Summary:

 Senate Bill 286 (SB 286) enacts the Education Freedom Account Act. SB 286 provides powers and duties. SB 286 provides for education freedom accounts and allowable uses. SB 286 provides procedures and application requirements for parents and education service providers. SB 186 creates a review commission. SB 286 makes appropriations. 

Legislation Overview:

 Senate Bill 286 enacts the Education Freedom Act (Act) and provides for Education Freedom Accounts (Accounts).
SECTION 1 adds a new section of the Public School Code that provides this act may be cited as the Education Freedom Account Act (Act).
SECTION 2 adds a new section to provide Definitions as used in the Act.
SECTION 3 adds a new section to create the Education Freedom Account Program (Program).
A. The Program is created in the department to allow the department, in contract with parents of participating students, to pay for private school and other qualifying educational expenses through “education freedom accounts” (Accounts). 
The department: (1) shall establish Accounts for students who qualify for the Program; (2) shall determine the amount each participating student is eligible to receive as specified in this Subsection; provided that a participating student shall not receive more than the student's qualifying educational expenses; (3) shall make monthly deposits into each Account; and (4) may contract for financial management services for Accounts. 
B. Money in a participating student's Account shall be used by the department, in contract with parents, only in accordance with the provisions of the Act and only for the qualifying educational expenses as specified in this subsection.
C. The department and the parent shall enter into an annual contract that specifies what qualifying educational expenses will be purchased each semester or other term, the cost of the educational services to be provided and by whom the educational services will be provided. The department shall not deposit into an Account more than the combined cost of educational services provided to the participating student in that year. A parent shall not pay more for educational services than the parent of a similarly situated school-age person pays. Money in an Account shall not be refunded, rebated or shared with a parent or participating student in any manner. A refund or rebate for educational services purchased through an Account shall be credited directly to that Account. A parent may make payments for the cost of educational services not covered by an Account, but in no case shall a parent deposit personal funds into a participating student's account. 
D. Money in a participating student's Account shall be issued at the direction of the student's parent to an education service provider in the name of the student. 
E. If an education service provider requires partial payment of tuition prior to the start of the academic year to reserve space for a participating student, such partial payment may be paid by the department prior to the start of the school year in which the Account is awarded and deducted in an equitable manner from subsequent monthly account deposits to ensure that adequate funds remain available throughout the school year; provided that if the participating student does not attend the education service provider to which partial payment was made, the partial payment shall be returned to the department by the education service provider for credit to the Account. 
F. Funds deposited in an Account shall not constitute taxable income for state tax purposes of the parent or the participating student. 
G. Except as provided in Subsection H of this section, any unexpended or unencumbered balance in an Account may remain in the account until one of the following occurs, at which time the department shall close the Account and the unexpended or unencumbered balance shall revert to the General Fund: (1) the parent withdraws the participating student from the Program; (2) the student graduates from high school; or (3) the account is closed by the department because of misuse of funds. 
H. The department shall revert unexpended or unencumbered balances every two years unless it waives the reversion of an Account for extenuating circumstances. 
I. Nothing in the Act shall be construed to require a participating student to be enrolled only in a private school, but the participating student must be in compliance with the Attendance for Success Act.
SECTION 4 adds a new section called the Education Freedom Account (Account). 
A. A parent may apply to the department to establish an Account for an eligible student. 
B. The department shall accept and approve applications year-round and shall establish procedures and rules for approving applications in an expeditious manner. 
C. The department shall create a standard form that parents shall submit to establish a student's eligibility for the Program and shall ensure that the application is publicly available and may be submitted through various sources, including the internet. 
D. The department shall approve an application for an Account if: (1) the parent submits an application for an Account in accordance with the application procedures; (2) the student, on whose behalf the parent is applying, is an eligible student; (3) funds are available for the Program or the Account; and (4) the parent signs a contract with the department agreeing to the requirements specified in this subsection.
E. The department shall annually renew a student's Account if funds are available. 
F. Upon notice to the department, a participating student may choose to stop receiving Account funding and enroll full time in a public school. Enrolling as a full-time student in a public school shall result in the immediate suspension of payment of additional funds into the Account; provided that, for Accounts that have been open for at least one full school year, the department may allow an Account to remain open and active for the parent to pay qualifying educational expenses from money remaining in the Account. The department shall revert unexpended or unencumbered balances in a student's Account and close the Account at the beginning of the next school year if the student is enrolled in a public school. 
G. If an eligible student decides to return to the Program, payments into the student's Account may resume if the Account is still open and active. A new Account may be established if the student's Account is closed. 
H. The department may adopt rules to provide the least disruptive process for a student who chooses to stop participating in the Program and enroll full time in a public school. 
SECTION 5 adds a new section to provide Additional Powers and Duties.
A. The department shall: (1) maintain an updated list of qualified education service providers and ensure that the list is publicly available through various sources, including the internet; 
(2) provide parents with a written explanation of the allowable uses of Account funds; 
(3) ensure that parents of students with disabilities receive notice that participation in the program is a parental placement pursuant to the federal Individuals with Disabilities Education Act, along with an explanation of the rights that parentally placed students may possess under federal law and any applicable state laws and rules; 
(4) implement a system for processing payments for services from an Account to an education service provider by electronic or online funds transfer as specified in the paragraph.
(5) implement a system, as part of the same system that facilitates the electronic or online funds transfers, for parents to publicly rate, review and share information about education service providers; 
(6) continue making deposits into a student’s Account until the: 
(a) department determines the student is no longer a participating student; 
(b) department determines there was misuse of the funds in the Account; 
(c) student withdraws from the program; 
(d) student enrolls full time in a public school; or 
(e) student graduates from high school; 
(7) audit individual Accounts; 
(8) make a parent or participating student ineligible for the Program in the event of misuse of Account funds; provided that if a parent is determined to be ineligible for the program and the participating student is free from personal misconduct, that student may be eligible for an Account if placed with a new guardian or other person with the legal authority to act on behalf of the student; 
(9) refer suspected cases of misuse of Account funds to law enforcement if evidence of fraudulent use of Account funds exists; 
(10) create procedures to ensure that a fair process exists to determine whether a misuse of Account funds has occurred; and 
(11) create procedures to ensure that a fair process exists to determine whether an education service provider may be barred from receiving payments from Accounts; provided that an education service provider may appeal the department's decision to bar; and provided further that if the department bars an education service provider from receiving payments, the department shall notify parents of participating students of the department's decision. 
B. The department may:
A. contract with private organizations to administer the Program or specific functions of the Program, including contracting with private financial management firms to manage Accounts; 
(2) withhold from deposits or deduct from an Account an amount to cover the costs of administering the Program, in an amount up to a maximum of five percent annually in the first two years of the program and up to a maximum of three percent annually thereafter; 
(3) bar an education service provider from accepting payments from Accounts if the department determines that the education service provider has: (a) substantially misrepresented information or failed to refund any overpayments in a timely manner; or (b) failed to provide participating students with sufficient educational goods or services; 
(4) accept gifts, grants and donations from any source to cover administrative costs, to inform the public about the Program or to fund additional Accounts; and 
(5) adopt rules in accordance with the State Rules Act that are consistent with the Act and necessary for the administration of that Act. 
SECTION 6 adds new section titled Education Service Providers.
A. The department by rule shall provide the application process and procedures education service providers to apply for listing as an eligible provider. An application form signed by a prospective education service provider warrants that the provider: (1) shall not refund, rebate or share money from Accounts with parents or participating students and shall return refunds to the department; and (2) shall provide the education services contained in the agreement entered into with a parent. 
B. An education service provider is not an agent of the state or federal government, a local school board or school district or governing authority or charter school. No action of an education service provider shall be construed as an action by the state or any of its departments, institutions or political subdivisions. 
C. An education service provider shall not be required to alter its creed, practices, admissions policy or curriculum to accept payments pursuant to the Act except as provided in that Act. 
SECTION 7 adds a new section to protect Student Records.
Upon being notified that a participating student is enrolled with an education service provider, a public school that previously enrolled the participating student shall provide the education service provider with the student's school records. The public school and the education service provider shall comply with the provisions of the federal Family Educational Rights and Privacy Act of 1974 when sharing student records.
SECTION 8 adds a new section to create the Education Freedom Review Commission (Commission).
A. The department shall create the Commission to assist the department in determining what expenditures meet the requirements to be considered qualifying educational expenses to educate a participating student and to provide recommendations to the department on how to implement, administer and improve the Program. 
B. The Commission shall consist of nine voting members as specified in this Subsection.
C. The voting members shall be appointed by the secretary. The secretary, or the secretary's designee, shall serve as the nonvoting chair of the Commission.