South Carolina ESA Program

# The Palmetto State's Choice: A Comprehensive Analysis of South Carolina's Education Scholarship Trust Fund Program

Executive Summary

South Carolina's Education Scholarship Trust Fund (ESTF) program represents a significant and complex development in the state's K-12 education landscape. Forged through a tumultuous legal and legislative process, the program's architecture offers a compelling case study in how states are navigating constitutional hurdles to implement private school choice policies. This report provides a comprehensive analysis of the ESTF, deconstructing its legal origins, operational framework, initial enrollment and demographic trends, the emerging fiscal debate, and the nascent accountability structures designed to govern it.

The program's journey began with the passage of Senate Bill 39 in 2023, which established a means-tested Education Savings Account (ESA) with a strict "prior public school attendance" requirement. This initial framework was immediately challenged and ultimately reshaped by the South Carolina Supreme Court's landmark ruling in Eidson v. South Carolina Department of Education. The court found that using public funds for private school tuition constituted an unconstitutional "direct benefit" to private institutions, effectively halting a core function of the program. The legislature's swift response, Senate Bill 62 in 2025, not only restored the tuition provision but fundamentally re-engineered the program's financial structure. By introducing a non-public Trustee to manage the scholarship funds, lawmakers created a legal firewall intended to render the benefit to private schools indirect and constitutionally permissible.

The current ESTF program is a targeted, capped, and means-tested ESA, standing in contrast to the universal models proliferating in states like Arizona. It provides a scholarship of $7,500 for the 2025-26 school year to a capped number of students from low- and middle-income families, with eligibility expanding in phases. Despite its limited scope, initial demand has been exceptionally high, with applications far exceeding the available slots in its first two years. Preliminary data from the inaugural applicant pool is particularly noteworthy, showing a majority of applicants self-identified as racial minorities and a large proportion were Medicaid recipients. This provides a powerful, real-world counterpoint to the common critique that such programs primarily serve more affluent families.

The fiscal debate surrounding the ESTF is nascent but follows a predictable trajectory seen in other states. Proponents argue the program will generate net savings for taxpayers as students move from a more expensive public system to a less expensive ESA. Critics contend it is a new drain on state resources that diverts essential funding from public schools. The program's ultimate net fiscal impact will hinge on a critical, yet-to-be-measured metric: the "switcher rate," or the percentage of participants who previously attended public schools.

While the enabling legislation includes provisions for accountability—including parental agreements, provider approvals, and a statutory mandate for the state's Education Oversight Committee (EOC) to report on academic outcomes—the practical infrastructure for robust financial auditing and performance evaluation is still under construction. South Carolina has a critical opportunity to learn from the well-documented "oversight deficit" of more mature programs and proactively build a system of rigorous oversight that can scale with the program and maintain long-term public trust. This report concludes with forward-looking recommendations for state policymakers focused on prioritizing data transparency, scaling oversight in lockstep with enrollment, and ensuring programmatic stability to allow for meaningful longitudinal evaluation.

Section I: Forged in Legal Fire: The Legislative and Constitutional Evolution of the ESTF

The fundamental architecture of South Carolina's Education Scholarship Trust Fund (ESTF) program is not merely a product of policy preference but a direct and calculated response to legal conflict. Its journey from an initial legislative framework to its current, restructured form was dictated by a pivotal state Supreme Court decision that forced lawmakers to re-engineer the very flow of public funds. Understanding this constitutional and legislative evolution is essential to comprehending the program's unique design, its strategic legal underpinnings, and the potential points of friction that will define its future.

The Initial Framework: Senate Bill 39 (2023)

In May 2023, Governor Henry McMaster signed Senate Bill 39 into law, establishing the Education Scholarship Trust Fund and creating South Carolina's first ESA program.1 The legislation, which became Act 8, was designed as a targeted intervention aimed at providing educational options for low-income families.5 The core components of the original law reflected a cautious, phased-in approach to school choice.

The program offered a scholarship valued at $6,000 per student for the inaugural 2024-25 school year.2 Eligibility was strictly means-tested and designed to expand over a three-year period. In its first year, participation was limited to students from households with an income at or below 200% of the Federal Poverty Level (FPL). This threshold was set to increase to 300% of FPL in the second year and 400% in the third year.2

A defining feature of S.B. 39 was its strict "switcher" mandate. To be eligible, a student was required to have attended a South Carolina public school during the previous school year. The only exceptions were for students entering kindergarten for the first time and for students who had received a scholarship in the prior year and were seeking to renew.2 This requirement was a deliberate policy choice designed to ensure that the program primarily served as an "exit ramp" from the public school system, a key factor in arguments about its fiscal impact.

Finally, the program's scale was limited by legislated enrollment caps. For the 2024-25 school year, participation was capped at 5,000 students. This was scheduled to increase to 10,000 students in 2025-26 and 15,000 students in 2026-27 and beyond.7 This capped, phased-in structure positioned the ESTF as a pilot program, distinct from the universal, uncapped models that had emerged in states like Arizona.12

The Constitutional Challenge: Eidson v. South Carolina Department of Education

The legality of the newly minted program was challenged almost immediately. In October 2023, a coalition including the South Carolina State Conference of the NAACP, the South Carolina Education Association (SCEA), and a group of public school parents filed a lawsuit directly with the state Supreme Court, seeking to have the program declared unconstitutional.1

The central legal argument rested on Article XI, Section 4 of the South Carolina Constitution, which states, “No money shall be paid from public funds nor shall the credit of the State...be used for the direct benefit of any religious or other private educational institution”.1 This type of provision, present in many state constitutions, is often referred to as a "Blaine Amendment," historically aimed at preventing public funding of sectarian schools.13 The plaintiffs argued that allowing parents to use the state-funded $6,000 scholarships to pay for tuition at private, often religious, schools constituted an unconstitutional "direct benefit" of public funds to those institutions.16

In a landmark 3-2 decision issued in September 2024, the South Carolina Supreme Court sided with the plaintiffs, dealing a significant blow to the program just as it was launching.1 The majority opinion reasoned that the ESTF funds, which originated from state appropriations, remained "public funds" even when deposited into a parent's account. Therefore, when a parent used those funds to pay tuition, it created a direct financial benefit to the private school, violating the plain language of Article XI, Section 4\.5

Critically, however, the court did not strike down the entire ESTF program. Instead, it employed the legal doctrine of severability. It declared unconstitutional only the specific provisions of the law that allowed scholarship funds to be used for private school tuition and fees. The court explicitly allowed the program to continue for all other qualifying expenses, such as tutoring, educational therapies, curriculum, and technology.16 This ruling created an immediate and chaotic situation for the nearly 3,000 families who had already been awarded scholarships for the 2024-25 school year and had enrolled their children in private schools with the expectation of using the funds for tuition.13 They were left with scholarships they could no longer use for their primary intended purpose, creating immense uncertainty and political pressure for a legislative solution.

The Legislative Response: Senate Bill 62 (2025)

The South Carolina General Assembly responded to the Eidson ruling with remarkable speed and strategic focus during its 2025 legislative session. The result was Senate Bill 62, a comprehensive overhaul of the ESTF program designed explicitly to circumvent the Supreme Court's constitutional objections.13

The core legal innovation embedded in S.B. 62 was the creation of a new administrative structure centered on a non-public Trustee. The new law mandates that the State Superintendent of Education appoint a Trustee—who cannot be a public entity or employee—to hold, manage, control, and disburse the scholarship funds.26 This was a direct and calculated maneuver to address the court's finding that the funds remained "public." The legislative theory is that by transferring state appropriations into a fund managed by a private trustee, the funds legally cease to be "public funds" and instead become part of a "trust corpus" to which parents, as beneficiaries, hold equitable title.27 When a parent then directs these trust funds to a private school, the benefit is no longer a direct benefit from the state, but an indirect one originating from a private trust and a parent's private choice.26 Opponents of the program have characterized this structure as a "loophole" or a "workaround" of the constitution, signaling that the program's legal foundation may face future challenges.26

Beyond this central legal strategy, S.B. 62 enacted several other significant changes to expand and refine the program. It increased the annual scholarship amount to $7,500 for the 2025-26 school year, expanded income eligibility thresholds, and significantly modified the "switcher" requirement.25 These changes, detailed in subsequent sections, reflect a legislative intent not only to restore the program but to strengthen and broaden its appeal.

The legal and legislative battle over the ESTF reveals a profound commitment among state policymakers to establishing a functional school choice program. The failure of the initial, more straightforward model in S.B. 39 did not lead to the policy's abandonment but rather to its strategic re-engineering. This experience provides a modern playbook for other states with similar "direct benefit" or Blaine Amendment clauses in their constitutions. The legal battleground for school choice has evolved beyond broad ideological principles to the intricate mechanics of fund transfers and the legal definitions of "public," "private," and "direct benefit." The success or failure of South Carolina's new trustee model will be closely watched as a national precedent for navigating these complex constitutional landscapes.

Section II: Architectural Blueprint of the Education Scholarship Trust Fund

Following its legal and legislative reconstruction, the Education Scholarship Trust Fund (ESTF) program now operates under a detailed architectural framework established by Senate Bill 62\. This framework defines the roles of the administering agencies, the value and source of the scholarships, and the wide array of educational expenses for which families can use the funds. A granular understanding of this design is crucial for assessing its functionality, accessibility, and fiscal implications.

Program Administration and Financial Management

The day-to-day operation of the ESTF involves a partnership between a state agency, a private financial technology vendor, and the newly created Trustee.

Administering Agency: The South Carolina Department of Education (SCDE) serves as the primary state agency responsible for the program's overall administration. Its duties include developing and processing applications, determining student eligibility, approving Education Service Providers (ESPs), and general program oversight.32

Financial Platform: Parents do not receive direct cash payments. Instead, they manage their student's scholarship funds and execute payments to approved providers through a third-party digital wallet platform, ClassWallet.10 This structure is now a common feature in ESA programs nationwide, as it serves two key functions: it prevents the commingling of scholarship funds with personal funds, and it creates a clear, auditable digital record of every transaction. Under the program's rules, all payments must be initiated through the ClassWallet platform, and direct reimbursements to parents for out-of-pocket expenses are prohibited.33

The Trustee Model: The most significant structural feature, introduced by S.B. 62, is the role of the Trustee. This individual or entity, appointed by the State Superintendent of Education, must not be a public employee or public entity.26 The Trustee is legally responsible for holding, managing, and disbursing the scholarship funds from the trust. This creates a formal legal separation between the state's appropriation of funds and the final payment to an educational provider, a design intended to withstand constitutional scrutiny.13

Scholarship Value and Funding

The value of the ESTF scholarship and its funding source were both modified and clarified under the revised legislation.

Scholarship Value: The original program under S.B. 39 established a scholarship value of $6,000 for the 2024-25 school year.2 Recognizing that this amount might not cover tuition at many private institutions, S.B. 62 increased the scholarship value to $7,500 for the 2025-26 school year.29 For the 2026-27 school year, the official program website projects a slight increase to $7,634.32

Future Adjustments: The new law also created a mechanism for automatic future increases. Beginning in 2026-27, the scholarship amount will be adjusted annually based on the percentage increase in the state's average per-pupil "State Aid to Classrooms" funding.13 This escalator clause ensures that the scholarship's value does not stagnate over time and maintains a relative relationship to public school funding.

Funding Source: The source of the program's appropriation was a point of significant legislative debate. Various proposals considered funding the program through the state's General Fund or through revenue from the South Carolina Education Lottery.13 The final version of S.B. 62 provides flexibility, clarifying that funding shall be decided annually by the General Assembly from either of these sources.31

Allowable Expenses

A key feature that defines the ESTF as a true ESA, rather than a traditional voucher, is the broad range of approved educational goods and services for which families can use the funds. This flexibility is designed to empower parents to customize their child's education.10 The list of qualifying expenses is extensive and includes 2:

• Tuition and Fees: This includes tuition and required fees at approved private schools, as well as tuition and fees for attending a public school outside of a student's resident district.
• Curriculum and Materials: Textbooks, online curriculum, workbooks, and other required instructional materials.
• Tutoring: Private tutoring services from providers approved by the SCDE.
• Educational Therapies: Services for students with disabilities, such as speech-language therapy, occupational therapy, physical therapy, and behavioral therapy from licensed providers.
• Technology: Computer hardware (laptops, desktops, tablets) and other technological devices used primarily for educational needs. The program sets specific spending limits, such as a maximum of $1,500 for a computer or tablet, which can be purchased once every two years.36
• Testing Fees: Fees for nationally norm-referenced tests, Advanced Placement (AP) exams, industry certification exams, and college admissions tests like the SAT or ACT.
• Transportation: Fees paid to a transportation provider for travel to and from an approved provider. The cap for this expense was increased from $750 under the original law to $3,000 per school year under S.B. 62\.28
• School Uniforms: The cost of required school uniforms was added as a qualifying expense in the revised law.28
• Public School Services: Families can use funds to contract with public school districts for individual classes, after-school tutoring, or to pay fees associated with participation in extracurricular activities.

The following table provides a clear, at-a-glance comparison of the program's original design under S.B. 39 and its current architecture under S.B. 62, highlighting the direct impact of the Eidson court ruling and the subsequent legislative revisions.

Table 1: Legislative Evolution: Key Differences Between S.B. 39 (2023) and S.B. 62 (2025)

This architectural evolution demonstrates a clear legislative intent to create a durable and expansive school choice program. The changes made in S.B. 62 were not merely cosmetic; they were substantive revisions to the program's legal foundation, financial viability, and accessibility, all designed to ensure its survival and growth in the wake of a significant constitutional challenge.

Section III: Enrollment Dynamics and Participant Profile: A Nascent Market

As a new and evolving program, the Education Scholarship Trust Fund's enrollment patterns and participant demographics provide critical early indicators of its demand, reach, and function within South Carolina's educational ecosystem. The data, though preliminary, reveals a program with exceptionally high demand from its target population and an initial applicant pool that challenges common critiques of school choice initiatives.

Phased-In, Capped Enrollment

Unlike the "shock therapy" approach of universal programs that become available to all students at once, South Carolina's legislature designed the ESTF with a deliberate, multi-year phase-in for both the number of participants and their maximum income levels. This controlled rollout allows the state to manage the program's budgetary growth and administrative burden as it scales.

The program's legislated enrollment caps and corresponding income eligibility thresholds are detailed in the table below. The initial law, S.B. 39, set a three-year path to reaching 400% of the Federal Poverty Level (FPL). The revised law, S.B. 62, accelerated and expanded this, aiming for 500% of FPL in the third year, a level that would make an estimated 85% of all South Carolina households eligible for the program.31

Table 2: Phased Eligibility and Enrollment Caps (SY 2024-25 to 2026-27)

High Demand and Rapid Uptake

Despite the restrictive initial eligibility criteria, demand for the ESTF program has been overwhelmingly strong from its inception, indicating a significant latent demand for educational alternatives among the state's low- and middle-income families.

For the inaugural 2024-25 school year, which was limited to 5,000 students from households at or below 200% FPL, the SCDE received 7,907 student applications by the time the initial application window closed.45 This immediate oversubscription demonstrated that demand was nearly 60% higher than the available supply of scholarships.

This trend accelerated in the program's second year. For the 2025-26 school year, the enrollment cap was doubled to 10,000 students and the income threshold was raised to 300% FPL. All 10,000 scholarships were awarded by late June 2025, roughly six months after the application process began.29 The SCDE was forced to create a waitlist for additional eligible applicants, confirming that demand continues to significantly outpace the legislated enrollment caps.49

The Evolving "Switcher" Requirement

A critical factor in analyzing any ESA program is its "switcher rate"—the percentage of participants who were previously enrolled in public schools. This metric is the fulcrum of the fiscal debate, as high switcher rates are associated with cost savings for the state. South Carolina's approach to this issue has evolved significantly.

The original law, S.B. 39, contained a classic and strict switcher mandate. It required that an eligible student must have attended a public school in the prior year, with narrow exceptions for incoming kindergarteners and renewing participants.2 This design would have produced a near-100% switcher rate among new, non-kindergarten students.

The revised law, S.B. 62, represents a fundamental strategic shift. It removed the mandatory "prior public school attendance" requirement as a condition of general eligibility.32 This change opened the program to students who were already attending private school or being homeschooled, provided they met the income criteria. However, the legislature balanced this expansion by retaining "prior year public school attendance" as a priority category during the application process.10 This hybrid approach allows the program to build a broader political constituency by including non-switchers, while still incentivizing and prioritizing families leaving the public system, which supports the fiscal savings argument. The actual switcher rate under this new priority system is not yet known and will be a crucial data point to monitor in future years.

Initial Applicant Demographics (SY 2024-25)

While the SCDE has not yet released official demographic reports on the students who were ultimately awarded scholarships, the Palmetto Promise Institute, a think tank, compiled and published data on the initial pool of 7,907 applicants for the program's first year.45 This data provides the only available snapshot of the families who sought to use the program and offers a powerful narrative about its initial reach.

The applicant pool was geographically diverse, with families from all 46 of South Carolina's counties submitting applications.45 Most strikingly, the data on race and ethnicity showed that a decisive majority of applicants self-identified as racial minorities. This profile provides a compelling, real-world counterpoint to the frequent critique that school choice programs disproportionately benefit affluent, white families. The initial data for South Carolina's means-tested program suggests the opposite may be true. When eligibility is tightly restricted by income, the program is heavily utilized by the intended target population of lower-income and minority families.

Table 3: Inaugural Applicant Pool Profile (SY 2024-25)

Source: Palmetto Promise Institute analysis of 7,907 applications 45

Note: Applicants could select multiple racial categories, so percentages do not sum to 100%.

The high percentage of applicants who are Medicaid recipients (nearly 75%) further underscores that the program, in its initial, tightly-controlled phase, is reaching its intended audience of economically disadvantaged families. The critical question for the future is how this demographic profile will evolve as the program's income caps rise dramatically to 500% of the FPL in 2026-27, opening eligibility to a much broader swath of middle-income households across the state.

Section IV: The Fiscal Debate: Projecting Costs and Savings in a New Program

As with any significant public expenditure, the fiscal impact of the Education Scholarship Trust Fund program is a central and contentious issue. While the program is too new for a definitive, data-driven analysis of its net effect on the state budget, the frameworks for the debate are already in place, mirroring the arguments seen in states with more mature ESA programs. The discussion revolves around two competing models: one that views the program as a new and costly deficit-driver, and another that projects it as a fiscally efficient policy that will generate net savings for taxpayers.

Gross Program Cost Projections

The most straightforward component of the fiscal analysis is the program's gross cost, which is the direct, top-line expenditure required to fund the scholarships and their administration. This figure is determined by the legislated enrollment caps and the per-student scholarship value.

• School Year 2024-25: With a cap of 5,000 students and a scholarship value of $6,000, the maximum gross cost for the inaugural year was $30 million.7
• School Year 2025-26: The cap increased to 10,000 students and the scholarship value rose to $7,500, bringing the maximum gross scholarship cost to $75 million.31
• School Year 2026-27: The cap is set to rise to 15,000 students. With the scholarship value projected to be approximately $7,634, the maximum gross cost will be approximately $114.5 million.32

In addition to the scholarships themselves, the program incurs administrative costs. The revised law, S.B. 62, allows the SCDE to retain up to 7% of the total scholarship fund for program administration, a significant increase from the 2% allowed under the original law.38 This retention provides funding for SCDE staff and for vendor costs, such as the contract with ClassWallet, which are estimated to be around $135 per student.38 This administrative overhead represents an additional layer of program cost that must be included in any comprehensive fiscal analysis.

Table 4: Projected Gross Program Cost and Administrative Overhead (FY2025-FY2027)

\Note: The 2% rate was under S.B. 39; the 7% rate was enacted by S.B. 62 for subsequent years.*

Constructing the Net Fiscal Impact Debate

While the gross cost is a matter of simple arithmetic, the debate over the program's net fiscal impact is far more complex and politically charged. It hinges entirely on the accounting treatment of students who switch from public schools versus those who were already in private educational settings.

Model 1: The Deficit-Driver Argument (Program Critics)

This model, advanced by program opponents such as the South Carolina Education Association (SCEA) and the ACLU of South Carolina, frames the ESTF program as a diversion of public funds that harms traditional public schools.39 The core of this argument is that any scholarship awarded to a student who was not previously enrolled in a public school represents an entirely new and additional cost to the state. From this perspective, the state is taking on a new financial obligation to subsidize the education of students it was not previously funding.55

Critics point to the experience of Arizona, where the rapid expansion of a universal ESA program was blamed for contributing to a significant state budget shortfall, as a cautionary tale for South Carolina.56 They argue that as eligibility expands, a growing percentage of participants will be "non-switchers" (i.e., students already in private schools), transforming the program into an expensive subsidy for families who were already paying for private education. An analysis cited by the ACLU of South Carolina went so far as to project that a fully universal voucher program in the state could cost taxpayers as much as $2.9 billion annually.56 In this view, the ESTF is a fiscally irresponsible policy that drains resources from an already underfunded public education system.

Model 2: The Net Savings Argument (Program Proponents)

This model, championed by school choice advocates like EdChoice and the Palmetto Promise Institute, presents a starkly different fiscal narrative. It argues that the program's gross cost is substantially offset—or even outweighed—by the savings generated every time a student leaves the public school system to use an ESTF scholarship.21

The logic of this model is straightforward: the state and local governments are relieved of the cost of educating that "switcher" student in a public school. Since the total per-pupil expenditure in South Carolina's public schools is significantly higher than the ESTF scholarship amount (average per-pupil spending exceeds $10,000, compared to the $7,500 scholarship), each switcher generates net savings for the state and local taxpayers.58 Proponents often cite fiscal analyses of other school choice programs, such as South Carolina's own tax-credit scholarship for students with special needs, which have been estimated to produce millions of dollars in net savings for the state.57 In this view, the ESTF is not a new drain on the budget but rather a more efficient allocation of existing education dollars.

The state's own official fiscal impact statements, prepared by the Revenue and Fiscal Affairs Office (RFA), have thus far remained neutral in this debate. While the RFA's analyses meticulously calculate the program's direct gross costs, they classify the potential savings from students leaving public schools as "undetermined".43 This is a methodologically conservative and standard practice for a government fiscal office, as actual savings at the district level depend on complex factors, such as whether a district can reduce staffing or consolidate resources in response to small changes in enrollment. However, this analytical vacuum has significant political consequences. It allows both sides of the debate to advance their own models without a definitive, official arbiter of the program's net cost.

Ultimately, the single most important variable that will determine the ESTF's long-term net fiscal impact is the "switcher rate." The removal of the mandatory switcher requirement in S.B. 62 makes this metric paramount. If the program primarily attracts students already outside the public system, its net cost to the state will be high. Conversely, if the priority given to public school applicants results in a high switcher rate—similar to the 57% rate observed in Arizona's mature universal program 12—the argument for net savings becomes substantially more credible. Tracking this metric as the program scales will be the key to moving the fiscal debate from theoretical modeling to evidence-based analysis.

Section V: Accountability and Oversight: Building an Infrastructure from Scratch

While public debate often focuses on enrollment numbers and fiscal projections, the long-term success and political viability of any ESA program depend heavily on the strength of its accountability and oversight infrastructure. For South Carolina's nascent ESTF program, this infrastructure is being built from the ground up. The enabling legislation includes several statutory and administrative safeguards, and an independent state agency is tasked with evaluation. However, the practical systems for robust financial auditing and academic performance tracking are still in their formative stages, representing both a critical challenge and an opportunity to learn from the missteps of more established programs.

Statutory and Administrative Safeguards

The legislative framework for the ESTF program contains several provisions designed to ensure proper use of funds and establish baseline requirements for participants and providers.

• Parental Agreement: As a condition of receiving a scholarship, parents must sign an annual agreement with the SCDE. In this agreement, they attest that they will use the scholarship funds only for qualifying expenses, provide a program of academic instruction for their child in the core subjects of English/language arts, mathematics, social studies, and science, and ensure their child complies with the program's assessment requirements.3
• Definition and Penalties for Misuse: The state code explicitly defines "substantial misuse" as willfully and knowingly receiving or spending any portion of a scholarship for a non-qualifying purpose. The SCDE has the authority to declare a parent ineligible for program continuation if substantial misuse is found.27
• Provider Approval and Requirements: All Education Service Providers (ESPs), including private schools, tutors, and therapists, must apply to and be approved by the SCDE to be eligible to receive ESTF payments.32 As part of this process, providers must certify that they will comply with all applicable health and safety laws and adhere to non-discrimination policies on the basis of race, color, or national origin. They are also required to conduct criminal background checks on their employees.4
• Financial Controls via Digital Platform: The mandatory use of the ClassWallet platform serves as a primary financial control mechanism. It ensures that funds are only directed to SCDE-approved vendors and creates a digital transaction record for every purchase. The prohibition on direct reimbursement to parents is a key safeguard against the misuse of funds for non-educational purposes.33

The Role of the Education Oversight Committee (EOC)

To provide an independent layer of evaluation, the state legislature tasked the South Carolina Education Oversight Committee (EOC) with overseeing and reporting on the ESTF program's performance.60 The EOC is a nonpartisan body composed of educators, business leaders, and elected officials.

The EOC's first mandated task was to develop and administer an annual parental satisfaction survey. The inaugural report, published in December 2024, reflected the chaotic rollout of the program, which was disrupted by the Supreme Court's Eidson ruling. The survey yielded a Net Promoter Score (NPS) of \-0.92, indicating that there were slightly more "detractors" (unhappy participants) than "promoters" (enthusiastic participants) in the program's first year.11 This initial result provides a baseline for measuring improvements in program administration and family satisfaction over time.

Crucially, the EOC's statutory mandate extends beyond satisfaction surveys. The committee is required to collect, analyze, and publicly report on the academic performance of scholarship students, including learning gains and graduation rates. This data must be disaggregated by grade level, gender, family income level, race, and the number of years a student has participated in the program.11 This legislative requirement for detailed, disaggregated academic reporting is a significant strength of the program's design. However, due to the program's recent launch, no such academic data is yet available. The EOC has indicated that it expects to include academic performance data in its 2025 report.11

Current Data Gaps and Oversight Deficiencies

As a program in its infancy, the ESTF currently has significant gaps in its accountability framework, not due to legislative omission but to the simple lack of time and operational history.

• Lack of Audits and Misuse Data: There are no public reports of financial audits of parent accounts or participating providers, nor are there any documented cases of fraud or misuse of funds.60 The legal challenges to the program have been based on its constitutional structure, not on operational malfeasance.1 At present, the primary financial accountability check is the SCDE's process of cross-referencing ESTF participant lists with public school enrollment data to prevent students from being funded by both systems simultaneously.11
• Absence of Academic Performance Data: The most critical accountability gap is the complete absence of data on the academic outcomes of participating students. While mandated by law, the systems for collecting, analyzing, and reporting this information are still being built. Until this data becomes available, any evaluation of the program's educational effectiveness will be purely anecdotal.

South Carolina is in a critical formative period for its ESA program. The state has a unique opportunity to learn from the well-documented "oversight deficit" that has plagued larger, more mature programs in other states. The case of Arizona, for instance, demonstrates how a program that scales exponentially without a corresponding investment in administrative and audit capacity can lead to public instances of misspending, eroding public trust and creating political backlash.12

South Carolina's program is currently small and its growth is controlled by legislative caps. This provides a crucial window of opportunity for policymakers to be proactive. The decision in S.B. 62 to increase the administrative retention fee from 2% to 7% suggests an awareness of the need for greater resources for oversight.38 The key challenge will be to ensure these additional funds are strategically deployed to build a sophisticated, risk-based auditing system and a robust data collection infrastructure, rather than being consumed by basic application processing. The statutory mandate for the EOC to report on disaggregated academic outcomes is a powerful tool, but its value is entirely contingent on the will and resources dedicated to its implementation. Fulfilling this mandate will require significant cooperation between the EOC, the SCDE, and the diverse array of participating private schools and service providers. The success or failure of this data collection effort will ultimately determine whether future debates about the ESTF program are guided by empirical evidence or by ideology.

Section VI: Concluding Analysis and Forward-Looking Implications

South Carolina's journey with the Education Scholarship Trust Fund has established it as a critical case study in the evolving landscape of American school choice. The program's tumultuous birth and strategic reconstruction offer profound lessons for policymakers in South Carolina and across the nation. The analysis reveals a program defined by a central tension: the legislature has successfully navigated significant constitutional barriers to create a targeted, in-demand educational choice program, yet the practical infrastructure for fiscal accountability and performance evaluation is still in its infancy. The program's long-term success will depend less on the legal theories that enabled its creation and more on the state's commitment to building a foundation of transparent data, rigorous oversight, and stable implementation.

Synthesis of Findings

The ESTF's identity is inextricably linked to its legal origins. Its architecture, particularly the novel use of a non-public Trustee, is a direct and calculated response to the South Carolina Supreme Court's interpretation of the state constitution's "direct benefit" clause. This makes the program a national test case for a new legal strategy aimed at implementing ESAs in states with similar constitutional prohibitions.

By design, the ESTF is a targeted, means-tested, and capped ESA, which distinguishes it from the universal models that have captured national attention. This deliberate, phased-in approach has allowed the state to manage the program's growth and budget impact. The initial results of this targeted design are compelling: demand has far outstripped the supply of scholarships, and the inaugural applicant pool was composed of a majority of racial minorities and a large proportion of Medicaid recipients. This provides strong early evidence that, when restricted by income, such programs are utilized heavily by the economically disadvantaged families they are intended to serve.

The program's future fiscal and demographic trajectory will be shaped by two key variables. First is the "switcher rate." The legislative shift from a mandatory public school attendance requirement to a priority category was a strategic move to broaden the program's political base, but it introduces significant uncertainty into net cost calculations. The program's net cost or savings to the state will be almost entirely a function of the proportion of participants who switch from public schools versus those who were already in private settings. Second is the rapid expansion of income eligibility. As the income cap rises to 500% of the federal poverty level, the program will become accessible to a much larger segment of middle-income families, which will likely alter its demographic profile and increase its gross cost.

Finally, while the enabling legislation laudably includes a strong mandate for accountability—particularly the requirement for the Education Oversight Committee to report on disaggregated academic outcomes—the practical infrastructure for robust oversight is not yet in place. The program is currently operating with minimal financial auditing and no academic performance data, representing a critical vulnerability that must be addressed proactively.

Forward-Looking Recommendations for South Carolina Policymakers

Based on this comprehensive analysis, the following recommendations are offered to guide the ESTF program through its next phase of development and ensure its long-term effectiveness and public accountability.

1. Prioritize and Fund Robust Data Collection. The statutory mandate for the EOC to report on academic outcomes by demographic subgroup is a best practice in program design, but a mandate without resources is symbolic. The General Assembly should provide dedicated funding to the EOC and SCDE to build the data infrastructure necessary to fulfill this requirement. This includes establishing clear, standardized, and mandatory reporting protocols for all participating Education Service Providers as a condition of their approval. Doing so is the only way to move future debates about the program's effectiveness from anecdote to evidence.

2. Scale Oversight Proactively, Not Reactively. The state should learn from the well-documented challenges of larger ESA programs where oversight capacity lagged years behind enrollment growth. The increased 7% administrative funding provides an opportunity to be proactive. A significant portion of these funds should be used to establish a dedicated, sophisticated audit unit within the SCDE. This unit should be tasked with developing and implementing a risk-based auditing protocol for both parent accounts and service providers before the program reaches its 15,000-student cap and potentially expands further.

3. Commission an Independent "Switcher Rate" Analysis. The net fiscal impact of the ESTF will be the most persistent and politically charged question surrounding the program. To provide a credible, objective baseline for legislative and public debate, the General Assembly should commission an independent, non-partisan entity—such as the state's Revenue and Fiscal Affairs Office or a university-based research center—to conduct an annual analysis of the program's switcher rate and model its net fiscal effect. This would introduce a common set of facts into a debate that is otherwise prone to competing and often biased analyses.

4. Ensure Programmatic Stability to Enable Meaningful Evaluation. In its first two years, the ESTF program has been subject to a constitutional lawsuit, a judicial injunction, and a complete legislative overhaul. This instability has been disruptive for families and providers. To build confidence and allow for the collection of meaningful longitudinal data on student outcomes, policymakers should prioritize a period of stable implementation under the current framework established by S.B. 62\. Major structural changes or further expansions beyond the current statutory plan should be deferred until at least three to five years of consistent academic and financial data are available for a true evaluation of the model's effectiveness.

South Carolina stands at a critical juncture. It has successfully designed and launched an innovative educational choice program that is in high demand among its target population. Its future success, however, will be measured not by the cleverness of its legal structure, but by its demonstrated commitment to transparency, accountability, and, ultimately, the educational outcomes of the students it serves.

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