Senate File 547 - Introduced SENATE FILE 547 BY COMMITTEE ON EDUCATION (SUCCESSOR TO SF 372) A BILL FOR An Act relating to education savings grants for certain pupils 1 attending an accredited nonpublic school or specified public 2 schools, 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 2481SV (2) 88 md/jh

S.F. 547 Section 1. Section 256.7, Code 2019, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 34. 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. Pupils with an individual education plan developed 9 in accordance with chapter 256B or who are considered to 10 have a disability according to section 504 of the federal 11 Rehabilitation Act and the federal Americans with Disabilities 12 Act and who are eligible to enroll in grades kindergarten 13 through twelve and who are either attending an accredited 14 nonpublic school or, following a denial of a request for open 15 enrollment under section 282.18, are attending and paying 16 tuition at a public school other than the pupils’ district of 17 residence shall be eligible to receive an education savings 18 grant in the manner provided in this section for school years 19 beginning on or after July 1, 2020. Education savings grants 20 shall be made available to parents and guardians in the manner 21 authorized under subsection 4, paragraph “c” , for the payment of 22 qualified educational expenses as provided in this section. 23 2. a. (1) By January 31 preceding the school year for 24 which the education savings grant is requested, the parent 25 or guardian of the pupil requesting to receive an education 26 savings grant shall submit an application to the department of 27 education, on application forms developed by the department of 28 education. 29 (2) In addition to information deemed appropriate by 30 the department of education, the application shall require 31 certification from the accredited nonpublic or public school of 32 the pupil’s enrollment for the following school year. 33 b. By March 1 preceding the school year for which the 34 education savings grant is requested, the department of 35 -1- LSB 2481SV (2) 88 md/jh 1/ 9

S.F. 547 education shall notify the department of management of the 1 number of pupils in each school district designated for the 2 following school year to receive an education savings grant 3 and the amount of the education savings grant for each pupil. 4 The department of education shall also notify the parent or 5 guardian of each pupil who is approved to receive an education 6 savings grant and the amount of the grant. 7 c. Education savings grants shall only be approved for one 8 school year and applications must be submitted annually for 9 education savings grants in subsequent school years. 10 3. a. The department of management shall assign each pupil 11 an education savings grant in an amount equal to the product 12 of the pupil’s weighted enrollment that would otherwise be 13 assigned to the pupil under this chapter if the pupil was 14 enrolled in the pupil’s district of residence multiplied by the 15 difference between eighty-seven and five-tenths percent of the 16 regular program state cost per pupil and the statewide average 17 regular program state foundation property tax per pupil in the 18 same school year. 19 b. The department of management shall on July 1 following 20 the determination of the amount of the education savings grant 21 for each approved pupil transfer such amounts to the pupil’s 22 account in the education savings grant fund established under 23 subsection 4. Such amount shall be available to the pupil’s 24 parent or guardian in the manner authorized under subsection 25 4, paragraph “c” , for the payment of qualified educational 26 expenses incurred by such persons for the pupil during that 27 school year. 28 4. An education savings grant fund is created in the state 29 treasury under the control of the department of management 30 consisting of moneys appropriated to the department of 31 management for the purpose of providing education savings 32 grants under this section. For the fiscal year commencing July 33 1, 2020, and each succeeding fiscal year, there is appropriated 34 from the general fund of the state to the department of 35 -2- LSB 2481SV (2) 88 md/jh 2/ 9

S.F. 547 management to be credited to the fund the amount necessary 1 to pay all education savings grants approved for that fiscal 2 year. The director of the department of management has all 3 powers necessary to carry out and effectuate the purposes, 4 objectives, and provisions of this section pertaining to the 5 fund, including the power to do all of the following: 6 a. Make and enter into contracts necessary for the 7 administration of the fund. 8 b. Procure insurance against any loss in connection with the 9 assets of the fund or require a surety bond. 10 c. Contract with a private financial management firm to 11 manage the fund, in collaboration with the treasurer of state, 12 including providing for the disbursement of education savings 13 grants in the form of an electronic debit card or checks that 14 are payable directly from the pupil’s account within the fund. 15 d. Conduct audits or other review necessary to properly 16 administer the program. 17 e. Adopt rules pursuant to chapter 17A for the 18 administration of the fund and accounts within the fund. 19 5. a. For each pupil approved for an education savings 20 grant, the department of management shall establish an account 21 for that pupil in the education savings grant fund. The 22 amount of the pupil’s education savings grant determined under 23 subsection 3 shall be deposited into the pupil’s account on 24 July 1, and such amount shall be immediately available for 25 the payment of qualified educational expenses incurred by the 26 parent or guardian for the pupil during that fiscal year using 27 the payment method authorized under subsection 4, paragraph 28 “c” . 29 b. An accredited nonpublic or public school that accepts 30 payment from a parent or guardian using funds from a pupil’s 31 account in the education savings grant fund shall not refund, 32 rebate, or share any portion of such payment with the parent, 33 guardian, or pupil. 34 c. Moneys remaining in a pupil’s account upon conclusion 35 -3- LSB 2481SV (2) 88 md/jh 3/ 9

S.F. 547 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 or for the payment 3 of qualified higher education expenses under subsection 8. 4 6. For purposes of this section, “qualified educational 5 expenses” includes tuition and fees at an accredited nonpublic 6 or public school, textbooks, fees or payments for educational 7 therapies, including tutoring or cognitive skills training, 8 curriculum fees and materials for a course of study for a 9 specific subject matter or grade level, tuition or fees for 10 nonpublic online education programs, education materials and 11 services for pupils with disabilities, including the cost of 12 paraprofessionals and assistants who are trained in accordance 13 with state law, standardized test fees, fees required by the 14 department of education not to exceed for each grant recipient 15 five percent of the total grant amount in any fiscal year, 16 qualified higher education expenses, as defined in section 17 12D.1, subsection 2, paragraph “k” , excluding room and board 18 expenses, and other expenses incurred by the parent or guardian 19 that are directly related to the education of the pupil at 20 an accredited nonpublic school, including a nonpublic school 21 accredited by an independent accrediting agency approved by 22 the department of education. “Qualified educational expenses” 23 do not include transportation costs for the pupil, the cost 24 of food or refreshments consumed by the pupil, the cost of 25 clothing for the pupil, or the cost of disposable materials, 26 including but not limited to paper, notebooks, pencils, pens, 27 and art supplies. 28 7. A person who makes a false claim for the purpose 29 of obtaining an education savings grant provided for in 30 this section or who knowingly receives the grant or makes a 31 payment from an account within the education savings grant 32 fund without being legally entitled to do so is guilty of a 33 fraudulent practice under chapter 714. The false claim for an 34 education savings grant or a payment from an account shall be 35 -4- LSB 2481SV (2) 88 md/jh 4/ 9

S.F. 547 disallowed. If amounts from the grant have been disbursed from 1 the applicable account in the education savings grant fund, the 2 department of management shall initiate legal proceedings to 3 recover such amounts. A parent or guardian, or a pupil for 4 purposes of subsection 8, who commits a fraudulent practice 5 under this subsection is prohibited from participating in the 6 education savings grant program in the future. 7 8. a. For each pupil with a positive balance in the pupil’s 8 account in the education savings grant fund upon graduation 9 from high school, the department of management shall maintain 10 such account in the fund until the pupil is twenty-three years 11 of age. Following graduation from high school until the pupil 12 is twenty-three years of age, moneys in the pupil’s account may 13 be used for qualified higher education expenses, as defined in 14 section 12D.1, subsection 2, paragraph “k” , incurred by the 15 pupil while attending an institution of higher education under 16 the control of the state board of regents, a community college 17 located in this state, or a private college or university 18 located in this state. Payments from a pupil’s account for 19 qualified higher education expenses shall be made in the same 20 manner as payments for qualified educational expenses under 21 subsection 5. Moneys in a pupil’s account when the pupil 22 turns twenty-three years of age shall be transferred by the 23 department of management for deposit in the general fund of the 24 state. 25 b. Notwithstanding the age limitation in paragraph “a” , 26 if the pupil with a positive balance in the pupil’s account 27 in the education savings grant fund upon graduation from high 28 school serves on federal active duty, other than training, and 29 is discharged under honorable conditions, the limitation date 30 otherwise applicable under paragraph “a” shall be extended 31 by one year for each year of federal active duty service by 32 the pupil, but not to a date after the pupil’s twenty-seventh 33 birthday. 34 9. This section shall not be construed to authorize the 35 -5- LSB 2481SV (2) 88 md/jh 5/ 9

S.F. 547 state or any political subdivision of the state to exercise 1 authority over any accredited nonpublic school or construed to 2 require an accredited nonpublic school to modify its standards 3 for admission or educational program in order to receive 4 payment from a parent or guardian using funds from a pupil’s 5 account in the education savings grant fund. An accredited 6 nonpublic school that accepts payment from a parent or guardian 7 using funds from a pupil’s account in the education savings 8 grant fund is not an agent of this state or of a political 9 subdivision of this state. Rules adopted by the department of 10 management or the department of education to implement this 11 section that impose an undue burden on an accredited nonpublic 12 school are invalid. 13 Sec. 3. Section 422.7, Code 2019, is amended by adding the 14 following new subsection: 15 NEW SUBSECTION . 48. Subtract, to the extent included, the 16 amount of an education savings grant under section 257.11B 17 received by the taxpayer for payment of qualified educational 18 expenses. 19 Sec. 4. APPLICABILITY. This Act applies to school budget 20 years and fiscal years beginning on or after July 1, 2020. 21 Sec. 5. APPLICABILITY. The section of this Act enacting 22 section 422.7, subsection 48, applies to tax years beginning on 23 or after January 1, 2020. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 This bill provides education savings grants for certain 28 pupils attending accredited nonpublic schools or specified 29 public schools if certain conditions are met and establishes an 30 education savings grant fund. 31 Under the bill, pupils with an individual education plan 32 or who are considered to have a disability according to 33 specified federal laws and who are eligible to enroll in 34 grades kindergarten through 12 and who are either attending an 35 -6- LSB 2481SV (2) 88 md/jh 6/ 9

S.F. 547 accredited nonpublic school or, following a denial of a request 1 for open enrollment, are attending and paying tuition at a 2 public school other than the pupils’ district of residence, 3 are eligible to receive an education savings grant in school 4 years beginning on or after July 1, 2020, for the payment of 5 qualified educational expenses, as defined in the bill. By 6 January 31 preceding the school year for which the education 7 savings grant is requested, the parent or guardian of the pupil 8 requesting to receive an education savings grant must submit an 9 application to the department of education. 10 The bill requires that by March 1 preceding the school 11 year for which the education savings grant is requested, 12 the department of education must notify the department of 13 management of the number of pupils in each school district 14 designated for the following school year to receive an 15 education savings grant and the amount of the education savings 16 grant for each pupil. Education savings grants may only be 17 approved for one school year and annual applications must be 18 submitted for education savings grants in subsequent school 19 years. 20 The amount of each education savings grant is equal to 21 the product of the pupil’s weighted enrollment that would 22 otherwise be assigned to the pupil if the pupil was enrolled 23 in the pupil’s district of residence multiplied by the 24 difference between 87.5 percent of the regular program state 25 cost per pupil and the statewide average regular program state 26 foundation property tax per pupil in the same school year. 27 The bill creates an education savings grant fund in 28 the state treasury under the control of the department of 29 management consisting of moneys appropriated to the department 30 of management for the purpose of providing education savings 31 grants. For the fiscal year commencing July 1, 2020, and each 32 succeeding fiscal year, the bill appropriates from the general 33 fund of the state to the department of management for deposit 34 in the fund the amount necessary to pay all education savings 35 -7- LSB 2481SV (2) 88 md/jh 7/ 9

S.F. 547 grants approved for that fiscal year. For each pupil approved 1 for an education savings grant, the department of management 2 must establish an account for that pupil in the education 3 savings grant fund. The amount of the pupil’s education 4 savings grant is deposited into the pupil’s account on July 1 5 and such amount is available for use by parents and guardians 6 for the payment of qualified educational expenses incurred by 7 the parent or guardian for the pupil during that fiscal year. 8 The bill authorizes the department of management to 9 contract with a private financial management firm to manage 10 the education savings grant fund, in collaboration with the 11 treasurer of state, including providing for the disbursement 12 of education savings grants in the form of an electronic debit 13 card or checks that are payable directly from the pupil’s 14 account within the fund. 15 The bill provides that moneys remaining in a pupil’s account 16 upon the conclusion of the fiscal year shall remain in the 17 pupil’s account in the education savings grant fund for the 18 payment of qualified educational expenses in future fiscal 19 years or for qualified higher education expenses as authorized 20 in the bill. 21 Under the bill, for each pupil with a positive balance in 22 the pupil’s account in the education savings grant fund upon 23 graduation from high school, the department of management is 24 required to maintain the account in the fund until the pupil 25 reaches an age specified in the bill. Until the pupil reaches 26 the age limitation, moneys in the pupil’s account may be used 27 by the pupil for qualified higher education expenses, as 28 defined in Code section 12D.1. Moneys in a pupil’s account 29 when the pupil reaches the age limitation are transferred by 30 the department of management for deposit in the general fund 31 of the state. 32 The bill provides that a person who makes a false claim for 33 the purpose of obtaining an education savings grant or who 34 knowingly receives the grant or makes a payment from an account 35 -8- LSB 2481SV (2) 88 md/jh 8/ 9

S.F. 547 within the education savings grant fund without being legally 1 entitled to do so is guilty of a fraudulent practice and is 2 subject to a criminal penalty. The bill allows the department 3 of management to initiate legal proceedings to recover grants 4 and amounts improperly awarded or paid from accounts under the 5 bill. 6 The bill provides that an education savings grant received 7 by a taxpayer is not taxable income for purposes of state 8 individual income taxation. This provision of the bill applies 9 to tax years beginning on or after January 1, 2020. 10 The bill applies to school budget years and fiscal years 11 beginning on or after July 1, 2020. 12 -9- LSB 2481SV (2) 88 md/jh 9/ 9