ANCHORAGE, Alaska — The Alaska Department of Education and Early Development has approved the first group of Scholarship Granting Organizations, nonprofits that can redistribute taxpayer contributions to grant scholarships for K-12 students starting next year.

Gov. Mike Dunleavy opted Alaska into the federal program created by last year's federal budget reconciliation bill. The federal tax credit scholarship program is an effort designed to boost funding to private schools, allowing taxpayers to contribute up to $1,700 individually, or $3,400 per married couple, from their federal tax liabilities beginning on Jan. 1. The nonprofits can begin distributing scholarship money to students next fall.

"Donors can begin putting resources behind Alaska's K — 12 students," Alaska Education Commissioner Deena Bishop said in an Oct. 2 prepared statement. "We are excited to see so many organizations stepping forward."

Friends of Spruce Tree Montessori and Alaska Students First are the only Alaska-based organizations approved in October. Outside organizations make up 18 of the 20 initially approved nonprofits.

The tax credit scholarships are somewhat similar to school voucher programs available in more than a dozen states. Vouchers redirect state funding to families, often used to pay for private school tuition. While tax credit scholarships similarly provide funding to students, the tax credits do not come from state funds and may be used for a wider variety of expenses than vouchers.

Public school advocates in Alaska are both excited and anxious about the influx of new funding. Caroline Storm, executive director of the Coalition for Education Equity, said proposed regulations published by the IRS this month lack regulations that require spending on needy students, often required by other government funding for schools. While the guidance claims 96% of students in participating states are eligible to receive scholarships, individual donors will decide where their tax credits go, likely giving a sizable advantage to choice schools, she said.

Storm said public schools are at a disadvantage because many of the established Lower 48 nonprofits on the state education department's initial approval list have robust marketing arms to solicit contributions from taxpayers that will take Alaska organizations longer to stand up.

"The underlying issue is that public schools do not charge tuition," Storm said. "The majority of the funds will go to private schools, I honestly believe that. I hope I'm wrong, but I don't think I am."

Some of the approved organizations plan to support student athletics while others support gifted and talented students, but the majority are tied to religious institutions.

Bishop said four additional organizations have submitted paperwork since the initial list was published, and federal regulations allow the state to approve nonprofits whose 501(c)(3) status is still pending.

The Alaska Council of School Administrators is among the four, submitting paperwork just after the initial deadline for RISE, which stands for Raising Investment in Student Education.

Leigh Sloan, president of the Alaska School Choice Network, said the new nonprofit Alaska Students First is the "sister organization" for Alaska School Choice. The organization seeks to grant scholarships to students attending homeschools, charter schools and other choice options beyond neighborhood public schools.

"I see our charter schools as pretty much the only way we can offer school choice right now, so I'm hoping to just expand that," Sloan said. "I think the more SGOs we have, the better."

Sloan started the nonprofit to ensure compliance with an IRS requirement that 90% of all money received goes back to students. Sloan said she's looking to style scholarships after Education Savings Accounts, a school choice policy option currently available in 29 states. The government-funded accounts allow eligible families to apply for and receive money for services beyond what's offered by neighborhood public schools. Sloan said she's hoping to work with low-income families, especially those living in "school choice deserts" without a non-public school option.

More than half of the nearly 350 students who attend Anchor Lutheran School in the Taku/Campbell neighborhood receive scholarships, according to Lower School Principal Tessa Cushman, who also teaches seventh grade language and literacy and provides reading support to students.

Cushman said the school grants up to $500,000 in scholarships yearly. Additional funding from nonprofits would help expand career and technical education programs for students at Anchor Lutheran.

"We've been trying to get scholarships so that the people that want to be here can be here. We do not want finances to be a reason why people cannot come to our school," Cushman said Friday afternoon. "Anytime you're putting money into education, you are putting money into the future."

In Fairbanks, Sabrina Binkley founded Spruce Tree Montessori in 2012, after encountering a long wait list at a different Montessori school. Friends of Spruce Tree Montessori started the same year, throwing a yearly fundraiser that has supported students with partial scholarships well before the federal tax credit program was created.

"We raised a few thousand dollars a year and we gave out scholarships right from the beginning," Binkley said. "We've always been a scholarship granting organization."

Binkley said the nonprofit supported 11 students with partial scholarships this year, and staff can also receive funding to pay for teacher training and professional development. Binkley hopes the scholarships will attract more students, particularly middle-school-aged students to help grow their multi-grade classrooms.

"My board members agreed that this would be a great way to increase pathways for Alaska families to choose an educational environment that's the best fit for their child," said Binkley. (Binkley's husband, Ryan Binkley, is president of the Binkley Co., which owns the Daily News.)

Sloan's and Binkley's nonprofits are the only two Alaska-based organizations to receive initial state approval.

Not yet approved, RISE is led by Frank Hauser, who recently left his role as superintendent of the Juneau School District. RISE is the only Alaska-based organization focused on supporting public school students.

"I couldn't sit by and just potentially see this opportunity not going towards our students attending public education schools," Hauser said. "The federal scholarship tax credit was really not designed for public schools. We're going to take advantage of it."

Hauser expects smaller staffs at rural school districts may struggle with the paperwork required to comply with the IRS reporting requirements. A former rural superintendent, Hauser said RISE intends to provide clerical assistance to those districts.

Lisa Parady, executive director of the Alaska Council of School Administrators, said RISE may also support larger school districts. Parady questioned whether Alaska's new governor will opt back into the federal tax credit program, and wanted to support public school students while the opportunity exists.

"It's great that a lot of outside-the-state organizations are showing some kind of interest here, but we know Alaska best and we are prepared to do what we can to best support our children," Parady said.

The Anchorage School Board recently approved a resolution calling on the Association of Alaska School Boards to set up a similar organization supporting public school students.

Kelly Lessens, chair of the governance committee, said the program allows Alaska school districts to expand educational opportunities for students without impacting their classroom budgets.

"Instead of sending all of your tax dollars to D.C., you could help us keep some of those dollars local. We could go beyond the bare minimum," Lessens said during a September meeting. "If you wanted to support high-dose tutoring for example, that's something that these scholarships could do at scale."

Board member Paul McDonogh said he'd be hesitant to support a program that shares similarities to controversial voucher systems in the Lower 48 that seek to redirect state funding for schools directly to families. He added language to the resolution to encourage the Association of Alaska School Boards to ensure public funding remains untouched, prioritize needy students and publicly report their budgets, ultimately voting to approve the resolution. The resolution will appear before a gathering of Alaska school board members in November.

"If it's voucher shaped, looks like a voucher, quacks like a voucher, is it a voucher technically," McDonogh said during the September meeting. "I would be concerned that this pushes us down a slippery slope into the abyss of education funding not being a sort of tax mandate."

The federal Treasury Department estimates the program could bring in $26 billion over the next four years. The American Federation for Children estimates the program could generate $60 million for Alaska schools per year if 10% of eligible taxpayers contribute.

The new funding stream could be a boon for public school districts that have suffered from budget reductions and inflated costs in recent years, but also comes with concerns about whether existing funding streams will remain untouched.

"We're looking at this potentially becoming one of the largest if not the largest federal program for education," Hauser said. "That $26 billion is going to have to come from somewhere, and it's really hard to imagine that in future years, federal funding for the nation's public schools is not going to be impacted."

Laura Capelle, president of NEA-Alaska, state affiliate for the National Education Association union, said she's concerned the program violates the Alaska Constitution. She called it a "federally sponsored voucher program."

"The newly released regulations outlining the criteria for Scholarship Granting Organizations suggest that the benefits will go to a very narrow selection of private schools, located almost exclusively in Alaska's urban centers," Capelle said in an email. "So, this is not a solution that reaches every child or addresses the real challenges facing Alaska's public schools."

Democratic U.S. Sens. Mark Kelly of Arizona and Mazie Hirono of Hawaii introduced a bill to repeal the federal tax credit program in April. A public comment period on the existing regulations ends in December.

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