Senate File 2154 - Introduced SENATE FILE 2154 BY BEHN , JOHNSON , GUTH , SEGEBART , GARRETT , SINCLAIR , ERNST , CHAPMAN , ROZENBOOM , KAPUCIAN , CHELGREN , ZAUN , ANDERSON , BERTRAND , WHITVER , BOETTGER , FEENSTRA , ZUMBACH , BREITBACH , GREINER , SCHNEIDER , DIX , SMITH , and HOUSER A BILL FOR An Act relating to education savings grants for pupils 1 attending a nonpublic school or receiving competent private 2 instruction, establishing an education savings grant fund, 3 providing an income tax exemption, making appropriations, 4 providing penalties, and including applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5773XS (5) 85 md/sc

S.F. 2154 Section 1. Section 256.7, Code 2014, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 33. Adopt rules relating to applications 3 for an education savings grant pursuant to section 257.11B, 4 including application processing timelines and information 5 required to be submitted by a parent or guardian. 6 Sec. 2. NEW SECTION . 257.11B Education savings grant 7 program. 8 1. Pupils eligible to enroll in grades kindergarten through 9 twelve and attending a nonpublic school or receiving competent 10 private instruction under chapter 299A shall be eligible to 11 receive an education savings grant in the manner provided in 12 this section for school years beginning on or after July 1, 13 2015. Education savings grants shall be made available to 14 parents and guardians in the manner authorized under subsection 15 4, paragraph “c” , for the payment of qualified educational 16 expenses as provided in this section. 17 2. a. (1) By January 31 preceding the school year for 18 which the education savings grant is requested, the parent 19 or guardian of the pupil requesting to receive an education 20 savings grant shall submit an application to the department of 21 education, on application forms developed by the department, 22 indicating that the parent or guardian intends to enroll the 23 pupil in a nonpublic school or provide competent private 24 instruction for the pupil under chapter 299A. 25 (2) In addition to such information deemed appropriate by 26 the department of education, the application shall require 27 certification from the nonpublic school of the pupil’s 28 enrollment for the following school year or a statement 29 indicating the parent or guardian’s intent to provide or 30 arrange for competent private instruction for the pupil for the 31 following school year. 32 b. By March 1 preceding the school year for which the 33 education savings grant is requested, the department of 34 education shall notify the department of management of the 35 -1- LSB 5773XS (5) 85 md/sc 1/ 9

S.F. 2154 number of pupils in each school district designated for the 1 following school year to receive an education savings grant 2 and the amount of the education savings grant for each pupil. 3 The department of education shall also notify the parent 4 or guardian of such pupils who are approved to receive an 5 education savings grant. 6 c. Education savings grants shall only be approved for one 7 school year and applications must be submitted under paragraph 8 “a” for education savings grants in subsequent school years. 9 3. a. The department of management shall assign each pupil 10 an education savings grant in an amount equal to the statewide 11 average state foundation aid per pupil in the same school year. 12 b. The department of management shall on July 1 following 13 the determination of the amount of the education savings grant 14 for each approved pupil transfer such amounts to the pupil’s 15 account in the education savings grant fund established under 16 subsection 4. Such amount shall be available to the pupil’s 17 parent or guardian in the manner authorized under subsection 18 4, paragraph “c” , for the payment of qualified educational 19 expenses incurred by such persons for the pupil during that 20 school year. 21 4. An education savings grant fund is created in the state 22 treasury under the control of the department of management 23 consisting of moneys appropriated to the department for the 24 purpose of providing education savings grants under this 25 section. For the fiscal year commencing July 1, 2015, and 26 each succeeding fiscal year, there is appropriated from the 27 general fund of the state to the department of management to be 28 credited to the fund the amount necessary to pay all education 29 savings grants approved for that fiscal year. The director of 30 the department of management has all powers necessary to carry 31 out and effectuate the purposes, objectives, and provisions of 32 this section pertaining to the fund, including the power to do 33 all of the following: 34 a. Make and enter into contracts necessary for the 35 -2- LSB 5773XS (5) 85 md/sc 2/ 9

S.F. 2154 administration of the fund. 1 b. Procure insurance against any loss in connection with the 2 assets of the fund or require a surety bond. 3 c. Contract with a private financial management firm to 4 manage the fund, in collaboration with the treasurer of state, 5 including providing for the disbursement of education savings 6 grants in the form of an electronic debit card or checks that 7 are payable directly from the pupil’s account within the fund. 8 d. Conduct audits or other review necessary to properly 9 administer the program. 10 e. Adopt rules pursuant to chapter 17A for the 11 administration of the fund and accounts within the fund. 12 5. a. For each pupil approved for an education savings 13 grant, the department shall establish an account for that pupil 14 in the education savings grant fund. The amount of the pupil’s 15 education savings grant determined under subsection 3 shall be 16 deposited into the pupil’s account on July 1 and such amount 17 shall be immediately available for the payment of qualified 18 educational expenses incurred by the parent or guardian for 19 the pupil during that fiscal year using the payment method 20 authorized under subsection 4, paragraph “c” . 21 b. A nonpublic school or other entity that accepts payment 22 from a parent or guardian using funds from a pupil’s account in 23 the education savings grant fund shall not refund, rebate, or 24 share any portion of such payment with the parent, guardian, or 25 pupil. 26 c. Moneys remaining in a pupil’s account upon conclusion 27 of the fiscal year shall remain in the pupil’s account within 28 the education savings grant fund for the payment of qualified 29 educational expenses in future fiscal years or for the payment 30 of higher education costs under subsection 8. 31 6. For purposes of this section, “qualified educational 32 expenses” includes tuition and fees at a nonpublic school, 33 textbooks, fees or payments for educational therapies including 34 tutoring or cognitive skills training, curriculum fees and 35 -3- LSB 5773XS (5) 85 md/sc 3/ 9

S.F. 2154 materials for a course of study for a specific subject matter 1 or grade level, tuition or fees for nonpublic online education 2 programs, education materials and services for pupils with 3 disabilities including the cost of paraprofessionals and 4 assistants who are trained in accordance with state law, 5 standardized test fees, fees required by the department not 6 to exceed for each grant recipient five percent of the total 7 grant amount in any fiscal year, higher education expenses, as 8 defined in section 12D.1, excluding room and board expenses, 9 and other expenses incurred by the parent or guardian that 10 are directly related to the education of the pupil at a 11 nonpublic school, including a nonpublic school accredited by an 12 independent accrediting agency approved by the department of 13 education, or directly related to providing competent private 14 instruction for the pupil under chapter 299A. The cost of one 15 computer or other portable computing device shall be allowed as 16 a qualified educational expense for a pupil if such a purchase 17 has not been made using funds from that pupil’s account 18 in either of the two immediately preceding fiscal years. 19 “Qualified educational expenses” do not include transportation 20 costs for the pupil, the cost of food or refreshments consumed 21 by the pupil, the cost of clothing for the pupil, or the cost 22 of disposable materials, including but not limited to paper, 23 notebooks, pencils, pens, and art supplies. 24 7. A person who makes a false claim for the purpose of 25 obtaining an education savings grant provided for in this 26 section or who knowingly receives the grant or makes a payment 27 from an account within the education savings grant fund 28 without being legally entitled to it is guilty of a fraudulent 29 practice. The false claim for an education savings grant or a 30 payment from an account shall be disallowed and if amounts from 31 the grant have been disbursed from the applicable account in 32 the education savings grant fund, the department of management 33 shall initiate legal proceedings to recover such amounts. A 34 parent or guardian, or a pupil for purposes of subsection 8, 35 -4- LSB 5773XS (5) 85 md/sc 4/ 9

S.F. 2154 who violates this subsection is prohibited from participating 1 in the education savings grant program in the future. 2 8. a. For each pupil with a positive balance in the 3 pupil’s account in the education savings grant fund upon 4 graduation from high school or completion of an equivalent 5 level of competent private instruction under chapter 299A, the 6 department of management shall maintain the account in the 7 fund until the pupil is twenty-three years of age. Following 8 graduation from high school until the pupil is twenty-three 9 years of age, moneys in the pupil’s account may be used for 10 higher education costs, as defined in section 12D.1, subsection 11 2, incurred by the pupil while attending an institution of 12 higher education under the control of the state board of 13 regents, a community college located in this state, or a 14 private college or university located in this state. Payments 15 from a pupil’s account for higher education costs shall be 16 made in the same manner as payments for qualified educational 17 expenses under subsection 5. Moneys in a pupil’s account when 18 the pupil turns twenty-three years of age shall be transferred 19 by the department for deposit in the general fund of the state. 20 b. Notwithstanding the age limitation in paragraph “a” , 21 if the pupil with a positive balance in the pupil’s account 22 within the education savings grant fund upon graduation from 23 high school or completion of an equivalent level of competent 24 private instruction under chapter 299A serves on federal active 25 duty, other than training, and is discharged under honorable 26 conditions, the limitation date otherwise applicable under 27 paragraph “a” shall be extended by one year for each year of 28 federal active duty service by the pupil, but not to a date 29 after the pupil’s twenty-seventh birthday. 30 9. This section shall not be construed to authorize the 31 state or any political subdivision of the state to exercise 32 authority over any nonpublic school or pupil receiving 33 competent private instruction under chapter 299A or construed 34 to require a nonpublic school to modify its admissions or 35 -5- LSB 5773XS (5) 85 md/sc 5/ 9

S.F. 2154 educational program in order to receive payment from a parent 1 or guardian using funds from a pupil’s account in the education 2 savings grant fund. A nonpublic school or entity providing 3 competent private instruction under chapter 299A, that accepts 4 payment from a parent or guardian using funds from a pupil’s 5 account in the education savings grant fund is not an agent of 6 this state or other political subdivision of this state. Rules 7 adopted by the department to implement this section that impose 8 an undue burden on a nonpublic school or entity providing 9 competent private instruction under chapter 299A are invalid. 10 Sec. 3. Section 422.7, Code 2014, is amended by adding the 11 following new subsection: 12 NEW SUBSECTION . 51. Subtract, to the extent included, the 13 amount of any education savings grant under section 257.11B 14 received during the tax year by pupils for whom the taxpayer is 15 the parent or guardian authorized to spend such grant amounts 16 for qualified educational expenses. 17 Sec. 4. APPLICABILITY. This Act applies to school budget 18 years and fiscal years beginning on or after July 1, 2015. 19 Sec. 5. APPLICABILITY. The section of this Act enacting 20 section 422.7, subsection 51, applies to tax years beginning on 21 or after January 1, 2015. 22 EXPLANATION 23 The inclusion of this explanation does not constitute agreement with 24 the explanation’s substance by the members of the general assembly. 25 This bill provides education savings grants for pupils 26 attending a nonpublic school or receiving competent private 27 instruction and establishes an education savings grant fund. 28 Under the bill, pupils eligible to enroll in grades 29 kindergarten through 12 and attending a nonpublic school or 30 receiving competent private instruction under Code chapter 31 299A are eligible to receive an education savings grant for 32 school years beginning on or after July 1, 2015. By January 31 33 preceding the school year for which the education savings grant 34 is requested, the parent or guardian of the pupil requesting to 35 -6- LSB 5773XS (5) 85 md/sc 6/ 9

S.F. 2154 receive an education savings grant must submit an application 1 to the department of education indicating that the parent or 2 guardian intends to enroll the pupil in a nonpublic school or 3 provide competent private instruction for the pupil. 4 The bill requires that by March 1 preceding the school 5 year for which the education savings grant is requested, 6 the department of education must notify the department of 7 management of the number of pupils in each school district 8 designated for the following school year to receive an 9 education savings grant and the amount of the education savings 10 grant for each pupil. Education savings grants may only be 11 approved for one school year and applications must be submitted 12 for education savings grants in subsequent school years. 13 The amount of each education savings grant is equal to the 14 statewide average state foundation aid per pupil in the same 15 school year. 16 The bill creates an education savings grant fund in the state 17 treasury under the control of the department of management 18 consisting of moneys appropriated to the department for the 19 purpose of providing education savings grants. For the fiscal 20 year commencing July 1, 2015, and each succeeding fiscal year, 21 there is appropriated from the general fund of the state to the 22 department of management for deposit in the fund the amount 23 necessary to pay all education savings grants approved for 24 that fiscal year. For each pupil approved for an education 25 savings grant, the department of management must establish an 26 account for that pupil in the education savings grant fund. 27 The amount of the pupil’s education savings grant is deposited 28 into the pupil’s account on July 1 and such amount is available 29 for use by parents and guardians for the payment of qualified 30 educational expenses, as defined in the bill, incurred by the 31 parent or guardian for the pupil during that fiscal year. 32 The bill authorizes the department of education to 33 contract with a private financial management firm to manage 34 the education savings grant fund, in collaboration with the 35 -7- LSB 5773XS (5) 85 md/sc 7/ 9

S.F. 2154 treasurer of state, including providing for the disbursement 1 of education savings grants in the form of an electronic debit 2 card or checks that are payable directly from the pupil’s 3 account within the fund. 4 The bill provides that moneys remaining in a pupil’s account 5 upon the conclusion of the fiscal year shall remain in the 6 pupil’s account within the education savings grant fund for 7 the payment of qualified educational expenses in future fiscal 8 years or for higher education costs as authorized in the bill. 9 Under the bill, for each pupil with a positive balance in 10 the pupil’s account in the education savings grant fund upon 11 graduation from high school or completion of an equivalent 12 level of competent private instruction under Code chapter 13 299A, the department of management is required to maintain the 14 account in the fund until the pupil reaches an age specified in 15 the bill. Until the pupil reaches the age limitation, moneys 16 in the pupil’s account may be used by the pupil for higher 17 education costs, as defined in Code section 12D.1. Moneys in a 18 pupil’s account when the pupil reaches the age limitation are 19 transferred by the department of management for deposit in the 20 general fund of the state. 21 The bill provides that a person who makes a false claim for 22 the purpose of obtaining an education savings grant or who 23 knowingly receives the grant or makes a payment from an account 24 within the education savings grant fund without being legally 25 entitled to it is guilty of a fraudulent practice and is 26 subject to a criminal penalty. The bill allows the department 27 of management to initiate legal proceedings to recover grants 28 and amounts improperly awarded or paid from accounts under the 29 bill. 30 The bill provides that moneys from an education savings 31 grant under the bill are not taxable income under Code chapter 32 422. The provision of the bill enacting Code section 422.7, 33 subsection 51, applies to tax years beginning on or after 34 January 1, 2015. 35 -8- LSB 5773XS (5) 85 md/sc 8/ 9