Three states that said no to the FSTC are reconsidering: Hawaii, New Mexico, and Oregon

By mid-May 2026, roughly 30 states had moved toward participating in the federal Scholarship Tax Credit (FSTC / ECCA / §25F), while only three had affirmatively said they would not: Hawaii, New Mexico, and Oregon. According to reporting summarized by Ballotpedia and Education Week, the governors of all three are now reconsidering their positions ahead of the program's January 1, 2027 launch.

The reconsideration reflects a recurring dynamic in the FSTC debate: because the credit is funded by the federal government rather than state budgets, declining does not save a state money — it simply means donors in that state can still claim the §25F credit by giving to Scholarship Granting Organizations (SGOs) in opted-in states, with those scholarships funding K-12 students elsewhere. The credit follows the SGO's state of operation, not the donor's residence. For a state that stays out, the practical effect is that its own families are not eligible for scholarships while its residents' donations subsidize students in participating states.

Several governors who initially declined or vetoed opt-in legislation cited the same reason: the absence of final IRS implementing regulations. Treasury issued Notice 2025-70 in November 2025 to begin that rulemaking and has said it intends to publish proposed regulations. As guidance firms up, the calculus for holdout states may shift — particularly given that the opt-in is an annual decision, so a state that sits out 2027 can still join in 2028 or any later year by submitting a qualifying SGO list to the U.S. Treasury.

Whether Hawaii, New Mexico, or Oregon ultimately reverse course remains to be seen; as of late May 2026 none had formally opted in. But the fact that all three declining states are publicly revisiting the question — rather than treating their earlier “no” as final — underscores how fluid the national map remains with more than half a year before the program begins.