The Federal Scholarship Tax Credit Is a Workforce Development Opportunity. Governor Ferguson Has Two Months to Claim It.

Nava Carlyle  |  October 5, 2026

This week, the U.S. Treasury Department released its long-awaited rules for the Federal Scholarship Tax Credit (FSTC). The rules confirm the broad strokes: taxpayers can redirect a federal tax credit, up to $1,700 individually or $3,400 for married couples filing jointly, to a Scholarship Granting Organization (SGO) that distributes educational service scholarships to students. As the state opt-in deadline, January 1, 2027, approaches, the decisions are starting to roll in.

The Bellevue Chamber joined the Washington Student Success Coalition to get Governor Ferguson to "yes." Our members' interest is in workforce development, and this is an opportunity to develop our local talent pool. We're asking Governor Ferguson to opt Washington in, and our members, alongside all Washingtonians, to start building and supporting the SGO partnerships kids deserve.

A Workforce Development Opportunity, Not Just a Tax Credit

The FSTC lets any taxpayer redirect up to $1,700 of their federal tax liability, up to $3,400 for married couples filing jointly, to a qualified Scholarship Granting Organization (SGO), dollar for dollar. SGOs pool those contributions and award them to eligible K-12 students for a wide variety of educational services. Importantly, SGOs can be organizations already providing services to students, supporting everything from tutoring, career-centered development, arts and music programs, and field-trip transportation to special education therapies. Funds can also help cover services that often strain public school budgets, including extended-day care, technology, health and counseling services, and school supplies.

"Any particular SGO may narrow its own focus and adopt more stringent requirements than those applicable under section 25F. For example, an SGO may choose to limit its scholarships … to specific subject matter areas such as science or foreign languages, or to students whose household income is less than 80 percent of the area median gross income." — Preamble, Explanation of Provisions, Part I

That flexibility is what makes this a workforce development tool and not just a parallel voucher system. Washington's business community, workforce boards, and career and technical education partners have an opening to stand up, or support, SGOs focused specifically on career-connected learning: industry credentials, apprenticeship-linked coursework, and the skills our members tell us they cannot find enough of locally.

What Treasury's New Rules Mean for Washington

1. $1,700 individually, and no marriage penalty. Married couples filing jointly can receive up to $3,400 if each spouse contributes, with no reduction for filing jointly. Unused credit carries forward five years. Donors in any state can give to any SGO on Washington's list, or on the list of any other participating state.
2. Who can benefit. A student needs to be eligible to enroll in a public school and to live in Washington. A participating state may not limit SGOs to certain types of schools or expenses.
3. Streamlined financial verification. SGOs must confirm household income is at or below 300% of area median income, and roughly 95% of U.S. children fall below that level. Families can verify with tax or pay documents, or with an award letter from SNAP, TANF, WIC, Section 8, or SSI. Foster children qualify automatically.
4. A new safe harbor for public schools. One of the most important updates for public schools is a new income-verification safe harbor for tutoring and special needs services. It applies to schools in a HUD Qualified Census Tract, or schools where at least 80% of students live in such tracts. These schools can select individual students for academic tutoring or special needs services based on demonstrated need, with no household income verification required.
5. Accountable public charities, not private actors. An SGO must be a 501(c)(3) public charity and be authorized to do business in Washington. No in-state headquarters is required, so national SGOs can serve Washington. Each SGO must serve 10 or more students, not all at one school, and may not earmark gifts for a particular student.
6. Spend it, track it, protect it. Single-state SGOs must spend 90% of receipts on scholarships; those that are 85%-plus scholarship-focused apply that test to their scholarship account alone; multistate SGOs clear both tests, state by state. Money's due out the door by the end of the following year. Accountability is built in: segregated accounts, independent annual audits, IRS certification, public reporting, and duplicate award checks. Insiders, selection-committee members, and major donors, and their families, can't receive scholarships. The IRS publishes the approved list, removals included.

The Benefit to Public Schools

Public schools stand to gain directly from this program. Scholarships can cover the support many public schools already provide with local dollars. That opens the door for math tutors, art and enrichment services, field-trip transportation vendors, and more to partner directly with public schools and get paid through SGO scholarships instead of school budgets. In practice, that means federal money could cover costs local levies currently carry, at no new cost to families. This incredible opportunity could mean thousands of dollars, if not more, to raise the quality of the public school education experience for students, families, and teachers.

Washington Isn't Deciding Alone

New York announced its opt-in with a conditional-yes model Washington could follow, and Massachusetts will likely be next. Polling commissioned by Democrats for Education Reform (DFER) across nine states with Democratic governors, California, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Michigan, New Jersey, and Pennsylvania, found majority support for opting in in every state, from 63% in Michigan to 78% in Pennsylvania, holding among Democrats, Black voters, and Latino voters alike.

"For months, Democratic governors told us they were waiting on the rules from Treasury. Treasury has answered, and it confirmed that public school students are in." — Jorge Elorza, CEO, Democrats for Education Reform

"Only about a third of students are proficient in reading or math right now. That should be unacceptable to us." — Arne Duncan, former U.S. Secretary of Education and senior fellow, Democrats for Education Reform

"Many public schools and their partners already run eligible programs. What most don't have yet is an SGO to expand them." — Nicole Pollock, President, Democrats for Education Reform

That last point is the logistical hurdle. Scholarship-granting organizations cannot be built overnight: they have to get certified, raise money, tell families the money is there, and build systems to check eligibility and pay for services. Every month Washington waits to decide is a month those partners in our state cannot start building.

The Window Is Open, Not Open Forever

The Bellevue Chamber sees this as a workforce development opportunity: a federally funded, state-supervised channel for tutoring and career-connected learning that strengthens the pipeline our local employers depend on. We are urging Governor Ferguson to opt in, and we are urging Washington's business community to start now, alongside school districts and workforce partners, on the SGO infrastructure the state will need the moment he does. Governor Ferguson has two months to decide whether Washington students get $1 billion or more in education funding, or watch that money fund scholarships somewhere else. We're asking him to choose Washington.