The new Education Freedom Act poses many questions for those in the world of higher education and raises concerns for HOPE scholarship funding.
The new Education Freedom Act poses many questions for those in the world of higher education and raises concerns for HOPE scholarship funding.
Last month, after a brief Special Session of the Tennessee General Assembly, Gov. Bill Lee’s Education Freedom Act passed. Lee introduced the bill in 2023 but reintroduced it in 2025, leading to its quick passing by the Tennessee legislature.
This is all a part of a larger effort to improve the K-12 education system statewide, which has long been perceived as sitting in a state of mismanagement and underfunding. Tennessee ranks 45th in per-student spending and 44th in average teacher salary, according to a release by Tennessee Senate Democrats.
The Education Freedom Act faced heavy debate and controversy during and after its passing. To that fact, 20 Republicans voted against party lines in the House, passing 54-44.
The Act provides 20,000 new scholarships throughout the state. These scholarships are to be used to pay the tuition of students attending private schools. Each scholarship is just over $7,000 in value, and the law requires the money to be spent on tuition and fees before expenditures for supplies or other related expenses.
Half of the scholarships are reserved for students meeting criteria concerning disabilities, location and income levels, designated to be no more than 300% of the amount required for the student to qualify for free or reduced lunch prices.
The other 10,000 scholarships are available for anyone in the state — meeting the aforementioned criteria is not a requirement. The law establishes a mechanism that will allow the Department of Education to increase the number of scholarships yearly by no more than 5,000 additional scholarships to meet demand.
Much controversy aims at how the law will be funded. The entire bill is estimated to cost the state $447 million in the first year. Some of these are one-time expenses. Others, like vouchers, are continuous and may increase in cost in the future. The scholarships will cost just under $146 million in the first year.
The law will redirect money collected from taxes on sports gambling in the state. Since its legalization in 2019, sports gambling has created hundreds of millions of dollars in revenue for the state.
Well, what’s the possible complaint? That same source of money is already being spent on other education programs, a large part going toward the Tennessee HOPE Scholarship. Robert Kelchen, head of the Department of Educational Leadership and Policy Studies, with expertise in higher education finance, outlined some worries about funding the Education Freedom Act.
“The potential concern is that college scholarships are funded out of the same pool of money that the Governor is drawing upon for school construction under this proposal,” Kelchen said. “At this point, it seems like there’s been enough money to pay for both, but we’re not quite sure what lottery or gambling revenue is going to look like going forward, and we’re not sure what student scholarship needs will look like going forward.”
Kelchen explained that any potential concerns concerning funding post-secondary and K-12 programs from the same pot would be a long-term concern. Currently, there is sufficient funding for these programs. Kelchen outlined possible scenarios in which we could see budgetary conflicts.
College scholarships are “unlikely to happen in the short term because overall, the state budget is pretty strong,” Kelchen said. “But if we get into a recession, then there will be some challenging political decisions.”
Kelchen also emphasized that even if the state were to face budget reductions, post-secondary scholarships would not be easy to cut.
“If there is a budget shortfall,” Kelchen said, “I could certainly see the scholarships for students staying intact, but the budget reductions being made through the funding that goes to colleges because it’s a lot less politically popular to take money away from students than colleges.”
Kelchen emphasized that immediate effects on post-secondary scholarships are unlikely and that long-term effects are also unclear.
“It’s not entirely clear whether it will have an effect on higher education,” Kelchen said. “It’s possible, but as a researcher, I haven’t seen good research on that. But there are several states where school voucher costs have been much higher than expected.”
The HOPE Scholarship is an extensive program that provides funding to students attending a college or university who also meet specific academic requirements. Scholarships are $4,500 per year for underclassmen and $5,700 per year for upperclassmen.
In the 2022-2023 school year, the HOPE Scholarship provided funding to over 70,000 students in the state. That year, it cost the state just over $314 million. The HOPE Scholarship is funded through the state’s lottery for the education program, taking revenue earned through the lottery and sports gambling and directing it toward the education system.
Those in support of the bill, including Gov. Lee, have maintained that there is enough funding to support the new school vouchers while maintaining the HOPE scholarship — however, those in opposition dispute that. Democrat state Sen. London Lamar, who opposes the Education Freedom Act, laid out her worries in an opinion piece in the Tennessean.
According to Lamar in her opinion piece, “Governor Lee and his supporters argue that there will be sufficient funding for both K-12 and higher education, but this optimistic outlook ignores the growing demands on the Tennessee Education Lottery Scholarship program. From 2021 to 2024, the funding demands for this program have grown by nearly $100 million. If the governor’s plan proceeds, the state will be forced to draw from the lottery’s shortfall reserve, a fund designed for emergencies, not to patch holes created by legislative overreach.”
Lamar stated that she worried the voucher program would jeopardize thousands of students currently receiving the HOPE Scholarship. Josh Dunn, director of the Institute of American Civics, with expertise in education policy, spoke to the possibility of the HOPE scholarship losing any funding.
“So the question is whether or not it could affect the HOPE scholarship,” Dunn said. “I suppose there could be some stress put on the system if the voucher program were to grow substantially. But for the foreseeable future, it doesn’t look like there would be an issue, and if there were to ever be one, I think the legislature would work to reinforce both programs. There’s a very large constituency that supports the HOPE scholarship.”
Dunn explained that the voucher system is not that significant of a funding item, with just 20,000 vouchers, and is not likely to affect other education programs anytime soon.
“I think that the big issue that’s arisen from this is just the debate over education policy,” Dunn said. “Should parental choice play a role in the provision of education? To what degree? That’s more than the actual dollars at stake. That’s the bigger question out there.”
The text of the legislation allows funding to flow from the state’s general fund and earmarks funds from the state’s lottery for education programs. Additional fail-safes for financing exist, such as the state’s lottery reserves. In the past two years, Tennessee’s large budget surplus has funded several programs and initiatives, which stood at $1.5 billion at the end of fiscal year 2023. It is unclear how much of that money is still available and what could be spent on the Education Freedom Act.
While concerns over the impact the cost of K-12 vouchers will have on higher education scholarships persist, it appears as though post-secondary programs like the HOPE scholarship are not in any danger right now. Professors Dunn and Kelchen stated that the income from lottery and gambling taxes is a large enough pool to fund the relatively small voucher program, certainly for the near future. There may be unexpected or dramatic changes in revenue from the state’s lottery for education programs or in the demand for vouchers. Still, programs like the HOPE scholarship maintain enormous support, and cutting it would be deeply politically unpopular.
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