House Study Bill 203 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON EDUCATION BILL BY CHAIRPERSON JORGENSEN) A BILL FOR An Act providing education savings grants for pupils attending 1 a nonpublic school, establishing an education savings grant 2 fund, making appropriations, providing penalties, and 3 including applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2327YC (5) 86 md/sc

H.F. _____ 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. a. The following pupils shall be eligible to receive an 9 education savings grant in the manner provided in this section: 10 (1) For the school budget year beginning July 1, 2017, 11 pupils eligible to enroll in kindergarten who are attending a 12 nonpublic school for that budget year. 13 (2) For each school budget year beginning on or after July 14 1, 2018, pupils eligible to enroll in the grade levels eligible 15 for an education savings grant in the immediately preceding 16 school budget year and pupils eligible to enroll in the grade 17 level that is one grade level higher than the highest grade 18 level that was eligible for an education savings grant in the 19 immediately preceding budget year, but not higher than grade 20 twelve, who are attending a nonpublic school for that budget 21 year. 22 b. Education savings grants shall be made available to 23 parents and guardians in the manner authorized under subsection 24 4, paragraph “c” , for the payment of qualified educational 25 expenses as provided in this section. 26 2. a. (1) By January 31 preceding the school year for 27 which the education savings grant is requested, the parent 28 or guardian of the pupil requesting to receive an education 29 savings grant shall submit an application to the department of 30 education, on application forms developed by the department, 31 indicating that the parent or guardian intends to enroll the 32 pupil in a nonpublic school. 33 (2) In addition to such information deemed appropriate by 34 the department of education, the application shall require 35 -1- LSB 2327YC (5) 86 md/sc 1/ 8

H.F. _____ certification from the nonpublic school of the pupil’s 1 enrollment for the following school year. 2 b. By March 1 preceding the school year for which the 3 education savings grant is requested, the department of 4 education shall notify the department of management of the 5 number of pupils in each school district designated for the 6 following school year to receive an education savings grant. 7 The department of education shall also notify the parent 8 or guardian of such pupils who are approved to receive an 9 education savings grant. 10 c. Education savings grants shall only be approved for one 11 school year per application, and applications must be submitted 12 under paragraph “a” for education savings grants in subsequent 13 school years. 14 3. a. The department of management shall assign each pupil 15 an education savings grant in an amount equal to the statewide 16 average state foundation aid per pupil in the same school year. 17 b. The department of management shall on July 1 following 18 the determination of the amount of the education savings grant 19 for each approved pupil transfer such amounts to the pupil’s 20 account in the education savings grant fund established under 21 subsection 4. Such amount shall be available to the pupil’s 22 parent or guardian in the manner authorized under subsection 23 4, paragraph “c” , for the payment of qualified educational 24 expenses incurred by such persons for the pupil during that 25 school year. 26 4. An education savings grant fund is created in the state 27 treasury under the control of the department of management 28 consisting of moneys appropriated to the department for the 29 purpose of providing education savings grants under this 30 section. For the fiscal year commencing July 1, 2017, and 31 each succeeding fiscal year, there is appropriated from the 32 general fund of the state to the department of management to be 33 credited to the fund the amount necessary to pay all education 34 savings grants approved for that fiscal year. The director of 35 -2- LSB 2327YC (5) 86 md/sc 2/ 8

H.F. _____ the department of management has all powers necessary to carry 1 out and effectuate the purposes, objectives, and provisions of 2 this section pertaining to the fund, including the power to do 3 all of the following: 4 a. Make and enter into contracts necessary for the 5 administration of the fund. 6 b. Procure insurance against any loss in connection with the 7 assets of the fund or require a surety bond. 8 c. Contract with a private financial management firm to 9 manage the fund, in collaboration with the treasurer of state, 10 including providing for the disbursement of education savings 11 grants in the form of an electronic debit card or checks that 12 are payable directly from the pupil’s account in the fund. 13 d. Conduct audits or other review necessary to properly 14 administer the program. 15 e. Adopt rules pursuant to chapter 17A for the 16 administration of the fund and accounts in the fund. 17 5. a. For each pupil approved for an education savings 18 grant, the department shall establish an account for that pupil 19 in the education savings grant fund. The amount of the pupil’s 20 education savings grant determined under subsection 3 shall be 21 deposited into the pupil’s account on July 1 and such amount 22 shall be immediately available for the payment of qualified 23 educational expenses incurred by the parent or guardian for 24 the pupil during that fiscal year using the payment method 25 authorized under subsection 4, paragraph “c” . 26 b. A nonpublic school or other entity that accepts payment 27 from a parent or guardian using funds from a pupil’s account in 28 the education savings grant fund shall not refund, rebate, or 29 share any portion of such payment with the parent, guardian, or 30 pupil. 31 c. Moneys remaining in a pupil’s account upon conclusion 32 of the fiscal year shall remain in the pupil’s account in the 33 education savings grant fund for the payment of qualified 34 educational expenses in future fiscal years, unless subject to 35 -3- LSB 2327YC (5) 86 md/sc 3/ 8

H.F. _____ the transfer required under subsection 8. 1 6. a. For purposes of this section, “qualified educational 2 expenses” includes tuition and fees at a nonpublic school, 3 textbooks, fees or payments for educational therapies including 4 tutoring or cognitive skills training, curriculum fees and 5 materials for a course of study for a specific subject matter 6 or grade level, tuition or fees for nonpublic online education 7 programs, education materials and services for pupils with 8 disabilities including the cost of paraprofessionals and 9 assistants who are trained in accordance with state law, 10 standardized test fees, fees required by the department not 11 to exceed for each grant recipient five percent of the total 12 grant amount in any fiscal year, higher education expenses, 13 as defined in section 12D.1, resulting from the pupil’s 14 participation in a program under chapter 261E, excluding room 15 and board expenses, and other expenses incurred by the parent 16 or guardian that are directly related to the education of the 17 pupil at a nonpublic school, including a nonpublic school 18 accredited by an independent accrediting agency approved by the 19 department of education. The cost of one computer or other 20 portable computing device shall be allowed as a qualified 21 educational expense for a pupil if such a purchase has not been 22 made using funds from that pupil’s account in either of the 23 two immediately preceding fiscal years. “Qualified educational 24 expenses” do not include transportation costs for the pupil, the 25 cost of food or refreshments consumed by the pupil, the cost of 26 clothing for the pupil, or the cost of disposable materials, 27 including but not limited to paper, notebooks, pencils, pens, 28 and art supplies. 29 b. For purposes of this section, “nonpublic school” means 30 the same as defined in section 285.16. 31 7. A person who makes a false claim for the purpose 32 of obtaining an education savings grant provided for in 33 this section or who knowingly receives the grant or makes a 34 payment from an account in the education savings grant fund 35 -4- LSB 2327YC (5) 86 md/sc 4/ 8

H.F. _____ without being legally entitled to it is guilty of a fraudulent 1 practice. The false claim for an education savings grant or a 2 payment from an account shall be disallowed and if amounts from 3 the grant have been disbursed from the applicable account in 4 the education savings grant fund, the department of management 5 shall initiate legal proceedings to recover such amounts. A 6 parent or guardian, or a pupil for purposes of subsection 8, 7 who violates this subsection is prohibited from participating 8 in the education savings grant program in the future. 9 8. For each pupil with a positive balance in the pupil’s 10 account in the education savings grant fund upon graduation 11 from high school or upon termination of the pupil’s enrollment 12 in the nonpublic school, moneys in the pupil’s account shall be 13 transferred by the department for deposit in the general fund 14 of the state. 15 9. A nonpublic school that accepts payment from a parent or 16 guardian using funds from a pupil’s account in the education 17 savings grant fund is not an agent of this state or other 18 political subdivision of this state. 19 Sec. 3. Section 422.7, Code 2015, is amended by adding the 20 following new subsection: 21 NEW SUBSECTION . 51. Subtract, to the extent included, the 22 amount of any education savings grant under section 257.11B 23 received during the tax year by a taxpayer authorized to spend 24 such grant amounts for qualified educational expenses. 25 Sec. 4. APPLICABILITY. This Act applies to school budget 26 years and fiscal years beginning on or after July 1, 2017. 27 Sec. 5. APPLICABILITY. The provision of this Act amending 28 section 422.7 applies to tax years beginning on or after 29 January 1, 2017. 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 provides education savings grants for pupils 34 attending a nonpublic school and establishes an education 35 -5- LSB 2327YC (5) 86 md/sc 5/ 8

H.F. _____ savings grant fund. 1 Under the bill, for the school budget year beginning July 2 1, 2017, pupils eligible to enroll in kindergarten who are 3 attending a nonpublic school for that budget year are eligible 4 to receive an education savings grant. For each succeeding 5 budget year, an additional grade level is added until all grade 6 levels from kindergarten through 12 are eligible in the budget 7 year beginning July 1, 2029. By January 31 preceding the 8 school year for which the education savings grant is requested, 9 the parent or guardian of the pupil requesting to receive an 10 education savings grant must submit an application to the 11 department of education indicating that the parent or guardian 12 intends to enroll the pupil in a nonpublic school. 13 The bill requires that by March 1 preceding the school 14 year for which the education savings grant is requested, 15 the department of education must notify the department of 16 management of the number of pupils in each school district 17 designated for the following school year to receive an 18 education savings grant and the amount of the education savings 19 grant for each pupil. Education savings grants may only be 20 approved for one school year per application, and applications 21 must be submitted for education savings grants in subsequent 22 school years. 23 The amount of each education savings grant is equal to the 24 statewide average state foundation aid per pupil in the same 25 school year. 26 The bill creates an education savings grant fund in the state 27 treasury under the control of the department of management 28 consisting of moneys appropriated to the department for the 29 purpose of providing education savings grants. For the fiscal 30 year commencing July 1, 2017, and each succeeding fiscal year, 31 there is appropriated from the general fund of the state to the 32 department of management for deposit in the fund the amount 33 necessary to pay all education savings grants approved for 34 that fiscal year. For each pupil approved for an education 35 -6- LSB 2327YC (5) 86 md/sc 6/ 8

H.F. _____ savings grant, the department of management must establish an 1 account for that pupil in the education savings grant fund. 2 The amount of the pupil’s education savings grant is deposited 3 into the pupil’s account on July 1 and such amount is available 4 for use by parents and guardians for the payment of qualified 5 educational expenses, as defined in the bill, incurred by the 6 parent or guardian for the pupil during that fiscal year. 7 The bill defines “nonpublic school” to mean those nonpublic 8 schools accredited by the department of education and nonpublic 9 institutions which comply with state board of education 10 standards for providing special education programs. 11 The bill authorizes the department of education to 12 contract with a private financial management firm to manage 13 the education savings grant fund, in collaboration with the 14 treasurer of state, including providing for the disbursement 15 of education savings grants in the form of an electronic debit 16 card or checks that are payable directly from the pupil’s 17 account within the fund. 18 The bill provides that moneys remaining in a pupil’s account 19 upon the conclusion of the fiscal year shall remain in the 20 pupil’s account within the education savings grant fund for 21 the payment of qualified educational expenses in future fiscal 22 years. 23 Under the bill, for each pupil with a positive balance in 24 the pupil’s account in the education savings grant fund upon 25 graduation from high school or upon termination of the pupil’s 26 enrollment in the nonpublic school, moneys in the pupil’s 27 account are transferred by the department of management for 28 deposit in the general fund of the state. 29 The bill provides that a person who makes a false claim for 30 the purpose of obtaining an education savings grant or who 31 knowingly receives the grant or makes a payment from an account 32 within the education savings grant fund without being legally 33 entitled to it is guilty of a fraudulent practice and is 34 subject to a criminal penalty. The bill allows the department 35 -7- LSB 2327YC (5) 86 md/sc 7/ 8

H.F. _____ of management to initiate legal proceedings to recover grants 1 and amounts improperly awarded or paid from accounts under the 2 bill. 3 The bill provides that moneys from an education savings 4 grant under the bill are not taxable income under Code chapter 5 422. 6 The bill applies to school budget years and fiscal years 7 beginning on or after July 1, 2017. 8 The provision of the bill amending Code section 422.7 9 applies to tax years beginning on or after January 1, 2017. 10 -8- LSB 2327YC (5) 86 md/sc 8/ 8