Illinois could secure as much as $1 billion in scholarship funding for students if Gov. J.B. Pritzker opts the state into a new federal tax credit program, according to an analysis released Oct. 1 by the Illinois Policy Institute. The U.S. Treasury Department published detailed regulations for the Federal Scholarship Tax Credit, also called the Education Freedom Tax Credit, and Pritzker now has until Jan. 1 to decide whether Illinois will participate. The program would allow taxpayers to claim dollar-for-dollar federal tax credits for donations to approved scholarship organizations, without reducing funding for public schools.
The Treasury rules clarify that married couples filing jointly can claim up to $3,400 in tax credits if each spouse contributes at least $1,700 to qualified scholarship organizations. Taxpayers aren't limited to donating within their home state—they can give to any government-approved scholarship organization nationwide. The regulations define student household income based on money families actually receive rather than estimated asset values, an approach the Treasury estimates would make roughly 95% of U.S. school-age children eligible for scholarship funds. Students can use scholarship money across state borders, meaning an Indiana student could potentially attend an Illinois private school with scholarship dollars even if Illinois doesn't participate. States opting in for 2027 must declare their intent by Jan. 1, but they have until Feb. 15, 2027, to submit their final list of approved scholarship organizations.
The Illinois Policy Institute notes that scholarship organizations will undergo annual compliance reviews and financial audits to ensure they follow program requirements covering student eligibility, qualified expenses, scholarship spending, and fund management. Organizations receiving more than $500,000 annually would need independent outside auditors, while smaller groups could use independent committees not affiliated with management. The report adds that the Treasury Department is still developing separate guidance on which K-12 education expenses scholarships can cover, calling that clarification a "high priority." According to the analysis, donors can direct their contributions to local public school foundations that qualify as scholarship organizations, allowing those foundations to expand fundraising and serve more students.
Colorado Gov. Jared Polis plans to participate in the program and has called it "free money," predicting that most Democratic governors will join once they understand the mechanics. The Illinois Policy Institute explains that if Pritzker declines to opt in, Illinois taxpayers would still be able to claim the federal credit by donating to scholarship organizations in participating states—but those dollars would flow out of Illinois rather than supporting local students. A billboard near the Indiana border in south suburban Chicago is already encouraging Illinois residents to donate to Indiana scholarship groups if Pritzker refuses. The analysis emphasizes that the program takes no money from public school budgets but could channel significant private dollars directly to local students through eligible public school foundations that already raise private donations.
If Illinois opts in, the report argues, taxpayers face a straightforward choice: donate up to $1,700 individually or $3,400 as a married couple to local scholarship organizations and claim a full federal tax credit, or send that same money to the federal government through taxes for Washington to allocate to any priority. The analysis concludes that the most effective way to support public education would be contributing to local scholarship organizations, including public school foundations, since the 1:1 tax credit would encourage more giving and let these foundations reach more students. With the Jan. 1 deadline approaching, Illinois stands to either capture nearly $1 billion in scholarship funding for its own students or watch those dollars leave the state entirely.