House Study Bill 243 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON EDUCATION BILL BY CHAIRPERSON HITE) A BILL FOR An Act establishing a student first scholarship program for 1 certain pupils attending nonpublic schools, establishing 2 a student first scholarship 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 2244YC (4) 89 md/jh

H.F. _____ Section 1. Section 256.9, Code 2021, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 63. Adopt rules relating to the 3 administration of and applications for the student first 4 scholarship program pursuant to section 257.11B, including but 5 not limited to application processing timelines and information 6 required to be submitted by a parent or guardian. 7 Sec. 2. NEW SECTION . 257.11B Student first scholarship 8 program. 9 1. a. For the school budget year beginning July 1, 2022, 10 and each succeeding school budget year, the following resident 11 pupils who are attending a nonpublic school, as defined in 12 section 285.16, shall be eligible to receive a student first 13 scholarship in the manner provided in this section: 14 (1) A pupil eligible to enroll in kindergarten who, if 15 enrolled in the pupil’s district of residence, would attend 16 a public school identified for comprehensive support and 17 improvement under the federal Every Student Succeeds Act, Pub. 18 L. No. 114-95, or an equivalent objective federal standard. 19 (2) A pupil eligible to enroll in grade one through grade 20 twelve if the pupil has attended a public school identified for 21 comprehensive support and improvement under the federal Every 22 Student Succeeds Act, Pub. L. No. 114-95, or an equivalent 23 objective federal standard, for the equivalent of the two 24 immediately preceding semesters for which the student first 25 scholarship is requested and if the pupil is not otherwise 26 ineligible under this section. 27 (3) A pupil who received a student first scholarship for 28 the immediately preceding school budget year, who is eligible 29 to enroll in grade one through grade twelve, and who is not 30 otherwise ineligible under this section. 31 b. Student first scholarships shall be made available to 32 parents and guardians in the manner authorized under subsection 33 4, paragraph “c” , for the payment of qualified educational 34 expenses as provided in this section. 35 -1- LSB 2244YC (4) 89 md/jh 1/ 11

H.F. _____ c. For purposes of this subsection, “resident” means the 1 same as defined in section 282.1, subsection 2. 2 2. a. (1) By January 1 preceding the school year for 3 which the student first scholarship is requested, the parent or 4 guardian of the pupil requesting a student first scholarship 5 shall submit an application to the department of education, on 6 application forms developed by the department of education, 7 indicating that the parent or guardian intends to enroll the 8 pupil in a nonpublic school for the entirety of the school 9 year. 10 (2) In addition to such information deemed appropriate by 11 the department of education, the application shall require 12 certification from the nonpublic school of the pupil’s 13 enrollment for the following school year. 14 b. By February 1 preceding the school year for which the 15 student first scholarship is requested, the department of 16 education shall determine the number of pupils in each school 17 district approved to receive a scholarship for the following 18 school year and shall notify the parent or guardian of each 19 pupil approved for the following school year to receive a 20 scholarship and the amount of the scholarship for the pupil. 21 c. Student first scholarships shall only be approved for 22 one school year and applications must be submitted annually for 23 student first scholarships in subsequent school years. 24 3. The department of education shall assign each pupil a 25 student first scholarship in an amount equal to the sum of all 26 the following for the same school budget year: 27 a. The product of the pupil’s weighted enrollment that 28 would otherwise be assigned to the pupil under this chapter if 29 the pupil was enrolled in the pupil’s district of residence 30 multiplied by the difference between eighty-seven and 31 five-tenths percent of the regular program state cost per pupil 32 and the statewide average foundation property tax per pupil. 33 b. The total teacher salary supplement district cost per 34 pupil for the pupil’s district of residence. 35 -2- LSB 2244YC (4) 89 md/jh 2/ 11

H.F. _____ c. The total professional development supplement district 1 cost per pupil for the pupil’s district of residence. 2 d. The total early intervention supplement district cost per 3 pupil for the pupil’s district of residence. 4 e. The total area education agency teacher salary supplement 5 district cost per pupil for the pupil’s district of residence. 6 f. The total area education agency professional development 7 supplement district cost per pupil for the pupil’s district of 8 residence. 9 g. The total teacher leadership supplement district cost per 10 pupil for the pupil’s district of residence. 11 4. A student first scholarship fund is created in the 12 state treasury under the control of the department of 13 education consisting of moneys appropriated to the department 14 of education for the purpose of providing student first 15 scholarships under this section. For the fiscal year 16 commencing July 1, 2022, and each succeeding fiscal year, there 17 is appropriated from the general fund of the state to the 18 department of education to be credited to the fund the amount 19 necessary to pay all student first scholarships approved for 20 that fiscal year. The director of the department of education 21 has all powers necessary to carry out and effectuate the 22 purposes, objectives, and provisions of this section pertaining 23 to the fund, including the power to do all of the following: 24 a. Make and enter into contracts necessary for the 25 administration of the fund. 26 b. Procure insurance against any loss in connection with the 27 assets of the fund or require a surety bond. 28 c. Contract with a private financial management firm to 29 manage the fund, in collaboration with the treasurer of state, 30 including providing for the disbursement of student first 31 scholarships in the form of an electronic debit card or checks 32 that are payable directly from the pupil’s account within the 33 fund. 34 d. Conduct audits or other reviews necessary to properly 35 -3- LSB 2244YC (4) 89 md/jh 3/ 11

H.F. _____ administer the program. 1 e. Adopt rules for the administration of the fund and 2 accounts within the fund. 3 5. a. For each pupil approved for a student first 4 scholarship, the department of education shall establish an 5 account for that pupil in the student first scholarship fund. 6 The amount of the pupil’s student first scholarship shall be 7 deposited into the pupil’s account on July 1, and such amount 8 shall be immediately available for the payment of qualified 9 educational expenses incurred by the parent or guardian for 10 the pupil during that fiscal year using the payment method 11 authorized under subsection 4, paragraph “c” . 12 b. A nonpublic school that accepts payment from a parent 13 or guardian using funds from a pupil’s account in the student 14 first scholarship fund shall not refund, rebate, or share any 15 portion of such payment with the parent, guardian, or pupil. 16 c. Moneys remaining in a pupil’s account upon conclusion 17 of the fiscal year shall remain in the pupil’s account in the 18 student first scholarship fund for the payment of qualified 19 educational expenses in future fiscal years during which the 20 pupil participates in the program until the pupil becomes 21 ineligible under the program or until the remaining amounts are 22 transferred to the state general fund under subsection 8. 23 6. a. For purposes of this section, “qualified educational 24 expenses” includes tuition and fees at a nonpublic school, 25 textbooks, fees or payments for educational therapies, 26 including tutoring or cognitive skills training, curriculum 27 fees, software, and materials for a course of study for a 28 specific subject matter or grade level, tuition or fees for 29 nonpublic online education programs, tuition for vocational and 30 life skills education approved by the department of education, 31 education materials and services for pupils with disabilities, 32 including the cost of paraprofessionals and assistants who are 33 trained in accordance with state law, standardized test fees, 34 advanced placement examinations or examinations related to 35 -4- LSB 2244YC (4) 89 md/jh 4/ 11

H.F. _____ postsecondary education admission or credentialing, qualified 1 education expenses, as defined in section 12D.1, excluding 2 room and board expenses, and other expenses incurred by the 3 parent or guardian that are directly related to the education 4 of the pupil at a nonpublic school, including a nonpublic 5 school accredited by an independent accrediting agency approved 6 by the department of education. The cost of one computer or 7 other portable computing device shall be allowed as a qualified 8 educational expense for a pupil if the computer or portable 9 computing device is used primarily for the education of the 10 pupil and if such a purchase has not been made using funds from 11 that pupil’s account in any of the three immediately preceding 12 fiscal years. 13 b. “Qualified educational expenses” does not include 14 transportation costs for the pupil, the cost of food or 15 refreshments consumed by the pupil, the cost of clothing for 16 the pupil, or the cost of disposable materials, including 17 but not limited to paper, notebooks, pencils, pens, and art 18 supplies. 19 7. a. A person who makes a false claim for the purpose 20 of obtaining a student first scholarship provided for in this 21 section or who knowingly receives the scholarship or makes a 22 payment from an account within the student first scholarship 23 fund without being legally entitled to do so is guilty of a 24 fraudulent practice under chapter 714. The false claim for a 25 student first scholarship or a payment from an account shall 26 be disallowed. The department of education shall also close 27 the pupil’s account in the student first scholarship fund and 28 transfer any remaining moneys in the account for deposit in the 29 general fund of the state. If the improperly obtained amounts 30 from the scholarship have been disbursed from the applicable 31 account in the student first scholarship fund, the department 32 of education shall recover such amounts from the parent or 33 guardian, including by initiating legal proceedings to recover 34 such amounts, if necessary. A parent or guardian who commits 35 -5- LSB 2244YC (4) 89 md/jh 5/ 11

H.F. _____ a fraudulent practice under this section is prohibited from 1 participating in the student first scholarship program in the 2 future. 3 b. If, prior to the end of the required attendance 4 period of the school year, a pupil who receives a student 5 first scholarship withdraws from enrollment in the nonpublic 6 school or is expelled, the nonpublic school shall notify the 7 department of education in writing of the pupil’s withdrawal 8 or expulsion, and the pupil’s parent or guardian shall notify 9 the department of education of the pupil’s withdrawal or 10 expulsion from the nonpublic school. A pupil’s expulsion 11 from the nonpublic school prior to the end of the required 12 attendance period for the school year shall invalidate the 13 pupil’s eligibility for the student first scholarship for the 14 school budget year. A pupil’s withdrawal from a nonpublic 15 school prior to the end of the required attendance period of 16 the school year shall invalidate the pupil’s eligibility for 17 the student first scholarship for the school budget year unless 18 the withdrawal is the result of a change in residence of the 19 pupil and the pupil, following written notice by the parent 20 or guardian and certification by the new nonpublic school to 21 the department of education, enrolls in a different nonpublic 22 school in this state for the remainder of the school year. 23 c. (1) Upon receipt of a notice of expulsion under 24 paragraph “b” , the department of education shall close the 25 pupil’s account in the student first scholarship fund and 26 transfer any remaining moneys in the account for deposit in 27 the general fund of the state. In addition, if amounts from 28 the scholarship for the school budget year during which the 29 pupil is expelled have been disbursed from the expelled pupil’s 30 account in the student first scholarship fund, the department 31 of education shall recover such amounts from the parent or 32 guardian, including by initiating legal proceedings to recover 33 such amounts, if necessary. 34 (2) Upon receipt of a notice of withdrawal under paragraph 35 -6- LSB 2244YC (4) 89 md/jh 6/ 11

H.F. _____ “b” and a determination that the pupil’s withdrawal was 1 not the result of a change in residence, the department of 2 education shall cease disbursements of remaining moneys in 3 the pupil’s account in the student first scholarship fund, 4 close the pupil’s account, and transfer any moneys remaining 5 in the pupil’s account for deposit in the general fund of 6 the state. In addition, if amounts from the scholarship for 7 the school budget year during which the withdrawal occurs 8 have been disbursed from the pupil’s account in the student 9 first scholarship fund, the department of education shall 10 recover such amounts from the parent or guardian to the extent 11 the amount disbursed exceeds the amount of the scholarship 12 proportionate to the remaining portion of the school year 13 following the withdrawal, including by initiating legal 14 proceedings to recover such amounts, if necessary. 15 (3) Upon receipt of a notice of withdrawal under paragraph 16 “b” and a determination that the withdrawal was the result of 17 a change in residence but that the pupil did not enroll in 18 a different nonpublic school in this state for the remainder 19 of the school year, the department of education shall cease 20 disbursements of remaining moneys in the pupil’s account in 21 the student first scholarship fund, close the pupil’s account, 22 and transfer any moneys remaining in the pupil’s account for 23 deposit in the general fund of the state. 24 (4) If a pupil’s eligibility is invalidated under the 25 provisions of paragraph “b” , the pupil shall be ineligible for a 26 student first scholarship for the following school budget year 27 under subsection 1, paragraph “a” , subparagraphs (2) and (3). 28 8. Moneys remaining in a pupil’s account when the pupil 29 graduates from high school or turns twenty-one years of age, 30 whichever occurs first, shall be transferred by the department 31 of education for deposit in the general fund of the state. 32 9. a. A parent may appeal to the state board of education 33 any administrative decision the department of education 34 makes pursuant to this section, including but not limited 35 -7- LSB 2244YC (4) 89 md/jh 7/ 11

H.F. _____ to determinations of eligibility, allowable expenses, and 1 removal from the program. The department shall notify the 2 parent or guardian in writing of the appeal process at the same 3 time the department notifies the parent or guardian of the 4 administrative decision. The state board of education shall 5 establish the appeals process consistent with chapter 17A and 6 shall post such appeal process information on the state board 7 of education’s internet site. 8 b. The state board of education shall refer cases of 9 substantial misuse of student first scholarship funds to the 10 attorney general for the purpose of collection or for the 11 purpose of a criminal investigation if the state board of 12 education obtains evidence of fraudulent use of an account. 13 10. This section shall not be construed to authorize the 14 state or any political subdivision of the state to exercise 15 authority over any nonpublic school or construed to require 16 a nonpublic school to modify its academic standards for 17 admission or educational program in order to receive payment 18 from a parent or guardian using funds from a pupil’s account 19 in the student first scholarship fund. A nonpublic school 20 that accepts payment from a parent or guardian using funds 21 from a pupil’s account in the student first scholarship fund 22 is not an agent of this state or of a political subdivision 23 of this state. Rules adopted by the department of education 24 to implement this section that impose an undue burden on a 25 nonpublic school are invalid. 26 Sec. 3. Section 422.7, Code 2021, is amended by adding the 27 following new subsection: 28 NEW SUBSECTION . 51. Subtract, to the extent included, the 29 amount of a student first scholarship under section 257.11B 30 received by the taxpayer for payment of qualified educational 31 expenses. 32 Sec. 4. APPLICABILITY. The following applies to school 33 budget years and fiscal years beginning on or after July 1, 34 2022: 35 -8- LSB 2244YC (4) 89 md/jh 8/ 11

H.F. _____ The section of this Act enacting section 257.11B. 1 Sec. 5. APPLICABILITY. The following applies to tax years 2 beginning on or after January 1, 2022: 3 The section of this Act enacting section 422.7, subsection 4 51. 5 EXPLANATION 6 The inclusion of this explanation does not constitute agreement with 7 the explanation’s substance by the members of the general assembly. 8 This bill establishes a student first scholarship program 9 for certain pupils attending a nonpublic school. 10 Under the bill, the following pupils who attend a nonpublic 11 school are eligible to receive a student first scholarship: 12 (1) a pupil eligible to enroll in kindergarten who, if enrolled 13 in the pupil’s district of residence, would attend a public 14 school identified for comprehensive support and improvement 15 under the federal Every Student Succeeds Act, Pub. L. No. 16 114-95, or an equivalent federal standard; (2) a pupil eligible 17 to enroll in grade 1 through grade 12 if the pupil has attended 18 a public school identified for comprehensive support and 19 improvement under the federal Every Student Succeeds Act, Pub. 20 L. No. 114-95, or an equivalent federal standard, for the 21 equivalent of the two immediately preceding semesters; and 22 (3) a pupil who received a student first scholarship for the 23 immediately preceding school budget year and who is eligible 24 to enroll in grade 1 through grade 12. By January 1 preceding 25 the school year for which the student first scholarship is 26 requested, the parent or guardian of the pupil requesting to 27 receive a student first scholarship must submit an application 28 to the department of education indicating that the parent or 29 guardian intends to enroll the pupil in a nonpublic school for 30 the entirety of the school year. 31 The bill requires that by February 1 preceding the school 32 year for which the student first scholarship is requested, the 33 department of education must notify the parent or guardian of 34 each pupil approved for the following school year to receive a 35 -9- LSB 2244YC (4) 89 md/jh 9/ 11

H.F. _____ student first scholarship and the amount of the student first 1 scholarship for the pupil, as specified in the bill. Student 2 first scholarships must be approved for each school year and 3 applications must be submitted each year. 4 The bill creates a student first scholarship fund in 5 the state treasury under the control of the department of 6 education consisting of moneys appropriated to the department 7 of education for the purpose of providing student first 8 scholarships. For the fiscal year commencing July 1, 2022, and 9 each succeeding fiscal year, the bill appropriates from the 10 general fund of the state to the department of education for 11 deposit in the fund the amount necessary to pay all student 12 first scholarships approved for that fiscal year. For each 13 pupil approved for a student first scholarship, the department 14 of education must establish an account for that pupil in the 15 student first scholarship fund. The amount of the pupil’s 16 student first scholarship is deposited into the pupil’s account 17 on July 1 and such amount is available for use by parents and 18 guardians for the payment of qualified educational expenses, as 19 defined in the bill, incurred by the parent or guardian for the 20 pupil during that fiscal year. 21 The bill authorizes the department of education to contract 22 with a private financial management firm to manage the student 23 first scholarship fund, in collaboration with the treasurer 24 of state, including providing for the disbursement of student 25 first scholarships in the form of an electronic debit card 26 or checks that are payable directly from the pupil’s account 27 within the fund. 28 The bill provides that moneys remaining in a pupil’s account 29 upon the conclusion of the fiscal year shall remain in the 30 pupil’s account in the student first scholarship fund for the 31 payment of qualified educational expenses in future fiscal 32 years during which the pupil participates in the program until 33 the pupil becomes ineligible or until the remaining amounts are 34 required to be transferred to the general fund of the state 35 -10- LSB 2244YC (4) 89 md/jh 10/ 11

H.F. _____ under the bill. 1 Under the bill, for each pupil with a positive balance 2 in the pupil’s account in the student first scholarship fund 3 upon graduation from high school or reaching 21 years of age, 4 whichever occurs first, the department of education is required 5 to transfer such remaining moneys for deposit in the general 6 fund of the state. 7 The bill establishes procedures for parent or guardian 8 appeals to the state board of education and provides that a 9 person who makes a false claim for the purpose of obtaining 10 a student first scholarship or who knowingly receives the 11 scholarship or makes a payment from an account in the student 12 first scholarship fund without being legally entitled to do so 13 is guilty of a fraudulent practice and is subject to a criminal 14 penalty. The bill directs the department of education to 15 recover scholarships and amounts improperly awarded or paid 16 and requires the closure of the pupil’s account and transfer 17 of all remaining moneys to the general fund of the state. The 18 bill also establishes requirements and procedures for parents 19 or guardians and for the department of education when a pupil 20 receiving a student first scholarship withdraws or is expelled 21 from the nonpublic school prior to the end of the required 22 attendance period of the school year, including requirements 23 for disposition of the pupil’s account within the student first 24 scholarship fund and recovery of scholarship funds. 25 The bill provides that a student first scholarship received 26 by a taxpayer is not taxable income for purposes of state 27 individual income taxation. This provision of the bill applies 28 to tax years beginning on or after January 1, 2022. 29 The section of the bill enacting the student first 30 scholarship program applies to school budget years and fiscal 31 years beginning on or after July 1, 2022. 32 -11- LSB 2244YC (4) 89 md/jh 11/ 11