In Pennsylvania, $680 million of the annual state budget is set aside for two tax credit scholarship programs. They’re the commonwealth’s version of a school voucher program.
That’s more than the annual state funding for the Department of Community and Economic Development (DCED) and the Department of Agriculture combined.
But during a recent House Education Committee hearing, Pennsylvania lawmakers questioned whether the voucher program money was being spent effectively. They also raised concerns about oversight and transparency.
Program growth, limited data
The state’s two main tax-credit scholarship programs, the Educational Improvement Tax Credit (EITC) and the Opportunity Scholarship Tax Credit (OSTC), allow businesses to reduce their state tax bills by donating to approved scholarship organizations. Those organizations then distribute scholarship money to students for private school tuition or other approved educational expenses.
Over the last decade, funding for EITC alone has increased by 353%, far outpacing the roughly 60% increase in state funding for public education during the same period, according to Rep. Mary Isaacson (D-Philadelphia).
Despite the increase in funding, only basic information is reported back to the state about scholarship recipients, such as county of residence and grade level. In fact, all student data is maintained by the organizations in charge of handing out scholarships, including household income.
“This is a significant amount of money, but we have very little data on how it is being spent, where it is being utilized, and if the students utilizing the program have improved academic performance,” said Rep. Peter Schweyer (D-Lehigh), majority chair of the committee.
‘Just trust us’
Schweyer said the current system essentially allows hundreds of millions of public dollars to be directed by private organizations with minimal oversight.
“We are putting our trust in the hands of nonprofit organizations who are selling tax credits or brokering tax credits or helping individuals or businesses get tax credits and saying, ’Trust us, this is cool, this is fine,’” Schweyer said.
James O’Donnell, director of the Tax Credit Division of DCED, said each organization is required to complete an annual audit, but those are purely financial—tracking money in and out. Audits do not require organizations to list what scholarships were used for.
The DCED does list the educational improvement organizations and scholarship organizations in charge of distributing tax credit funding on its website, along with the businesses that participate. But lawmakers say this information alone isn’t enough to justify such a significant budget allotment.
“So we have no way to see if scholarships are doing the intended thing, to move students from one education system to another,” said Rep. Paul Friel (D-Chester). “I think to have over half a billion dollars with lack of oversight, without having the data to support the academic outcomes or who these scholarships go to is very concerning to me.
“Just $50 million from those tax credits could fully fund those who are dropping Pennie or getting kicked off Medicaid.”
New reporting requirements
O’Donnell said scholarship organizations are required to report more data as of the 2025-2026 academic year, including school district of residence and private school attended by scholarship recipients, but not household income levels.
Lawmakers and public education advocates think more needs to be done.
Newly proposed House Bill 2632 would establish a program in 2027 to increase oversight of participating scholarship organizations. They would be required to report the amount of scholarship dollars used, income level of recipients’ household, and amount of remaining tuition charged to the student.
The bill is currently in the Appropriations Committee awaiting a vote before heading to the House floor.
“Our goal has always been to invest in kids and if it costs $1,000 or $100,000 to invest in a kid, we are going to do that.” Schweyer said. “But we want to make sure the dollars are being spent appropriately.”
