After Governor Mike Dunleavy opted Alaska into the federal Scholarship Tax Credit, NEA-Alaska argued the program violates the state constitution's ban on public money for private and religious schools. The state's education commissioner counters that §25F donations are private dollars, not public funds, so no constitutional bar applies.
Most of the state-level fights over the federal Scholarship Tax Credit (FSTC / ECCA / §25F) have turned on politics, whether a governor or legislature wants the program at all. Alaska has surfaced a different and sharper question, one of state constitutional law. In late January 2026, Governor Mike Dunleavy signed Alaska into the federal credit ahead of its January 1, 2027 launch, putting the state on the roster of early opt-ins. Within days, NEA-Alaska, the state's largest teachers' union, argued that the move is unlawful under Alaska's own constitution, setting up a legality dispute that is distinct from the national voucher framing the unions have used elsewhere.
The union's argument is rooted in Alaska's constitutional no-aid clause, which bars the use of public funds for the direct benefit of private or religious educational institutions. NEA-Alaska President Laura Capelle asserted that channeling the federal credit toward private-school tuition would run headlong into that prohibition, regardless of how the dollars are labeled. Alaska's no-aid clause is among the stricter such provisions in the country, and it has shaped the state's school-choice litigation before, which is why the union's challenge lands differently here than a generic objection that §25F is a voucher in disguise. The question NEA-Alaska is raising is not whether the program is good policy, but whether a state with a strict no-public-funds clause can lawfully participate in a federal credit that ultimately reaches private and religious schools.
Education Commissioner Deena Bishop rejected the premise. Her position is that §25F does not move public money at all: the scholarships are funded by private charitable donations routed through Scholarship Granting Organizations, and the donors receive a federal income-tax credit (capped at $1,700 per donor) rather than a state appropriation. In Bishop's framing, no state dollars are spent, no state revenue is reduced, and the constitutional no-aid clause is therefore never triggered. As she put it, the money is literally individual money, and no public money is reduced. That public-versus-private characterization is the entire ballgame: if the credited donations count as private funds, Alaska's no-aid clause has nothing to grab onto; if a court treats the federal tax credit as a form of public subsidy directed at private schooling, the clause may bar Alaska's participation outright. The dispute is, for now, unresolved.
For donors, families, and prospective SGO founders watching Alaska, this is a bellwether for how strict-no-aid states will fit into a national program built on private donations and federal credits. The reasoning tracks a familiar line in school-choice law, that a tax credit is not a government expenditure, a distinction the U.S. Supreme Court drew in a 2011 Arizona case when it held taxpayers lacked standing to challenge a state tuition-tax-credit program. Whether Alaska's courts apply that logic to a strict state no-aid clause is the open question. We cover the broader union opposition to §25F and the voucher framing separately; this Alaska dispute is a narrower constitutional-legality challenge. Alaska's current status, and every other state's, is tracked on our Alaska state page and the state participation map, and the mechanics of how the credit is funded are explained in how the federal tax credit works.
