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The Texas Comptroller has officially adopted the final rules for the Education Freedom Account program created by Senate Bill 2 during the 89th Legislative Session earlier this year. These rules shape every component of how the program will operate, including eligibility standards, funding amounts, prioritization criteria, and approved educational expenses. Texas families now have their first complete picture of how the state intends to administer this new model of school choice.
The program marks a historic shift in Texas education policy. For the first time, qualifying families will be able to access an education account administered through the Comptroller’s office that allows approved funds to be used for private school tuition, tutoring, instructional materials, therapies, and other approved education-related expenses purchased directly through the state’s payment system. The Legislature designed the program to launch in the 2026 to 2027 school year, and the Comptroller’s rules provide the operational roadmap.
Texas Policy Research fully supports the idea of educational freedom. Empowering parents with the ability to choose the learning environment that best fits their children is a defining feature of a healthy education system. However, the new rules also highlight limits in the final program design. While some Texas families will benefit from expanded options, this framework remains far from the universal, student centered model of school choice that Texas needs.
Eligibility Rules: Who Qualifies Under the New ESA Program
The rules confirm that a child is eligible if they are a Texas resident, a U.S. citizen or legal resident, and eligible to attend a Texas public school or public prekindergarten program. The child cannot be enrolled in a public school at the time they intend to use ESA funds, since participating students cannot be counted toward a district’s average daily attendance.
Eligibility for prekindergarten follows state law, meaning that children qualify if they meet categories such as income status, language proficiency, homelessness, or military family status.
Parents must also provide documentation proving citizenship or lawful presence, residency, income, and disability status. Accepted documents include birth certificates, passports, permanent resident cards, leases or mortgages, tax returns, and other official records. The Comptroller allows for electronic verification when possible, with the goal of reducing administrative delays for families.
Prioritization Rules and Lottery Process
Even though eligibility is broad, access to the program is not universal. The Legislature established a one billion dollar cap for the first biennium, and the rules outline a strict prioritization process that determines which applicants may participate.
According to the Comptroller’s rules and the informational flyer released to families, if applications exceed available funding, the program must admit students in the following order:
- Siblings of children already admitted.
- Children with disabilities in households at or below 500% of the federal poverty level. (For a family of four, this is roughly $240,000 or less in annual income.)
- Children in households at or below 200% of the federal poverty level. (This is roughly $60,000 or less for a family of four.)
- Children above 200% and below 500% of the federal poverty level. (For a family of four, this means roughly $60,000 to $240,000 in annual income.)
- Children from households at or above 500% of the federal poverty level, roughly $240,000 or more for a family of four, are capped at 20% of total program funds.
These income categories matter because they structure the lottery around a family’s financial need. Families earning about $60,000 or less receive higher priority than middle or upper-middle income families, and households above roughly $240,000 per year are admitted last and limited to 20% of the total funds available. This tiered system reflects the Legislature’s intent to focus initial funding on students with the greatest financial constraints.
Students who are accepted remain in the program as long as they continue to qualify. Unaccepted applicants are placed on a waiting list and will only be admitted when additional funds become available.
This structure highlights a fundamental limitation. With more than 6 million school-aged children in Texas, a program capped at $1 billion will serve only a fraction of families. While the ESA framework expands choice for some, it does not achieve the universal access that would allow school choice to deliver real, competitive pressure on the public education monopoly.
Early estimates suggest that during its first year, the Education Freedom Account program will serve roughly 50,000 to 100,000 students statewide. This range reflects the fact that the $1 billion cap must cover varying award amounts, including higher funding levels for students with disabilities and lower amounts for homeschool participants. Even at the upper end of the estimates, the program would reach fewer than 2% of Texas school-aged children. This makes clear that the program’s design is not universal and that most families will remain outside the system unless the Legislature significantly expands funding in future sessions.
In one of our earlier analyses, we explained how long-term school choice programs in other states produce significant fiscal savings by allowing students to switch from public to private education. The EdChoice report we evaluated found that mature programs nationwide have saved taxpayers between $19.4 billion and $45.6 billion, even though students in those programs often receive only a fraction of what public school students are funded. Those findings underscore how a capped program in Texas may limit the potential for long-term fiscal benefits.
Funding Levels: How Much Parents Can Expect to Receive
The Comptroller’s rules affirm the funding structure set in statute. Each participating child receives 85% of the statewide average of state and local funding per student. Based on current estimates, this amount will be approximately $10,800 annually for private school students.
Students with disabilities may receive up to $30,000 per year if they have an individualized education program (IEP) on file. This funding is intended to help families secure specialized services that the public school system often fails to provide effectively.
Homeschooled students may receive up to $2,000 per year for approved expenses, but they cannot use ESA funds for tuition or services from unapproved providers. This distinction in funding highlights a key structural difference. While ESAs can theoretically support students in a variety of learning environments, Texas has limited full funding to private school students only.
In comparison, many mature ESA programs in other states allow parents to distribute funds more freely across hybrid, online, home-based, and microschool models. Research from our earlier work analyzing school choice design shows that flexibility is a key driver of innovation and long-term savings. The narrow structure in Texas may limit some of those benefits.
Another important structural consideration is how this program is funded over time. The TEFA program does not contain a sunset clause, so it does not expire automatically and does not require lawmakers to reauthorize its legal existence each session. It is now written into the Texas Education Code as an ongoing program. However, lawmakers must appropriate funds every biennium for the program to continue operating at any meaningful scale. This stands in contrast to the public school system, which is effectively on autopilot. Public education funding formulas automatically drive future spending upward unless the Legislature intervenes, while TEFA must rely on specific appropriations each session. This creates long-term uncertainty and places the entire program at the mercy of shifting political priorities, rather than establishing a stable, predictable funding structure where dollars follow the student.
Approved Providers: Which Schools and Services Can Participate
To qualify as an approved private school under TEFA, a school must be accredited by a Texas recognized body or the TEA, administer annual assessments to participating students in 3rd through 12th grades, maintain a physical presence in the state, and demonstrate at least 2 years of campus operation, even if the qualifying campus is out of state.
The rules also create a framework for approving tutors, therapists, and other service providers. These individuals must meet licensure standards, pass state background checks, and avoid disqualifying misconduct. Providers who fail to comply with program rules face suspension or permanent removal.
The Comptroller adopted a detailed system for approving vendors of educational products, academic assessments, online courses, and specialized educational services. All purchases must be made through a Comptroller-approved payment platform.
These guardrails are intended to prevent misuse of funds and maintain basic accountability within the program, which is an important protection for both families and taxpayers. At the same time, the rules introduce participation hurdles that may unintentionally exclude legitimate and innovative education models. Microschools, learning pods, and many homeschool cooperatives often operate with flexible structures that do not fit neatly within accreditation or licensure frameworks designed for traditional institutions. A truly universal school choice system should maintain strong safeguards against fraud while still allowing a wide range of high-quality providers to participate. The current rules reflect a more restrictive approach that narrows the marketplace of educational options available to families.
Understanding What ESA Funds Can Be Used For
ESA funds may be spent on a wide range of approved educational expenses, including private school tuition, instructional materials, textbooks, tutoring, therapies, assessments, transportation, and certain forms of technology. Technology expenses are limited to 10% of the child’s annual award.
ESA funds cannot be withdrawn as cash or reimbursed for purchases. Parents must make all purchases through the state-administered payment platform, and funds go directly to approved providers or vendors.
While this structure aligns with the Education Savings Account model, the restrictions make TEFA more limited than ESA programs in states like Arizona or Florida. Texas’s ESA program functions more like a controlled marketplace than a fully flexible account.
It is also worth noting that many progressive advocacy groups and pro-public education organizations continue to describe programs like TEFA as vouchers, even though the characterization is incorrect. Under a voucher system, the state sends funds directly to a private school to cover tuition. Under TEFA, parents never receive money and cannot handle or redirect funds. All purchases must go through a state-supervised payment system and must be made only to approved vendors for approved expenses. This structure aligns with an ESA rather than a voucher model, and understanding the difference is essential for accurate public debate.
Oversight and Enforcement: How Compliance is Maintained
The Comptroller has the authority to suspend accounts for violations, halt spending until corrections are made, and permanently remove non-compliant parents or providers. If the Comptroller finds evidence of fraud or other violations of law, they must notify the appropriate county or district attorney. These enforcement provisions ensure that taxpayer funds and participating families are protected.
How Texas’s ESA Rules Compare to Universal School Choice Models
Texas’s program differs significantly from universal ESA models in other states. Universal programs allow all students to participate, redirect existing public school dollars to follow students, and permit broad flexibility in how families use funds. TEFA, by contrast, operates as a capped, parallel system funded through general revenue with a heavy emphasis on compliance and administrative oversight.
In a previous analysis of school choice programs around the country, we highlighted how universal ESA models have produced significant long-term fiscal savings. They generate those savings because students switching to private options reduce state obligations in the Foundation School Program. The capped model in Texas limits the possibility of those statewide benefits.
Similarly, as we explained earlier, distinguishing ESAs from vouchers, ESAs are designed to empower parents with flexible spending authority for a range of educational services. Texas has narrowed that flexibility with strict vendor limits and a controlled payment platform, which may inhibit the level of innovation that universal school choice systems often produce.
Conclusion: A Step Forward, But Not the Finish Line
The Education Freedom Account program represents progress for Texas families seeking more options, flexibility, and individualized learning opportunities. The Comptroller’s rules provide clarity and structure for program rollout and help families understand how to navigate eligibility, funding, and allowable expenses.
At the same time, the program remains limited in scale and design. It does not challenge the public education monopoly, does not allow funding to follow students fully out of the system, and does not create the broad competition that drives statewide academic improvement. With participation expected to reach only a small percentage of Texas students, true educational freedom remains out of reach for most families.
Texas Policy Research will continue to advocate for a universal school choice system that provides every child in Texas with access to high-quality educational options. Texans deserve a model where funding follows the student, where regulatory burdens do not stifle innovation, and where parents are trusted to determine the best path for their children. The foundation for that future has been laid, but much work remains.
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