House File 2261 - Introduced HOUSE FILE 2261 BY SHIPLEY A BILL FOR An Act establishing an education scholarship account program 1 for pupils attending a nonpublic school or receiving private 2 instruction, establishing an education scholarship account 3 fund, providing an income tax exemption, establishing school 4 district supplementary weighting for education scholarship 5 recipients, making appropriations, providing penalties, and 6 including applicability provisions. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 5773YH (6) 88 md/jh

H.F. 2261 Section 1. Section 8.6, Code 2020, is amended by adding the 1 following new subsection: 2 NEW SUBSECTION . 17. Education scholarship applications. To 3 adopt rules relating to applications for an education 4 scholarship pursuant to section 257.11B, including application 5 processing timelines and information required to be submitted 6 by a parent or guardian. 7 Sec. 2. Section 257.6, subsection 1, paragraph a, Code 2020, 8 is amended by adding the following new subparagraph: 9 NEW SUBPARAGRAPH . (9) In addition to amounts under 10 other provisions of this subsection, resident pupils who are 11 participating in the education scholarship account program 12 under section 257.11B and either receiving competent private 13 instruction or independent private instruction pursuant to 14 chapter 299A or enrolled in an accredited nonpublic school 15 shall be counted as two-tenths of one pupil. 16 Sec. 3. NEW SECTION . 257.11B Education scholarship account 17 program. 18 1. a. For the school budget year beginning July 1, 2021, 19 and each succeeding school budget year, resident pupils 20 eligible to enroll in kindergarten through grade twelve and who 21 are attending a nonpublic school, as defined in section 285.16, 22 or receiving private instruction, and who are not otherwise 23 ineligible under this section, shall be eligible to receive an 24 education scholarship in the manner provided in this section. 25 b. For purposes of this section: 26 (1) “Private instruction” means competent private 27 instruction or independent private instruction as defined in 28 section 299A.1. 29 (2) “Resident” means the same as defined in section 282.1, 30 subsection 2. 31 2. a. By January 31 preceding the school year for which 32 the education scholarship is requested, the parent or guardian 33 of the pupil requesting to receive an education scholarship 34 shall submit an application to the department of management, on 35 -1- LSB 5773YH (6) 88 md/jh 1/ 8

H.F. 2261 application forms developed by the department of management, 1 indicating that the parent or guardian intends to enroll the 2 pupil in a nonpublic school or place the pupil under private 3 instruction. 4 (1) In addition to such information deemed appropriate by 5 the department of management, the application shall require 6 certification from the nonpublic school of the pupil’s 7 enrollment for the applicable school year or a statement from 8 the intended provider of private instruction for the pupil for 9 the applicable school year. 10 (2) Applications submitted for pupils, other than those 11 eligible to enroll in kindergarten, shall include evidence 12 of the pupil’s completion and performance on each statewide 13 assessment administered to the pupil required by the pupil’s 14 nonpublic school or, for pupils receiving private instruction, 15 that the parent or guardian has satisfied the provisions 16 of section 299A.3, subsections 1, 2, and 3. To receive 17 an education scholarship, completion of all reports and 18 evaluations described under section 299A.3, subsections 19 1, 2, and 3, is required for each pupil receiving private 20 instruction. 21 b. By March 1 preceding the school year for which the 22 education scholarship is requested, the department of 23 management shall notify the parent or guardian of each pupil 24 approved for the following school year to receive an education 25 scholarship and the amount of the education scholarship for the 26 pupil. 27 c. Education scholarships shall only be approved for one 28 school year and applications must be submitted annually for 29 education scholarships in subsequent school years. 30 3. The department of management shall assign each pupil an 31 education scholarship in an amount equal to eighty percent of 32 the regular program state cost per pupil for the same school 33 year. 34 4. An education scholarship account fund is created 35 -2- LSB 5773YH (6) 88 md/jh 2/ 8

H.F. 2261 in the state treasury under the control of the department 1 of management consisting of moneys appropriated to the 2 department of management for the purpose of providing 3 education scholarships under this section. For the fiscal 4 year commencing July 1, 2021, and each succeeding fiscal year, 5 there is appropriated from the general fund of the state to the 6 department of management to be credited to the fund the amount 7 necessary to pay all education scholarships approved for that 8 fiscal year. The director of the department of management has 9 all powers necessary to carry out and effectuate the purposes, 10 objectives, and provisions of this section pertaining to the 11 fund, including the power to do all of the following: 12 a. Make and enter into contracts necessary for the 13 administration of the fund. 14 b. Procure insurance against any loss in connection with the 15 assets of the fund or require a surety bond. 16 c. Contract with a private financial management firm 17 to manage the fund, in collaboration with the treasurer of 18 state, including providing for the disbursement of education 19 scholarships in the form of an electronic debit card or checks 20 that are payable directly from the pupil’s account within the 21 fund. 22 d. Conduct audits or other reviews necessary to properly 23 administer the program. 24 e. Adopt rules under chapter 17A for the administration of 25 the fund and accounts within the fund. 26 5. a. For each pupil approved for an education scholarship, 27 the department of management shall establish an account 28 for that pupil in the education scholarship account fund. 29 Unless already made available to the parent or guardian under 30 paragraph “b” , the amount of the pupil’s education scholarship 31 shall be deposited into the pupil’s account on July 1, and such 32 amount shall be immediately available to the parent or guardian 33 for the payment of qualified educational expenses incurred 34 by the parent or guardian for the pupil during that fiscal 35 -3- LSB 5773YH (6) 88 md/jh 3/ 8

H.F. 2261 year using the payment method authorized under subsection 4, 1 paragraph “c” . 2 b. Upon written request of the parent or guardian, the 3 amount of the pupil’s education scholarship shall be deposited 4 into the pupil’s account and be made available as soon as 5 practicable after the department of management provides notice 6 under subsection 2, paragraph “b” , if qualified educational 7 expenses for the pupil for the applicable school year are due 8 prior to July 1 of the school year. 9 c. A nonpublic school or a provider of private instruction 10 that accepts payment from a parent or guardian using funds from 11 a pupil’s account in the education scholarship account fund 12 shall not refund, rebate, or share any portion of such payment 13 with the parent, guardian, or pupil. 14 d. Moneys remaining in a pupil’s account upon conclusion 15 of the fiscal year shall remain in the pupil’s account in the 16 education scholarship account fund for the payment of qualified 17 educational expenses in future fiscal years during which the 18 pupil participates in the program or for payment to the pupil 19 as provided under subsection 8. 20 6. For purposes of this section, “qualified educational 21 expenses” includes tuition and fees at a nonpublic school, 22 textbooks, fees or payments for educational therapies, 23 including tutoring or cognitive skills training, curriculum 24 fees and materials for a course of study for a specific subject 25 matter or grade level, tuition or fees for nonpublic online 26 education programs, education materials and services for pupils 27 with disabilities, including the cost of paraprofessionals 28 and assistants who are trained in accordance with state law, 29 standardized test fees, and other expenses incurred by the 30 parent or guardian that are directly related to the education 31 of the pupil under private instruction or at an accredited 32 nonpublic school. 33 7. A person who makes a false claim for the purpose of 34 obtaining an education scholarship provided for in this 35 -4- LSB 5773YH (6) 88 md/jh 4/ 8

H.F. 2261 section or who knowingly receives the scholarship or makes 1 a payment from an account within the education scholarship 2 account fund without being legally entitled to do so is guilty 3 of a fraudulent practice under chapter 714. The false claim 4 for an education scholarship or a payment from an account 5 shall be disallowed. If amounts from the scholarship have 6 been disbursed from the applicable account in the education 7 scholarship account fund, the department of management shall 8 initiate legal proceedings to recover such amounts. A parent 9 or guardian who commits a fraudulent practice under this 10 subsection is prohibited from participating in the education 11 scholarship program in the future. 12 8. For each pupil with a positive balance in the pupil’s 13 account in the education scholarship account fund upon 14 graduation from high school or completion of an equivalent 15 level of private instruction, the department of management 16 shall pay such amount from the pupil’s account to the 17 pupil within thirty days of the graduation or completion of 18 instruction or the pupil’s eighteenth birthday, whichever is 19 later. 20 Sec. 4. Section 422.7, Code 2020, is amended by adding the 21 following new subsection: 22 NEW SUBSECTION . 48. Subtract, to the extent included, 23 the amount of an education scholarship under section 257.11B 24 received by the taxpayer for payment of qualified educational 25 expenses or paid to the taxpayer under section 257.11B, 26 subsection 8. 27 Sec. 5. APPLICABILITY. The following applies to school 28 budget years and fiscal years beginning on or after July 1, 29 2021: 30 1. The section of this Act amending section 257.6. 31 2. The section of this Act enacting section 257.11B. 32 Sec. 6. APPLICABILITY. The following applies to tax years 33 beginning on or after January 1, 2021: 34 The section of this Act enacting section 422.7, subsection 35 -5- LSB 5773YH (6) 88 md/jh 5/ 8

H.F. 2261 48. 1 EXPLANATION 2 The inclusion of this explanation does not constitute agreement with 3 the explanation’s substance by the members of the general assembly. 4 This bill provides education scholarships for pupils 5 attending a nonpublic school or receiving private instruction 6 and establishes an education scholarship account fund. 7 Under the bill, pupils who are eligible to enroll in 8 kindergarten through grade 12 and who attend a nonpublic school 9 or are placed under private instruction under Code chapter 299A 10 are eligible to receive an education scholarship. The parent 11 or guardian of the pupil requesting to receive an education 12 scholarship must submit an application to the department of 13 management indicating that the parent or guardian intends to 14 enroll the pupil in a nonpublic school or provide private 15 instruction. To receive an education scholarship, completion 16 of all reports and evaluations under Code section 299A.3 (1), 17 (2), and (3), is required for each pupil receiving private 18 instruction. 19 The bill requires that by March 1 preceding the school 20 year for which the education scholarship is requested, the 21 department of management must notify the parent or guardian of 22 each pupil approved for the following school year to receive an 23 education scholarship and the amount of the scholarship for the 24 pupil. Education scholarships must be approved for each school 25 year and applications must be submitted each year. 26 The amount of the education scholarship is equal to 80 27 percent of the regular program district cost per pupil for the 28 same school budget year. 29 The bill creates an education scholarship fund in the state 30 treasury under the control of the department of management 31 consisting of moneys appropriated to the department of 32 management for the purpose of providing education scholarships. 33 For the fiscal year commencing July 1, 2021, and each 34 succeeding fiscal year, there is appropriated from the 35 -6- LSB 5773YH (6) 88 md/jh 6/ 8

H.F. 2261 general fund of the state to the department of management for 1 deposit in the fund the amount necessary to pay all education 2 scholarships approved for that fiscal year. For each pupil 3 approved for an education scholarship, the department of 4 management must establish an account for that pupil in the 5 education scholarship account fund. The amount of the pupil’s 6 education scholarship is deposited into the pupil’s account 7 on July 1 and such amount is available for use by parents and 8 guardians for the payment of qualified educational expenses, as 9 defined in the bill, incurred by the parent or guardian for the 10 pupil during that fiscal year. 11 Upon written request of the parent or guardian, the amount of 12 the pupil’s education scholarship shall be deposited into the 13 pupil’s account and be made available as soon as practicable 14 after the notice of receipt of the scholarship is given to the 15 parent or guardian if qualified educational expenses for the 16 pupil for the applicable school year are due prior to July 1 of 17 the school year. 18 The bill authorizes the department of management to 19 contract with a private financial management firm to manage the 20 education scholarship account fund, in collaboration with the 21 treasurer of state, including providing for the disbursement of 22 education scholarships in the form of an electronic debit card 23 or checks that are payable directly from the pupil’s account 24 within the fund. 25 The bill provides that moneys remaining in a pupil’s account 26 upon the conclusion of the fiscal year shall remain in the 27 pupil’s account in the education scholarship fund for the 28 payment of qualified educational expenses in future fiscal 29 years during which the pupil participates in the program or for 30 payment to the pupil as authorized in the bill. 31 Under the bill, for each pupil with a positive balance in the 32 pupil’s account upon graduation from high school or completion 33 of an equivalent level of private instruction, the department 34 of management is required to pay such amount to the pupil based 35 -7- LSB 5773YH (6) 88 md/jh 7/ 8

H.F. 2261 on timelines established in the bill. 1 The bill provides that a person who makes a false claim 2 for the purpose of obtaining an education scholarship or who 3 knowingly receives the scholarship or makes a payment from an 4 account within the fund without being legally entitled to do so 5 is guilty of a fraudulent practice and is subject to a criminal 6 penalty. The bill allows the department of management to 7 initiate legal proceedings to recover scholarships and amounts 8 improperly awarded or paid from accounts. 9 The bill provides that for public school enrollment counts 10 under Code section 257.6, resident pupils who are participating 11 in the education scholarship account program and either 12 receiving private instruction or enrolled in an accredited 13 nonpublic school shall be counted as two-tenths of one pupil. 14 The bill provides that an education scholarship received 15 by a taxpayer or amounts paid to the pupil are not taxable 16 income for purposes of state individual income taxation. This 17 provision of the bill applies to tax years beginning on or 18 after January 1, 2021. 19 The section of the bill enacting the education savings 20 account program and the section of the bill establishing 21 enrollment values for public school district funding under Code 22 section 257.6 apply to school budget years and fiscal years 23 beginning on or after July 1, 2021. 24 -8- LSB 5773YH (6) 88 md/jh 8/ 8