Why are top Arizona Democrats opposing new federal education tax credit?

PHOENIX – Top Arizona Democrats at the state and national levels are taking a stand against a new federal education tax credit program.

The tax credit is part of President Trump’s One Big Beautiful Bill Act, which was signed into law last summer. It is essentially a way for the federal government to indirectly provide financial support to private schools with taxpayer money and has been compared to Arizona’s Empowerment Scholarship, or ESA, school voucher program by opponents.

It works like this:

• Taxpayers can get dollar-for-dollar federal tax credits up to $1,700 for donations they make to state-recognized Scholarship Granting Organizations.
• The SGOs are required to use those donations to provide elementary and secondary school students with vouchers that must be used for qualifying education expenses such as supplies, tutoring and private school tuition.
• Students who receive the vouchers must be from households that earn under 300% of the area median income.

SGOs can provide support to public and private school families. However, opponents of the education tax credits are concerned that most of the funds will wind up at private schools and that the program will cost taxpayers far more than estimates suggest.

Gov. Katie Hobbs vetoes bill to opt into education tax credit program

States have to opt in for their residents to be eligible for the tax credit program when it begins in 2027. The Republican-controlled Arizona Legislature passed Senate Bill 1142 for that reason, but Democratic Gov. Katie Hobbs vetoed the legislation Monday.

“It is irresponsible to sign this bill before the federal government has released any regulatory guidance,” Hobbs wrote in her veto letter.

Superintendent of Public Instruction Tom Horne, a Republican, said he is disappointed that Hobbs is keeping Arizona out of the program.

“It benefits the state at federal expense and helps all schools, whether public or private,” Horne said in a statement.

Sen. Mark Kelly wants to repeal federal education tax credit

Now, Arizona U.S. Sen. Mark Kelly is co-sponsoring the Keep Public Funds in Public Schools Act to repeal the education tax credit provision from the One Big Beautiful Bill Act.

The Democrat cited Arizona’s school voucher program, which by some estimates takes up $1 billion in taxpayer money annually, in his argument against the program.

“In Arizona, we’ve already seen how universal vouchers are leading to rampant fraud and benefiting people who already had the means to send their kids to private school, while decimating public education for everyone else,” he said in a statement. “If we want to keep improving education to build a better future for the next generation, we have to start with keeping public funds in public schools that serve all kids.”

Arizona’s ESA program allows families to use public education tax dollars for private school or homeschooling expenses. It was created in 2011 and primarily benefited students with special needs. It was expanded to other groups over the years before becoming universal in 2022. The program currently has over 100,000 users.

School choice advocates have been touting the program’s growth, but it hasn’t been without controversy. Opponents say a lack of accountability has resulted in a high rate of misused funds.

In Hobbs’ veto letter, she alluded to accountability issue.

“We have seen what happens when these types of programs lack accountability, transparency and oversight. I hope the administration ensures any federal school choice program will have the much-needed guardrails Arizona’s ESA program lacks,” she wrote.

Funding for this journalism is made possible by the Arizona Local News Foundation.

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