funds will be used to support the Federal Scholarship Tax Credit in Nebraska. If that remains true, it would seem as if it does not pose harm to school funding within our state.”“I feel it is interesting that a measure like this which was voted down by the public in 2024, has found a way to become a reality. It will be interesting to see how the citizens of Nebraska will support future efforts when their voice was denied,” said Meridian Superintendent Randy Kort. “I look at this as an issue that I currently cannot change and feel we will just need to do our job of working with the students we have and giving them a safe and supportive environment while developing lifelong learners who are productive citizens for our communities.”

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