Nebraska ESA and School Choice 2025: What Referendum 435 Changed

Nebraska parents who were hoping to use state scholarship money to fund a microschool or private school tuition ran into a wall in November 2024. Referendum 435 — a voter initiative that asked Nebraskans whether to keep or repeal the LB 1402 scholarship program — resulted in repeal, 57% to 43%. Nebraska has no operational ESA or educational freedom account program as of 2025.

This matters if you're planning your education budget. Here's the full picture of what existed, what happened, and what's actually available now.

What LB 1402 Would Have Done

LB 1402, passed by the Nebraska Legislature in 2023, created a scholarship program that would have provided state-funded scholarships for private and homeschool education. The program was set up as a tax-credit scholarship — businesses and individuals could donate to scholarship-granting organizations and receive a state tax credit in return. Those scholarships would then be distributed to families for private school tuition.

The maximum annual scholarship was $6,435 per student in the first year, scaling up over time. For a microschool family paying for a shared facilitator and educational materials, that would have been meaningful real money.

LB 1402 never fully launched. Opponents gathered enough signatures to put it on the November 2024 ballot as Referendum 435, allowing voters to overturn the law. They did.

What Referendum 435 Decided

Referendum 435 asked a single question: should LB 1402 be kept or repealed? The answer was repeal, 57% to 43% — a clear majority, not a narrow outcome. The program was voided.

The vote reflected Nebraska's historically moderate political culture. Unlike Arizona, Arkansas, or West Virginia — states that have passed universal ESA programs without major opposition — Nebraska's electorate includes a significant bloc of voters skeptical of public funding flowing to private institutions. Rural school districts, teachers' unions, and public school advocates ran an effective campaign framing LB 1402 as a threat to rural school funding.

The repeal is complete. There is no pending legislation that would revive it, no court challenge that has reversed the outcome, and no administrative workaround. Nebraska homeschool and microschool families operate without state scholarship support as of the 2024-25 school year.

What's Actually Available for Nebraska Families in 2025

The landscape isn't entirely empty, but it requires realistic expectations.

Nebraska Opportunity Scholarship Act (post-repeal status). The scholarship-granting organizations established under LB 1402 cannot operate the tax-credit scholarship program now that the underlying law is repealed. Families who had applied or been approved under the pre-repeal program are no longer receiving disbursements.

529 Education Savings Plans. Nebraska's 529 plan — NEST (Nebraska Educational Savings Trust) — allows tax-advantaged savings for qualified education expenses. Post-2017 federal tax law changes allow 529 funds to be used for K-12 private school tuition up to $10,000 per year. Homeschool families can use 529 funds for private tutors, online courses, and certain educational materials that qualify as educational expenses. Nebraska provides a state income tax deduction for contributions to NEST accounts (up to $10,000 for single filers, $10,000 per account per taxpayer).

The 529 deduction doesn't approach the direct scholarship value LB 1402 would have provided, but it's a real tax benefit for families who can fund the account in advance.

Nebraska Advantage Microenterprise Tax Credit. This credit isn't designed for homeschool families — it's a small business incentive. But a microschool operating as a formal business entity (LLC, sole proprietorship) that makes new investments in equipment, technology, or facilities may qualify for a 20% credit on up to $20,000 of new investment. This is most relevant to microschool operators who are treating their pod as a business rather than a family educational arrangement.

Federal Tax Considerations. There is no federal ESA program. Congressional discussions about federal school choice legislation continue, but nothing has passed. A federal scholarship tax credit was floated with an expected effective date of 2027, but as of 2025 it has not been enacted. Don't budget around it.

VELA Education Fund. VELA is a private philanthropy that provides micro-grants to innovative non-traditional education models, including learning pods and microschools. VELA grants are not public funds and have no state connection — they're trust-based, non-prescriptive grants to individual educators and families building new educational models. Nebraska microschool founders have received VELA funding. The grant amounts are modest (typically $1,000–$5,000 for early-stage projects) but the application process is accessible and the organizational strings are minimal.

Private Scholarships and Foundation Grants. Several national organizations (EdChoice, Stand Together, various faith-based foundations) provide scholarships for private school or microschool education. These are competitive and not Nebraska-specific, but families who qualify can access meaningful support.

Will Nebraska Try Again?

School choice advocates in Nebraska have not given up. The 2025 legislative session included discussion of alternative approaches — including a direct appropriation model rather than the tax-credit structure that went to voters as Referendum 435. Whether any of those approaches pass the legislature and survive the political environment is genuinely uncertain.

The path forward is harder than in 2023. Referendum 435 created a clear signal that the current Nebraska electorate does not want public funds flowing to private education. Advocates are working to reframe the issue, improve rural messaging, and build a coalition that can hold a majority in a future vote. That's a multi-year project.

For families making educational decisions today, it's reasonable to hope for future state funding but unwise to plan around it. Budget for your microschool or private school on the assumption that no state support arrives.

Planning Your Microschool Budget Without ESA Funding

The absence of ESA funding means Nebraska microschool families are working from a straightforward cost-sharing model: the families in the pod collectively cover facilitator compensation and operating costs.

Nebraska facilitators with experience earn $18–$26/hr. A pod of 5 families sharing a facilitator who works 20 hours per week is looking at roughly $10,000–$14,000 per family per year in facilitator costs alone, before materials, space, and insurance.

The Nebraska Micro-School & Pod Kit includes budget templates that model cost per student at different group sizes, so families can see clearly what the numbers look like with 4, 6, or 8 students — and what changes if a family leaves mid-year.

Until Nebraska passes a functioning school choice program, that math is the starting point for every pod.

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