Read More: Pennsylvania’s Educational Improvement Tax Credit (EITC) Program 

Background: Pennsylvania’s Educational Improvement Tax Credit (EITC) Program 

Pennsylvania’s Educational Improvement Tax Credit (EITC) program has directed hundreds of millions of private dollars into nonprofit organizations and educational initiatives across the Commonwealth since its establishment in 2001. The program operates as a public-private partnership administered by the Department of Community and Economic Development (DCED), providing state tax credits to businesses and individuals who make contributions to approved nonprofit organizations. Those organizations fall into three categories: Scholarship Organizations (SOs), which provide tuition assistance to students; Pre-Kindergarten Scholarship Organizations (PKSOs); and Educational Improvement Organizations (EIOs), which deliver innovative programming to K-12 students in conjunction with public schools. 

For nonprofits, the EIO track is the most directly relevant. Organizations registered as EIOs must provide educational programming that goes beyond standard public school curriculum — including programs in arts, workforce skills, STEM, mentoring, and literacy, among others. Nearly 900 organizations are currently registered as EIOs with DCED, representing a remarkably broad cross-section of Pennsylvania’s nonprofit sector: community libraries, youth-serving organizations, museums, cultural institutions, workforce development programs, and local education foundations, among many others. 

On the funder side, Pennsylvania businesses apply for EITC credits through DCED’s Enterprise eGrants System on a first-come, first-served basis beginning July 1 of each fiscal year. As of the most recently published list (FY 2024-25), there were 2,242 business participants statewide. The companion Opportunity Scholarship Tax Credit (OSTC) program operates similarly but is specifically targeted at students attending low-achieving public schools. Together, EITC and OSTC currently carry a combined authorization cap of $680 million — a figure that has grown nearly 445% since FY 2016-17. 

HB 2632: What the Bill Actually Does 

House Bill 2632, introduced by Representative Nikki Rivera (D-96), passed the Pennsylvania House on a 105-97 vote and has been framed by its sponsors as a transparency and accountability measure. Representative Rivera’s stated goal — that a program directing $680 million in tax credits per year should have stronger public reporting on how those dollars are spent — is a legitimate one, and PANO shares it. Current law restricts data collection in ways that make it difficult to track outcomes for scholarship recipients, distribution of funding by income level, or how many students seeking assistance were ultimately turned away. 

But HB 2632 does more than add reporting requirements. As drafted, the bill expressly terminates the authority of DCED to accept applications for or approve tax credits under both the existing EITC and OSTC programs beginning in FY 2027-28. Those programs are replaced in their entirety by a new Education Options Tax Credit program, with new eligibility categories, new participation standards, new obligations on scholarship organizations, and a restructured distribution of funding. While the $680 million aggregate cap is preserved through an amendment adopted in the Appropriations Committee, the underlying programs that nearly 900 EIOs and more than 2,200 business participants have been operating within would no longer exist. 

That is a significant structural change, not an accountability measure. For nonprofit organizations that have built programs and planning assumptions around EITC participation over many years, the distinction matters. Even where overall funding levels remain nominally the same, changes in program structure, eligibility criteria, and administrative requirements can determine whether a given organization remains able to access that funding — or not. And this change is arriving at a particularly difficult moment: at a time when Pennsylvania nonprofits are already navigating federal funding freezes, a looming state budget impasse, and the lingering financial strain of last year’s 135-day budget delay, a structural overhaul of a longstanding funding program adds another layer of administrative burden and uncertainty that organizations can ill afford. 

PANO’s concern is not that the underlying policy conversation is happening. Accountability, transparency, and equity in how public dollars are directed are values the nonprofit sector shares. Our concern is that describing HB 2632 solely as a reporting and accountability bill does not fully reflect what it does — and that a structural change of this magnitude to a program that hundreds of nonprofits depend on should not move through committee and to a House floor vote without meaningful engagement with the organizations that will be affected. PANO and our members would welcome the opportunity to be part of that conversation before the bill advances further in the Senate. 

Read the full letter: here