Senate File 2091 - Introduced SENATE FILE 2091 BY CHELGREN A BILL FOR An Act providing education savings grants for pupils attending 1 a nonpublic school or receiving competent private 2 instruction, establishing an education savings grant fund, 3 providing an income tax exemption, making appropriations, 4 providing penalties, and including applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5674XS (3) 87 md/jh

S.F. 2091 Section 1. Section 256.7, Code 2018, 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. For the school budget year beginning July 1, 2019, 9 and each succeeding school budget year, the following resident 10 pupils who are attending a nonpublic school, as defined 11 in section 285.16, or who are receiving competent private 12 instruction under chapter 299A shall be eligible to receive an 13 education savings grant in the manner provided in this section: 14 (1) A pupil eligible to enroll in kindergarten. 15 (2) A pupil eligible to enroll in grade one through grade 16 twelve if the pupil has attended a public school for the 17 equivalent of the two immediately preceding semesters for which 18 the educational savings grant is requested and if the pupil is 19 not otherwise ineligible under this section. 20 (3) A pupil who received an education savings grant for 21 the immediately preceding school budget year, who is eligible 22 to enroll in grade one through grade twelve, and who is not 23 otherwise ineligible under this section. 24 b. Education savings grants shall be made available to 25 requesting parents and guardians of an eligible pupil each 26 school budget year for the duration of the education savings 27 grant period and in the manner authorized under subsection 28 4, paragraph “c” , for the payment of qualified educational 29 expenses as provided in this section. 30 c. For purposes of this subsection, “resident” means the 31 same as defined in section 282.1. 32 2. a. (1) By January 31 preceding the school year for 33 which the education savings grant is first requested or the 34 school year following expiration of a previous education 35 -1- LSB 5674XS (3) 87 md/jh 1/ 10

S.F. 2091 savings grant period, the parent or guardian of the pupil 1 requesting to receive an education savings grant shall submit 2 an application to the department of education, on application 3 forms developed by the department, indicating that the parent 4 or guardian intends to enroll the pupil in a nonpublic school 5 or place the pupil under competent private instruction as 6 provided for in chapter 299A. 7 (2) In addition to such information deemed appropriate by 8 the department of education, the application shall require 9 certification from the nonpublic school of the pupil’s 10 enrollment for the following school year or a statement 11 indicating the parent or guardian’s intent to place the pupil 12 under competent private instruction for the following school 13 year. 14 b. An application from the parent or guardian of an 15 eligible pupil shall be approved for the duration of the 16 education savings grant period. Upon submission of a valid 17 application from the parent or guardian of an eligible pupil, 18 the department of education shall enter into a contract with 19 the parent or guardian requiring provision and funding of the 20 education savings grant for each school budget year of the 21 education savings grant period for which the pupil remains 22 eligible under the requirements of this section. The education 23 savings grant period is five years or the number of years until 24 completion of the school year during which the pupil graduates 25 from high school or completes an equivalent level of competent 26 private instruction under chapter 299A, whichever is less, 27 provided that the parent or guardian may terminate the contract 28 at any time. 29 c. By March 1 preceding each school year, the department 30 of education shall notify the department of management of the 31 number of pupils designated for the following school year 32 to receive an education savings grant and the amount of the 33 education savings grant for each pupil. The department of 34 education shall also notify the parent or guardian of such 35 -2- LSB 5674XS (3) 87 md/jh 2/ 10

S.F. 2091 pupils who are approved to receive an education savings grant. 1 3. a. The department of management shall assign each 2 pupil an education savings grant in an amount equal to the 3 difference between eighty-seven and five-tenths percent of the 4 regular program state cost per pupil and the statewide average 5 foundation property tax per pupil for the same school year. 6 b. The department of management shall on July 1 following 7 the determination of the amount of the education savings grant 8 for each approved pupil transfer such amounts to the pupil’s 9 account in the education savings grant fund established under 10 subsection 4. Such amount shall be available to the pupil’s 11 parent or guardian in the manner authorized under subsection 12 4, paragraph “c” , for the payment of qualified educational 13 expenses incurred by such persons for the pupil during that 14 school year or in a future school year pursuant to subsection 15 5, paragraph “c” . 16 4. An education savings grant fund is created in the state 17 treasury under the control of the department of management 18 consisting of moneys appropriated to the department of 19 management for the purpose of providing education savings 20 grants under this section. For the fiscal year commencing July 21 1, 2019, and each succeeding fiscal year, there is appropriated 22 from the general fund of the state to the department of 23 management to be credited to the fund the amount necessary 24 to pay all education savings grants approved for that fiscal 25 year. The director of the department of management has all 26 powers necessary to carry out and effectuate the purposes, 27 objectives, and provisions of this section pertaining to the 28 fund, including the power to do all of the following: 29 a. Make and enter into contracts necessary for the 30 administration of the fund. 31 b. Procure insurance against any loss in connection with the 32 assets of the fund or require a surety bond. 33 c. Contract with a private financial management firm to 34 manage the fund, in collaboration with the treasurer of state, 35 -3- LSB 5674XS (3) 87 md/jh 3/ 10

S.F. 2091 including providing for the disbursement of education savings 1 grants in the form of an electronic debit card or checks that 2 are payable directly from the pupil’s account within the fund. 3 d. Conduct audits or other review necessary to properly 4 administer the program. 5 e. Adopt rules for the administration of the fund and 6 accounts within the fund. 7 5. a. For each pupil approved for an education savings 8 grant, the department of management shall establish an account 9 for that pupil in the education savings grant fund. The amount 10 of the pupil’s education savings grant shall be deposited 11 into the pupil’s account on July 1, and such amount shall be 12 immediately available for the payment of qualified educational 13 expenses incurred by the parent or guardian for the pupil 14 during that fiscal year using the payment method authorized 15 under subsection 4, paragraph “c” . 16 b. A nonpublic school or a provider of competent private 17 instruction under chapter 299A that accepts payment from a 18 parent or guardian using funds from a pupil’s account in the 19 education savings grant fund shall not refund, rebate, or share 20 any portion of such payment with the parent, guardian, or 21 pupil. 22 c. Moneys remaining in a pupil’s account upon conclusion 23 of the fiscal year shall remain in the pupil’s account in the 24 education savings grant fund for the payment of qualified 25 educational expenses in future fiscal years during which the 26 pupil participates in the program or for the payment of higher 27 education costs as provided under subsection 8. 28 6. a. For purposes of this section, “qualified educational 29 expenses” includes tuition and fees at a nonpublic school, 30 textbooks, fees or payments for educational therapies, 31 including tutoring or cognitive skills training, curriculum 32 fees and materials for a course of study for a specific subject 33 matter or grade level, tuition or fees for nonpublic online 34 education programs, education materials and services for pupils 35 -4- LSB 5674XS (3) 87 md/jh 4/ 10

S.F. 2091 with disabilities, including the cost of paraprofessionals 1 and assistants who are trained in accordance with state law, 2 standardized test fees, fees required by the department not to 3 exceed for each grant recipient five percent of the total grant 4 amount in any fiscal year, higher education costs, as defined 5 in section 12D.1, excluding room and board expenses, and other 6 expenses incurred by the parent or guardian that are directly 7 related to the education of the pupil at a nonpublic school, 8 including a nonpublic school accredited by an independent 9 accrediting agency approved by the department of education, or 10 directly related to providing competent private instruction 11 for the pupil under chapter 299A. The cost of one computer or 12 other portable computing device shall be allowed as a qualified 13 educational expense for a pupil if such a purchase has not been 14 made using funds from that pupil’s account in either of the two 15 immediately preceding fiscal years. 16 b. “Qualified educational expenses” does not include 17 transportation costs for the pupil, the cost of food or 18 refreshments consumed by the pupil, the cost of clothing for 19 the pupil, or the cost of disposable materials, including 20 but not limited to paper, notebooks, pencils, pens, and art 21 supplies. 22 7. A person who makes a false claim for the purpose 23 of obtaining an education savings grant provided for in 24 this section or who knowingly receives the grant or makes a 25 payment from an account within the education savings grant 26 fund without being legally entitled to do so is guilty of a 27 fraudulent practice under chapter 714. The false claim for an 28 education savings grant or a payment from an account shall be 29 disallowed. If amounts from the grant have been disbursed from 30 the applicable account in the education savings grant fund, the 31 department of management shall initiate legal proceedings to 32 recover such amounts. A parent or guardian, or a pupil for 33 purposes of subsection 8, who commits a fraudulent practice 34 under this section is prohibited from participating in the 35 -5- LSB 5674XS (3) 87 md/jh 5/ 10

S.F. 2091 education savings grant program in the future. 1 8. a. For each pupil with a positive balance in the 2 pupil’s account in the education savings grant fund upon 3 graduation from high school or completion of an equivalent 4 level of competent private instruction under chapter 299A, the 5 department of management shall maintain the account in the 6 fund until the pupil is twenty-three years of age. Following 7 graduation from high school until the pupil is twenty-three 8 years of age, moneys in the pupil’s account may be used 9 for higher education costs, as defined in section 12D.1, 10 incurred by the pupil while attending an institution of higher 11 education under the control of the state board of regents, a 12 community college located in this state, or a private college 13 or university located in this state. Payments from a pupil’s 14 account for higher education costs shall be made in the same 15 manner as payments for qualified educational expenses under 16 subsection 5. Moneys in a pupil’s account when the pupil 17 turns twenty-three years of age shall be transferred by the 18 department of management for deposit in the general fund of the 19 state. 20 b. Notwithstanding the age limitation in paragraph “a” , 21 if the pupil with a positive balance in the pupil’s account 22 in the education savings grant fund upon graduation from high 23 school or completion of an equivalent level of competent 24 private instruction under chapter 299A serves on federal active 25 duty, other than training, and is discharged under honorable 26 conditions, the limitation date otherwise applicable under 27 paragraph “a” shall be extended by one year for each year of 28 federal active duty service by the pupil, but not to a date 29 after the pupil’s twenty-seventh birthday. 30 9. This section shall not be construed to authorize the 31 state or any political subdivision of the state to exercise 32 authority over any nonpublic school or provider of competent 33 private instruction under chapter 299A or construed to require 34 a nonpublic school or provider of competent private instruction 35 -6- LSB 5674XS (3) 87 md/jh 6/ 10

S.F. 2091 under chapter 299A to modify its academic standards for 1 admission or educational program in order to receive payment 2 from a parent or guardian using funds from a pupil’s account 3 in the education savings grant fund. A nonpublic school or 4 provider of competent private instruction under chapter 299A 5 that accepts payment from a parent or guardian using funds 6 from a pupil’s account in the education savings grant fund is 7 not an agent of this state or of a political subdivision of 8 this state. Rules adopted by the department to implement this 9 section that impose an undue burden on a nonpublic school or 10 provider of competent private instruction under chapter 299A 11 are invalid. 12 Sec. 3. Section 422.7, Code 2018, is amended by adding the 13 following new subsection: 14 NEW SUBSECTION . 51. Subtract, to the extent included, the 15 amount of an education savings grant under section 257.11B 16 received by the taxpayer for payment of qualified educational 17 expenses. 18 Sec. 4. APPLICABILITY. The following apply to school budget 19 years and fiscal years beginning on or after July 1, 2019: 20 1. The section of this Act amending section 256.7. 21 2. The section of this Act enacting section 257.11B. 22 Sec. 5. APPLICABILITY. The following applies to tax years 23 beginning on or after January 1, 2019: 24 The section of this Act enacting section 422.7, subsection 25 51. 26 EXPLANATION 27 The inclusion of this explanation does not constitute agreement with 28 the explanation’s substance by the members of the general assembly. 29 This bill establishes an education savings grant program 30 for pupils attending a nonpublic school or receiving competent 31 private instruction and establishes an education savings grant 32 fund. 33 For the school budget year beginning July 1, 2019, 34 and each succeeding school budget year, resident pupils 35 -7- LSB 5674XS (3) 87 md/jh 7/ 10

S.F. 2091 who are attending a nonpublic school or who are receiving 1 competent private instruction are eligible to receive an 2 education savings grant if the pupil is eligible to enroll in 3 kindergarten, is eligible to enroll in grade 1 through grade 12 4 and has attended a public school for the equivalent of the two 5 immediately preceding semesters, or if the pupil received an 6 education savings grant for the immediately preceding school 7 budget year. By January 31 preceding the school year for which 8 the education savings grant is first requested or the school 9 year following expiration of a previous education savings grant 10 period, the parent or guardian of the pupil requesting to 11 receive an education savings grant must submit an application 12 to the department of education indicating that the parent or 13 guardian intends to enroll the pupil in a nonpublic school or 14 place the pupil under competent private instruction. 15 The bill requires that by March 1 preceding each school 16 year, the department of education must notify the department 17 of management of the number of pupils designated for the 18 following school year to receive an education savings grant and 19 the amount of the education savings grant for each pupil. An 20 application from the parent or guardian of an eligible pupil 21 shall be approved for the duration of the education savings 22 grant period and the department of education shall enter into a 23 contract with the parent or guardian requiring provision and 24 funding of the education savings grant for each school budget 25 year of the education savings grant period for which the pupil 26 remains eligible. The education savings grant period is five 27 years or the number of years until completion of the school 28 year during which the pupil graduates from high school or 29 completes an equivalent level of competent private instruction, 30 whichever is less, provided that the parent or guardian may 31 terminate the contract at any time. 32 The amount of each education savings grant is equal to the 33 difference between 87.5 percent of the regular program state 34 cost per pupil and the statewide average foundation property 35 -8- LSB 5674XS (3) 87 md/jh 8/ 10

S.F. 2091 tax per pupil in the same school year. 1 The bill creates an education savings grant fund in 2 the state treasury under the control of the department of 3 management consisting of moneys appropriated to the department 4 of management for the purpose of providing education savings 5 grants. For the fiscal year commencing July 1, 2019, and each 6 succeeding fiscal year, there is appropriated from the general 7 fund of the state to the department of management for deposit 8 in the fund the amount necessary to pay all education savings 9 grants approved for that fiscal year. For each pupil approved 10 for an education savings grant, the department of management 11 must establish an account for that pupil in the education 12 savings grant fund. The amount of the pupil’s education 13 savings grant is deposited into the pupil’s account on July 1 14 and such amount is available for use by parents and guardians 15 for the payment of qualified educational expenses, as defined 16 in the bill, incurred by the parent or guardian for the pupil 17 during that fiscal year or in a future fiscal year as provided 18 in the bill. 19 The bill authorizes the department of education to 20 contract with a private financial management firm to manage 21 the education savings grant fund, in collaboration with the 22 treasurer of state, including providing for the disbursement 23 of education savings grants in the form of an electronic debit 24 card or checks that are payable directly from the pupil’s 25 account within the fund. 26 The bill provides that moneys remaining in a pupil’s account 27 upon the conclusion of the fiscal year shall remain in the 28 pupil’s account in the education savings grant fund for the 29 payment of qualified educational expenses in future fiscal 30 years during which the pupil participates in the program or for 31 higher education costs as authorized in the bill. 32 Under the bill, for each pupil with a positive balance in 33 the pupil’s account in the education savings grant fund upon 34 graduation from high school or completion of an equivalent 35 -9- LSB 5674XS (3) 87 md/jh 9/ 10

S.F. 2091 level of competent private instruction under Code chapter 1 299A, the department of management is required to maintain the 2 account in the fund until the pupil reaches an age specified in 3 the bill. Until the pupil reaches the age limitation, moneys 4 in the pupil’s account may be used by the pupil for higher 5 education costs, as defined in Code section 12D.1. Moneys in a 6 pupil’s account when the pupil reaches the age limitation are 7 transferred by the department of management for deposit in the 8 general fund of the state. 9 The bill provides that a person who makes a false claim for 10 the purpose of obtaining an education savings grant or who 11 knowingly receives the grant or makes a payment from an account 12 in the education savings grant fund without being legally 13 entitled to do so is guilty of a fraudulent practice and is 14 subject to a criminal penalty. The bill allows the department 15 of management to initiate legal proceedings to recover grants 16 and amounts improperly awarded or paid. 17 The bill provides that an education savings grant received 18 by a taxpayer is not taxable income for purposes of state 19 individual income taxation. This provision of the bill applies 20 to tax years beginning on or after January 1, 2019. 21 The sections of the bill amending Code section 256.7 and 22 enacting Code section 257.11B apply to school budget years and 23 fiscal years beginning on or after July 1, 2019. 24 -10- LSB 5674XS (3) 87 md/jh 10/ 10