One of the fastest ways to make a new funding program harder than it needs to be is to build an organization before deciding what job it actually needs to do. Unfortunately, I think there is a real risk of that happening with the new Education Freedom Tax Credit Scholarship.
After months of speaking with leaders, I am starting to notice a trend. School and networks hear about Scholarship Granting Organizations and then immediately start thinking about structure. Should our school or network become one? Do we need a new nonprofit? Who handles the applications? Who owns compliance?
Personally, for all of the educators reading this, I would start somewhere else.
Start With the Students
Under federal law, an SGO has a specific job. It must be an eligible 501(c)(3), must keep qualified federal contributions separate from its other funds and must meet federal scholarship requirements. It has to serve at least ten students who attend two or more different schools and spend at least 90 percent of its income on scholarships. This is not a simple process, and requires real infrastructure and expertise. As such, it may make sense for some established scholarship organizations and education nonprofits to take this task on, but not every school community needs to build their own.
Our guidance at FundEDU is much simpler (and saves you time!): consider partnering with an SGO before deciding you need to run one.
That comes directly from the work we already do. In Pennsylvania’s tax-credit system, FundEDU plays a critical role in making education funding move: donor outreach, lead generation, contribution tracking, documentation, compliance, reporting and follow-up. We help schools understand the opportunity, develop the donor side, and ultimately connect the people involved so students can benefit. This provides another important lesson that I think we can adopt to the EFTC in that schools do not need to duplicate the expertise that makes an organization like ours effective. Instead, schools have the information that we need much more: knowledge of their communities.
As my previous articles have referenced, a district knows where families are running into costs that become barriers. Its foundation knows which requests keep appearing, and which never get funded. Principals, faculty and staff are aware of which opportunities students pass up because something outside the ordinary school budget gets in the way.
So before you devote time this fall to discussing whether an existing nonprofit should become an SGO or if you should start a new one locally, I would review your state’s list of approved SGOs (which should become available this fall) and spend time figuring out which SGO I would want to work with. Key questions that I would ask include:
- Does it intend to serve students in public schools?
- How will families apply?
- Who will answer their questions?
- How will eligibility be verified?
- How will the organization communicate with schools?
- Does it understand the community it intends to serve?
Above all else, those are the questions that define if your SGO views your school as a client, or as a partner. We already know that schools ask similar versions of them whenever you choose vendors, nonprofit partners, or after-school providers. The upcoming EFTC program is not different simply because a tax credit sits behind it.
There Is Another Reason Not to Rush
As I indicated before, we don’t have the official SGO lists yet. Beyond that, the Treasury is still writing the implementation rules, hopefully to be announced before the end of September. Nonetheless, you and your school can use the existing time productively, so you are prepared when January 1st comes around.
My suggestions are simple, and are likely the things that your school is already excelling at.
- Understand the families you serve.
- Learn the eligibility rules.
- Identify the organizations likely to operate in your state.
- Look at your education foundation and donor network.
- Decide who needs to communicate with families.
- Then sit down with potential SGO partners when announced to compare responsibilities and expertise.
That is much closer to how FundEDU approaches tax-credit work. Ultimately, our job is not to make every school become every part of the system. It is to help schools understand the revenue opportunity, make the right connections, develop donor strategy, keep the process organized and reduce the administrative burden that comes with pursuing it.
A Middle Ground Between Ignoring and Overbuilding
It is an incredible blessing that many schools will be entering the school choice scholarship conversation for the first time. However, that new program feeling makes it tempting either to ignore the program entirely or to overbuild for it. Instead, I suggest that there is a large middle ground between those choices, and that’s the type of partnership that most schools should look for.
Your school can participate without administering everything. Your school can represent your families without selecting scholarship recipients. Your school can help an SGO understand your community without becoming the SGO itself.
In a few short months, donors will be deciding where to contribute and SGOs will be deciding how their programs operate. Schools and leaders that have already built relationships with those organizations will be in a better position to make sure their students are understood.
In closing, I want to reiterate that public schools do not need to run the EFTC. Instead, they need to know who is running it, how it will work, and ensure their students have a place in it.