HF 2294 (LSB 5166YH (6) 86)

HOUSE FILE 2294

BY  NUNN

A BILL FOR

An Act relating to the provision of prekindergarten services using innovative financing partnership contracts, providing financing authority to the treasurer of state, and making appropriations.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  256E.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Department” means the department of administrative services.
   2.  “Director” means the director of the department of administrative services.
   3.  “Note” means an innovative financing partnership note issued by the treasurer of state for the fund and the purposes of this chapter.
    Sec. 2.  NEW SECTION.  256E.2  Innovative financing partnership program —— contract criteria —— parties.
   1.  Program established.  Subject to an appropriation of funds by the general assembly for the purpose of facilitating the formation of innovative financing partnerships between the department and contracting parties for the operation of local prekindergarten programs that result in positive educational and developmental outcomes that have both a positive fiscal impact on governmental entities and are strongly supported by a given historical model, an innovative financing partnership program is established in the department of administrative services and shall be administered by the department in collaboration with the department of education.
   2.  Contracting parties.  The parties to an innovative financing partnership contract entered into under this chapter shall consist of the following:
   a.  One or more service providers who provide prekindergarten services to at-risk three-year-old and at-risk four-year-old children under chapter 237A, 256, 256A, 256C, 256G, 279, or 280.
   b.  Investors who provide the capital to expand and deliver prekindergarten services under the contract. Such investors may include but are not limited to philanthropic investors seeking a full or partial return of principal, and federal agencies that are not seeking a financial return.
   c.  An independent evaluator to determine whether the prekindergarten services provided under the contract resulted in positive educational and developmental outcomes that have both a positive fiscal impact on governments and are strongly supported by a given historical model.
   d.  One or more outcomes payers who agree to repay the investors only if the independent evaluator makes the determinations identified in paragraph “c”. Outcomes payers may also include any governmental entity, including but not limited to a school district, the child development coordinating council, or any private entity who agrees to commit to pay investors for outcomes achieved. Investors may be paid for the principal invested and the interest earned, but the total payment shall not exceed ninety percent of the state’s budgetary value for the outcomes.
   3.  Proposal criteria.  The department of administrative services, in collaboration with the department of education, shall evaluate innovative financing partnership contract proposals based on all of the following criteria:
   a.  Expected outcomes shall be budget-neutral or better, after accounting for projected cost reductions from positive educational and developmental outcomes that have both a positive fiscal impact on governments and are strongly supported by a given historical model.
   b.  Payment shall be conditioned on achievement of specific outcomes based on defined performance targets.
   c.  An objective process shall be used by an independent evaluator to determine whether defined performance targets have been achieved.
   d.  A schedule of payments shall be made, including a return on investment calculation and a calculation of the amounts of payments that would be earned by the service provider if defined performance targets are achieved as determined by the independent evaluator.
   e.  A determination shall be made by the department of administrative services, in collaboration with the department of education, that the contract proposal will result in significant performance improvements and budgetary savings across all affected agencies if the performance targets are achieved, and that the savings will exceed the debt service requirements of any notes issued in accordance with this chapter.
   f.  A clear description shall be made of the programming that will be provided by the service provider.
   4.  Additional weighting.  The department may assign additional weight to contract proposals that meet any of the following requirements:
   a.  Are submitted by service providers that demonstrate a strong commitment to ongoing professional development.
   b.  Demonstrate a mix of public and private service providers.
   c.  Demonstrate the use of new and enhanced services for children.
   d.  Are received from cities or school districts with a higher percentage of families whose family income is at or below two hundred fifty percent of the federal poverty level as defined by the most recently revised poverty income guidelines published by the United States department of health and human services.
   e.  Are received from cities or school districts with a higher percentage of immigrant and refugee families.
   f.  Demonstrate a plan to combine funding streams to bolster the services provided to the targeted population.
   g.  Demonstrate strategies to improve early mathematic skills and early literacy skills, including the literacy skills of children who have been identified as limited English proficient.
   h.  Demonstrate strategies to increase family engagement and connect families to other community resources.
   i.  Provide a comprehensive child development program.
   j.  Limit class size.
   k.  Establish a student-teacher ratio of not more than eight students for every one teacher.
   l.  Demonstrate substantial parental involvement.
   m.  Demonstrate community support.
   n.  Utilize services provided by other community agencies.
   o.  Utilize teachers licensed under chapter 272.
   p.  Include a plan for program evaluation that includes but is not limited to the measurement of student outcomes beyond the outcomes measured under subsection 2, paragraph “c”.
   q.  Serve communities with waiting lists for high-quality prekindergarten services.
   5.  Reporting requirements.  An innovative financing partnership contract proposal shall also contain provisions requiring a service provider to submit a biannual report to the department detailing the service provider’s progress in executing or performing the contract, and requiring that the independent evaluator submit an annual report to the department and to the general assembly detailing any available data relating to performance target outcomes measures being used by the independent evaluator in accordance with subsection 2, paragraph “c”.
    Sec. 3.  NEW SECTION.  256E.3  Contract —— financing —— general and specific bonding powers.
   1.  Authority to execute contract.  Subject to an appropriation of funds for the purpose stated in section 256E.2, the director may enter into an innovative financing partnership contract upon receiving the governor’s and the executive council’s approval of the innovative financing partnership contract proposal that meets the requirements of section 256E.2. The director may make payments from the fund established under section 256E.4, subsection 1, pursuant to the innovative financing partnership contract entered into under this section based on achievement of the defined performance targets as provided in section 256E.2, subsection 3, paragraph “c”. The director shall, not later than February 1 of each year in which a contract entered into under this section remains in force and effect, provide to the general assembly an annual status report on any innovative financing partnership contracts entered into under this section.
   2.  Financing authority.  To provide funds for payments under subsection 1, the treasurer of state, upon the request of the director, may issue innovative financing partnership notes in the manner described for the issuance of bonds under chapter 12A and do all things necessary with respect to the purposes of this chapter. The maximum maturity of the notes, including renewals, shall not exceed fifteen years from the date of issue of the original notes. The treasurer of state shall have all of the powers which are necessary to issue and secure notes and carry out the purposes of the innovative financing partnership fund. The treasurer of state may issue notes in principal amounts which, in the opinion of the treasurer of state, are necessary to provide sufficient funds for the innovative financing partnership fund, the payment of interest on the notes, the establishment of reserves to secure the notes, the costs of issuance of the notes, other expenditures of the treasurer of state incident to and necessary or convenient to carry out the note issuance for the innovative financing partnership fund, and all other expenditures of the treasurer of state necessary or convenient to administer the innovative financing partnership fund; provided, however, excluding the issuance of refunding notes, notes issued pursuant to this section shall not be issued in an aggregate principal amount that exceeds ten million dollars. The notes are investment securities and negotiable instruments within the meaning of and for purposes of the uniform commercial code, chapter 554.
   3.  A contract entered into under this section shall at a minimum include the following:
   a.  A requirement that the repayment to the investors be conditioned on specific performance outcome measures set in the innovative financing partnership contract.
   b.  A requirement for an independent evaluator to determine whether the outcomes have been achieved in accordance with section 256E.2, subsection 2, paragraph “c”.
   c.  A provision that repayment to the investors be based upon available moneys in the innovative financing partnership fund and subject to appropriation by the general assembly.
   d.  A provision that the investors are ineligible to receive or view any personally identifiable student data of students receiving prekindergarten services funded through the innovative financing partnership contract entered into under this section.
   4.  An innovative financing partnership contract entered into under this section is exempt from the provisions and requirements of chapter 8A relating to procurement.
   5.  Limitations.  Notes issued under this section are payable solely and only out of the moneys, assets, or revenues of the innovative financing partnership fund and any note reserve funds established pursuant to section 256E.4, all of which may be deposited with trustees or depositories in accordance with note or security documents and pledged by the commission to the payment thereof. Notes issued under this section shall contain on their face a statement that the notes do not constitute an indebtedness of the state. The treasurer of state shall not pledge the credit or taxing power of this state or any political subdivision of this state or make notes issued pursuant to this section payable out of any moneys except those in the innovative financing partnership fund.
    Sec. 4.  NEW SECTION.  256E.4  Innovative financing partnership fund.
   1.  Fund established.  An innovative financing partnership fund is created and established as a separate and distinct fund in the state treasury. The moneys in the innovative financing partnership fund are appropriated to the department for purposes of the innovative financing partnership program as set out in the contract between the director and the service provider in accordance with section 256E.3. Moneys in the fund shall not be subject to appropriation for any other purpose by the general assembly, but shall be used only for the purposes of this chapter. The treasurer of state shall act as custodian of the fund and disburse moneys contained in the fund as directed by the director, including automatic disbursements of funds received pursuant to the terms of the contract entered into under section 256E.3. The fund shall be administered by the director who shall make expenditures from the fund consistent with the purposes of this chapter without further appropriation.
   2.  Revenue for fund.  Revenue for the innovative financing partnership fund shall include but is not limited to the following, which shall be deposited with the treasurer of state or the treasurer’s designee as provided by any security documents and credited to the fund:
   a.  The proceeds of notes issued to capitalize and pay the costs of the fund and investment earnings on the proceeds of the fund.
   b.  Interest attributable to investment of moneys in the fund or an account of the fund.
   c.  Moneys received from the department of management under section 256E.5.
   d.  Moneys in the form of a devise, gift, bequest, donation, federal or other grant, reimbursement, repayment, judgment, transfer, payment, or appropriation from any source intended to be used for the purposes of the fund.
   3.  Nonreversion.  Notwithstanding section 8.33, moneys in the innovative financing partnership fund at the end of each fiscal year shall not revert to the general fund of the state but shall remain available for the purposes of the fund. Notwithstanding section 12C.7, subsection 2, interest or earnings on moneys in the fund shall be credited to the fund.
   4.  Note reserve and special funds.  The treasurer of state may create and establish, in the same manner and under the same conditions and requirements as provided in chapter 12A, one or more special funds, to be known as note reserve funds, to secure one or more issues of notes issued pursuant to section 256E.3.
    Sec. 5.  NEW SECTION.  256E.5  School district payments.
   Notwithstanding section 256C.4, subsection 1, paragraph “e”, at the close of each fiscal year in which the department determines that the performance targets and savings specified under the contract entered into pursuant to section 256E.3 have been achieved, the board of directors of each school district shall pay to the department of management any unexpended or unencumbered moneys remaining from preschool foundation aid received in the previous fiscal year by the school district under section 257.16. Any moneys paid under this section shall be deposited by the department of management in the innovative financing partnership fund.
    Sec. 6.  NEW SECTION.  256E.6  Limitations.
   Innovative financing partnership notes issued pursuant to this chapter are not debts of the state or of any political subdivision of the state, do not constitute a pledge of the faith and credit of the state, and are not a charge against the general credit or general fund of the state. The issuance of any notes pursuant to this chapter by the treasurer of state does not directly, indirectly, or contingently obligate the state or a political subdivision of the state to apply moneys from, or to levy or pledge any form of taxation whatsoever to, the payment of the notes. Notes issued under this chapter are payable solely and only from the sources and funds referred to in sections 256E.3 through 256E.5.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill establishes, subject to an appropriation by the general assembly for the purpose of facilitating the provision of prekindergarten education services under innovative financing partnership contracts as a means to reduce the costs for such services, an innovative financing partnership program to be administered by the department of administrative services (DAS), in collaboration with the department of education. The bill authorizes the director of the department of administrative services to enter into a contract with various parties under certain conditions.
   PARTIES TO CONTRACT. The parties in an innovative financing partnership contract shall consist of one or more providers of prekindergarten services; investors who provide the capital to expand and deliver prekindergarten services under the contract, including but not limited to philanthropic investors seeking a full or partial financial return, and federal agencies that are not seeking a financial return; an independent evaluator; and one or more outcomes payers who agree to pay the investors only if the independent evaluator determines that the prekindergarten services provided under the contract result in the improvements identified. Outcomes payers may also include any governmental entity, including but not limited to a school district, or any private entity who agrees to commit to pay investors for outcomes achieved. Investors may be paid for the principal invested and interest earned, but the total payment from the state shall not exceed 90 percent of the state’s budgetary value for the outcomes.
   CONTRACT PROPOSAL CRITERIA. DAS must evaluate contract proposals based on the expected outcomes, which must be budget-neutral or better, after accounting for projected cost reductions from positive educational and developmental outcomes that have both a positive fiscal impact on governments and are strongly supported by a given historical model; payment conditioned on achievement of specific outcomes; an objective process to be used by an independent evaluator to determine whether performance targets have been achieved; a schedule of payments, including a return on investment calculation and a calculation of the amounts of payments earned; a determination by DAS, in collaboration with the department of education, that the contract proposal will result in significant performance improvements and budgetary savings, and that the savings will exceed the debt service requirements of any notes issued by the treasurer of state, and a clear description of the programming that will be provided by the service provider.
   ADDITIONAL WEIGHTING. DAS may assign additional weight to contract proposals that meet any of the criteria identified in the bill. 
   CONTRACT REPORTING REQUIREMENTS. An innovative financing partnership contract proposal must contain provisions requiring the service provider to submit a biannual report to the general assembly detailing the service provider’s progress, and requiring that the independent evaluator submit an annual report to the general assembly. The contract must, at a minimum, include a requirement that the repayment to the investor be conditioned on specific performance outcome measures set in the contract, a requirement for an independent evaluator to determine whether the outcomes have been achieved, a provision that repayment to the investor be based upon available moneys in the innovative financing partnership fund and subject to appropriation by the general assembly, and that the investors are ineligible to receive or view any personally identifiable student data of students receiving prekindergarten services funded through the contract.
   INNOVATIVE FINANCING PARTNERSHIP —— CONTRACT AUTHORITY AND FINANCING POWERS. The DAS director may enter into an innovative financing partnership contract upon receiving the governor’s and the executive council’s approval of the contract; may make payments pursuant to the contract and based on achievement of the performance targets; and shall, not later than February 1 of each year in which a contract remains in force and effect, provide to the department and to the general assembly an annual status report. 
   FINANCING AUTHORITY. To provide funds for payments, the treasurer of state may, upon the request of the DAS director, issue notes in the manner described for the issuance of bonds under Code chapter 12A. Such notes are payable solely and only out of the moneys, assets, or revenues of the innovative financing partnership fund and any note reserve funds the treasurer of state is authorized to establish under the bill. The maximum maturity of the notes, including renewals, is 15 years from the original note issuance date. Notes issued shall contain on their face a statement that the notes do not constitute an indebtedness of the state.
   FUND. An innovative financing partnership fund is created and established as a separate and distinct fund in the state treasury. The moneys in the fund are appropriated to the DAS for purposes of the innovative financing partnership program set out in the contract between the director and the service provider. Moneys in the fund shall not be subject to appropriation for any other purpose by the general assembly. 
   Revenue for the fund shall include but is not limited to the proceeds of notes issued to capitalize and pay the costs of the fund and investment earnings on the proceeds, interest attributable to investment of money in the fund or an account of the fund, moneys from the department of management, and moneys from any source intended to be used for the purposes of the fund. Moneys in the fund and any interest earned on moneys in the fund are not subject to reversion.
   SCHOOL DISTRICT PAYMENTS. At the close of each fiscal year, school boards must pay to the department of management any unexpended or unencumbered moneys remaining from preschool foundation aid received in the previous fiscal year by the school district. The department of management is directed to deposit such moneys in the innovative financing partnership fund.
   LIMITATIONS. Notes issued by the treasurer of state for purposes of innovative financing partnership contracts are not debts of the state, nor of any political subdivision of the state, and do not constitute a pledge of the faith and credit of the state or a charge against the general credit or general fund of the state. The notes issued are payable solely and only from the funds created in accordance with the bill.