Senate File 240 - Introduced SENATE FILE 240 BY BEHN , CHELGREN , SINCLAIR , ZUMBACH , BREITBACH , SCHULTZ , GARRETT , SEGEBART , JOHNSON , KAPUCIAN , SMITH , SCHNEIDER , GUTH , CHAPMAN , KRAAYENBRINK , FEENSTRA , ZAUN , BERTRAND , ANDERSON , COSTELLO , SHIPLEY , DIX , WHITVER , and ROZENBOOM 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 1076XS (3) 86 md/sc

S.F. 240 Section 1. Section 256.7, Code 2015, 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 2016. 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 1076XS (3) 86 md/sc 1/ 9

S.F. 240 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 regular program state foundation aid per pupil in the 12 same school year. 13 b. The department of management shall on July 1 following 14 the determination of the amount of the education savings grant 15 for each approved pupil transfer such amounts to the pupil’s 16 account in the education savings grant fund established under 17 subsection 4. Such amount shall be available to the pupil’s 18 parent or guardian in the manner authorized under subsection 19 4, paragraph “c” , for the payment of qualified educational 20 expenses incurred by such persons for the pupil during that 21 school year. 22 4. An education savings grant fund is created in the state 23 treasury under the control of the department of management 24 consisting of moneys appropriated to the department for the 25 purpose of providing education savings grants under this 26 section. For the fiscal year commencing July 1, 2016, and 27 each succeeding fiscal year, there is appropriated from the 28 general fund of the state to the department of management to be 29 credited to the fund the amount necessary to pay all education 30 savings grants approved for that fiscal year. The director of 31 the department of management has all powers necessary to carry 32 out and effectuate the purposes, objectives, and provisions of 33 this section pertaining to the fund, including the power to do 34 all of the following: 35 -2- LSB 1076XS (3) 86 md/sc 2/ 9

S.F. 240 a. Make and enter into contracts necessary for the 1 administration of the fund. 2 b. Procure insurance against any loss in connection with the 3 assets of the fund or require a surety bond. 4 c. Contract with a private financial management firm to 5 manage the fund, in collaboration with the treasurer of state, 6 including providing for the disbursement of education savings 7 grants in the form of an electronic debit card or checks that 8 are payable directly from the pupil’s account within the fund. 9 d. Conduct audits or other review necessary to properly 10 administer the program. 11 e. Adopt rules for the administration of the fund and 12 accounts within the fund. 13 5. a. For each pupil approved for an education savings 14 grant, the department shall establish an account for that pupil 15 in the education savings grant fund. The amount of the pupil’s 16 education savings grant determined under subsection 3 shall be 17 deposited into the pupil’s account on July 1, and such amount 18 shall be immediately available for the payment of qualified 19 educational expenses incurred by the parent or guardian for 20 the pupil during that fiscal year using the payment method 21 authorized under subsection 4, paragraph “c” . 22 b. A nonpublic school or other entity that accepts payment 23 from a parent or guardian using funds from a pupil’s account in 24 the education savings grant fund shall not refund, rebate, or 25 share any portion of such payment with the parent, guardian, or 26 pupil. 27 c. Moneys remaining in a pupil’s account upon conclusion 28 of the fiscal year shall remain in the pupil’s account in the 29 education savings grant fund for the payment of qualified 30 educational expenses in future fiscal years or for the payment 31 of higher education costs as provided under subsection 8. 32 6. For purposes of this section, “qualified educational 33 expenses” includes tuition and fees at a nonpublic school, 34 textbooks, fees or payments for educational therapies, 35 -3- LSB 1076XS (3) 86 md/sc 3/ 9

S.F. 240 including tutoring or cognitive skills training, curriculum 1 fees and materials for a course of study for a specific subject 2 matter or grade level, tuition or fees for nonpublic online 3 education programs, education materials and services for pupils 4 with disabilities, including the cost of paraprofessionals 5 and assistants who are trained in accordance with state law, 6 standardized test fees, fees required by the department not to 7 exceed for each grant recipient five percent of the total grant 8 amount in any fiscal year, higher education costs, as defined 9 in section 12D.1, excluding room and board expenses, and other 10 expenses incurred by the parent or guardian that are directly 11 related to the education of the pupil at a nonpublic school, 12 including a nonpublic school accredited by an independent 13 accrediting agency approved by the department of education, or 14 directly related to providing competent private instruction 15 for the pupil under chapter 299A. The cost of one computer or 16 other portable computing device shall be allowed as a qualified 17 educational expense for a pupil if such a purchase has not been 18 made using funds from that pupil’s account in either of the 19 two immediately preceding fiscal years. “Qualified educational 20 expenses” does not include transportation costs for the pupil, 21 the cost of food or refreshments consumed by the pupil, the 22 cost of clothing for the pupil, or the cost of disposable 23 materials, including but not limited to paper, notebooks, 24 pencils, pens, and art supplies. 25 7. A person who makes a false claim for the purpose of 26 obtaining an education savings grant provided for in this 27 section or who knowingly receives the grant or makes a payment 28 from an account within the education savings grant fund 29 without being legally entitled to it is guilty of a fraudulent 30 practice. The false claim for an education savings grant or a 31 payment from an account shall be disallowed and if amounts from 32 the grant have been disbursed from the applicable account in 33 the education savings grant fund, the department of management 34 shall initiate legal proceedings to recover such amounts. A 35 -4- LSB 1076XS (3) 86 md/sc 4/ 9

S.F. 240 parent or guardian, or a pupil for purposes of subsection 8, 1 who commits a fraudulent practice under this subsection is 2 prohibited from participating in the education savings grant 3 program in the future. 4 8. a. For each pupil with a positive balance in the 5 pupil’s account in the education savings grant fund upon 6 graduation from high school or completion of an equivalent 7 level of competent private instruction under chapter 299A, the 8 department of management shall maintain the account in the 9 fund until the pupil is twenty-three years of age. Following 10 graduation from high school until the pupil is twenty-three 11 years of age, moneys in the pupil’s account may be used for 12 higher education costs, as defined in section 12D.1, subsection 13 2, incurred by the pupil while attending an institution of 14 higher education under the control of the state board of 15 regents, a community college located in this state, or a 16 private college or university located in this state. Payments 17 from a pupil’s account for higher education costs shall be 18 made in the same manner as payments for qualified educational 19 expenses under subsection 5. Moneys in a pupil’s account when 20 the pupil turns twenty-three years of age shall be transferred 21 by the department for deposit in the general fund of the state. 22 b. Notwithstanding the age limitation in paragraph “a” , 23 if the pupil with a positive balance in the pupil’s account 24 in the education savings grant fund upon graduation from high 25 school or completion of an equivalent level of competent 26 private instruction under chapter 299A serves on federal active 27 duty, other than training, and is discharged under honorable 28 conditions, the limitation date otherwise applicable under 29 paragraph “a” shall be extended by one year for each year of 30 federal active duty service by the pupil, but not to a date 31 after the pupil’s twenty-seventh birthday. 32 9. This section shall not be construed to authorize the 33 state or any political subdivision of the state to exercise 34 authority over any nonpublic school or pupil receiving 35 -5- LSB 1076XS (3) 86 md/sc 5/ 9

S.F. 240 competent private instruction under chapter 299A or construed 1 to require a nonpublic school to modify its admissions or 2 educational program in order to receive payment from a parent 3 or guardian using funds from a pupil’s account in the education 4 savings grant fund. A nonpublic school or entity providing 5 competent private instruction under chapter 299A that accepts 6 payment from a parent or guardian using funds from a pupil’s 7 account in the education savings grant fund is not an agent of 8 this state or of a political subdivision of this state. Rules 9 adopted by the department to implement this section that impose 10 an undue burden on a nonpublic school or entity providing 11 competent private instruction under chapter 299A are invalid. 12 Sec. 3. Section 422.7, Code 2015, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 51. Subtract, to the extent included, the 15 amount of an education savings grant under section 257.11B 16 received by the taxpayer for payment of qualified educational 17 expenses. 18 Sec. 4. APPLICABILITY. This Act applies to school budget 19 years and fiscal years beginning on or after July 1, 2016. 20 Sec. 5. APPLICABILITY. The section of this Act enacting 21 section 422.7, subsection 51, applies to tax years beginning on 22 or after January 1, 2016. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill provides education savings grants for pupils 27 attending a nonpublic school or receiving competent private 28 instruction and establishes an education savings grant fund. 29 Under the bill, pupils eligible to enroll in grades 30 kindergarten through 12 and attending a nonpublic school or 31 receiving competent private instruction under Code chapter 32 299A are eligible to receive an education savings grant for 33 school years beginning on or after July 1, 2016. By January 31 34 preceding the school year for which the education savings grant 35 -6- LSB 1076XS (3) 86 md/sc 6/ 9

S.F. 240 is requested, the parent or guardian of the pupil requesting to 1 receive an education savings grant must submit an application 2 to the department of education indicating that the parent or 3 guardian intends to enroll the pupil in a nonpublic school or 4 provide competent private instruction for the pupil. 5 The bill requires that by March 1 preceding the school 6 year for which the education savings grant is requested, 7 the department of education must notify the department of 8 management of the number of pupils in each school district 9 designated for the following school year to receive an 10 education savings grant and the amount of the education 11 savings grant for each pupil. Education savings grants must 12 be approved for each school year and applications must be 13 submitted each year. 14 The amount of each education savings grant is equal to the 15 statewide average regular program state foundation aid per 16 pupil in the same school year. 17 The bill creates an education savings grant fund in the state 18 treasury under the control of the department of management 19 consisting of moneys appropriated to the department for the 20 purpose of providing education savings grants. For the fiscal 21 year commencing July 1, 2016, and each succeeding fiscal year, 22 there is appropriated from the general fund of the state to the 23 department of management for deposit in the fund the amount 24 necessary to pay all education savings grants approved for 25 that fiscal year. For each pupil approved for an education 26 savings grant, the department of management must establish an 27 account for that pupil in the education savings grant fund. 28 The amount of the pupil’s education savings grant is deposited 29 into the pupil’s account on July 1 and such amount is available 30 for use by parents and guardians for the payment of qualified 31 educational expenses, as defined in the bill, incurred by the 32 parent or guardian for the pupil during that fiscal year. 33 The bill authorizes the department of education to 34 contract with a private financial management firm to manage 35 -7- LSB 1076XS (3) 86 md/sc 7/ 9

S.F. 240 the education savings grant fund, in collaboration with the 1 treasurer of state, including providing for the disbursement 2 of education savings grants in the form of an electronic debit 3 card or checks that are payable directly from the pupil’s 4 account within the fund. 5 The bill provides that moneys remaining in a pupil’s account 6 upon the conclusion of the fiscal year shall remain in the 7 pupil’s account in the education savings grant fund for the 8 payment of qualified educational expenses in future fiscal 9 years or for higher education costs as authorized in the bill. 10 Under the bill, for each pupil with a positive balance in 11 the pupil’s account in the education savings grant fund upon 12 graduation from high school or completion of an equivalent 13 level of competent private instruction under Code chapter 14 299A, the department of management is required to maintain the 15 account in the fund until the pupil reaches an age specified in 16 the bill. Until the pupil reaches the age limitation, moneys 17 in the pupil’s account may be used by the pupil for higher 18 education costs, as defined in Code section 12D.1. Moneys in a 19 pupil’s account when the pupil reaches the age limitation are 20 transferred by the department of management for deposit in the 21 general fund of the state. 22 The bill provides that a person who makes a false claim for 23 the purpose of obtaining an education savings grant or who 24 knowingly receives the grant or makes a payment from an account 25 in the education savings grant fund without being legally 26 entitled to it is guilty of a fraudulent practice and is 27 subject to a criminal penalty. The bill allows the department 28 of management to initiate legal proceedings to recover grants 29 and amounts improperly awarded or paid. 30 The bill provides that an education savings grant received 31 by a taxpayer is not taxable income under Code section 422.7, 32 subsection 51. This provision of the bill applies to tax years 33 beginning on or after January 1, 2016. 34 The bill applies to school budget years and fiscal years 35 -8- LSB 1076XS (3) 86 md/sc 8/ 9