H.F. 2294 Section 1. NEW SECTION . 256E.1 Definitions. 1 As used in this chapter, unless the context otherwise 2 requires: 3 1. “Department” means the department of administrative 4 services. 5 2. “Director” means the director of the department of 6 administrative services. 7 3. “Note” means an innovative financing partnership note 8 issued by the treasurer of state for the fund and the purposes 9 of this chapter. 10 Sec. 2. NEW SECTION . 256E.2 Innovative financing 11 partnership program —— contract criteria —— parties. 12 1. Program established. Subject to an appropriation of 13 funds by the general assembly for the purpose of facilitating 14 the formation of innovative financing partnerships between the 15 department and contracting parties for the operation of local 16 prekindergarten programs that result in positive educational 17 and developmental outcomes that have both a positive fiscal 18 impact on governmental entities and are strongly supported by 19 a given historical model, an innovative financing partnership 20 program is established in the department of administrative 21 services and shall be administered by the department in 22 collaboration with the department of education. 23 2. Contracting parties. The parties to an innovative 24 financing partnership contract entered into under this chapter 25 shall consist of the following: 26 a. One or more service providers who provide prekindergarten 27 services to at-risk three-year-old and at-risk four-year-old 28 children under chapter 237A, 256, 256A, 256C, 256G, 279, or 29 280. 30 b. Investors who provide the capital to expand and deliver 31 prekindergarten services under the contract. Such investors 32 may include but are not limited to philanthropic investors 33 seeking a full or partial return of principal, and federal 34 agencies that are not seeking a financial return. 35 -1- LSB 5166YH (6) 86 kh/rj 1/ 12

H.F. 2294 c. An independent evaluator to determine whether the 1 prekindergarten services provided under the contract resulted 2 in positive educational and developmental outcomes that have 3 both a positive fiscal impact on governments and are strongly 4 supported by a given historical model. 5 d. One or more outcomes payers who agree to repay the 6 investors only if the independent evaluator makes the 7 determinations identified in paragraph “c” . Outcomes payers 8 may also include any governmental entity, including but 9 not limited to a school district, the child development 10 coordinating council, or any private entity who agrees to 11 commit to pay investors for outcomes achieved. Investors may 12 be paid for the principal invested and the interest earned, 13 but the total payment shall not exceed ninety percent of the 14 state’s budgetary value for the outcomes. 15 3. Proposal criteria. The department of administrative 16 services, in collaboration with the department of education, 17 shall evaluate innovative financing partnership contract 18 proposals based on all of the following criteria: 19 a. Expected outcomes shall be budget-neutral or better, 20 after accounting for projected cost reductions from positive 21 educational and developmental outcomes that have both a 22 positive fiscal impact on governments and are strongly 23 supported by a given historical model. 24 b. Payment shall be conditioned on achievement of specific 25 outcomes based on defined performance targets. 26 c. An objective process shall be used by an independent 27 evaluator to determine whether defined performance targets have 28 been achieved. 29 d. A schedule of payments shall be made, including a return 30 on investment calculation and a calculation of the amounts 31 of payments that would be earned by the service provider if 32 defined performance targets are achieved as determined by the 33 independent evaluator. 34 e. A determination shall be made by the department of 35 -2- LSB 5166YH (6) 86 kh/rj 2/ 12

H.F. 2294 administrative services, in collaboration with the department 1 of education, that the contract proposal will result in 2 significant performance improvements and budgetary savings 3 across all affected agencies if the performance targets are 4 achieved, and that the savings will exceed the debt service 5 requirements of any notes issued in accordance with this 6 chapter. 7 f. A clear description shall be made of the programming that 8 will be provided by the service provider. 9 4. Additional weighting. The department may assign 10 additional weight to contract proposals that meet any of the 11 following requirements: 12 a. Are submitted by service providers that demonstrate a 13 strong commitment to ongoing professional development. 14 b. Demonstrate a mix of public and private service 15 providers. 16 c. Demonstrate the use of new and enhanced services for 17 children. 18 d. Are received from cities or school districts with a 19 higher percentage of families whose family income is at or 20 below two hundred fifty percent of the federal poverty level as 21 defined by the most recently revised poverty income guidelines 22 published by the United States department of health and human 23 services. 24 e. Are received from cities or school districts with a 25 higher percentage of immigrant and refugee families. 26 f. Demonstrate a plan to combine funding streams to bolster 27 the services provided to the targeted population. 28 g. Demonstrate strategies to improve early mathematic 29 skills and early literacy skills, including the literacy 30 skills of children who have been identified as limited English 31 proficient. 32 h. Demonstrate strategies to increase family engagement and 33 connect families to other community resources. 34 i. Provide a comprehensive child development program. 35 -3- LSB 5166YH (6) 86 kh/rj 3/ 12

H.F. 2294 j. Limit class size. 1 k. Establish a student-teacher ratio of not more than eight 2 students for every one teacher. 3 l. Demonstrate substantial parental involvement. 4 m. Demonstrate community support. 5 n. Utilize services provided by other community agencies. 6 o. Utilize teachers licensed under chapter 272. 7 p. Include a plan for program evaluation that includes but 8 is not limited to the measurement of student outcomes beyond 9 the outcomes measured under subsection 2, paragraph “c” . 10 q. Serve communities with waiting lists for high-quality 11 prekindergarten services. 12 5. Reporting requirements. An innovative financing 13 partnership contract proposal shall also contain provisions 14 requiring a service provider to submit a biannual report to 15 the department detailing the service provider’s progress in 16 executing or performing the contract, and requiring that the 17 independent evaluator submit an annual report to the department 18 and to the general assembly detailing any available data 19 relating to performance target outcomes measures being used 20 by the independent evaluator in accordance with subsection 2, 21 paragraph “c” . 22 Sec. 3. NEW SECTION . 256E.3 Contract —— financing —— 23 general and specific bonding powers. 24 1. Authority to execute contract. Subject to an 25 appropriation of funds for the purpose stated in section 26 256E.2, the director may enter into an innovative financing 27 partnership contract upon receiving the governor’s and the 28 executive council’s approval of the innovative financing 29 partnership contract proposal that meets the requirements of 30 section 256E.2. The director may make payments from the fund 31 established under section 256E.4, subsection 1, pursuant to the 32 innovative financing partnership contract entered into under 33 this section based on achievement of the defined performance 34 targets as provided in section 256E.2, subsection 3, paragraph 35 -4- LSB 5166YH (6) 86 kh/rj 4/ 12

H.F. 2294 “c” . The director shall, not later than February 1 of each year 1 in which a contract entered into under this section remains in 2 force and effect, provide to the general assembly an annual 3 status report on any innovative financing partnership contracts 4 entered into under this section. 5 2. Financing authority. To provide funds for payments under 6 subsection 1, the treasurer of state, upon the request of the 7 director, may issue innovative financing partnership notes in 8 the manner described for the issuance of bonds under chapter 9 12A and do all things necessary with respect to the purposes 10 of this chapter. The maximum maturity of the notes, including 11 renewals, shall not exceed fifteen years from the date of issue 12 of the original notes. The treasurer of state shall have all 13 of the powers which are necessary to issue and secure notes and 14 carry out the purposes of the innovative financing partnership 15 fund. The treasurer of state may issue notes in principal 16 amounts which, in the opinion of the treasurer of state, are 17 necessary to provide sufficient funds for the innovative 18 financing partnership fund, the payment of interest on the 19 notes, the establishment of reserves to secure the notes, the 20 costs of issuance of the notes, other expenditures of the 21 treasurer of state incident to and necessary or convenient 22 to carry out the note issuance for the innovative financing 23 partnership fund, and all other expenditures of the treasurer 24 of state necessary or convenient to administer the innovative 25 financing partnership fund; provided, however, excluding the 26 issuance of refunding notes, notes issued pursuant to this 27 section shall not be issued in an aggregate principal amount 28 that exceeds ten million dollars. The notes are investment 29 securities and negotiable instruments within the meaning of and 30 for purposes of the uniform commercial code, chapter 554. 31 3. A contract entered into under this section shall at a 32 minimum include the following: 33 a. A requirement that the repayment to the investors be 34 conditioned on specific performance outcome measures set in the 35 -5- LSB 5166YH (6) 86 kh/rj 5/ 12

H.F. 2294 innovative financing partnership contract. 1 b. A requirement for an independent evaluator to determine 2 whether the outcomes have been achieved in accordance with 3 section 256E.2, subsection 2, paragraph “c” . 4 c. A provision that repayment to the investors be based upon 5 available moneys in the innovative financing partnership fund 6 and subject to appropriation by the general assembly. 7 d. A provision that the investors are ineligible to 8 receive or view any personally identifiable student data of 9 students receiving prekindergarten services funded through the 10 innovative financing partnership contract entered into under 11 this section. 12 4. An innovative financing partnership contract entered 13 into under this section is exempt from the provisions and 14 requirements of chapter 8A relating to procurement. 15 5. Limitations. Notes issued under this section are payable 16 solely and only out of the moneys, assets, or revenues of the 17 innovative financing partnership fund and any note reserve 18 funds established pursuant to section 256E.4, all of which 19 may be deposited with trustees or depositories in accordance 20 with note or security documents and pledged by the commission 21 to the payment thereof. Notes issued under this section 22 shall contain on their face a statement that the notes do not 23 constitute an indebtedness of the state. The treasurer of 24 state shall not pledge the credit or taxing power of this state 25 or any political subdivision of this state or make notes issued 26 pursuant to this section payable out of any moneys except those 27 in the innovative financing partnership fund. 28 Sec. 4. NEW SECTION . 256E.4 Innovative financing 29 partnership fund. 30 1. Fund established. An innovative financing partnership 31 fund is created and established as a separate and distinct 32 fund in the state treasury. The moneys in the innovative 33 financing partnership fund are appropriated to the department 34 for purposes of the innovative financing partnership program as 35 -6- LSB 5166YH (6) 86 kh/rj 6/ 12

H.F. 2294 set out in the contract between the director and the service 1 provider in accordance with section 256E.3. Moneys in the fund 2 shall not be subject to appropriation for any other purpose by 3 the general assembly, but shall be used only for the purposes 4 of this chapter. The treasurer of state shall act as custodian 5 of the fund and disburse moneys contained in the fund as 6 directed by the director, including automatic disbursements of 7 funds received pursuant to the terms of the contract entered 8 into under section 256E.3. The fund shall be administered 9 by the director who shall make expenditures from the fund 10 consistent with the purposes of this chapter without further 11 appropriation. 12 2. Revenue for fund. Revenue for the innovative financing 13 partnership fund shall include but is not limited to the 14 following, which shall be deposited with the treasurer of 15 state or the treasurer’s designee as provided by any security 16 documents and credited to the fund: 17 a. The proceeds of notes issued to capitalize and pay the 18 costs of the fund and investment earnings on the proceeds of 19 the fund. 20 b. Interest attributable to investment of moneys in the fund 21 or an account of the fund. 22 c. Moneys received from the department of management under 23 section 256E.5. 24 d. Moneys in the form of a devise, gift, bequest, donation, 25 federal or other grant, reimbursement, repayment, judgment, 26 transfer, payment, or appropriation from any source intended to 27 be used for the purposes of the fund. 28 3. Nonreversion. Notwithstanding section 8.33, moneys 29 in the innovative financing partnership fund at the end of 30 each fiscal year shall not revert to the general fund of 31 the state but shall remain available for the purposes of the 32 fund. Notwithstanding section 12C.7, subsection 2, interest or 33 earnings on moneys in the fund shall be credited to the fund. 34 4. Note reserve and special funds. The treasurer of state 35 -7- LSB 5166YH (6) 86 kh/rj 7/ 12

H.F. 2294 may create and establish, in the same manner and under the same 1 conditions and requirements as provided in chapter 12A, one 2 or more special funds, to be known as note reserve funds, to 3 secure one or more issues of notes issued pursuant to section 4 256E.3. 5 Sec. 5. NEW SECTION . 256E.5 School district payments. 6 Notwithstanding section 256C.4, subsection 1, paragraph 7 “e”, at the close of each fiscal year in which the department 8 determines that the performance targets and savings specified 9 under the contract entered into pursuant to section 256E.3 have 10 been achieved, the board of directors of each school district 11 shall pay to the department of management any unexpended or 12 unencumbered moneys remaining from preschool foundation aid 13 received in the previous fiscal year by the school district 14 under section 257.16. Any moneys paid under this section 15 shall be deposited by the department of management in the 16 innovative financing partnership fund. 17 Sec. 6. NEW SECTION . 256E.6 Limitations. 18 Innovative financing partnership notes issued pursuant to 19 this chapter are not debts of the state or of any political 20 subdivision of the state, do not constitute a pledge of the 21 faith and credit of the state, and are not a charge against the 22 general credit or general fund of the state. The issuance of 23 any notes pursuant to this chapter by the treasurer of state 24 does not directly, indirectly, or contingently obligate the 25 state or a political subdivision of the state to apply moneys 26 from, or to levy or pledge any form of taxation whatsoever to, 27 the payment of the notes. Notes issued under this chapter are 28 payable solely and only from the sources and funds referred to 29 in sections 256E.3 through 256E.5. 30 EXPLANATION 31 The inclusion of this explanation does not constitute agreement with 32 the explanation’s substance by the members of the general assembly. 33 This bill establishes, subject to an appropriation by the 34 general assembly for the purpose of facilitating the provision 35 -8- LSB 5166YH (6) 86 kh/rj 8/ 12

H.F. 2294 of prekindergarten education services under innovative 1 financing partnership contracts as a means to reduce the 2 costs for such services, an innovative financing partnership 3 program to be administered by the department of administrative 4 services (DAS), in collaboration with the department of 5 education. The bill authorizes the director of the department 6 of administrative services to enter into a contract with 7 various parties under certain conditions. 8 PARTIES TO CONTRACT. The parties in an innovative financing 9 partnership contract shall consist of one or more providers of 10 prekindergarten services; investors who provide the capital to 11 expand and deliver prekindergarten services under the contract, 12 including but not limited to philanthropic investors seeking 13 a full or partial financial return, and federal agencies 14 that are not seeking a financial return; an independent 15 evaluator; and one or more outcomes payers who agree to pay the 16 investors only if the independent evaluator determines that the 17 prekindergarten services provided under the contract result in 18 the improvements identified. Outcomes payers may also include 19 any governmental entity, including but not limited to a school 20 district, or any private entity who agrees to commit to pay 21 investors for outcomes achieved. Investors may be paid for the 22 principal invested and interest earned, but the total payment 23 from the state shall not exceed 90 percent of the state’s 24 budgetary value for the outcomes. 25 CONTRACT PROPOSAL CRITERIA. DAS must evaluate contract 26 proposals based on the expected outcomes, which must be 27 budget-neutral or better, after accounting for projected cost 28 reductions from positive educational and developmental outcomes 29 that have both a positive fiscal impact on governments and 30 are strongly supported by a given historical model; payment 31 conditioned on achievement of specific outcomes; an objective 32 process to be used by an independent evaluator to determine 33 whether performance targets have been achieved; a schedule of 34 payments, including a return on investment calculation and a 35 -9- LSB 5166YH (6) 86 kh/rj 9/ 12

H.F. 2294 calculation of the amounts of payments earned; a determination 1 by DAS, in collaboration with the department of education, that 2 the contract proposal will result in significant performance 3 improvements and budgetary savings, and that the savings will 4 exceed the debt service requirements of any notes issued by the 5 treasurer of state, and a clear description of the programming 6 that will be provided by the service provider. 7 ADDITIONAL WEIGHTING. DAS may assign additional weight to 8 contract proposals that meet any of the criteria identified in 9 the bill. 10 CONTRACT REPORTING REQUIREMENTS. An innovative financing 11 partnership contract proposal must contain provisions requiring 12 the service provider to submit a biannual report to the 13 general assembly detailing the service provider’s progress, 14 and requiring that the independent evaluator submit an 15 annual report to the general assembly. The contract must, 16 at a minimum, include a requirement that the repayment to 17 the investor be conditioned on specific performance outcome 18 measures set in the contract, a requirement for an independent 19 evaluator to determine whether the outcomes have been achieved, 20 a provision that repayment to the investor be based upon 21 available moneys in the innovative financing partnership fund 22 and subject to appropriation by the general assembly, and that 23 the investors are ineligible to receive or view any personally 24 identifiable student data of students receiving prekindergarten 25 services funded through the contract. 26 INNOVATIVE FINANCING PARTNERSHIP —— CONTRACT AUTHORITY 27 AND FINANCING POWERS. The DAS director may enter into an 28 innovative financing partnership contract upon receiving 29 the governor’s and the executive council’s approval of the 30 contract; may make payments pursuant to the contract and based 31 on achievement of the performance targets; and shall, not later 32 than February 1 of each year in which a contract remains in 33 force and effect, provide to the department and to the general 34 assembly an annual status report. 35 -10- LSB 5166YH (6) 86 kh/rj 10/ 12

H.F. 2294 FINANCING AUTHORITY. To provide funds for payments, the 1 treasurer of state may, upon the request of the DAS director, 2 issue notes in the manner described for the issuance of bonds 3 under Code chapter 12A. Such notes are payable solely and 4 only out of the moneys, assets, or revenues of the innovative 5 financing partnership fund and any note reserve funds the 6 treasurer of state is authorized to establish under the bill. 7 The maximum maturity of the notes, including renewals, is 15 8 years from the original note issuance date. Notes issued 9 shall contain on their face a statement that the notes do not 10 constitute an indebtedness of the state. 11 FUND. An innovative financing partnership fund is created 12 and established as a separate and distinct fund in the state 13 treasury. The moneys in the fund are appropriated to the 14 DAS for purposes of the innovative financing partnership 15 program set out in the contract between the director and the 16 service provider. Moneys in the fund shall not be subject to 17 appropriation for any other purpose by the general assembly. 18 Revenue for the fund shall include but is not limited to 19 the proceeds of notes issued to capitalize and pay the costs 20 of the fund and investment earnings on the proceeds, interest 21 attributable to investment of money in the fund or an account 22 of the fund, moneys from the department of management, and 23 moneys from any source intended to be used for the purposes of 24 the fund. Moneys in the fund and any interest earned on moneys 25 in the fund are not subject to reversion. 26 SCHOOL DISTRICT PAYMENTS. At the close of each fiscal 27 year, school boards must pay to the department of management 28 any unexpended or unencumbered moneys remaining from preschool 29 foundation aid received in the previous fiscal year by the 30 school district. The department of management is directed to 31 deposit such moneys in the innovative financing partnership 32 fund. 33 LIMITATIONS. Notes issued by the treasurer of state for 34 purposes of innovative financing partnership contracts are not 35 -11- LSB 5166YH (6) 86 kh/rj 11/ 12