Implementing Education Choice

Conservative and libertarian donors have made phenomenal gains in the area of education choice over the past 10 years. The question now becomes: how do we defend those gains? There are some phenomenal groups out there that are focused on implementation, particularly with regard to the three big pillars we’ve identified: 1) the supply of schools; 2) making sure parents know how to opt in their kids; and 3) defending against the onslaught of legal and public relations attention from people who are not keen on school choice.

At a recent event that DonorsTrust hosted in Dallas, we held a conversation on education choice implementation to highlight what’s going on. How are we expanding supply? How do we get parents to understand the process here and what are we going to do to defend against the lawsuits and the negative press when it comes? Our panelists were Nathan Cunneen, the State Director for American Federation for Children, American Federation for Children; Lisa Tarshis, Primer Foundation’s executive director; and Tom Fisher, who is EdChoice’s executive vice president and director of litigation.

Note: This transcript was generated and cleaned by AI.

Peter Lipsett: Nathan Cunneen right here is the state director for American Federation for Children. AFC, of course, moved its headquarters from Washington, DC, to Dallas, as so many other… I guess I could get people to raise hands on how many companies have moved to Dallas, but AFC moved to Dallas several years ago and has also been instrumental in the fight here to get education savings accounts. We’re going to dive into that. Lisa Tarshis is with Primer Foundation. She’s executive director there. Primer is a set of different organizations, really, with a big focus on building that supply, getting those micro schools built out across the country in a good, smart way. We’ll hear about that. And then Tom Fisher is EdChoice’s executive vice president and director of litigation, and he’s going to dive in on that litigation fight.

So, my friends, because this is an education panel, let’s start by giving a letter grade, and no grade inflation here. How would you grade the national implementation effort of all of these school choice victories so far? We’ll just go down the line real quick, and then I’ll let you explain it.

Lisa Tarshis: A D.

Peter Lipsett: Okay. Ouch.

Nathan Cunneen: We’re starting off in a pessimistic way. I would give a C to the national organization, and I’ll just acknowledge my bias right here at the front: Texas is doing it right. Texas gets an A, and the rest of the country needs to learn from the real miracle that has occurred here in the last few years.

Peter Lipsett: Tom?

Thomas Fisher: I’m an optimist. I’m going to go C+. I think we’ve got a lot of work to do, especially educating parents to know that these options are there, and encouraging new providers to enter the marketplace, especially in states where we have a robust education savings account program, so we really have good competition.

Peter Lipsett: It does sound like we need a parent conference based on all this. Lisa, you have a D. What’s the quick explanation of that?

Lisa Tarshis: I think a lot of people are clapping their hands that the legislation was passed, and I think there are tons of parents out there who don’t actually know how to use it, how to leverage it, or don’t know that it is for them or that they can get it for their kids. We are seeing tons of founders who want to start schools who actually can’t do that. We’ll talk about that a little bit more later, but the supply doesn’t exist, and I worry that we are going to hand the victory to the other side if we don’t fix these issues.

Peter Lipsett: And that’s a good summation of why we think this issue is so important. I remember sitting at my desk one day dwelling on this issue, and literally the same day I got an email from Tommy Schultz, who runs American Federation for Children, announcing that they had just hired a new person to be the national implementation director. So AFC and others do realize this is a big deal as well. We’re going to spend the next few minutes talking about that. So we’ve identified these three problems. You reiterated it: we need schools, because people actually need a place to go. The parents need to actually understand that this is even an option, and as with signing up for any program, there are hurdles to that. It’s different in every state. And then the other side is coming after us in terms of painting this as a bad thing, as a dangerous thing.

We’ve actually seen states where it has been rolled back because those efforts have been successful. They’re going in the courts, they’re going in the court of public opinion, and we have to push back on that. So let’s start with the supply. No, no, no. Where did I want to start? I want to start with the awareness question. Nathan, talk to us about just generally, how aware is the public that these victories have even come to pass in Texas and across the country?

Nathan Cunneen: Absolutely. The shocking thing, really, is that even in mature school choice programs that have been around for a decade or more, still fewer than 30% of the populace are really aware that their education options exist. And this is a major problem. I was blessed earlier with a highway metaphor that I’m going to steal and use for the rest of this panel: if the policy victory is the car, the awareness is the gasoline. It’s the number of families who apply for the program that allows us to protect it over the next years to decade. It’s what incentivizes new school supply. It’s the parents showing up to help defend against hostile litigation or advocating to their legislators that we need to expand the program. And what we’ve seen over and over again in states is that the folks we really want to take advantage of these education choice programs, low-income and special needs families, are the last population that usually discovers that these options exist.

In fact, there’s some research from other states that shows it takes about three or four years to get information disseminated amongst those communities that these options even exist at all. So that’s where philanthropy has a major role to play, and I do think Texas has been a shining light on that effort. Texas has the benefit of not only being one of the biggest states in the country, but we also get to learn from what all the other states that have gone before us have done. That was really the American Federation for Children’s guiding light during this implementation process. Our national implementation team partnered with private philanthropy to try to drive as many low-income and special needs student applications as humanly possible, because we know that if we can have a big first year and a big second year, that’s going to set up everything else that we’re going to talk about on this panel today.

But also, maybe we can cut that learning curve in Texas in a way that other states just haven’t been able to. That’s what’s really going to fuel this movement, I think, over the next 10 years: can we find a way, working with philanthropy and new technical tools, to make sure that the low-income families who are least likely to know about this can actually get the information in front of them as quickly as possible? Because everything else flows from there.

Peter Lipsett: Was there a particular, for lack of a better word, disaster or failing from other states that you saw and thought, “Oh, that’s not going to work”? Something that maybe people in the room would think, “Oh, of course that’s a good way to do it.”

Nathan Cunneen: I think, generously, the mistake over the last several decades has just been that the money has been late in a number of ways. Full disclosure: the reason that I’m here, the reason that I do this work, is because I was a school choice recipient when I was growing up as a student in Florida. I used the tax credit program, and so I’m incredibly thankful to the philanthropic community who made my private education possible. My parents never could have paid for private school without the school choice program. But my mom didn’t find out about it through an awareness campaign. There was no marketing to educate students like me or parents like her that these options existed. She found out about it through word of mouth. And when we’re talking about places like Texas or Tennessee, or even Oklahoma, which is getting up there, we’re talking about 274,000 people applying for school choice in Texas.

Word of mouth can’t keep up with that kind of size. We need technical tools, we need holistic marketing programs, and we need the money that funds all of those things. I think in some of the legacy school choice states where we still see awareness lagging, it’s just been because these things haven’t existed in a really powerful way until post-COVID. And I think post-COVID, the movement has done a much better job of recognizing this is important.

Peter Lipsett: One thing I hear from donors sometimes is a hesitation to fund marketing efforts. They think, “That’s just going to go into advertising, that’s just going to go to pay premiums on all of that.” And it sounds like in this case, that is where dollars can be leveraged.

Nathan Cunneen: State partners can play a really big role in making sure that we can show philanthropic ROI. Here in Texas, the comptroller’s office has done a wonderful job of providing organizations with information about what kind of applications or awareness they are driving. So if the American Federation for Children sends a parent to the application link hosted with the comptroller’s office, we actually get that data back, knowing that we were the reason that that parent went and applied. We can then turn around and show our donors the real-world effect that they’re having with their marketing dollar.

Peter Lipsett: That’s good. Now, all of that awareness is moot if there are no schools for people to go to, right? The supply question is a really, really big deal, and it’s not easy to start a school. There are lots of people, I think, who want to start schools. My wife was part of a group of ladies in my little town that tried to start a school, and they did ultimately, after going through three different locations and having fire marshals reject their applications and going in front of the city boards and doing all of that. Then it fell apart because one of the women was a psychopath. That’s a whole separate conversation. Don’t go into business with a psychopath. But it’s hard. It’s really hard, isn’t it, Lisa?

Lisa Tarshis: It’s really hard.

Peter Lipsett: How big is this problem of supply?

Lisa Tarshis: It’s really big. Can I go back for one second to the marketing question, and then we’ll talk about the supply issue? Sometimes people hear “marketing” and they have a notion of what marketing means, but I actually think in this space it means a lot of things in a lot of different ways. For example, this past year when the Texas program came online, we worked with two different organizations, Black Pastors United for Education and the Texas Public Policy Foundation. In a six-week period, we got to 600 pastors, primarily in Black and brown churches, and hosted events with the pastors and with their communities, and got 24,000 students to register for the TEFA program. So that is another form of marketing that can be really effective. I think later we’ll talk about the federal scholarship tax credit program, but as we think about marketing, it’s yes, both the mass blasting and getting information out there in all of those ways, but it’s also these really targeted efforts of how we get to the communities that really need it.

So how big is the problem with school choice? Two stats, I think, really show this. There were 41,000 students in Florida this past year who had ESA (education savings account) funds, who wanted to use them to send their kids to a school, and didn’t. Thirty-five percent of those families cited the reason they didn’t use them was because they could not find a seat. That’s a tens-of-thousands-of-students issue. In Texas, there were 274,000 students who applied for TEFA, the Texas program. There are somewhere between 70,000 and 100,000 seats in private schools in Texas. The program didn’t fund all of those students; it funded 105,000 to 107,000. But that program will expand over time, and the seats don’t exist for those families to choose them. So we are setting ourselves up for failure here, and I think those are just two examples of the size of the problem.

Peter Lipsett: So talk to us about Primer. You referenced the web of organizations, because there’s a for-profit, there’s a nonprofit, there’s a C4. You kind of have it all. Talk to us about how you’re addressing the supply problem.

Lisa Tarshis: We have this simple promise of what happens when you take amazing educators and give them the tools and the resources they need to start education in their community that is for the community and by the community. You back that with technology, you change the teacher role a little bit, and you can see amazing outcomes with students. We are seeing that our students are growing 70% more than their peers across the country, and 72% of them qualify for free and reduced lunch, so we’re really working with this lower-income population and helping close their gaps. Over the past five years, we have spent an enormous amount of time on real estate, on regulatory issues, on all of these pieces related to starting schools. Real estate has been the single hardest challenge to solve. We had over 1,500 educators from 42 states in a 12-month period ask to open a Primer.

So whereas the rest of the country is having problems finding educators, that’s not the issue we’re having. The real estate is the issue. What that really comes down to is things that you might not even think about, right? It’s zoning, it’s fire code, it’s occupancy. Those are the kinds of pieces that were designed when schools all looked one way and nobody could have fathomed the myriad of options that would exist today. I’ll give two quick examples here that I think bring this to light. There’s a campus that can have a maximum of 50 students. When we went to get our certificate of occupancy, they asked us, “Where is your bus parking for three buses?” Well, that’s funny. We don’t bus kids. We can’t fill one bus, let alone three buses, and we don’t have it. All they could do was check yes or no. We spent about $30,000 fighting Miami-Dade County in order to be able to open this school just to solve that one issue, which has nothing to do, by the way, with whether kids are getting a good education or not.

There is a charter school that we wanted to co-locate in. The charter school had an extra hallway they weren’t using, and they were going to rent it out to us. Well, that charter school predated the need to have a sprinkler system in the school. So they could put kids in those classrooms, but if we wanted to put kids in those classrooms, we had to sprinkler that hallway. How does that make sense? Either the building is safe for children or the building is not safe for children. It should not matter who the provider is that is putting children in that hallway. Why can you have Sunday school at a church, but you can’t have Monday school at a church?

There’s a whole web of these different pieces that just don’t make sense. So, as Peter alluded to, this past year we started a C4 called Schools for America that is going state by state and right-sizing these regulations. In Florida this past year, we passed SB 182, which makes it so that schools can operate by right in commercial and mixed-use zones and creates an alternative pathway to comply with fire code as an existing school rather than a new school. That means we could open in that charter school now. We could open in that church now. And not just us: any provider can, as long as you’re under 150 students. We need to take these kinds of reforms and bring them to other states, and we’re currently working on that and working with other organizations on that piece.

We’re also actively looking at who the other organizations are that are doing this work. For example, the Foundation for Government Accountability is running a bill in Florida this coming session with Byron and Erika Donalds that has to do with permitting. They are basically saying that if you don’t approve a permit within a certain number of days, it is deemed approved. By the way, it took me 173 days to get a permit in Miami for one of our schools, so that’s a fun fact. So we asked them, “Can you just add schools? So it’s good for this, this, this, this, and schools.” What are the other places where we don’t necessarily have to own the charge or get involved, but where other people are carrying that torch and we can leverage what’s already happening to make school choice more durable?

I’m going to say one last thing. The thing that keeps me up at night is that there are going to be more than these 41,000 families in Florida, or more than these families in Texas, who have the funds and can’t find a seat. And what’s going to happen is that the teachers union is going to come back and say, “Well, your program isn’t working, because these families are frustrated that they can’t find a place to send their kids. If you just give that money back to us, the families will have seats and it won’t be an issue.” If we don’t create the supply for those schools, we are handing them that win.

Peter Lipsett: There are a number of different groups out there that are engaged in this. Primer is obviously a piece of this, and if there’s time, we can dig into the nuts and bolts of that a little bit. You mentioned Erika Donalds. She has her Education Freedom Foundation and National Micro School Center. So there are other groups out there doing really good work on this front. Frankly, I don’t think that’s a saturated market yet. Maybe you would say so because you want Primer to be the answer, but…

Lisa Tarshis: No, I don’t know. And I’m the first to say there are amazing school networks out there, right? We talk a lot about folks wanting to invest in small schools and thinking about, “How do I go find one school leader to invest in?” I think that’s a stock option versus a mutual fund option. So we talk a lot about the networks. Anyway, that’s a sidebar, but we could get to that later.

Peter Lipsett: Perfect. So we have to have people know about it, and then we’ve got to get the schools. But then if it all gets shut down because litigation comes along and closes it, as we saw in Oklahoma, where they kind of lost theirs, at least for a while, or in South Carolina, which has had back-and-forth issues, we have seen litigation stymie good education choice programs. We also know that the teachers unions, et cetera, are funding public campaigns to say, “Don’t do this.” On the flip side, though, without litigation, we would never be in this situation either. So at the risk of asking a lawyer to give a short history of anything, give us the short history of how litigation actually helped us get here, and then let’s talk about the threats.

Thomas Fisher: Terrific. So 30 or so years ago when I was in law school, the big issue about school choice, other than trying to convince people it was a good idea, was whether you could spend a voucher at a Catholic school, because Catholic schools were going to be the main providers if we could use vouchers at all. That was an Establishment Clause question under the First Amendment. The Cleveland voucher program was one of the seminal pieces of legislation that tested this question. It wound up at the US Supreme Court in 2002, and lo and behold, the Court said, “This is fine. You can do this as long as parents are making the decision.” That’s the critical piece. Parents break the circuit between the state and the school, and if that happens, there’s no Establishment Clause problem. But what about those pesky state constitutions, where I spent a lot of my time thinking?

Many states over a period of centuries have enacted something called a Blaine Amendment, which is basically an anti-Catholic effort to shut down any money going to Catholic or other religious entities. So the concern was, will courts in states with Blaine Amendments say you can’t use the voucher at the Catholic school because of the state constitution? Guess what? There’s a flip side to the Establishment Clause in the First Amendment. It’s called the Free Exercise Clause. That issue got litigated in two cases, in 2020 and 2022, where the Supreme Court said states cannot bar religious providers from participating in school choice programs under the First Amendment’s Free Exercise Clause. Those were really critical decisions, clearing out any serious federal questions about the uses of school choice. Teachers unions, of course, are not done. They come back, and they start trying to use other provisions of state constitutions to thwart school choice.

The big one that they like to use is that every state has a constitutional commitment to public schools. No controversy there; that has been around for a long time. The teachers unions like to say, “Well, the implication of that, of course, is that you can’t then have private school choice, because we have a commitment to public schools.” That logic just doesn’t work, but that’s one of the big issues we continue to litigate around the country. And that’s why my organization, EdChoice Legal Advocates, exists: to address those issues, to step in and help defend the programs against state constitutional challenges.

Peter Lipsett: Are the provisions within the state constitutions explicitly saying a right to a public education, or a right to education? Are there some states that have it a little broader that make it easier?

Thomas Fisher: Well, every state constitution is exceptional and special in its own way. But for the most part, what we’re talking about here is a provision that says the state shall establish a uniform and general system of common schools that should be efficient, thorough, blah, blah, blah, blah, blah, blah, all kinds of additional words in there. Many state supreme courts have taken that to mean, on the one hand, that you have to have a minimally adequate public education. But the teachers unions are trying to go another step, and they’ve done this successfully in Florida. In fact, that’s the only state where it’s been successful: getting a state supreme court to say, “And by the way, if you also spend money on private school choice, you are thereby undercutting your adequate public schools, and therefore you cannot do it.” Now, the irony is that Florida, where that theory has been successful, happens to have one of the most successful ESA programs in the country, because everybody’s just ignored the decision.

There’s a new lawsuit in Florida that we’re getting involved with, where we’re hoping to get that case overturned in the state supreme court and stop the teachers unions from shopping it around the country to try to use it in other states. So it’s an important precedent that we’re trying to push back on.

Peter Lipsett: We’ve referenced Florida a lot. I know Texans are very proud of Texas. Texas is just a younger program. Texas is going to be the example that everyone uses soon. So don’t worry, Texas. Blow them out of the water. It’s coming. Okay. So big news with EdChoice is that you have recently taken over some litigation. Institute for Justice, many of you know, many of you support, has long been an important precedent setter in this area. The precedent is kind of set. Talk to us about the partnership now with EdChoice and IJ.

Thomas Fisher: Right. Before my current role, I was in Indiana state government as solicitor general for a number of years, and I had a chance to work with IJ in that role. One of the cases I litigated was a challenge to Indiana’s voucher program, and we worked hand in hand with IJ to get a big victory in the Indiana Supreme Court. A few years ago, when IJ made the decision that they wanted to hand off school choice defense, they decided EdChoice would be the place to go. And then EdChoice, I’m so grateful, recruited me to come and start up that litigation shop. So I’ve been working in a formal partnership with IJ for the past three years. In fact, just this month is the three-year anniversary. We have another year on our partnership, and right now the transition is going very smoothly. The cases are going very well, and all the new cases are coming to EdChoice Legal Advocates.

I have two additional lawyers who work with me and a paralegal, and we’re representing parents in these cases. We’ve learned a lot from IJ, and I think the partnership has been a resounding success. We look forward to continued work on this issue.

Peter Lipsett: And the difference here is, as I said, IJ was setting the precedent, and many others, like Pacific Legal, want to get the big precedent but then kind of back away from the field. What can sometimes happen is then there’s nobody… I mean, yes, a general private attorney can then protect it, but your job is to then pick off all the people who are just trying to go against that precedent, right?

Thomas Fisher: I think the critical thing in these cases, including in my experience when I litigated on behalf of Indiana, is having another aspect of litigation where you’ve got families who use these programs come into court, tell their stories, and augment the arguments already being made. With IJ having decided that it’s made its big precedent and wants to go do other things, it’s really important that we step in and continue to tell those stories on behalf of families who benefit from these programs. They are compelling stories and wonderful clients who work so hard for their children.

Peter Lipsett: Lisa, going back to the supply question for a minute, let’s say somebody out here says, “You know what? I want to start a school. I’m going to put my career on hold. I’m going to help my kids. I can do this, I think.” They don’t have a psychopath as a partner, so they’re good. They’re clean in that respect. They say, “I think maybe Primer can help me.” Talk to us, nuts and bolts wise, what does that look like in terms of coming to you, starting a school? Is it a cookie-cutter model? Do you give them a curriculum?

Lisa Tarshis: So at Primer, educators come to us. We help them find the real estate and get everything up and running. We have all of the back end. We have all of our own proprietary software. We give them the curriculum. We help to recruit the students. So we really think of ourselves as the entire back office for this. Now, there’s good and bad to that, right? You have some flexibility and freedom in terms of what you want to do, and some that you don’t. We know our reading and math program is working for students, so you have to follow what we’re doing there. There are other programs out there that have incubators and help people found schools where they have a lot more freedom. What I always say when somebody approaches is, “Well, what’s your end goal in this, and how many hard and fast lines do you have on what you want that to look like?” Depending on those answers, we help connect people with the right organizations who can help them get started.

Peter Lipsett: That’s great. All right, so switching gears a little bit, but it’s still all part of this. Many of you, hopefully at this point, have heard about the federal education freedom tax credit that was passed into law as part of the One Big Beautiful Bill. AFC is one of the leaders in this area. Nathan, I’ll just let you talk about it and expound on it, because we need to make sure people understand it, and we can also get input from others on this too.

Nathan Cunneen: Sure. History was made in the school choice movement with the passage of the Big Beautiful Bill, because this federal tax credit really represents, I think, the largest opportunity for school choice in the country that we’ve ever had. And having previously acknowledged my Texas bias, that’s saying something. The way it’s going to work is there is a dollar-for-dollar tax credit available starting in 2027. The rules for this program were just published this past week. What’s really spectacular about it is that it’s an uncapped tax credit, so billions and billions and billions of dollars can potentially be raised for school choice. Students are eligible based on a percentage of their area median income, so predominantly lower- and middle-class families are eligible. They can use it for private school tuition. Public school students can use it for tutoring. You can use it for extracurricular activities.

It really presents an opportunity for the philanthropic community to drive dollars in a way that really helps students within the education system. The challenge, primarily, and this is what AFC is really, really focused on, is that while the total aggregate tax credit is uncapped, individual contributions are limited to $1,700 per individual. Thankfully, we were blessed last week when the Treasury Department said that married couples can contribute $3,400 to the tax credit, which dramatically expands the market opportunity that exists for these dollars. But just to be completely frank with you all, we are terrified that it’s going to be very, very, very difficult to raise these dollars in $1,700 increments. Anyone who’s raised money before knows that billions of dollars in small dollar amounts is very difficult to raise. So what we’re building at AFC is a scholarship-granting organization that donors can contribute to, and we will package up that money and distribute it as scholarships.

We’re also doing something similar to what Primer is doing for schools, which I call “rent an SGO.” We are building all of the back-end technology to allow others with existing donor networks to use us as the back end for their own SGO. You can use all of our technology, you can use your logo, you can message your donors. We don’t need to have any part of the fundraising process. We just want to help organizations around the country raise as much of this money as we can. We don’t care if you give it to us, or if you start your own SGO, or give to somebody else. The important thing for kids is that we can go back to Congress during the next reconciliation process with proof of demand. We were talking about awareness here in Texas and around the country. If we can show this proof of demand, that we’ve raised several billion dollars and that students are using it, the chances of us being able to protect that program increase exponentially. So in 2027 and 2028, it’s crucially important that we raise as much of this money as possible, both for kids and for the health of the program overall.

Peter Lipsett: I mean, essentially, if you think that the federal government can spend 1,700 random dollars better than you can, great. Let them keep your taxes. If not, take $1,700, donate it to one of these scholarship-granting organizations, and that comes off your tax bill. Instead of the government spending that $1,700, one of these scholarship organizations will spend it on an issue that you care about. It is, to me, a no-brainer.

Nathan Cunneen: And you might even be getting more leverage on your dollar, because in many states, including here in Texas, the tax credit can stack on top of the existing state program. If a student is using the TEFA program in Texas and receiving $10,400, that might be plenty to pay for private school in the elementary or middle school years. Oftentimes private high school is a lot more expensive than some of those early education opportunities, but you can use this tax credit on top of your existing state-level scholarship, which will dramatically increase the options for families in places like Texas. I know there are a few other states, like Oklahoma, where the rules are the same and you can stack them.

Peter Lipsett: Lisa, Tom, anything you want to add about the education freedom tax piece?

Lisa Tarshis: Sure.

Peter Lipsett: The answer could be no.

Lisa Tarshis: The $1,700 is, I think, a challenge. Getting the word out there is definitely going to be a challenge. For every 1% of the taxpayer population that we get to donate to this program, that brings in $1.7 billion. So that is a significant amount of money just for getting an extra 1% of the taxpayer population to opt into this. Now, I think there are two big challenges here. You need to make your $1,700 donation: you contribute to an SGO, and then you wait until you file your taxes to get that back as a dollar-for-dollar credit on your federal tax liability. There are a lot of people in this country who don’t actually have the ability to write a $1,700 or a $3,400 contribution, but have $1,700 or $3,400 in tax liability. So longer term, we’re going to have to do two things.

The shorter-term, easier one is the payroll deduction option, where people can do that per paycheck and then send it to an SGO. The longer-term solution is, on the back end of a payroll system, to actually adjust your tax withholdings by the amount per paycheck, so that instead of it coming out, you have your federal tax line, your state tax line, and you’d almost have another tax line that comes out of your federal tax line and then goes straight over to the SGO. Because the rules just came out, and because this is going to involve all the different payroll providers and all of that, it’s not going to be live in January. But I think there’s a huge opportunity, and we and some others in this space are working on that already, because that has the potential to increase the number of people who can give to the program significantly.

Nathan Cunneen: I’m really glad that you brought that up. We’re currently working with strategic partners, and we think that we’re going to have this payroll deduction mechanism in process and implemented by March or April of next year, which would just be huge. We’re also working with key government partners to even try to get the government of Texas to do things like that.

Peter Lipsett: Do any of you have any sense, and this is me putting you on the spot here, you may not know this, but how much money is out there right now in scholarships? What is the delta of what this makes potentially possible? I mean, knowing that there’s some that would be cannibalized, et cetera, but…

Nathan Cunneen: With the $3,400 rule, my team estimates that the TAM of the scholarship fund is around $250 billion over the next decade. We’re waiting to get data on how sticky the tax credit is, whether somebody who contributes in the first year is exponentially more likely to continue. I think our hypothesis is that that is true. The $1,700 amount is potentially our disadvantage at the start, but small dollars can become our advantage at the end: somebody who is able to contribute $1,700 at the beginning may find it a lot easier to continue doing that than perhaps with a million-dollar gift. So hopefully we can see that sort of growth effect over time, but there’s a lot of uncertainty. Awareness is going to play a massive role. I also think we need legitimizing figures in the philanthropic community, in government, and among community leaders who are saying to people who don’t understand the tax code, “This is not a scam. This is actually a really good use of your dollar.” Unfortunately, we have to go much broader in terms of our donor base than people who are used to contributing philanthropically. That is just a massive awareness and implementation challenge.

Lisa Tarshis: I also think early adoption is going to be really important. At 12:01 on January 1st, people can start giving. We are using AFC as our SGO for the program, and one of the great things is that AFC is going to start deploying those dollars fairly quickly. So come February, March, April, you should start seeing some dollars out there for students, which then allows us to get testimonials and to hear success stories at a time when we still have the whole rest of the year to use those to leverage other people to give. So as many people as we can get to give in January, so that we can then deploy those dollars, I think is going to have a compounding effect.

Nathan Cunneen: And one more opportunity potentially for the folks in this room: $1,700 doesn’t necessarily have to be the maximum you could contribute to this effort. One of the things AFC is doing, and we’re encouraging other SGOs to do the same, is that we are not taking a percentage of funds raised. We have raised our full overhead through philanthropy, and very generous donors have funded our efforts. So every single dollar that we raise for scholarships is going to be handed out in scholarships, and we’re encouraging other organizations to look at doing the same. We think that’s best, reputationally, for the movement and for the growth of the program over time. But also, the whole reason that we’re doing this is to try to help kids, and every dollar that we can get in front of parents serves that end.

Peter Lipsett: All right. We’ve got three minutes left, so I could probably entertain one question from the audience. No pressure. It needs to be a really good question.

Audience Member: Tom, what’s the litigation outlook for this new federal school choice plan?

Thomas Fisher: Well, I think it’s going to be pretty difficult to have a serious challenge, at least at this point. The Supreme Court ruled years ago that taxpayers don’t have, as we call it in the legal profession, standing to sue to challenge tax credits, which isn’t to say that there might not be somebody who comes out of the woodwork and claims actual harm. It’s hard to imagine exactly what that would look like. But overall, I think the risk of a serious challenge is small enough that it’s not really something that we’ve completely had to model out. That said, if it does happen, I think we and many others will be ready to jump in and push back against that litigation. It’s such an important aspect of the development of the school choice model.

Peter Lipsett: Well, as we framed up to start this panel, this Education Choice Implementation Fund at DonorsTrust is built to try to answer some of these things through donations that you all make, that foundations make, that you can make with your qualified charitable distribution. We have not sent an email out. You haven’t seen this in your inbox yet, so this is hot-off-the-press news: we have just announced our first round of grantees for the Education Choice Implementation Fund with the initial batch of dollars raised. And all three of these organizations, as you may not be surprised, we would put them on the stage and withhold money. But all three of these organizations, Primer Foundation, AFC, and EdChoice, have received grants for some of the work that you’ve heard about here today.

Implementing Education Choice

Conservative and libertarian donors have made phenomenal gains in the area of education choice over the past 10 years. The question now becomes: how do we defend those gains? There are some phenomenal groups out there that are focused on implementation, particularly with regard to the three big pillars we’ve identified: 1) the supply of schools; 2) making sure parents know how to opt in their kids; and 3) defending against the onslaught of legal and public relations attention from people who are not keen on school choice.

At a recent event that DonorsTrust hosted in Dallas, we held a conversation on education choice implementation to highlight what’s going on. How are we expanding supply? How do we get parents to understand the process here and what are we going to do to defend against the lawsuits and the negative press when it comes? Our panelists were Nathan Cunneen, the State Director for American Federation for Children, American Federation for Children; Lisa Tarshis, Primer Foundation’s executive director; and Tom Fisher, who is EdChoice’s executive vice president and director of litigation.

Note: This transcript was generated and cleaned by AI.

Peter Lipsett: Nathan Cunneen right here is the state director for American Federation for Children. AFC, of course, moved its headquarters from Washington, DC, to Dallas, as so many other… I guess I could get people to raise hands on how many companies have moved to Dallas, but AFC moved to Dallas several years ago and has also been instrumental in the fight here to get education savings accounts. We’re going to dive into that. Lisa Tarshis is with Primer Foundation. She’s executive director there. Primer is a set of different organizations, really, with a big focus on building that supply, getting those micro schools built out across the country in a good, smart way. We’ll hear about that. And then Tom Fisher is EdChoice’s executive vice president and director of litigation, and he’s going to dive in on that litigation fight.

So, my friends, because this is an education panel, let’s start by giving a letter grade, and no grade inflation here. How would you grade the national implementation effort of all of these school choice victories so far? We’ll just go down the line real quick, and then I’ll let you explain it.

Lisa Tarshis: A D.

Peter Lipsett: Okay. Ouch.

Nathan Cunneen: We’re starting off in a pessimistic way. I would give a C to the national organization, and I’ll just acknowledge my bias right here at the front: Texas is doing it right. Texas gets an A, and the rest of the country needs to learn from the real miracle that has occurred here in the last few years.

Peter Lipsett: Tom?

Thomas Fisher: I’m an optimist. I’m going to go C+. I think we’ve got a lot of work to do, especially educating parents to know that these options are there, and encouraging new providers to enter the marketplace, especially in states where we have a robust education savings account program, so we really have good competition.

Peter Lipsett: It does sound like we need a parent conference based on all this. Lisa, you have a D. What’s the quick explanation of that?

Lisa Tarshis: I think a lot of people are clapping their hands that the legislation was passed, and I think there are tons of parents out there who don’t actually know how to use it, how to leverage it, or don’t know that it is for them or that they can get it for their kids. We are seeing tons of founders who want to start schools who actually can’t do that. We’ll talk about that a little bit more later, but the supply doesn’t exist, and I worry that we are going to hand the victory to the other side if we don’t fix these issues.

Peter Lipsett: And that’s a good summation of why we think this issue is so important. I remember sitting at my desk one day dwelling on this issue, and literally the same day I got an email from Tommy Schultz, who runs American Federation for Children, announcing that they had just hired a new person to be the national implementation director. So AFC and others do realize this is a big deal as well. We’re going to spend the next few minutes talking about that. So we’ve identified these three problems. You reiterated it: we need schools, because people actually need a place to go. The parents need to actually understand that this is even an option, and as with signing up for any program, there are hurdles to that. It’s different in every state. And then the other side is coming after us in terms of painting this as a bad thing, as a dangerous thing.

We’ve actually seen states where it has been rolled back because those efforts have been successful. They’re going in the courts, they’re going in the court of public opinion, and we have to push back on that. So let’s start with the supply. No, no, no. Where did I want to start? I want to start with the awareness question. Nathan, talk to us about just generally, how aware is the public that these victories have even come to pass in Texas and across the country?

Nathan Cunneen: Absolutely. The shocking thing, really, is that even in mature school choice programs that have been around for a decade or more, still fewer than 30% of the populace are really aware that their education options exist. And this is a major problem. I was blessed earlier with a highway metaphor that I’m going to steal and use for the rest of this panel: if the policy victory is the car, the awareness is the gasoline. It’s the number of families who apply for the program that allows us to protect it over the next years to decade. It’s what incentivizes new school supply. It’s the parents showing up to help defend against hostile litigation or advocating to their legislators that we need to expand the program. And what we’ve seen over and over again in states is that the folks we really want to take advantage of these education choice programs, low-income and special needs families, are the last population that usually discovers that these options exist.

In fact, there’s some research from other states that shows it takes about three or four years to get information disseminated amongst those communities that these options even exist at all. So that’s where philanthropy has a major role to play, and I do think Texas has been a shining light on that effort. Texas has the benefit of not only being one of the biggest states in the country, but we also get to learn from what all the other states that have gone before us have done. That was really the American Federation for Children’s guiding light during this implementation process. Our national implementation team partnered with private philanthropy to try to drive as many low-income and special needs student applications as humanly possible, because we know that if we can have a big first year and a big second year, that’s going to set up everything else that we’re going to talk about on this panel today.

But also, maybe we can cut that learning curve in Texas in a way that other states just haven’t been able to. That’s what’s really going to fuel this movement, I think, over the next 10 years: can we find a way, working with philanthropy and new technical tools, to make sure that the low-income families who are least likely to know about this can actually get the information in front of them as quickly as possible? Because everything else flows from there.

Peter Lipsett: Was there a particular, for lack of a better word, disaster or failing from other states that you saw and thought, “Oh, that’s not going to work”? Something that maybe people in the room would think, “Oh, of course that’s a good way to do it.”

Nathan Cunneen: I think, generously, the mistake over the last several decades has just been that the money has been late in a number of ways. Full disclosure: the reason that I’m here, the reason that I do this work, is because I was a school choice recipient when I was growing up as a student in Florida. I used the tax credit program, and so I’m incredibly thankful to the philanthropic community who made my private education possible. My parents never could have paid for private school without the school choice program. But my mom didn’t find out about it through an awareness campaign. There was no marketing to educate students like me or parents like her that these options existed. She found out about it through word of mouth. And when we’re talking about places like Texas or Tennessee, or even Oklahoma, which is getting up there, we’re talking about 274,000 people applying for school choice in Texas.

Word of mouth can’t keep up with that kind of size. We need technical tools, we need holistic marketing programs, and we need the money that funds all of those things. I think in some of the legacy school choice states where we still see awareness lagging, it’s just been because these things haven’t existed in a really powerful way until post-COVID. And I think post-COVID, the movement has done a much better job of recognizing this is important.

Peter Lipsett: One thing I hear from donors sometimes is a hesitation to fund marketing efforts. They think, “That’s just going to go into advertising, that’s just going to go to pay premiums on all of that.” And it sounds like in this case, that is where dollars can be leveraged.

Nathan Cunneen: State partners can play a really big role in making sure that we can show philanthropic ROI. Here in Texas, the comptroller’s office has done a wonderful job of providing organizations with information about what kind of applications or awareness they are driving. So if the American Federation for Children sends a parent to the application link hosted with the comptroller’s office, we actually get that data back, knowing that we were the reason that that parent went and applied. We can then turn around and show our donors the real-world effect that they’re having with their marketing dollar.

Peter Lipsett: That’s good. Now, all of that awareness is moot if there are no schools for people to go to, right? The supply question is a really, really big deal, and it’s not easy to start a school. There are lots of people, I think, who want to start schools. My wife was part of a group of ladies in my little town that tried to start a school, and they did ultimately, after going through three different locations and having fire marshals reject their applications and going in front of the city boards and doing all of that. Then it fell apart because one of the women was a psychopath. That’s a whole separate conversation. Don’t go into business with a psychopath. But it’s hard. It’s really hard, isn’t it, Lisa?

Lisa Tarshis: It’s really hard.

Peter Lipsett: How big is this problem of supply?

Lisa Tarshis: It’s really big. Can I go back for one second to the marketing question, and then we’ll talk about the supply issue? Sometimes people hear “marketing” and they have a notion of what marketing means, but I actually think in this space it means a lot of things in a lot of different ways. For example, this past year when the Texas program came online, we worked with two different organizations, Black Pastors United for Education and the Texas Public Policy Foundation. In a six-week period, we got to 600 pastors, primarily in Black and brown churches, and hosted events with the pastors and with their communities, and got 24,000 students to register for the TEFA program. So that is another form of marketing that can be really effective. I think later we’ll talk about the federal scholarship tax credit program, but as we think about marketing, it’s yes, both the mass blasting and getting information out there in all of those ways, but it’s also these really targeted efforts of how we get to the communities that really need it.

So how big is the problem with school choice? Two stats, I think, really show this. There were 41,000 students in Florida this past year who had ESA (education savings account) funds, who wanted to use them to send their kids to a school, and didn’t. Thirty-five percent of those families cited the reason they didn’t use them was because they could not find a seat. That’s a tens-of-thousands-of-students issue. In Texas, there were 274,000 students who applied for TEFA, the Texas program. There are somewhere between 70,000 and 100,000 seats in private schools in Texas. The program didn’t fund all of those students; it funded 105,000 to 107,000. But that program will expand over time, and the seats don’t exist for those families to choose them. So we are setting ourselves up for failure here, and I think those are just two examples of the size of the problem.

Peter Lipsett: So talk to us about Primer. You referenced the web of organizations, because there’s a for-profit, there’s a nonprofit, there’s a C4. You kind of have it all. Talk to us about how you’re addressing the supply problem.

Lisa Tarshis: We have this simple promise of what happens when you take amazing educators and give them the tools and the resources they need to start education in their community that is for the community and by the community. You back that with technology, you change the teacher role a little bit, and you can see amazing outcomes with students. We are seeing that our students are growing 70% more than their peers across the country, and 72% of them qualify for free and reduced lunch, so we’re really working with this lower-income population and helping close their gaps. Over the past five years, we have spent an enormous amount of time on real estate, on regulatory issues, on all of these pieces related to starting schools. Real estate has been the single hardest challenge to solve. We had over 1,500 educators from 42 states in a 12-month period ask to open a Primer.

So whereas the rest of the country is having problems finding educators, that’s not the issue we’re having. The real estate is the issue. What that really comes down to is things that you might not even think about, right? It’s zoning, it’s fire code, it’s occupancy. Those are the kinds of pieces that were designed when schools all looked one way and nobody could have fathomed the myriad of options that would exist today. I’ll give two quick examples here that I think bring this to light. There’s a campus that can have a maximum of 50 students. When we went to get our certificate of occupancy, they asked us, “Where is your bus parking for three buses?” Well, that’s funny. We don’t bus kids. We can’t fill one bus, let alone three buses, and we don’t have it. All they could do was check yes or no. We spent about $30,000 fighting Miami-Dade County in order to be able to open this school just to solve that one issue, which has nothing to do, by the way, with whether kids are getting a good education or not.

There is a charter school that we wanted to co-locate in. The charter school had an extra hallway they weren’t using, and they were going to rent it out to us. Well, that charter school predated the need to have a sprinkler system in the school. So they could put kids in those classrooms, but if we wanted to put kids in those classrooms, we had to sprinkler that hallway. How does that make sense? Either the building is safe for children or the building is not safe for children. It should not matter who the provider is that is putting children in that hallway. Why can you have Sunday school at a church, but you can’t have Monday school at a church?

There’s a whole web of these different pieces that just don’t make sense. So, as Peter alluded to, this past year we started a C4 called Schools for America that is going state by state and right-sizing these regulations. In Florida this past year, we passed SB 182, which makes it so that schools can operate by right in commercial and mixed-use zones and creates an alternative pathway to comply with fire code as an existing school rather than a new school. That means we could open in that charter school now. We could open in that church now. And not just us: any provider can, as long as you’re under 150 students. We need to take these kinds of reforms and bring them to other states, and we’re currently working on that and working with other organizations on that piece.

We’re also actively looking at who the other organizations are that are doing this work. For example, the Foundation for Government Accountability is running a bill in Florida this coming session with Byron and Erika Donalds that has to do with permitting. They are basically saying that if you don’t approve a permit within a certain number of days, it is deemed approved. By the way, it took me 173 days to get a permit in Miami for one of our schools, so that’s a fun fact. So we asked them, “Can you just add schools? So it’s good for this, this, this, this, and schools.” What are the other places where we don’t necessarily have to own the charge or get involved, but where other people are carrying that torch and we can leverage what’s already happening to make school choice more durable?

I’m going to say one last thing. The thing that keeps me up at night is that there are going to be more than these 41,000 families in Florida, or more than these families in Texas, who have the funds and can’t find a seat. And what’s going to happen is that the teachers union is going to come back and say, “Well, your program isn’t working, because these families are frustrated that they can’t find a place to send their kids. If you just give that money back to us, the families will have seats and it won’t be an issue.” If we don’t create the supply for those schools, we are handing them that win.

Peter Lipsett: There are a number of different groups out there that are engaged in this. Primer is obviously a piece of this, and if there’s time, we can dig into the nuts and bolts of that a little bit. You mentioned Erika Donalds. She has her Education Freedom Foundation and National Micro School Center. So there are other groups out there doing really good work on this front. Frankly, I don’t think that’s a saturated market yet. Maybe you would say so because you want Primer to be the answer, but…

Lisa Tarshis: No, I don’t know. And I’m the first to say there are amazing school networks out there, right? We talk a lot about folks wanting to invest in small schools and thinking about, “How do I go find one school leader to invest in?” I think that’s a stock option versus a mutual fund option. So we talk a lot about the networks. Anyway, that’s a sidebar, but we could get to that later.

Peter Lipsett: Perfect. So we have to have people know about it, and then we’ve got to get the schools. But then if it all gets shut down because litigation comes along and closes it, as we saw in Oklahoma, where they kind of lost theirs, at least for a while, or in South Carolina, which has had back-and-forth issues, we have seen litigation stymie good education choice programs. We also know that the teachers unions, et cetera, are funding public campaigns to say, “Don’t do this.” On the flip side, though, without litigation, we would never be in this situation either. So at the risk of asking a lawyer to give a short history of anything, give us the short history of how litigation actually helped us get here, and then let’s talk about the threats.

Thomas Fisher: Terrific. So 30 or so years ago when I was in law school, the big issue about school choice, other than trying to convince people it was a good idea, was whether you could spend a voucher at a Catholic school, because Catholic schools were going to be the main providers if we could use vouchers at all. That was an Establishment Clause question under the First Amendment. The Cleveland voucher program was one of the seminal pieces of legislation that tested this question. It wound up at the US Supreme Court in 2002, and lo and behold, the Court said, “This is fine. You can do this as long as parents are making the decision.” That’s the critical piece. Parents break the circuit between the state and the school, and if that happens, there’s no Establishment Clause problem. But what about those pesky state constitutions, where I spent a lot of my time thinking?

Many states over a period of centuries have enacted something called a Blaine Amendment, which is basically an anti-Catholic effort to shut down any money going to Catholic or other religious entities. So the concern was, will courts in states with Blaine Amendments say you can’t use the voucher at the Catholic school because of the state constitution? Guess what? There’s a flip side to the Establishment Clause in the First Amendment. It’s called the Free Exercise Clause. That issue got litigated in two cases, in 2020 and 2022, where the Supreme Court said states cannot bar religious providers from participating in school choice programs under the First Amendment’s Free Exercise Clause. Those were really critical decisions, clearing out any serious federal questions about the uses of school choice. Teachers unions, of course, are not done. They come back, and they start trying to use other provisions of state constitutions to thwart school choice.

The big one that they like to use is that every state has a constitutional commitment to public schools. No controversy there; that has been around for a long time. The teachers unions like to say, “Well, the implication of that, of course, is that you can’t then have private school choice, because we have a commitment to public schools.” That logic just doesn’t work, but that’s one of the big issues we continue to litigate around the country. And that’s why my organization, EdChoice Legal Advocates, exists: to address those issues, to step in and help defend the programs against state constitutional challenges.

Peter Lipsett: Are the provisions within the state constitutions explicitly saying a right to a public education, or a right to education? Are there some states that have it a little broader that make it easier?

Thomas Fisher: Well, every state constitution is exceptional and special in its own way. But for the most part, what we’re talking about here is a provision that says the state shall establish a uniform and general system of common schools that should be efficient, thorough, blah, blah, blah, blah, blah, blah, all kinds of additional words in there. Many state supreme courts have taken that to mean, on the one hand, that you have to have a minimally adequate public education. But the teachers unions are trying to go another step, and they’ve done this successfully in Florida. In fact, that’s the only state where it’s been successful: getting a state supreme court to say, “And by the way, if you also spend money on private school choice, you are thereby undercutting your adequate public schools, and therefore you cannot do it.” Now, the irony is that Florida, where that theory has been successful, happens to have one of the most successful ESA programs in the country, because everybody’s just ignored the decision.

There’s a new lawsuit in Florida that we’re getting involved with, where we’re hoping to get that case overturned in the state supreme court and stop the teachers unions from shopping it around the country to try to use it in other states. So it’s an important precedent that we’re trying to push back on.

Peter Lipsett: We’ve referenced Florida a lot. I know Texans are very proud of Texas. Texas is just a younger program. Texas is going to be the example that everyone uses soon. So don’t worry, Texas. Blow them out of the water. It’s coming. Okay. So big news with EdChoice is that you have recently taken over some litigation. Institute for Justice, many of you know, many of you support, has long been an important precedent setter in this area. The precedent is kind of set. Talk to us about the partnership now with EdChoice and IJ.

Thomas Fisher: Right. Before my current role, I was in Indiana state government as solicitor general for a number of years, and I had a chance to work with IJ in that role. One of the cases I litigated was a challenge to Indiana’s voucher program, and we worked hand in hand with IJ to get a big victory in the Indiana Supreme Court. A few years ago, when IJ made the decision that they wanted to hand off school choice defense, they decided EdChoice would be the place to go. And then EdChoice, I’m so grateful, recruited me to come and start up that litigation shop. So I’ve been working in a formal partnership with IJ for the past three years. In fact, just this month is the three-year anniversary. We have another year on our partnership, and right now the transition is going very smoothly. The cases are going very well, and all the new cases are coming to EdChoice Legal Advocates.

I have two additional lawyers who work with me and a paralegal, and we’re representing parents in these cases. We’ve learned a lot from IJ, and I think the partnership has been a resounding success. We look forward to continued work on this issue.

Peter Lipsett: And the difference here is, as I said, IJ was setting the precedent, and many others, like Pacific Legal, want to get the big precedent but then kind of back away from the field. What can sometimes happen is then there’s nobody… I mean, yes, a general private attorney can then protect it, but your job is to then pick off all the people who are just trying to go against that precedent, right?

Thomas Fisher: I think the critical thing in these cases, including in my experience when I litigated on behalf of Indiana, is having another aspect of litigation where you’ve got families who use these programs come into court, tell their stories, and augment the arguments already being made. With IJ having decided that it’s made its big precedent and wants to go do other things, it’s really important that we step in and continue to tell those stories on behalf of families who benefit from these programs. They are compelling stories and wonderful clients who work so hard for their children.

Peter Lipsett: Lisa, going back to the supply question for a minute, let’s say somebody out here says, “You know what? I want to start a school. I’m going to put my career on hold. I’m going to help my kids. I can do this, I think.” They don’t have a psychopath as a partner, so they’re good. They’re clean in that respect. They say, “I think maybe Primer can help me.” Talk to us, nuts and bolts wise, what does that look like in terms of coming to you, starting a school? Is it a cookie-cutter model? Do you give them a curriculum?

Lisa Tarshis: So at Primer, educators come to us. We help them find the real estate and get everything up and running. We have all of the back end. We have all of our own proprietary software. We give them the curriculum. We help to recruit the students. So we really think of ourselves as the entire back office for this. Now, there’s good and bad to that, right? You have some flexibility and freedom in terms of what you want to do, and some that you don’t. We know our reading and math program is working for students, so you have to follow what we’re doing there. There are other programs out there that have incubators and help people found schools where they have a lot more freedom. What I always say when somebody approaches is, “Well, what’s your end goal in this, and how many hard and fast lines do you have on what you want that to look like?” Depending on those answers, we help connect people with the right organizations who can help them get started.

Peter Lipsett: That’s great. All right, so switching gears a little bit, but it’s still all part of this. Many of you, hopefully at this point, have heard about the federal education freedom tax credit that was passed into law as part of the One Big Beautiful Bill. AFC is one of the leaders in this area. Nathan, I’ll just let you talk about it and expound on it, because we need to make sure people understand it, and we can also get input from others on this too.

Nathan Cunneen: Sure. History was made in the school choice movement with the passage of the Big Beautiful Bill, because this federal tax credit really represents, I think, the largest opportunity for school choice in the country that we’ve ever had. And having previously acknowledged my Texas bias, that’s saying something. The way it’s going to work is there is a dollar-for-dollar tax credit available starting in 2027. The rules for this program were just published this past week. What’s really spectacular about it is that it’s an uncapped tax credit, so billions and billions and billions of dollars can potentially be raised for school choice. Students are eligible based on a percentage of their area median income, so predominantly lower- and middle-class families are eligible. They can use it for private school tuition. Public school students can use it for tutoring. You can use it for extracurricular activities.

It really presents an opportunity for the philanthropic community to drive dollars in a way that really helps students within the education system. The challenge, primarily, and this is what AFC is really, really focused on, is that while the total aggregate tax credit is uncapped, individual contributions are limited to $1,700 per individual. Thankfully, we were blessed last week when the Treasury Department said that married couples can contribute $3,400 to the tax credit, which dramatically expands the market opportunity that exists for these dollars. But just to be completely frank with you all, we are terrified that it’s going to be very, very, very difficult to raise these dollars in $1,700 increments. Anyone who’s raised money before knows that billions of dollars in small dollar amounts is very difficult to raise. So what we’re building at AFC is a scholarship-granting organization that donors can contribute to, and we will package up that money and distribute it as scholarships.

We’re also doing something similar to what Primer is doing for schools, which I call “rent an SGO.” We are building all of the back-end technology to allow others with existing donor networks to use us as the back end for their own SGO. You can use all of our technology, you can use your logo, you can message your donors. We don’t need to have any part of the fundraising process. We just want to help organizations around the country raise as much of this money as we can. We don’t care if you give it to us, or if you start your own SGO, or give to somebody else. The important thing for kids is that we can go back to Congress during the next reconciliation process with proof of demand. We were talking about awareness here in Texas and around the country. If we can show this proof of demand, that we’ve raised several billion dollars and that students are using it, the chances of us being able to protect that program increase exponentially. So in 2027 and 2028, it’s crucially important that we raise as much of this money as possible, both for kids and for the health of the program overall.

Peter Lipsett: I mean, essentially, if you think that the federal government can spend 1,700 random dollars better than you can, great. Let them keep your taxes. If not, take $1,700, donate it to one of these scholarship-granting organizations, and that comes off your tax bill. Instead of the government spending that $1,700, one of these scholarship organizations will spend it on an issue that you care about. It is, to me, a no-brainer.

Nathan Cunneen: And you might even be getting more leverage on your dollar, because in many states, including here in Texas, the tax credit can stack on top of the existing state program. If a student is using the TEFA program in Texas and receiving $10,400, that might be plenty to pay for private school in the elementary or middle school years. Oftentimes private high school is a lot more expensive than some of those early education opportunities, but you can use this tax credit on top of your existing state-level scholarship, which will dramatically increase the options for families in places like Texas. I know there are a few other states, like Oklahoma, where the rules are the same and you can stack them.

Peter Lipsett: Lisa, Tom, anything you want to add about the education freedom tax piece?

Lisa Tarshis: Sure.

Peter Lipsett: The answer could be no.

Lisa Tarshis: The $1,700 is, I think, a challenge. Getting the word out there is definitely going to be a challenge. For every 1% of the taxpayer population that we get to donate to this program, that brings in $1.7 billion. So that is a significant amount of money just for getting an extra 1% of the taxpayer population to opt into this. Now, I think there are two big challenges here. You need to make your $1,700 donation: you contribute to an SGO, and then you wait until you file your taxes to get that back as a dollar-for-dollar credit on your federal tax liability. There are a lot of people in this country who don’t actually have the ability to write a $1,700 or a $3,400 contribution, but have $1,700 or $3,400 in tax liability. So longer term, we’re going to have to do two things.

The shorter-term, easier one is the payroll deduction option, where people can do that per paycheck and then send it to an SGO. The longer-term solution is, on the back end of a payroll system, to actually adjust your tax withholdings by the amount per paycheck, so that instead of it coming out, you have your federal tax line, your state tax line, and you’d almost have another tax line that comes out of your federal tax line and then goes straight over to the SGO. Because the rules just came out, and because this is going to involve all the different payroll providers and all of that, it’s not going to be live in January. But I think there’s a huge opportunity, and we and some others in this space are working on that already, because that has the potential to increase the number of people who can give to the program significantly.

Nathan Cunneen: I’m really glad that you brought that up. We’re currently working with strategic partners, and we think that we’re going to have this payroll deduction mechanism in process and implemented by March or April of next year, which would just be huge. We’re also working with key government partners to even try to get the government of Texas to do things like that.

Peter Lipsett: Do any of you have any sense, and this is me putting you on the spot here, you may not know this, but how much money is out there right now in scholarships? What is the delta of what this makes potentially possible? I mean, knowing that there’s some that would be cannibalized, et cetera, but…

Nathan Cunneen: With the $3,400 rule, my team estimates that the TAM of the scholarship fund is around $250 billion over the next decade. We’re waiting to get data on how sticky the tax credit is, whether somebody who contributes in the first year is exponentially more likely to continue. I think our hypothesis is that that is true. The $1,700 amount is potentially our disadvantage at the start, but small dollars can become our advantage at the end: somebody who is able to contribute $1,700 at the beginning may find it a lot easier to continue doing that than perhaps with a million-dollar gift. So hopefully we can see that sort of growth effect over time, but there’s a lot of uncertainty. Awareness is going to play a massive role. I also think we need legitimizing figures in the philanthropic community, in government, and among community leaders who are saying to people who don’t understand the tax code, “This is not a scam. This is actually a really good use of your dollar.” Unfortunately, we have to go much broader in terms of our donor base than people who are used to contributing philanthropically. That is just a massive awareness and implementation challenge.

Lisa Tarshis: I also think early adoption is going to be really important. At 12:01 on January 1st, people can start giving. We are using AFC as our SGO for the program, and one of the great things is that AFC is going to start deploying those dollars fairly quickly. So come February, March, April, you should start seeing some dollars out there for students, which then allows us to get testimonials and to hear success stories at a time when we still have the whole rest of the year to use those to leverage other people to give. So as many people as we can get to give in January, so that we can then deploy those dollars, I think is going to have a compounding effect.

Nathan Cunneen: And one more opportunity potentially for the folks in this room: $1,700 doesn’t necessarily have to be the maximum you could contribute to this effort. One of the things AFC is doing, and we’re encouraging other SGOs to do the same, is that we are not taking a percentage of funds raised. We have raised our full overhead through philanthropy, and very generous donors have funded our efforts. So every single dollar that we raise for scholarships is going to be handed out in scholarships, and we’re encouraging other organizations to look at doing the same. We think that’s best, reputationally, for the movement and for the growth of the program over time. But also, the whole reason that we’re doing this is to try to help kids, and every dollar that we can get in front of parents serves that end.

Peter Lipsett: All right. We’ve got three minutes left, so I could probably entertain one question from the audience. No pressure. It needs to be a really good question.

Audience Member: Tom, what’s the litigation outlook for this new federal school choice plan?

Thomas Fisher: Well, I think it’s going to be pretty difficult to have a serious challenge, at least at this point. The Supreme Court ruled years ago that taxpayers don’t have, as we call it in the legal profession, standing to sue to challenge tax credits, which isn’t to say that there might not be somebody who comes out of the woodwork and claims actual harm. It’s hard to imagine exactly what that would look like. But overall, I think the risk of a serious challenge is small enough that it’s not really something that we’ve completely had to model out. That said, if it does happen, I think we and many others will be ready to jump in and push back against that litigation. It’s such an important aspect of the development of the school choice model.

Peter Lipsett: Well, as we framed up to start this panel, this Education Choice Implementation Fund at DonorsTrust is built to try to answer some of these things through donations that you all make, that foundations make, that you can make with your qualified charitable distribution. We have not sent an email out. You haven’t seen this in your inbox yet, so this is hot-off-the-press news: we have just announced our first round of grantees for the Education Choice Implementation Fund with the initial batch of dollars raised. And all three of these organizations, as you may not be surprised, we would put them on the stage and withhold money. But all three of these organizations, Primer Foundation, AFC, and EdChoice, have received grants for some of the work that you’ve heard about here today.

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