Revision: Feb. 3, 2021, 11:41 a.m.
SB 130-FN - AS INTRODUCED
2021 SESSION
21-0923
06/04
SENATE BILL 130-FN
AN ACT relative to education freedom accounts.
SPONSORS: Sen. Bradley, Dist 3; Sen. Gray, Dist 6; Sen. Daniels, Dist 11; Sen. Ward, Dist 8; Sen. Carson, Dist 14; Sen. Gannon, Dist 23; Sen. Giuda, Dist 2; Sen. Morse, Dist 22; Rep. Cordelli, Carr. 4; Rep. Ladd, Graf. 4
COMMITTEE: Education
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ANALYSIS
This bill establishes the education freedom account program which permits the treasurer to transfer adequate education grants, plus any differentiated aid that would have been provided to a public school, to a scholarship organization for disbursement to parents to be used for certain educational purposes.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
21-0923
06/04
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Twenty One
AN ACT relative to education freedom accounts.
Be it Enacted by the Senate and House of Representatives in General Court convened:
1 Title. This act shall be known as the “Education Freedom Account Act” or “EFA Act.” The program created by it shall be known as the “Education Freedom Account Program” or “EFA Program.”
2 New Chapter; Education Freedom Accounts. Amend RSA by inserting after chapter 194-D the following new chapter:
CHAPTER 194-E
EDUCATION FREEDOM ACCOUNTS
194-E:1 Definitions. In this chapter:
I. “Adequate education grant” means the grant calculated under RSA 198:41.
II. “Curriculum” means the lessons and academic content taught in a specific course, program, or grade level.
III. “Department” means the department of education.
IV. "Education freedom account” or “EFA” means the account to which funds are allocated by the scholarship organization to the parent of an EFA student in order to pay for qualifying education expenses to educate the EFA student under this chapter.
V. “Education service provider” means a person or organization that receives payments from education freedom accounts to provide educational goods and services to EFA students.
VI. “Eligible student” means a resident of this state who is eligible to enroll in a public elementary or secondary school including but not limited to;
(a) A student currently attending a New Hampshire school that is remote or hybrid.
(b) A student currently assigned to a New Hampshire public school with assessment proficiency below 40 percent.
(c) A student currently attending a New Hampshire public school, including a chartered public school or nonpublic school.
(d) A kindergarten or first grade student.
(e) A sibling of a student with an education freedom account.
VII. “EFA student” means an eligible student who is participating in the EFA program.
VIII. “Full-time” means more than 50 percent of instructional time.
IX. “Remote or hybrid” shall mean any public school that is not providing instruction in-person where the student or the educator are both not physically present in the traditional classroom due to full-time or part-time classroom closure.
X. “Parent” means a biological or adoptive parent, legal guardian, custodian, or other person with legal authority to act on behalf of an EFA student.
XI. “Program” means the education freedom account program established in this chapter.
XII. “Scholarship organization”, means a scholarship organization approved under RSA 77:G, that administers and implements the EFA Act.
XIII. "Treasurer" means the treasurer of the state of New Hampshire.
194-E:2 Program.
I. The treasurer shall transfer to the scholarship organization the per pupil adequate education grant amount under RSA 198:40-a, plus any differentiated aid that would have been provided to a public school for that eligible student. The transfers shall be made in accordance with the distribution of adequate education grants under RSA 198:42.
II. Parents of an EFA student shall agree to use the funds deposited in their student’s EFA only for the following qualifying expenses to educate the EFA student:
(a) Tuition and fees at a private school.
(b) Tuition and fees for non-public online learning programs.
(c) Tutoring services provided by an individual or a tutoring facility.
(d) Services contracted for and provided by a district public school, chartered public school, public academy, or independent school, including, but not limited to, individual classes and curricular activities and programs.
(e) Textbooks, curriculum, or other instructional materials, including, but not limited to, any supplemental materials or associated online instruction required by either a curriculum or an education service provider.
(f) Computer hardware, Internet connectivity, or other technological services and devices, that are primarily used to help meet an EFA student’s educational needs.
(g) Educational software and applications.
(h) School uniforms.
(i) Fees for nationally standardized assessments, advanced placement examinations, examinations related to college or university admission or awarding of credits and tuition and/or fees for preparatory courses for such exams.
(j) Tuition and fees for summer education programs and specialized education programs.
(k) Tuition, fees, instructional materials, and examination fees at a career or technical school.
(l) Educational services and therapies, including, but not limited to, occupational, behavioral, physical, speech-language, and audiology therapies.
(m) Tuition and fees at an institution of higher education.
(n) Fees for transportation paid to a fee-for-service transportation provider for the student to travel to and from an education service provider.
(o) Any other educational expense approved by the scholarship organization.
III. The funds in an EFA may only be used for educational purposes in accordance with paragraph II.
IV. EFA funds shall not be refunded, rebated, or shared with a parent or EFA student in any manner. Any refund or rebate for goods or services purchased with EFA funds shall be credited directly to the student’s EFA.
V. Parents may make payments for the costs of educational goods and services not covered by the funds in their student’s EFA. However, personal deposits into an EFA shall not be permitted.
VI. Funds deposited in an EFA shall not constitute taxable income to the parent or the EFA student.
VII. An EFA shall remain in force, and any unused funds shall roll over from quarter-to-quarter and from year-to-year until the parent withdraws the EFA student from the EFA program or until the EFA student graduates from high school, unless the EFA is closed because of a substantial misuse of funds. Any unused funds shall revert to the treasurer and be allocated to fund other EFAs.
VIII. Nothing in this chapter shall be construed to require that an EFA student must be enrolled, full- or part-time, in either a private school or nonpublic online school.
194-E:3 Application for an Education Freedom Account.
I. A parent may apply to the scholarship organization to establish an EFA for an eligible student. The scholarship organization shall accept and approve applications for the fall and spring semesters each year and shall establish procedures for approving applications in an expeditious manner.
II. The scholarship organization shall create a standard form that parents can submit to establish their student’s eligibility for the EFA program and shall ensure that the application is publicly available and may be submitted through various sources, including the Internet.
III. The scholarship organization shall approve an application for an EFA if:
(a) The parent submits an application for an EFA in accordance with application procedures established by the scholarship organization.
(b) The student on whose behalf the parent is applying is an eligible student.
(c) Funds are available for the EFA.
(d) The parent signs an agreement with the scholarship organization promising:
(1) To provide an education for the eligible student in the core knowledge domains under RSA 193-E:2-a.
(2) Not to enroll the eligible student as a full-time student in a public school while participating in the EFA program.
(3) To use the funds in the EFA only for qualifying expenses to educate the eligible student as established by the EFA program.
(4) To comply with the rules and requirements of the EFA program.
IV. The signed agreement between the parent and the scholarship organization shall satisfy the compulsory school attendance requirements of RSA 193:1.
V. The scholarship organization shall annually renew a student’s EFA if funds are available.
VI. Upon notice to the scholarship organization, an EFA student may choose to stop receiving EFA funding and enroll full-time in a public school.
(a) Enrolling as a full-time student in the resident district public school shall result in the immediate suspension of payment of additional funds into the student’s EFA. However, an EFA that has been open for at least one full school year shall remain open and active for the parent to make qualifying expenditures to educate the student from funds remaining in the EFA. When no funds remain in the student’s EFA, the scholarship organization may close the EFA.
(b) If an eligible student decides to return to the EFA program, payments into the student’s existing EFA may resume if the EFA is still open and active. A new EFA may be established if the student’s EFA was closed.
194-E:4 Authority and Responsibilities of the Scholarship Organization. The scholarship organization shall have the following additional duties, obligations, and authority:
I. The scholarship organization shall maintain an updated list of education service providers and shall ensure that the list is publicly available through various sources, including the Internet.
II. The scholarship organization shall provide parents with a written explanation of the allowable uses of EFA funds, the responsibilities of parents, the duties of the scholarship organization, and the role of any financial management firms that the scholarship organization may contract with to administer any aspect of the EFA program.
III. The scholarship organization shall ensure that parents of students with disabilities receive notice that participation in the EFA program is a parental placement under 20 U.S.C. section 1412, Individuals with Disabilities Education Act (IDEA), along with an explanation of the rights that parentally placed students possess under IDEA and any applicable state laws.
IV. The scholarship organization shall, in cooperation with the department, determine eligibility for differentiated aid subject to any applicable state and federal laws.
V. The scholarship organization may withhold from deposits or deduct from EFAs an amount to cover the costs of administering the EFA program, up to a maximum of 10 percent annually.
VI. The scholarship organization shall implement a commercially viable system for payment of services from EFAs to education service providers by electronic or online funds transfer.
(a) The scholarship organization shall not adopt a system that relies exclusively on requiring parents to be reimbursed for out-of-pocket expenses, but rather shall provide maximum flexibility to parents by facilitating direct payments to education service providers as well as requests for pre-approval of and reimbursements for qualifying expenses, including expenses pursuant to RSA 194-E:2, II.
(b) A scholarship organization may contract with a private institution or organization to develop the payment system.
VII. The scholarship organization may also seek to implement a commercially viable system for parents to publicly rate, review, and share information about education service providers, ideally as part of the same system that facilitates the electronic or online funds transfers.
VIII. If an education service provider requires partial payment of tuition or fees prior to the start of the academic year to reserve space for an EFA student admitted to the education service provider, such partial payment may be paid by the scholarship organization, if funds are available, prior to the start of the school year in which the EFA is awarded and deducted in an equitable manner from subsequent quarterly EFA deposits to ensure adequate funds remain available throughout the school year; but if an EFA student decides not to use the education service provider, the partial reservation payment shall be returned to the scholarship organization by such education service provider and credited to the student’s EFA.
IX. The scholarship organization shall continue making deposits into a student’s EFA until:
(a) The scholarship organization determines that the EFA student is no longer an eligible student.
(b) The scholarship organization determines that there was substantial misuse of the funds in the EFA.
(c) The parent or EFA student withdraws from the EFA program.
(d) The EFA student enrolls full-time in the resident district public school.
(e) The EFA student graduates from high school.
X. The scholarship organization may conduct or contract for the auditing of individual EFAs, and shall at a minimum conduct random audits of EFAs on an annual basis.
XI. The scholarship organization may make any parent or EFA student ineligible for the EFA program in the event of intentional and substantial misuse of EFA funds.
(a) The scholarship organization shall create procedures to ensure that a fair process exists to determine whether an intentional and substantial misuse of EFA funds has occurred.
(b) If an EFA student is free from personal misconduct, that student shall be eligible for an EFA in the future if placed with a new guardian or other person with the legal authority to act on behalf of the student.
(c) The scholarship organization may refer suspected cases of intentional and substantial misuse of EFA funds to the attorney general for investigation if evidence of fraudulent use of EFA funds is obtained.
(d) A parent or EFA student may appeal the scholarship organization’s decision to deny eligibility for the EFA program to the department.
XII. The scholarship organization may bar an education service provider from accepting payments from EFAs if the scholarship organization determines that the education service provider has:
(a) Intentionally and substantially misrepresented information or failed to refund any overpayments in a timely manner.
(b) Routinely failed to provide students with promised educational goods or services.
XIII. The scholarship organization shall create procedures to ensure that a fair process exists to determine whether an education service provider may be barred from receiving payments from EFAs.
(a) If the scholarship organization bars an education service provider from receiving payments from EFAs, it shall notify parents and EFA students of its decision as quickly as possible.
(b) Education service providers may appeal the scholarship organization’s decision to bar them from receiving payments from the EFA to the department.
XIV. The scholarship organization may accept gifts and grants from any source to cover administrative costs, to inform the public about the EFA program, or to fund additional EFAs.
XV. The department may adopt rules that are necessary for the administration of this chapter.
XVI. The scholarship organization may adopt policies or procedures that are necessary for the administration of this chapter. This may include policies or procedures:
(a) Establishing or contracting for the establishment of an online anonymous fraud reporting service.
(b) Establishing an anonymous telephone number for fraud reporting.
(c) Requiring a surety bond for education service providers receiving more than $100,000 in EFA funds.
(d) Refunding payments from education service providers to EFAs.
XVII. The scholarship organization shall not exclude, discriminate against, or otherwise disadvantage any education provider with respect to programs or services under this section based in whole or in part on the provider’s religious character or affiliation, including religiously based or mission-based policies or practices.
194-E:5 Parent and Education Service Provider Advisory Commission.
I. There is established the parent and education service provider aAdvisory commission to assist the scholarship organization by providing recommendations about implementing, administering, and improving the EFA program.
II. The commission shall consist of 7 members who shall be parents of EFA students or education service providers and shall represent no fewer than 4 counties in the state. The members shall be appointed by the director of the scholarship organization and serve at the director's pleasure for one calendar year after which they may be reappointed. The director of the scholarship organization, or designee, shall serve as a non-voting chairperson of the commission. The commissioner of the department of education, or designee, shall serve as a non-voting member of the commission.
III. The scholarship organization may request the commission to meet, in person or virtually, to review appeals of education service provider denials pursuant to RSA 194-E:4, XI and to provide a recommendation to the scholarship organization as to whether an education service provider should be allowed to receive, or continue receiving, payments from EFAs.
194-E:6 Requirements for Education Service Providers.
I. The scholarship organization may approve education service providers on its own initiative, at the request of parents, or by notice to the scholarship organization provided by prospective education service providers.
II. A prospective education service provider that wishes to receive payments from EFAs shall:
(a) Submit notice to the scholarship organization that it wishes to receive payments from EFAs.
(b) Agree not to refund, rebate, or share EFA funds with parents or EFA students in any manner, except that funds may be remitted or refunded to an EFA in accordance with procedures established by the scholarship organization.
194-E:7 Independence of Education Service Providers.
I. Nothing in this chapter shall be deemed to limit the independence or autonomy of an education service provider or to make the actions of an education service provider the actions of the state government.
II. Education service providers shall be given maximum freedom to provide for the educational needs of EFA students without governmental control.
III. Nothing in this chapter shall be construed to expand the regulatory authority of the state, its officers, or any school district to impose any additional regulation of education service providers beyond those necessary to enforce the requirements of the EFA program.
IV. Any education service provider that accepts payment from an EFA under this chapter is not an agent of the state or federal government.
V. An education service provider shall not be required to alter its creed, practices, admissions policy, or curriculum in order to accept payments from an EFA.
194-E:8 Responsibilities of Public Schools and School Districts. A public school, or school district, that previously enrolled an EFA student shall provide a private school that is also an education service provider and that has enrolled an EFA student with a complete copy of the ESA student’s school records, in a timely manner, while complying with 20 U.S.C. section 1232g, the Family Educational Rights and Privacy Act of 1974.
194-E:9 Legal Proceedings.
I. In any legal proceeding challenging the application of this chapter to an education service provider, the state bears the burden of establishing that the law is necessary and does not impose any undue burden on the education service provider.
II. No liability shall arise on the part of the scholarship organization or the state or of any public school or school district based on the award of or use of an EFA pursuant to this chapter.
III. If any part of this chapter is challenged in a state court as violating either the state or federal constitutions, parents of eligible and/or EFA students shall be permitted to intervene as of right in such lawsuit for the purposes of defending the EFA program’s constitutionality. However, for the purposes of judicial administration, a court may require that all parents file a joint brief, so long as they are not required to join any brief filed on behalf of any named state defendant.
IV. If any provision of this chapter, or the application thereof to any person or circumstances, is held invalid, such invalidity shall not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are declared to be severable.
3 Effective Date. This act shall take effect 60 days after its passage.
21-0923
2/1/21
SB 130-FN- FISCAL NOTE
AS INTRODUCED
AN ACT relative to education freedom accounts.
FISCAL IMPACT: [ X ] State [ ] County [ X ] Local [ ] None
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STATE: | FY 2021 | FY 2022 | FY 2023 | FY 2024 |
Appropriation | $0 | $0 | $0 | $0 |
Revenue | $0 | $0 | $0 | $0 |
Expenditures | $0 | Indeterminable Increase | Indeterminable Increase | Indeterminable Increase |
Funding Source: | [ ] General [ X ] Education [ ] Highway [ ] Other | |||
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LOCAL: |
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Revenue | $0 | Indeterminable Decrease | Indeterminable Decrease | Indeterminable Decrease |
Expenditures | $0 | Indeterminable | Indeterminable | Indeterminable |
METHODOLOGY:
This bill establishes education freedom accounts (EFA) for qualifying students. All students that are residents of New Hampshire, who are eligible to enroll in a public elementary or secondary school, are eligible for an EFA. This includes, but is not limited to:
Under the program, parents execute an agreement with a scholarship organization for an EFA, which may be used for a variety of education expenses. Under this bill, EFAs are funded as follows:
The Department of Education has provided the following information:
Enrollment (K-12) | School Year | |
2019-20 | 2020-21 | |
Public Schools - District & Charter | 171,651 | 169,204 |
Non-Public School | 15,823 | 16,294 |
Homeschool | 2,955 | 6,110 |
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Total K-12 Students | 190,429 | 191,608 |
While program participation cannot be predicted, it is likely the net impact of this bill would be increased state education trust fund expenditures and decreased local adequacy grant revenue. Any impact to local expenditures is indeterminable. Below are illustrations of the fiscal impact for the most likely scenarios in which an EFA would be utilized in program year 1 (2021-22 school year):
State Expenditure to Fund ESA | $4,603 |
Scholarship Organization Admin Fee | ($460) |
Net EFA Funding | $4,143 |
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Adequacy Decrease to Former District School | ($4,603) |
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Total State Impact | $0 |
Total Local Revenue Decrease* | ($4,603) |
*The district would not see an impact to revenue associated with the student until the following year, as adequate education payments are made based on prior year enrollments. It should also be noted, while this bill makes no direct impact to district expenditures, districts may experience reduced spending to the extent there would be one fewer student in its school.
State Expenditure to Fund ESA | $4,603 |
Scholarship Organization Admin Fee | ($460) |
Net EFA Funding | $4,143 |
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Payment Decrease to Former Charter School | ($7,668) |
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Total State Expenditure Decrease | ($3,065) |
Total Local Impact | $0 |
State Expenditure to Fund ESA | $4,603 |
Scholarship Organization Admin Fee | ($460) |
Net EFA Funding | $4,143 |
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Total State Expenditure Increase | $4,603 |
Total Local Impact | $0 |
While not specific to the provision of this bill as currently written, for purposes of estimating the potential fiscal impact the Department of Education performed a long-term comprehensive modeling analysis based on adoption rates for the first 10-years of a similar EFA program in the State of Arizona. The full analysis can be found on the Department’s webpage at: www.education.nh.gov/sites/g/files/ehbemt326/files/inline-documents/sonh/efa-modeling-analysis.pdf.
For purpose of their analysis, the Department included the total taxpayer cost of students in a traditional public school based on the 2020 State Total Average Cost Per Pupil of $19,874. This includes all funding sources (e.g. state, local, federal, etc…). The taxpayer cost of students adopting an EFA education program, other than those adopters that remain in the traditional public school setting, uses the state average adequacy payment, including base adequacy plus differentiated aid ($4,597). The Department also included an annual inflation factor of 2.5%. The Department assumes the total number of students estimated to participate in an EFA education program education program over the first 10-years is between .01% and 2.43% of the total eligible student count, representing 0.5% of the total primary and secondary spend. The Department utilized two cost modeling scenarios, one assuming 100% of per-pupil costs are fixed and one assuming the savings realized when a student adopts an EFA education program will be retained by the traditional school. The Department’s scenarios are summarized below.
Modeling Scenario 1: This modeling scenario assumes that when a student adopts an EFA education program, the school will not realize any cost reductions in that year. This means that although the student will not be educated by the traditional school, the school will continue to spend the same amount of funds, $19,874 for each student that leaves the school. The Department indicates that it is reasonable to assume that all schools have a certain amount of variable costs associated with a student’s education. In some cases, these costs are estimated to be as high as $13,350 per pupil. In addition to no cost reductions in the first year, this model assumes that the school will be able to reduce the cost for the student over 3-years as depicted below.
Modeling Scenario 1 Year 1 Year 2 Year 3
Traditional School, Per-pupil Costs Still Incurred $19,874 $13,249 $6,625
Under Modeling Scenario 1, the Department’s estimates net cumulative savings to New Hampshire taxpayers (all sources) at approximately $0.4M in Year 1, $10.3M in Year 2, and $36.2M in Year 3.
Modeling Scenario 2: This modeling scenario assumes that when a student adopts an EFA education program, shared savings are realized. These savings are the difference between the total state cost per pupil to educate a student in the traditional public school ($19,874) and the cost per-pupil to educate a student adopting an EFA education program ($4,597). In this model, 100% of the savings are retained by the traditional public school in year-1 and the school achieves the cost reductions for the student over 3-years as depicted below:
Modeling Scenario 2 Year 1 Year 2 Year 3
Traditional School, Per-pupil Costs Still Incurred $15,659 $10,439 $5,220
Under Modeling Scenario 2, the Department’s estimates net cumulative savings to New Hampshire taxpayers (all sources) at approximately $0.4M in Year 1, $10.4M in Year 2, and $38.8M in Year 3.
AGENCIES CONTACTED:
Department of Education