House File 2284 - Introduced HOUSE FILE 2284 BY HIGHFILL A BILL FOR An Act establishing an education savings grant pilot program 1 by providing education savings grants for certain pupils 2 attending a nonpublic school, requiring periodic legislative 3 review of the pilot program, establishing an education 4 savings grant fund, making appropriations, providing 5 penalties, and including applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 5632YH (4) 86 md/sc

H.F. 2284 Section 1. Section 256.7, Code 2016, 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. Section 257.6, subsection 1, paragraph a, Code 2016, 7 is amended by adding the following new subparagraph: 8 NEW SUBPARAGRAPH . (8) Resident pupils attending an 9 accredited nonpublic school while receiving an education 10 savings grant pursuant to section 257.11B. Such pupils 11 shall not be counted for enrollment purposes under any other 12 subparagraph of this subsection 1. 13 Sec. 3. NEW SECTION . 257.11B Education savings grant pilot 14 program. 15 1. a. For the school budget year beginning July 1, 2017, 16 and each succeeding budget year, the following pupils shall be 17 eligible to receive an education savings grant in the manner 18 provided in this section: 19 (1) Not more than one hundred twenty pupils who are eligible 20 to enroll in kindergarten through grade twelve in the Waterloo 21 community school district, who are eligible for free and 22 reduced price meals under the federal National School Lunch 23 Act and the federal Child Nutrition Act of 1966, 42 U.S.C. 24 §1751-1785, and who are attending a nonpublic school during the 25 applicable school budget year. 26 (2) Not more than seventy pupils who are eligible to enroll 27 in kindergarten through grade twelve in the Sioux Center 28 community school district, who are eligible for free and 29 reduced price meals under the federal National School Lunch 30 Act and the federal Child Nutrition Act of 1966, 42 U.S.C. 31 §1751-1785, and who are attending a nonpublic school during the 32 applicable school budget year. 33 b. Education savings grants shall be made available to 34 parents and guardians in the manner authorized under subsection 35 -1- LSB 5632YH (4) 86 md/sc 1/ 10

H.F. 2284 4, paragraph “c” , for the payment of qualified educational 1 expenses as provided in this section. 2 2. a. (1) By January 31 preceding the school year for 3 which the education savings grant is requested, the parent 4 or guardian of the pupil requesting to receive an education 5 savings grant shall submit an application to the department of 6 education, on application forms developed by the department, 7 indicating that the parent or guardian intends to enroll the 8 pupil in a nonpublic school. 9 (2) In addition to such information deemed appropriate by 10 the department of education, the application shall require 11 certification from the nonpublic school of the pupil’s 12 enrollment for the following school year. 13 b. By March 1 preceding the school year for which the 14 education savings grant is requested, the department of 15 education shall notify the department of management of the 16 number of pupils in each school district designated for the 17 following school year to receive an education savings grant. 18 The department of education shall also notify the parent 19 or guardian of such pupils who are approved to receive an 20 education savings grant. 21 c. Education savings grants shall only be approved for one 22 school year per application, and applications must be submitted 23 under paragraph “a” for education savings grants in subsequent 24 school years. Applications for education savings grants are 25 approved in the order in which they are filed. However, in 26 order to provide continuity of education for pupils receiving 27 education savings grants, the department shall give priority 28 to applications submitted for pupils who received an education 29 savings grant during the previous school year. 30 3. The department of management shall assign each pupil an 31 education savings grant in an amount equal to five thousand 32 eight hundred fifty-four dollars. 33 4. An education savings grant fund is created in the state 34 treasury under the control of the department of management 35 -2- LSB 5632YH (4) 86 md/sc 2/ 10

H.F. 2284 consisting of moneys appropriated to the department for the 1 purpose of providing education savings grants under this 2 section. For the fiscal year commencing July 1, 2017, and 3 each succeeding fiscal year, there is appropriated from the 4 general fund of the state to the department of management to be 5 credited to the fund the amount necessary to pay all education 6 savings grants approved for that fiscal year. The director of 7 the department of management has all powers necessary to carry 8 out and effectuate the purposes, objectives, and provisions of 9 this section pertaining to the fund, including the power to do 10 all of the following: 11 a. Make and enter into contracts necessary for the 12 administration of the fund. 13 b. Procure insurance against any loss in connection with the 14 assets of the fund or require a surety bond. 15 c. Contract with a private financial management firm to 16 manage the fund, in collaboration with the treasurer of state, 17 including providing for the disbursement of education savings 18 grants in the form of an electronic debit card or checks that 19 are payable directly from the pupil’s account in the fund. 20 d. Conduct audits or other review necessary to properly 21 administer the program. 22 e. Adopt rules pursuant to chapter 17A for the 23 administration of the fund and accounts in the fund. 24 5. a. For each pupil approved for an education savings 25 grant, the department of management shall establish an account 26 for that pupil in the education savings grant fund. The 27 amount of the pupil’s education savings grant determined under 28 subsection 3 shall be deposited into the pupil’s account on 29 July 1 and such amount shall be immediately available for the 30 payment of qualified educational expenses incurred by the 31 parent or guardian for the pupil during that fiscal year using 32 the payment method authorized under subsection 4, paragraph 33 “c” . 34 b. A nonpublic school or other entity that accepts payment 35 -3- LSB 5632YH (4) 86 md/sc 3/ 10

H.F. 2284 from a parent or guardian using funds from a pupil’s account in 1 the education savings grant fund shall not refund, rebate, or 2 share any portion of such payment with the parent, guardian, or 3 pupil. 4 c. Moneys remaining in a pupil’s account upon conclusion 5 of the fiscal year shall remain in the pupil’s account in the 6 education savings grant fund for the payment of qualified 7 educational expenses in future fiscal years, unless such 8 amounts are required to be transferred to the general fund of 9 the state under subsection 8. 10 6. a. For purposes of this section, “qualified educational 11 expenses” includes tuition and fees at a nonpublic school, 12 textbooks, fees or payments for educational therapies including 13 tutoring or cognitive skills training, curriculum fees and 14 materials for a course of study for a specific subject matter 15 or grade level, tuition or fees for nonpublic online education 16 programs, education materials and services for pupils with 17 disabilities including the cost of paraprofessionals and 18 assistants who are trained in accordance with state law, 19 standardized test fees, fees required by the department not 20 to exceed for each grant recipient five percent of the total 21 grant amount in any fiscal year, higher education expenses, 22 as defined in section 12D.1, resulting from the pupil’s 23 participation in a program under chapter 261E, excluding room 24 and board expenses, and other expenses incurred by the parent 25 or guardian that are directly related to the education of the 26 pupil at a nonpublic school, including a nonpublic school 27 accredited by an independent accrediting agency approved by the 28 department of education. The cost of one computer or other 29 portable computing device shall be allowed as a qualified 30 educational expense for a pupil if such a purchase has not been 31 made using funds from that pupil’s account in either of the 32 two immediately preceding fiscal years. “Qualified educational 33 expenses” does not include transportation costs for the pupil, 34 the cost of food or refreshments consumed by the pupil, the 35 -4- LSB 5632YH (4) 86 md/sc 4/ 10

H.F. 2284 cost of clothing for the pupil, or the cost of disposable 1 materials, including but not limited to paper, notebooks, 2 pencils, pens, and art supplies. 3 b. For purposes of this section, “nonpublic school” means 4 the same as defined in section 285.16. 5 7. A person who makes a false claim for the purpose 6 of obtaining an education savings grant provided for in 7 this section or who knowingly receives the grant or makes a 8 payment from an account in the education savings grant fund 9 without being legally entitled to it is guilty of a fraudulent 10 practice. The false claim for an education savings grant or a 11 payment from an account shall be disallowed and if amounts from 12 the grant have been disbursed from the applicable account in 13 the education savings grant fund, the department of management 14 shall initiate legal proceedings to recover such amounts. A 15 parent or guardian, or a pupil for purposes of subsection 8, 16 who violates this subsection is prohibited from participating 17 in the education savings grant program in the future. 18 8. Except as provided in subsection 9, for each pupil with 19 a positive balance in the pupil’s account in the education 20 savings grant fund upon graduation from high school or upon 21 termination of the pupil’s enrollment in the nonpublic school, 22 moneys in the pupil’s account shall be transferred by the 23 department for deposit in the general fund of the state. 24 9. For each pupil with a positive balance in the pupil’s 25 account in the education savings grant fund upon graduation 26 from high school, the department of management shall maintain 27 such account in the fund until the pupil is twenty-five years 28 of age if the pupil has filed a request with the department to 29 extend the pupil’s account for the payment of higher education 30 costs. A request for such an extension must be filed with 31 the department by June 30 immediately following graduation. 32 Following graduation from high school until the pupil is 33 twenty-five years of age, moneys in the pupil’s account may 34 be used for higher education costs, as defined in section 35 -5- LSB 5632YH (4) 86 md/sc 5/ 10

H.F. 2284 12D.1, subsection 2. Disbursements from a pupil’s account 1 for higher education costs shall be claimed by and disbursed 2 to the pupil. Claims and disbursements for higher education 3 costs under this subsection shall be made in the same manner 4 as claims and disbursements for qualified educational expenses 5 under subsections 4 and 5. Moneys in a pupil’s account when 6 the pupil turns twenty-five years of age shall be transferred 7 by the department for deposit in the general fund of the state. 8 10. A nonpublic school that accepts payment from a parent or 9 guardian using funds from a pupil’s account in the education 10 savings grant fund is not an agent of this state or other 11 political subdivision of this state. 12 11. The provisions of this section shall be subject to 13 legislative review at least every five years. The review 14 shall be based upon an education savings grant status report 15 containing the recommendations of a legislative interim 16 committee appointed to conduct a review of the education 17 savings grant pilot program, to be prepared with the assistance 18 of the department of education in association with the 19 department of management. The first such report shall be 20 submitted to the general assembly no later than January 1, 21 2022, with subsequent reports developed and submitted by 22 January 1 at least every fifth year thereafter. 23 Sec. 4. Section 422.7, Code 2016, is amended by adding the 24 following new subsection: 25 NEW SUBSECTION . 51. Subtract, to the extent included, the 26 amount of any education savings grant under section 257.11B 27 received during the tax year by a taxpayer authorized to spend 28 such grant amounts for qualified educational expenses. 29 Sec. 5. APPLICABILITY. This Act applies to school budget 30 years and fiscal years beginning on or after July 1, 2017. 31 Sec. 6. APPLICABILITY. The provision of this Act amending 32 section 422.7 applies to tax years beginning on or after 33 January 1, 2017. 34 EXPLANATION 35 -6- LSB 5632YH (4) 86 md/sc 6/ 10

H.F. 2284 The inclusion of this explanation does not constitute agreement with 1 the explanation’s substance by the members of the general assembly. 2 This bill provides education savings grants for certain 3 pupils attending a nonpublic school and establishes an 4 education savings grant fund. 5 Under the bill, for school budget years beginning on or after 6 July 1, 2017, the following pupils are eligible to receive 7 an education savings grant: (1) not more than 120 pupils 8 who are eligible to enroll in kindergarten through grade 12 9 in the Waterloo community school district, who are eligible 10 for free and reduced price meals under federal law, and who 11 are attending a nonpublic school during the applicable school 12 budget year, and (2) not more than 70 pupils who are eligible 13 to enroll in kindergarten through grade 12 in the Sioux Center 14 community school district, who are eligible for free and 15 reduced price meals under federal law, and who are attending a 16 nonpublic school during the applicable school budget year. By 17 January 31 preceding the school year for which the education 18 savings grant is requested, the parent or guardian of the pupil 19 requesting to receive an education savings grant must submit an 20 application to the department of education indicating that the 21 parent or guardian intends to enroll the pupil in a nonpublic 22 school. 23 The bill requires that by March 1 preceding the school 24 year for which the education savings grant is requested, 25 the department of education must notify the department of 26 management of the number of pupils in each school district 27 designated for the following school year to receive an 28 education savings grant and the amount of the education savings 29 grant for each pupil. Education savings grants may only be 30 approved for one school year per application, and applications 31 must be submitted for education savings grants in subsequent 32 school years. Applications for education savings grants are 33 approved in the order in which they are filed. However, in 34 order to provide continuity of education for pupils receiving 35 -7- LSB 5632YH (4) 86 md/sc 7/ 10

H.F. 2284 education savings grants, the department shall give priority 1 to applications submitted for pupils who received an education 2 savings grant during the previous school year. 3 The amount of each education savings grant is equal to 4 $5,854. 5 The bill creates an education savings grant fund in the state 6 treasury under the control of the department of management 7 consisting of moneys appropriated to the department for the 8 purpose of providing education savings grants. For the fiscal 9 year commencing July 1, 2017, and each succeeding fiscal year, 10 there is appropriated from the general fund of the state to the 11 department of management for deposit in the fund the amount 12 necessary to pay all education savings grants approved for 13 that fiscal year. For each pupil approved for an education 14 savings grant, the department of management must establish an 15 account for that pupil in the education savings grant fund. 16 The amount of the pupil’s education savings grant is deposited 17 into the pupil’s account on July 1 and such amount is available 18 for use by parents and guardians for the payment of qualified 19 educational expenses, as defined in the bill, incurred by the 20 parent or guardian for the pupil during that fiscal year. 21 The bill defines “nonpublic school” to mean those nonpublic 22 schools accredited by the department of education and nonpublic 23 institutions which comply with state board of education 24 standards for providing special education programs. 25 The bill authorizes the department of education to 26 contract with a private financial management firm to manage 27 the education savings grant fund, in collaboration with the 28 treasurer of state, including providing for the disbursement 29 of education savings grants in the form of an electronic debit 30 card or checks that are payable directly from the pupil’s 31 account within the fund. 32 The bill provides that moneys remaining in a pupil’s account 33 upon the conclusion of the fiscal year shall remain in the 34 pupil’s account within the education savings grant fund for 35 -8- LSB 5632YH (4) 86 md/sc 8/ 10

H.F. 2284 the payment of qualified educational expenses in future fiscal 1 years. 2 Under the bill, unless a pupil graduates from high school 3 and a request for an extension of a pupil’s account for the 4 payment of higher education expenses is filed, for each pupil 5 with a positive balance in the pupil’s account in the education 6 savings grant fund upon graduation from high school or upon 7 termination of the pupil’s enrollment in the nonpublic school, 8 moneys in the pupil’s account are transferred by the department 9 of management for deposit in the general fund of the state. 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, the department of management is 13 required to maintain the account in the fund until the pupil 14 is 25 years old if the pupil has filed a request with the 15 department by June 30 following graduation from high school 16 for an extension of the account for the payment of higher 17 education expenses. Following graduation from high school 18 until the pupil is 25 years old, moneys in the pupil’s account 19 may be used by the pupil for higher education costs, as defined 20 in Code section 12D.1. Moneys in a pupil’s account when the 21 pupil turns 25 years old are transferred by the department of 22 management for deposit in the general fund of the state. 23 The bill provides that a person who makes a false claim for 24 the purpose of obtaining an education savings grant or who 25 knowingly receives the grant or makes a payment from an account 26 within the education savings grant fund without being legally 27 entitled to it is guilty of a fraudulent practice and is 28 subject to a criminal penalty. The bill allows the department 29 of management to initiate legal proceedings to recover grants 30 and amounts improperly awarded or paid from accounts under the 31 bill. 32 The education savings grant program is subject to 33 legislative review at least every five years. The review 34 shall be based upon an education savings grant status report 35 -9- LSB 5632YH (4) 86 md/sc 9/ 10

H.F. 2284 containing the recommendations of a legislative interim 1 committee. The first such report shall be submitted to the 2 general assembly no later than January 1, 2022, with subsequent 3 reports developed and submitted by January 1 at least every 4 fifth year thereafter. 5 The bill provides that moneys from an education savings 6 grant under the bill are not taxable income under Code chapter 7 422. 8 Under the bill, resident pupils attending an accredited 9 nonpublic school while receiving an education savings grant 10 under the bill are required to be counted as full-time pupils 11 for enrollment purposes in the public school district of 12 residence. 13 The bill applies to school budget years and fiscal years 14 beginning on or after July 1, 2017. 15 The provision of the bill amending Code section 422.7 16 applies to tax years beginning on or after January 1, 2017. 17 -10- LSB 5632YH (4) 86 md/sc 10/ 10