By Reuvain Borchardt

 

 

 

The federal budget bill just signed into law by President Donald Trump certainly was big, and it may also have been beautiful. (It was if you’re Trump and most Republicans, it wasn’t if you’re a spending hawk like Elon Musk or a Medicaid advocate like all Democrats and some Republicans.) But the one aspect of the bill that the frum community is talking about more than any other is the Educational Choice for Children Act (ECCA), more commonly known as “tuition tax credits.”

This provision, the result of years of lobbying by Agudath Israel and other organizations, survived numerous tweaks and an attempt to remove it by the Senate Parliamentarian.

In its final version, it provides a $1,700 tax credit per taxpayer for donations to scholarship-granting organizations, which can then grant scholarships to yeshivos.

That may sound like a lot of “legislativese” to yeshivah parents who are simply asking the question, “Will this lower my tuition?”

To that end, here’s our explainer on ECCA, with the help of Rabbi Avi Schnall, Agudah’s director of federal education affairs, and Rabbi A. D. Motzen, Agudah’s national director of government affairs, to help you know what is and what isn’t in the bill and how it can actually lower the cost of tuition for most yeshivah parents reading this article.

 

What does ECCA do?

ECCA creates institutions known as SGO, or scholarship-granting organizations. People can donate money to these SGO and get a dollar-for-dollar reduction on their federal tax bill, up to $1,700.

 

Who may make these donations?

Anyone who pays at least $1,700 in federal taxes in a year can make this donation and it comes off their tax bill.

Say you pay the federal government $10,000 in taxes in a given year. You can give $1,700 to the SGO, get a tax credit for the full $1,700, and then only owe the government $8,300. So you help out yeshiva parents, and you don’t even  lose a penny in the process.

 

When may these donations be made?

You can make the donation to the SGO at any time during the year. You can give the $1,700 at one time or in installments.

You may not know exactly how much you’ll owe the federal government in taxes until the year is over, but it doesn’t matter: as long as you’ll owe at least $1,700, you should donate $1,700 toward an SGO. The money will come off your tax bill, and you’ll get it refunded or credited when you file your taxes.

 

What does the SGO do with my donation?

“The SGO may give out scholarships for all sorts of educational uses, include tutoring, special-ed, and tuition for nonpublic schools,” says Motzen. “But an individual SGO might say, ‘We’re only going to give out scholarships for private school tuition and nothing else.’ And you can choose which SGO to give to.”

 

Can I control which school and which student the SGO gives my donation to?

Yes to the first and no to the second.

When you make a donation to the SGO, you may direct that the money go toward a particular school. But you may not direct which student it goes to.

This means that if you have kids in three schools, you may choose to tell the SGO that your $1,700 donation should go toward one of the three schools or be divided among all three. But you may not have it directed toward your own child’s tuition.

 

What happens to the money that’s donated?

Say a particular SGO says it uses all its money to give private-school scholarships, and in a given year, that SGO gets $500,000 in donations earmarked toward a given school.

Now parents of children in that school may apply directly to the SGO to receive scholarships and the SGO has $500,000 to distribute.

 

Who is eligible to receive these scholarships?

“Every student whose household earns less than three times the median household income of a particular area can apply for these scholarships,” says Schnall. “That means that here in Lakewood, any household is eligible as long as they don’t earn more than around $390,000. In Brooklyn it’s just over $290,000, and in Nassau County it’s about $470,000.”

“Whichever city you live in across the United States,” says Motzen, “a significant majority of students will be eligible for these scholarships.”

 

How does the SGO divide the funds?

That’s up to each SGO. One SGO may decide to give equal donations to all eligible applicants; another may choose to apportion it based on income level.

Is there any connection between whether, and how much, money I donate and the amount I receive?

No.

The amount you donate, or if you donate at all, bears no connection to the amount you receive.

A person who pays no income taxes and therefore makes no donations to the SGO may still receive scholarship money from it. And a person who does donate $1,700 but makes more than the limit of three times the median household income won’t get anything.

Why should I bother donating money to an SGO if it has no connection to what I receive?

Because the money you donate will go toward yeshivah scholarships, and you won’t lose a penny. It’s the easiest possible way to give tzedakah. If you owe at least $1,700 in taxes and don’t donate to an SGO, you’re just giving the money to Uncle Sam instead of toward someone’s yeshivah tuition.

Can anyone direct their $1,700 to any SGO and direct it toward any yeshivah?

Yes.

Most taxpaying yeshivah parents will presumably want to donate their $1,700 toward their children’s school(s).

But there are many single people or young couples without school-age children or couples whose children have all graduated. These people could be your friends, neighbors, relatives, or co-workers. Their $1,700 is up for grabs.

You can talk to them and ask them to donate it toward an SGO and direct it toward your kid’s school. Remind them that it doesn’t cost them a penny, and they’re helping parents pay tuition for their children’s education.

The more that a school’s parent body can get people to donate to an SGO and direct it toward their school, the more funds the SGO will be able to donate toward scholarships in that school.

If the schools know that this money will be coming in, what stops them from just raising tuition, knowing that many parents will be getting scholarships?

“That may be the number one question we’re getting now,” says Schnall. “It’s a fair question, but the answer is simple: The only way this money is generated is if the parents donate their tax money, and get their friends to, and have it directed toward that yeshivah. If parents feel the yeshivah is taking advantage of them, they won’t work hard to raise money for it. Many parents have kids in more than one yeshivah, and they could choose to give the money to the yeshivos that are not raising tuition.

“The schools will want the parents to bring in the donations. The only way for parents to be motivated to do this is if they feel the benefit. The schools are dependent on the parents here.

“So yes, the schools might do whatever they want, but it’s in their best interest to work with parents.”

Well, I heard that in Florida, the state passed a tuition voucher program, and the yeshivos subsequently raised tuition. What’s to stop that from happening here?

The voucher program works very differently from this tax credit program.

Under the voucher program, every yeshivah kid is given $8,000 to spend on tuition at whatever school he wants. The money is there, guaranteed. So the yeshivos could raise tuition.

In this federal tax credit, the money isn’t guaranteed to be there. So parents could tell the schools, “We will only donate funds to this school, and try to get our friends to, if you don’t raise tuition.”

When will SGO be up and running?

“Agudah has been hard at work, long before the bill passed, laying the groundwork for the program,” says Schnall, “and you’ll be hearing details about SGO in Lakewood, or whatever town you live in, very soon.”

This all sounds nice, but things don’t always turn out as planned. What might prevent this from working out well?

“Just like voting, it’s all about turnout,” says Schnall. “If people don’t show up by donating to the SGO, and don’t work to convince their friends to, this will be of minimal benefit. But if they do—and again, this costs the donors absolutely nothing at all—people could see sizable scholarships.”

How does ECCA affect school choice efforts, like vouchers, in states like New Jersey and New York, which don’t have such programs, and states that do, like Florida? Are these efforts continuing, or does the federal government passing ECCA kill chances for states to pass their own school-choice provisions?

“For states that have a school choice program,” Schnall says, “ECCA is on top of the state’s program. For example, Florida still has its $8,000 tuition voucher per student from the state in addition to what students can get from SGO. So this is a welcome addition.

“For states that don’t have a voucher program, like New Jersey, New York, and California, let’s face it, it’s going to be hard to get a voucher program in those places. So right now, the focus is going to be on having states opt in to this federal program. But once this is settled, successful, and off and running, we might try the state-level advocacy again. The work is hard, but we never give up.

“Remember, it was Rabbi Moshe Sherer who first proposed a federal school choice program in the 1970s. It took half a century to see it happen. So we’ll continue to work hard, and b’ezras Hashem we’ll see results.”

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