Illinois should opt into the Federal Scholarship Tax Credit

Every year, hundreds of businesses and individuals make donations to local educational foundations, offering up their services for silent auctions or raffles, all in the name of bolstering public school funding.

A new program could accelerate this kind of giving, improve workforce readiness and keep more young talent in the state. All Gov. JB Pritzker has to do is opt into the Federal Scholarship Tax Credit program. Nearly 800,000 northern Illinois residents will have an opportunity to tell Pritzker about their opinion of the program on their March 17 primary ballot.

This new federal program would give donors an annual dollar-for-dollar federal tax credit of up to $1,700 for contributing to nonprofit scholarship-granting organizations that help K-12 students pay for academic needs. Families with students in private schools, trade schools, home schools and religious schools could all receive funds from scholarship granting organizations; and public school foundations and booster clubs have an opportunity to collect additional funds by becoming SGOs themselves.

Eligible K-12 students — with household income at or below 300% of the area median — could use donor funds toward educational expenses, including tutoring, test preparation and fees, special education services, books, online learning tools, dual-enrollment courses, tuition and more.

The credit already is federal law. Donors will receive it whether Illinois participates or not. The question is whether those donated dollars will help students in Illinois or in other states.

Opting into the program is a win-win-win: it grants scholarships for kids; a tax credit for Illinoisans; and it takes no money from public schools. Illinois residents could guarantee $1,700 of their money directly helps local students, rather than seeing those donations fund scholarships out of district or out of state.

The Federal Scholarship Tax Credit would be good for Illinois families, good for employers and good for the state’s long-term economic health.

It offers a pathway for children to find success at school and, ultimately one day, in the workforce. The donated funds could help families access additional academic resources — such as tutoring, ACT preparation or paying to retake the ACT or SAT — that are often unaffordable. It also could grant them access to classes or career and technical education opportunities.

Not only is this the right thing to do, but it also makes good business sense.

Better educational outcomes don’t just help individual students — they strengthen the state’s economy. Higher education, whether it’s college or technical training, leads to higher incomes, broader tax bases and stronger consumer spending.

Stronger standardized testing scores can help students qualify for merit-based aid or gain admission to Illinois public universities, where in-state tuition is far less expensive than out-of-state options. When students can afford to attend college in Illinois, they are more likely to build their careers — and lives — here.

Employers benefit from a deeper, more stable talent pool, while the state benefits from retaining future entrepreneurs and business leaders.

At the same time, the Federal Scholarship Tax Credit reduces pressure on taxpayers by allowing private donations to help address achievement gaps, rather than coming up with new taxpayer-funded programs to fill these holes. Unlike new state-funded grants or incentive programs, this approach delivers a public benefit without raising taxes on businesses and residents.

At least 28 states already have taken steps to participate. Democratic Gov. Jared Polis of Colorado has called the program a “no-brainer,” describing it as free money that helps students without harming public schools.

“The more Democratic governors learn about it, I fully expect that most will come around and participate,” said Polis. “Because from our perspective, it’s free money.”

Sometimes the right policy choice also is a smart economic one. Illinois should follow suit and opt into the Federal Scholarship Tax Credit.

• Matt Paprocki is the president and CEO of Illinois Policy.