H.F. 446 Section 1. Section 256C.4, subsection 1, paragraph e, Code 1 2017, is amended to read as follows: 2 e. Preschool foundation aid funding shall not be used for 3 the costs of constructing a facility in connection with an 4 approved local program. Preschool foundation aid funding may 5 be used by approved local programs and community providers 6 for professional development for preschool teachers, for 7 instructional equipment, for material and equipment designed 8 to develop pupils’ large and small motor skills, and for other 9 direct costs. Preschool foundation aid funding may be used 10 by approved local programs for the costs of transportation 11 involving children participating in the preschool program. 12 The costs of transporting other children associated with the 13 preschool program or transported as provided in section 256C.3, 14 subsection 3 , paragraph “h” , may be prorated by the school 15 district. Preschool foundation aid funding received by an 16 approved local program that remain unexpended or unobligated 17 at the end of a fiscal year shall be used to build the approved 18 local program’s preschool program capacity in the next 19 succeeding fiscal year transferred for deposit in the school 20 district’s flexibility fund established under section 298A.16 . 21 Sec. 2. Section 257.10, subsection 10, paragraph d, Code 22 2017, is amended to read as follows: 23 d. The use of the funds calculated under this subsection 24 and any amount designated for professional development purposes 25 from the school district’s flexibility fund under section 26 298A.16 shall comply with the requirements of chapter 284 . If 27 all professional development requirements of chapter 284 are 28 met and funds received under this subsection remain unexpended 29 and unobligated at the end of a fiscal year, the school 30 district shall transfer all such unexpended and unobligated 31 funds for deposit in the school district’s flexibility fund 32 established under section 298A.16. 33 Sec. 3. Section 257.41, subsection 1, Code 2017, is amended 34 to read as follows: 35 -1- LSB 2494YH (5) 87 md/sc 1/ 8

H.F. 446 1. Budget. The budget of an approved program for at-risk 1 students, secondary students who attend alternative programs 2 or alternative schools, or returning dropouts and dropout 3 prevention for a school district, after subtracting funds 4 received under section 257.11, subsection 4 , paragraphs “a” 5 through “c” , and from other sources for that purpose, including 6 any previous carryover amount designated from the school 7 district’s flexibility fund under section 298A.16 , shall be 8 funded annually on a basis of one-fourth or more from the 9 district cost of the school district and up to three-fourths 10 through establishment of a modified supplemental amount. 11 Annually, the department of management shall establish a 12 modified supplemental amount for each such school district 13 equal to the difference between the approved budget for the 14 program for that district and the sum of the amount funded from 15 the district cost of the school district plus funds received 16 under section 257.11, subsection 4 , and from other sources 17 for that purpose, including any previous carryover amount 18 designated from the school district’s flexibility fund under 19 section 298A.16 . 20 Sec. 4. Section 257.41, Code 2017, is amended by adding the 21 following new subsection: 22 NEW SUBSECTION . 5. Unless otherwise provided by law, 23 moneys received by a school district from any source for use in 24 at-risk pupils’ programs, alternative programs and alternative 25 school programs, and returning dropout and dropout prevention 26 programs, that remain unexpended or unobligated at the end of 27 a budget year beginning on or after July 1, 2016, shall be 28 transferred for deposit in the school district’s flexibility 29 fund established under section 298A.16. 30 Sec. 5. Section 257.46, subsection 1, Code 2017, is amended 31 to read as follows: 32 1. The budget of an approved gifted and talented children 33 program for a school district, after subtracting funds 34 received from other sources for that purpose, including any 35 -2- LSB 2494YH (5) 87 md/sc 2/ 8

H.F. 446 amount designated from the school district’s flexibility fund 1 under section 298A.16, shall be funded annually on a basis 2 of one-fourth or more from the district cost of the school 3 district. 4 Sec. 6. Section 257.46, subsection 3, Code 2017, is amended 5 to read as follows: 6 3. If any portion of the gifted and talented program budget 7 remains unexpended at the end of the budget year, unless 8 otherwise provided by law, the remainder shall be carried over 9 to the subsequent budget year and added to the gifted and 10 talented program budget for that year transferred for deposit 11 in the school district’s flexibility fund established under 12 section 298A.16 . 13 Sec. 7. Section 284.6, subsection 9, Code 2017, is amended 14 to read as follows: 15 9. Moneys received pursuant to section 257.10, subsection 16 10 , or section 257.37A, subsection 2 , shall be maintained 17 as a separate listing within a school district’s or area 18 education agency’s budget for funds received and expenditures 19 made pursuant to this subsection . A school district shall 20 certify to the department of education how the school 21 district allocated the funds and that moneys received under 22 this subsection were used to supplement, not supplant, the 23 professional development opportunities the school district 24 would otherwise make available. Moneys received pursuant to 25 section 257.10, subsection 10, that remain unexpended and 26 unobligated at the end of a fiscal year shall, pursuant to 27 section 257.10, subsection 10, paragraph “d” , be transferred 28 for deposit in the school district’s flexibility fund 29 established under section 298A.16. 30 Sec. 8. NEW SECTION . 298A.16 School district flexibility 31 fund. 32 1. A flexibility fund shall be established in each school 33 corporation if the school corporation has unexpended and 34 unobligated funds required to be transferred from any of the 35 -3- LSB 2494YH (5) 87 md/sc 3/ 8

H.F. 446 following sources: 1 a. The home school assistance program under section 299A.12. 2 b. At-risk pupils programs, alternative programs and 3 alternative school programs, and returning dropout and dropout 4 prevention programs under section 257.40. 5 c. Gifted and talented children programs under section 6 257.46. 7 2. In addition to the transfers to the flexibility fund 8 required by law, a school district may transfer to the 9 flexibility fund any unexpended and unobligated moneys in 10 any other school district fund if the program, purpose, or 11 requirements for the expenditure of such moneys have been 12 repealed or are no longer in effect. 13 3. Moneys deposited in the flexibility fund may be used 14 by the school district during a budget year beginning in 15 the calendar year following the calendar year in which the 16 moneys were transferred to the flexibility fund for any of the 17 following: 18 a. An approved local program under the statewide preschool 19 program for four-year-old children under chapter 256C. 20 b. Professional development requirements under chapter 284. 21 c. The home school assistance program under section 299A.12. 22 d. At-risk pupils programs, alternative programs and 23 alternative school programs, and returning dropout and dropout 24 prevention programs under section 257.40. 25 e. Gifted and talented children programs under section 26 257.46. 27 4. Expenditures from the flexibility fund shall be 28 approved by resolution of the board of directors of the school 29 corporation and shall be included in the budget certified in 30 accordance with chapter 24. Before the board of directors may 31 adopt the resolution approving expenditures from the fund, the 32 board shall hold a public hearing on the proposed resolution. 33 The proposed resolution must state the original source and 34 purpose of the funds, the proposed use of such funds, the 35 -4- LSB 2494YH (5) 87 md/sc 4/ 8

H.F. 446 amount of the proposed expenditure, and the fiscal year from 1 which the transfer of such funds to the flexibility fund 2 occurred. The board shall publish notice of the time and the 3 place of the public hearing in the same manner as required in 4 section 24.9. The department of education shall prescribe the 5 form for public hearing notices. Within ten days following 6 adoption, a copy of the resolution shall be provided to the 7 auditor of state for inclusion in any audit performed under 8 chapter 11. 9 5. Expenditures approved from the flexibility fund 10 shall not be included in district cost, shall be regarded as 11 miscellaneous income, and shall not be considered a part of the 12 school district’s unexpended fund balance. 13 6. When exercising authority to carry out an agency action, 14 as defined in section 17A.2, or any applicable activity or 15 decision specified in section 17A.2, subsection 11, paragraphs 16 “a ” through “l” , related to the provisions of this section, the 17 department of education shall engage in such agency action, 18 activity, or decision in a manner that gives deference to 19 decisions of a school district’s board of directors, promotes 20 flexibility for school districts, and minimizes intrusions into 21 school district operations’ and board of directors’ decision 22 making. In addition, in any such agency action activity or 23 decision, the burden shall be on the department of education to 24 demonstrate that any decision or action of a school district’s 25 board of directors is an irrational, illogical, or wholly 26 unjustifiable interpretation of a provision of law. 27 Sec. 9. Section 299A.12, subsection 1, Code 2017, is amended 28 to read as follows: 29 1. The board of directors of a school district shall expend 30 moneys received pursuant to section 257.6, subsection 1 , 31 paragraph “a” , subparagraph (5), and amounts designated from 32 the school district’s flexibility fund under section 298A.16 33 for purposes of providing a home school assistance program. 34 Sec. 10. Section 299A.12, subsection 2, unnumbered 35 -5- LSB 2494YH (5) 87 md/sc 5/ 8

H.F. 446 paragraph 1, Code 2017, is amended to read as follows: 1 Purposes for which a school district may expend funds 2 received pursuant to section 257.6, subsection 1 , paragraph 3 “a” , subparagraph (5), or amounts designated from the school 4 district’s flexibility fund under section 298A.16 shall include 5 but not be limited to the following: 6 Sec. 11. Section 299A.12, subsection 2, paragraphs c and d, 7 Code 2017, are amended to read as follows: 8 c. Salary and benefits for the supervising teacher of 9 the home school assistance program students. If the teacher 10 is a part-time home school assistance program teacher and a 11 part-time regular classroom teacher, funds received pursuant to 12 section 257.6, subsection 1 , paragraph “a” , subparagraph (5), 13 or amounts designated from the school district’s flexibility 14 fund under section 298A.16 may be used only for the portion of 15 time in which the teacher is a home school assistance program 16 teacher. 17 d. Salary and benefits for clerical and office staff of 18 the home school assistance program. If the staff members are 19 shared with other programs or functions within the district, 20 funds received pursuant to section 257.6, subsection 1 , 21 paragraph “a” , subparagraph (5), or amounts designated from the 22 school district’s flexibility fund under section 298A.16 shall 23 only be expended for the portion of time spent providing the 24 home school assistance program services. 25 Sec. 12. Section 299A.12, subsection 3, unnumbered 26 paragraph 1, Code 2017, is amended to read as follows: 27 Purposes for which a school district shall not expend funds 28 received pursuant to section 257.6, subsection 1 , paragraph 29 “a” , subparagraph (5), or amounts designated from the school 30 district’s flexibility fund under section 298A.16 include but 31 are not limited to the following: 32 Sec. 13. Section 299A.12, Code 2017, is amended by adding 33 the following new subsection: 34 NEW SUBSECTION . 4. Unless otherwise prohibited by law, 35 -6- LSB 2494YH (5) 87 md/sc 6/ 8

H.F. 446 moneys received by a school district pursuant to section 257.6, 1 subsection 1, paragraph “a” , subparagraph (5), that remain 2 unexpended or unobligated at the end of a budget year beginning 3 on or after July 1, 2016, shall be transferred for deposit 4 in the school district’s flexibility fund established under 5 section 298A.16. 6 Sec. 14. EFFECTIVE UPON ENACTMENT. This Act, being deemed 7 of immediate importance, takes effect upon enactment. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill relates to public school funding by authorizing 12 the establishment of school district flexibility funds 13 and providing for the transfer of certain unexpended and 14 unobligated funds of the school district to the flexibility 15 fund. 16 The bill requires a flexibility fund to be established 17 in each school corporation if the school corporation has 18 unexpended or unobligated funds from the school district’s 19 preschool program under Code chapter 256C, professional 20 development supplement categorical funding, home school 21 assistance program, at-risk pupils program, alternative 22 programs, returning dropout and dropout prevention programs, 23 and gifted and talented children program. The bill provides 24 that moneys deposited in the flexibility fund may be used 25 by the school district during a budget year beginning in 26 the calendar year following the calendar year in which the 27 moneys were deposited in the flexibility fund for the school 28 district’s preschool program, professional development costs, 29 home school assistance program, at-risk pupils program, 30 alternative programs, returning dropout and dropout prevention 31 programs, and gifted and talented children program. 32 The bill provides that in addition to the transfers to 33 the flexibility fund required by law, a school district may 34 transfer to the flexibility fund any unexpended and unobligated 35 -7- LSB 2494YH (5) 87 md/sc 7/ 8

H.F. 446 moneys in any other school district fund if the program, 1 purpose, or requirements for expenditure of such moneys have 2 been repealed or are no longer in effect. 3 Expenditures from the flexibility fund are required to be 4 approved by resolution of the school board following a public 5 hearing and must be included in the school district’s certified 6 budget. The bill specifies that expenditures approved from the 7 flexibility fund are not included in district cost, must be 8 regarded as miscellaneous income, and are not considered a part 9 of the school district’s unexpended fund balance. 10 The bill makes corresponding changes to the provisions 11 of law governing preschool programs under Code chapter 256C, 12 professional development supplement categorical funding, 13 home school assistance programs, at-risk pupils programs, 14 alternative programs, returning dropout and dropout prevention 15 programs, and gifted and talented children programs to 16 require the transfer of unexpended or unobligated funds from 17 those programs to the flexibility fund and to authorize the 18 expenditure of moneys from the flexibility fund for those 19 programs. 20 The bill takes effect upon enactment. 21 -8- LSB 2494YH (5) 87 md/sc 8/ 8