A new federal voucher tax credit program, recent moves to dismantle the Department of Education, and proposed federal budget cuts to education reflect the growing tension between expansion of publicly-subsidized private education and threats to essential funding for high-need students in our public schools. To get ahead of these challenges, EdTrust in Texas hosted a briefing for advocates to shed a light on these consequential policy decisions and what they mean for Texas students.

Joined by EdTrust’s equitable school funding policy lead, Qubilah Huddleston, and government affairs senior manager, Blair Wriston, you can view the slides from the briefing. Here’s a quick breakdown:

The Federal Voucher Tax Credit

The recently passed “One Big Beautiful Bill Act” introduced an unprecedented federal voucher tax credit that could reshape education funding nationwide. This new policy establishes a large-scale tax write-off based on contributions made by individuals.

• How do they work? Individuals can receive a dollar-for-dollar credit on their federal tax bill for contributions of up to $1,700 per year made to non-profit Scholarship-Granting Organizations (SGOs) that are approved to distribute donated funds to eligible students.
• Who is eligible? Students must meet an income requirement of 300% of “area” median income; however, experts note that this threshold is high enough in many areas to make the program nearly “universal,” allowing many middle- and upper-middle-income families to participate. You can use this tool to explore the income cut-off for every county.
• What do these funds cover? Funds administered by SGOs can be used for a host of expenses, including tuition for private and religious schools, books, curricular materials, and tutoring.

At EdTrust, we have major concerns that this program diverts precious taxpayer dollars to unaccountable entities. The lack of oversight and transparency risks worsening educational disparities and promotes income and racial segregation between and within school systems.

Texas Implementation Decisions

Following passage of Senate Bill 2 (2025), Texas has already begun implementing its own universal statewide voucher program, officially named Texas Education Freedom Accounts (TEFA). Applications are expected to open in February 2026, with $1 billion available for the 2026-27 school year.

To participate in the new federal tax credit program, governors in every state will decide whether to opt-in at the beginning of each year and approve eligible SGOs starting January 1, 2027. While the federal Treasury Department is expected to finalize detailed regulations in 2026, there are several key questions left for Texas to answer:

• Defining SGOs: Which non-profit entities will Texas approve to serve as SGOs and administer funds?
• Program Alignment: Will participation in the state’s new TEFA program be required to receive a federal SGO scholarship? Will students who are enrolled in public schools — such as those participating in the existing Parent-Directed Special Education Services (PDSES) program — also be eligible for additional funds?
• Ensuring Transparency: To ensure funds are used effectively, will Texas set any data collection and public reporting requirements for SGOs that go beyond the limited transparency provided by TEFA?

Threat to Public Education Funding in the FY26 Budget

While this new federal tax credit promotes billions in voucher tax write-offs, negotiations over the FY26 budget threaten to significantly cut funding for Texas public schools. Now that Congress has temporarily paused the shutdown and extended funding until January 30, 2026, the focus has shifted back to spending negotiations.

The House budget proposal presents a severe threat to Texas schools with plans to slash funds by $1.4 billion statewide.

• Nearly every Texas school district (except for three) would lose funding, at an average of $270 per student
• Essential programs would face deep cuts or elimination, including a $400 million cut to Title I (impacting 3 million students from low-income backgrounds) and the elimination of all $100 million in funding for English language acquisition programs (impacting over 1 million Texas children)

The Senate proposal, in contrast, would largely maintain funding for public K-12 education at nearly the same levels as the previous year and reflects bipartisan compromise. You can use this tool to explore how much total and per-student funding is at stake for your school district.

We will continue to provide updates and encourage advocates to monitor these negotiations closely and engage members of Congress.