Key Takeaways
- • The Connecticut Education Association (CEA) released a brief in September arguing that private equity firms are well-positioned to profit from the federal Scholarship Tax Credit (FSTC) program while reducing pedagogical, counseling, and therapeutic services.
- • The FSTC, created under the One Big Beautiful Bill signed in July 2025, funnels federal tax-credit dollars into private school scholarships, with some estimates putting the program's cost at up to $101 billion.
- • Households may contribute up to $1,700 per individual or $3,400 per couple to scholarship granting organizations (SGOs) for a dollar-for-dollar reduction in tax liability, and scholarships are available to families earning up to 300% of area median income.
- • Private equity-linked entities are active in Connecticut's approved high-dosage tutoring vendor list, including Leonard Green-owned special education provider Stepping Stones Group, whose contracts include a no-solicitation clause that the brief says will entrench districts in renewals.
- • CEA urges Governor Ned Lamont not to opt Connecticut into the program, while more than 30 states have opted in this year.
Summary
In September, the Connecticut Education Association (CEA) released a policy brief examining private equity's presence in K-12 education in the state and its potential to profit from the Federal Scholarship Tax Credit (FSTC) program. The brief, which cites several Private Equity Stakeholder Project (PESP) reports, argues that private equity control has a troubling track record in healthcare, housing, and retail, and that similar characteristics could diminish pedagogical, counseling, and therapeutic services in schools. It focuses on tutoring and special education services as two areas where private equity is expanding.
The FSTC was included in the One Big Beautiful Bill, tax and spending legislation signed by President Trump in July 2025. The program channels federal dollars into private schools, with some estimates placing its cost at up to $101 billion. The mechanism is a tax credit: households may contribute up to $1,700 per individual or $3,400 per couple to participating scholarship granting organizations (SGOs), which can include nonprofits, churches, universities, and public schools, some connected to private equity executives. According to an analysis by the Institute on Taxation and Economic Policy, no other federally funded program offers full reimbursement to taxpayers in this way. Scholarships are available to children in families earning 300% or less of area median income, meaning some families earning more than $350,000 may qualify in certain areas. More than 30 states have opted in this year. CEA has urged Governor Ned Lamont not to participate, warning that statutorily embedded revenue streams could become dependable cash flow for private equity firms.
The brief also highlights a model Education Freedom Account Act introduced in August 2026 by the America First Policy Institute (AFPI). The model bill would require districts to establish fees for courses and other "a la carte services" and exclude students using those services from state funding counts. The brief argues such fees could punish low-income families and create unequal access to services such as art classes. Regulations announced by the Treasury in October state that scholarships for individual academic tutoring or special needs services at schools in low-income areas will not require income verification.
On tutoring, the brief notes that several vendors on Connecticut's approved high-dosage tutoring list are owned by private equity or venture capital firms. FEV Tutor, acquired by Alpine Investors less than three years before it abruptly shut down in January 2025, was on that list. The brief also points to Leonard Green and Partners, which owns special education provider Stepping Stones Group. A May 2026 Hartford Public Schools contract with Stepping Stones reportedly includes a no-solicitation clause requiring districts to pay a fee to directly hire previously contracted workers for two years after the contract ends. The brief also cites Leonard Green's prior ownership of Prospect Medical Holdings, which went bankrupt in 2025 while owing the State of Connecticut $127 million in taxes.
The brief recommends banning non-solicitation clauses, increasing contract transparency, protecting educator wages, restricting sale-leasebacks, and requiring pension funds to adopt anti-privatization investment policies for private equity. CEA president Kate Dias, in an op-ed, argued that the federal tax credit "would privatize Connecticut's public schools from the inside out."
The FSTC was included in the One Big Beautiful Bill, tax and spending legislation signed by President Trump in July 2025. The program channels federal dollars into private schools, with some estimates placing its cost at up to $101 billion. The mechanism is a tax credit: households may contribute up to $1,700 per individual or $3,400 per couple to participating scholarship granting organizations (SGOs), which can include nonprofits, churches, universities, and public schools, some connected to private equity executives. According to an analysis by the Institute on Taxation and Economic Policy, no other federally funded program offers full reimbursement to taxpayers in this way. Scholarships are available to children in families earning 300% or less of area median income, meaning some families earning more than $350,000 may qualify in certain areas. More than 30 states have opted in this year. CEA has urged Governor Ned Lamont not to participate, warning that statutorily embedded revenue streams could become dependable cash flow for private equity firms.
The brief also highlights a model Education Freedom Account Act introduced in August 2026 by the America First Policy Institute (AFPI). The model bill would require districts to establish fees for courses and other "a la carte services" and exclude students using those services from state funding counts. The brief argues such fees could punish low-income families and create unequal access to services such as art classes. Regulations announced by the Treasury in October state that scholarships for individual academic tutoring or special needs services at schools in low-income areas will not require income verification.
On tutoring, the brief notes that several vendors on Connecticut's approved high-dosage tutoring list are owned by private equity or venture capital firms. FEV Tutor, acquired by Alpine Investors less than three years before it abruptly shut down in January 2025, was on that list. The brief also points to Leonard Green and Partners, which owns special education provider Stepping Stones Group. A May 2026 Hartford Public Schools contract with Stepping Stones reportedly includes a no-solicitation clause requiring districts to pay a fee to directly hire previously contracted workers for two years after the contract ends. The brief also cites Leonard Green's prior ownership of Prospect Medical Holdings, which went bankrupt in 2025 while owing the State of Connecticut $127 million in taxes.
The brief recommends banning non-solicitation clauses, increasing contract transparency, protecting educator wages, restricting sale-leasebacks, and requiring pension funds to adopt anti-privatization investment policies for private equity. CEA president Kate Dias, in an op-ed, argued that the federal tax credit "would privatize Connecticut's public schools from the inside out."
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