Senate Study Bill 3206 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON APPROPRIATIONS BILL BY CHAIRPERSON SCHNEIDER) A BILL FOR An Act establishing an education savings grant program for 1 pupils attending a nonpublic school, establishing an 2 education savings grant fund, providing an income tax 3 exemption, making appropriations, providing penalties, and 4 including applicability provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 6195XC (12) 87 md/jh

S.F. _____ DIVISION I 1 SHORT TITLE 2 Section 1. SHORT TITLE. This Act shall be known and may be 3 cited as the “Iowa Student Opportunity Act”. 4 DIVISION II 5 EDUCATION SAVINGS GRANTS 6 Sec. 2. Section 8.6, Code 2018, is amended by adding the 7 following new subsection: 8 NEW SUBSECTION . 16. To adopt rules relating to the 9 administration of and applications for the education savings 10 grant program pursuant to section 257.11B, including but not 11 limited to application processing timelines and information 12 required to be submitted by a parent or guardian. 13 Sec. 3. NEW SECTION . 257.11B Education savings grant 14 program. 15 1. a. For the school budget year beginning July 1, 2019, 16 and each succeeding school budget year, the following resident 17 pupils who are attending a nonpublic school, as defined 18 in section 285.16, located in this state and who maintain 19 enrollment for the entirety of the required attendance period 20 of the school year shall be eligible to receive an education 21 savings grant in the manner provided in this section: 22 (1) A pupil eligible to enroll in kindergarten and if the 23 pupil is not otherwise ineligible under this section. 24 (2) A pupil eligible to enroll in grade one through grade 25 twelve if the pupil has attended a public school for the 26 equivalent of the two semesters immediately preceding the 27 school budget year for which the educational savings grant is 28 requested and if the pupil is not otherwise ineligible under 29 this section. 30 (3) A pupil who received an education savings grant for 31 the immediately preceding school budget year, who is eligible 32 to enroll in grade one through grade twelve, and who is not 33 otherwise ineligible under this section. 34 b. Education savings grants shall be made available to 35 -1- LSB 6195XC (12) 87 md/jh 1/ 10

S.F. _____ parents and guardians in the manner authorized under subsection 1 4, paragraph “c” , for the payment of qualified educational 2 expenses as provided in this section. 3 c. For purposes of this subsection, “resident” means the 4 same as defined in section 282.1. 5 2. a. (1) By January 31 preceding the school year for 6 which the education savings grant is requested, the parent 7 or guardian of the pupil requesting to receive an education 8 savings grant shall submit an application to the department of 9 management, on application forms developed by the department of 10 management, indicating that the parent or guardian intends to 11 enroll the pupil in a nonpublic school for the entirety of the 12 school year. 13 (2) In addition to such information deemed appropriate by 14 the department of management, the application shall require 15 certification from the nonpublic school of the pupil’s 16 enrollment for the following school year. 17 b. By March 1 preceding the school year for which the 18 education savings grant is requested, the department of 19 management shall notify the parent or guardian of each pupil 20 approved for the following school year to receive an education 21 savings grant and the amount of the education savings grant for 22 the pupil. 23 c. Education savings grants shall only be approved for one 24 school year and applications must be submitted annually for 25 education savings grants in subsequent school years. 26 3. The department of management shall assign each pupil an 27 education savings grant in an amount equal to sixty percent of 28 the regular program state cost per pupil for the same school 29 budget year. 30 4. An education savings grant fund is created in the state 31 treasury under the control of the department of management 32 consisting of moneys appropriated to the department of 33 management for the purpose of providing education savings 34 grants under this section. For the fiscal year commencing July 35 -2- LSB 6195XC (12) 87 md/jh 2/ 10

S.F. _____ 1, 2019, and each succeeding fiscal year, there is appropriated 1 from the general fund of the state to the department of 2 management to be credited to the fund the amount necessary 3 to pay all education savings grants approved for that fiscal 4 year. The director of the department of management has all 5 powers necessary to carry out and effectuate the purposes, 6 objectives, and provisions of this section pertaining to the 7 fund, including the power to do all of the following: 8 a. Make and enter into contracts necessary for the 9 administration of the fund. 10 b. Procure insurance against any loss in connection with the 11 assets of the fund or require a surety bond. 12 c. Contract with a private financial management firm to 13 manage the fund, in collaboration with the treasurer of state, 14 including providing for the disbursement of education savings 15 grants in the form of an electronic debit card or checks that 16 are payable directly from the pupil’s account within the fund. 17 d. Conduct audits or other review necessary to properly 18 administer the program. 19 e. Adopt rules for the administration of the fund and 20 accounts within the fund. 21 5. a. For each pupil approved for an education savings 22 grant, the department of management shall establish an account 23 for that pupil in the education savings grant fund. The amount 24 of the pupil’s education savings grant shall be deposited 25 into the pupil’s account on July 1, and such amount shall be 26 immediately available for the payment of qualified educational 27 expenses incurred by the parent or guardian for the pupil 28 during that fiscal year using the payment method authorized 29 under subsection 4, paragraph “c” . 30 b. A nonpublic school that accepts payment from a parent or 31 guardian using funds from a pupil’s account in the education 32 savings grant fund shall not refund, rebate, or share any 33 portion of such payment with the parent, guardian, or pupil. 34 c. Moneys remaining in a pupil’s account upon conclusion 35 -3- LSB 6195XC (12) 87 md/jh 3/ 10

S.F. _____ of the fiscal year shall remain in the pupil’s account in the 1 education savings grant fund for the payment of qualified 2 educational expenses in future fiscal years during which the 3 pupil participates in the program or for the payment of higher 4 education costs as provided under subsection 8. 5 6. a. For purposes of this section, “qualified educational 6 expenses” includes tuition and fees at a nonpublic school, 7 textbooks, fees or payments for educational therapies, 8 including tutoring or cognitive skills training, curriculum 9 fees and materials for a course of study for a specific subject 10 matter or grade level, tuition or fees for nonpublic online 11 education programs, education materials and services for pupils 12 with disabilities, including the cost of paraprofessionals 13 and assistants who are trained in accordance with state law, 14 standardized test fees, higher education costs, as defined in 15 section 12D.1, excluding room and board expenses, and other 16 expenses incurred by the parent or guardian that are directly 17 related to the education of the pupil at a nonpublic school, 18 including a nonpublic school accredited by an independent 19 accrediting agency approved by the department of education. 20 b. “Qualified educational expenses” does not include 21 transportation costs for the pupil, the cost of food or 22 refreshments consumed by the pupil, the cost of clothing for 23 the pupil, or the cost of disposable materials, including 24 but not limited to paper, notebooks, pencils, pens, and art 25 supplies. 26 7. a. A person who makes a false claim for the purpose 27 of obtaining an education savings grant provided for in this 28 section or who knowingly receives the grant or makes a payment 29 from an account within the education savings grant fund without 30 being legally entitled to do so is guilty of a fraudulent 31 practice under chapter 714. The false claim for an education 32 savings grant or a payment from an account shall be disallowed. 33 The department of management shall also close the pupil’s 34 account in the education savings grant fund and transfer any 35 -4- LSB 6195XC (12) 87 md/jh 4/ 10

S.F. _____ remaining moneys in the account for deposit in the general 1 fund of the state. If the improperly obtained amounts from 2 the grant have been disbursed from the applicable account in 3 the education savings grant fund, the department of management 4 shall recover such amounts from the parent or guardian, or from 5 the pupil for purposes of subsection 8, including by initiating 6 legal proceedings to recover such amounts, if necessary. A 7 parent or guardian, or a pupil for purposes of subsection 8 8, who commits a fraudulent practice under this section is 9 prohibited from participating in the education savings grant 10 program in the future. 11 b. If, prior to the end of the required attendance period 12 of the school year, a pupil who receives an education savings 13 grant withdraws from enrollment in the nonpublic school or is 14 expelled, the nonpublic school shall notify the department of 15 management in writing of the pupil’s withdrawal or expulsion, 16 and the pupil’s parent or guardian shall notify the department 17 of management of the pupil’s withdrawal or expulsion from the 18 nonpublic school. A pupil’s expulsion from the nonpublic 19 school prior to the end of the required attendance period for 20 the school year shall invalidate the pupil’s eligibility for 21 the education savings grant for the school budget year. A 22 pupil’s withdrawal from a nonpublic school prior to the end 23 of the required attendance period of the school year shall 24 invalidate the pupil’s eligibility for the education savings 25 grant for the school budget year unless the withdrawal is 26 the result of a change in residence of the pupil and the 27 pupil, following written notice by the parent or guardian and 28 certification by the new nonpublic school to the department of 29 management, enrolls in a different nonpublic school in this 30 state for the remainder of the school year. 31 c. (1) Upon receipt of a notice of expulsion under 32 paragraph “b” , the department of management shall close 33 the pupil’s account in the education savings grant fund and 34 transfer any remaining moneys in the account for deposit in 35 -5- LSB 6195XC (12) 87 md/jh 5/ 10

S.F. _____ the general fund of the state. In addition, if amounts from 1 the grant for the school budget year during which the pupil 2 is expelled have been disbursed from the expelled pupil’s 3 account in the education savings grant fund, the department 4 of management shall recover such amounts from the parent or 5 guardian, including by initiating legal proceedings to recover 6 such amounts, if necessary. 7 (2) Upon receipt of a notice of withdrawal under paragraph 8 “b” and a determination that the pupil’s withdrawal was not the 9 result of a change in residence, the department of management 10 shall cease disbursements of remaining moneys in the pupil’s 11 account in the education savings grant fund and maintain the 12 pupil’s account if and until such time that the pupil uses 13 the funds for higher education expenses under subsection 8. 14 In addition, if amounts from the grant for the school budget 15 year during which the withdrawal occurs have been disbursed 16 from the pupil’s account in the education savings grant fund, 17 the department of management shall recover such amounts from 18 the parent or guardian to the extent the amount disbursed 19 exceeds the amount of the grant proportionate to the remaining 20 portion of the school year following the withdrawal, including 21 by initiating legal proceedings to recover such amounts, if 22 necessary. 23 (3) Upon receipt of a notice of withdrawal under paragraph 24 “b” and a determination that the withdrawal was the result of 25 a change in residence but that the pupil did not enroll in 26 a different nonpublic school in this state for the remainder 27 of the school year, the department of management shall cease 28 disbursements of remaining moneys in the pupil’s account in the 29 education savings grant fund and maintain the pupil’s account 30 if and until such time that the pupil uses the funds for higher 31 education expenses under subsection 8. 32 (4) If a pupil’s eligibility is invalidated under the 33 provisions of paragraph “b” , the pupil shall be ineligible for 34 an education savings grant for the following school budget year 35 -6- LSB 6195XC (12) 87 md/jh 6/ 10

S.F. _____ under subsection 1, paragraph “a” , subparagraph (3). 1 8. For each pupil with a positive balance in the pupil’s 2 account in the education savings grant fund upon graduation 3 from high school, the department of management shall maintain 4 the account in the fund until the pupil is twenty-five years of 5 age. Following graduation from high school until the pupil is 6 twenty-five years of age, moneys in the pupil’s account may be 7 used for higher education costs, as defined in section 12D.1, 8 incurred by the pupil while attending an institution of higher 9 education under the control of the state board of regents, a 10 community college located in this state, or a private college 11 or university located in this state. Payments from a pupil’s 12 account for higher education costs shall be made in the same 13 manner as payments for qualified educational expenses under 14 subsection 5. Moneys in a pupil’s account when the pupil turns 15 twenty-five years of age shall be transferred by the department 16 of management for deposit in the general fund of the state. 17 9. This section shall not be construed to authorize the 18 state or any political subdivision of the state to exercise 19 authority over any nonpublic school or construed to require a 20 nonpublic school to modify its academic standards for admission 21 or educational program in order to receive payment from a 22 parent or guardian using funds from a pupil’s account in the 23 education savings grant fund. A nonpublic school that accepts 24 payment from a parent or guardian using funds from a pupil’s 25 account in the education savings grant fund is not an agent of 26 this state or of a political subdivision of this state. Rules 27 adopted by the department to implement this section that impose 28 an undue burden on a nonpublic school are invalid. 29 Sec. 4. Section 422.7, Code 2018, is amended by adding the 30 following new subsection: 31 NEW SUBSECTION . 51. Subtract, to the extent included, the 32 amount of an education savings grant under section 257.11B 33 received by the taxpayer for payment of qualified educational 34 expenses. 35 -7- LSB 6195XC (12) 87 md/jh 7/ 10

S.F. _____ Sec. 5. APPLICABILITY. The following applies to school 1 budget years and fiscal years beginning on or after July 1, 2 2019: 3 The section of this division of this Act enacting section 4 257.11B. 5 Sec. 6. APPLICABILITY. The following applies to tax years 6 beginning on or after January 1, 2019: 7 The section of this division of this Act enacting section 8 422.7, subsection 51. 9 EXPLANATION 10 The inclusion of this explanation does not constitute agreement with 11 the explanation’s substance by the members of the general assembly. 12 This bill establishes an education savings grant program for 13 certain pupils attending a nonpublic school. 14 Division I of the bill provides that the Act shall be known 15 and may be cited as the “Iowa Student Opportunity Act”. 16 Under Division II of the bill, the following pupils who 17 attend a nonpublic school in this state and who maintain 18 enrollment for the entirety of the required attendance period 19 of the school year are eligible to receive an education savings 20 grant: (1) a pupil eligible to enroll in kindergarten; (2) 21 a pupil eligible to enroll in grade 1 through grade 12 if 22 the pupil has attended a public school for the equivalent 23 of the two immediately preceding semesters; and (3) a pupil 24 who received an education savings grant for the immediately 25 preceding school budget year and who is eligible to enroll 26 in grade 1 through grade 12. By January 31 preceding the 27 school year for which the education savings grant is requested, 28 the parent or guardian of the pupil requesting to receive an 29 education savings grant must submit an application to the 30 department of management indicating that the parent or guardian 31 intends to enroll the pupil in a nonpublic school for the 32 entirety of the school year. 33 The bill requires that by March 1 preceding the school 34 year for which the education savings grant is requested, the 35 -8- LSB 6195XC (12) 87 md/jh 8/ 10

S.F. _____ department of management must notify the parent or guardian of 1 each pupil approved for the following school year to receive an 2 education savings grant and the amount of the education savings 3 grant for the pupil, as specified in the bill. Education 4 savings grants must be approved for each school year and 5 applications must be submitted each year. 6 The bill creates an education savings grant fund in 7 the state treasury under the control of the department of 8 management consisting of moneys appropriated to the department 9 of management for the purpose of providing education savings 10 grants. For the fiscal year commencing July 1, 2019, and each 11 succeeding fiscal year, there is appropriated from the general 12 fund of the state to the department of management for deposit 13 in the fund the amount necessary to pay all education savings 14 grants approved for that fiscal year. For each pupil approved 15 for an education savings grant, the department of management 16 must establish an account for that pupil in the education 17 savings grant fund. The amount of the pupil’s education 18 savings grant is deposited into the pupil’s account on July 1 19 and such amount is available for use by parents and guardians 20 for the payment of qualified educational expenses, as defined 21 in the bill, incurred by the parent or guardian for the pupil 22 during that fiscal year. 23 The bill authorizes the department of management to 24 contract with a private financial management firm to manage 25 the education savings grant fund, in collaboration with the 26 treasurer of state, including providing for the disbursement 27 of education savings grants in the form of an electronic debit 28 card or checks that are payable directly from the pupil’s 29 account within the fund. 30 The bill provides that moneys remaining in a pupil’s account 31 upon the conclusion of the fiscal year shall remain in the 32 pupil’s account in the education savings grant fund for the 33 payment of qualified educational expenses in future fiscal 34 years during which the pupil participates in the program or for 35 -9- LSB 6195XC (12) 87 md/jh 9/ 10

S.F. _____ higher education costs as authorized in the bill. 1 Under the bill, for each pupil with a positive balance in 2 the pupil’s account in the education savings grant fund upon 3 graduation from high school, the department of management is 4 required to maintain the account in the fund until the pupil 5 reaches an age specified in the bill. Until the pupil reaches 6 the age limitation, moneys in the pupil’s account may be used 7 by the pupil for higher education costs, as defined in Code 8 section 12D.1. Moneys in a pupil’s account when the pupil 9 reaches the age limitation are transferred by the department of 10 management for deposit in the general fund of the state. 11 The bill provides that a person who makes a false claim for 12 the purpose of obtaining an education savings grant or who 13 knowingly receives the grant or makes a payment from an account 14 in the education savings grant fund without being legally 15 entitled to do so is guilty of a fraudulent practice and is 16 subject to a criminal penalty. The bill directs the department 17 of management to recover grants and amounts improperly awarded 18 or paid and requires the closure of the pupil’s account and 19 transfer of all remaining moneys to the general fund of the 20 state. The bill also establishes requirements and procedures 21 for parents or guardians and for the department of management 22 when a pupil receiving an education savings grant withdraws 23 or is expelled from the nonpublic school prior to the end of 24 the required attendance period of the school year, including 25 requirements for disposition of the pupil’s account within the 26 education savings grant fund and recovery of grant funds. 27 Division II of the bill provides that an education savings 28 grant received by a taxpayer is not taxable income for purposes 29 of state individual income taxation. This provision of the 30 bill applies to tax years beginning on or after January 1, 31 2019. 32 The section of the bill enacting the education savings 33 grant program applies to school budget years and fiscal years 34 beginning on or after July 1, 2019. 35 -10- LSB 6195XC (12) 87 md/jh 10/ 10