FISCAL NOTE

House Bill 452 as introduced creates the Parent’s Choice Program to allow parents of participating students to establish and utilize education savings accounts (ESAs) to cover qualifying educational expenses. The bill creates the eight-member Parent’s Choice Board, chaired by the State Treasurer, to administer the program. The bill provides that the program shall commence with the 2023-2024 school year, with K-12 public and nonpublic schools annually submitting a notification to the Treasurer of their intention to participate in the program.

The bill creates the Parent’s Choice Program Trust Fund, with funds appropriated by the Legislature, with any unexpended funds being reappropriated annually. The bill provides for funds in the Parent’s Choice Program Trust Fund to be deposited into the ESA of eligible students, with the amount of ESA funding granted to an eligible student, on a yearly basis, being equal to 100% of the Education Trust Fund’s (ETF) share of the prior year’s Foundation Program Fund as provided in Section 16-13-231(b)(2)g., Code of Alabama 1975. Based on the ETF’s share of the Foundation Program Fund for FY22 and the FY22 average daily membership (ADM) a total of $5,561 would be deposited into the ESA of each participating student. The bill provides that deposits to ESAs be made on the following schedule: (1) one half of the total annually required deposit no later than August 1; and (2) one half of the total annually required deposit no later than January 1. The bill provides that if an education service provider requires partial payment of tuition or fees before the start of the academic year to reserve space for a participating student, the partial payment may be paid before the start of the school year before ESA funds are awarded and deducted in an equitable manner from subsequent ESA deposits to ensure adequate funds remain available throughout the school year. In addition, the bill provides that participation and receipt of scholarship funds pursuant to the Alabama Accountability Act of 2013, Chapter 6D, Title 16, Code of Alabama 1975, is supplemental to the receipt of ESA funds by a participating student.

Further, the bill provides that funds deposited into an ESA do not constitute taxable income; and identifies qualified expenses that can be expended with an ESA.

Further, the bill creates the Parent’s Choice Program Expense Fund and allows unexpended monies in this fund to be reappropriated annually. The bill provides that up to 4% of the Parent’s Choice Program Trust Fund may annually be transferred to the Expense Fund to cover annual administrative costs of the program. The bill provides that if the number of participating students increases significantly after any fiscal year, the Treasurer may request an appropriation from the Legislature to the Expense Fund in an amount equal to the increase in administrative costs. In addition, the bill allows the Treasurer to accept gifts and grants from any source to be deposited into the Expense Fund to cover administrative costs. The bill also provides that board members shall be paid for reasonable and necessary expenses at the same rate as state employees.

Further, the bill provides that the program, commencing with the 2023-2024 school year, shall allow participation of any eligible student whose parent has an adjusted gross income of 500% of the federal poverty level on the immediately previous year’s tax return, or any child who is, was, or would have been eligible to enter kindergarten during the 2023-2024 school year, or who will be enrolled in the first, fifth, and ninth grades during that school year, and each school year thereafter. This bill provides for staggered implementation each school year thereafter for students entering kindergarten, fifth, or ninth grade until full implementation at the 2026-2027 school year. In addition, this bill would increase the obligations of the Treasurer’s Office by an undetermined amount by requiring the Treasurer to annually mail, by December 1, application and ESA information to the parent of each eligible recipient.

Further, the bill provides that if, under certain conditions, deposits into an ESA are halted, the board shall notify the parent of the ESA and allow the parent to respond before closing the ESA and returning any remaining monies to the state. This bill requires either state achievement or nationally recognized norm-referenced tests to be annually administered to all participating students with test results reported to parents, the State Board of Education, and the State Superintendent of Education.

Further, the bill provides that the board shall implement a portal for: (1) payment for services from ESAs to participating schools or education service providers; and (2) publicly rating, reviewing, and sharing information about participating schools and education service providers. The bill allows the board to conduct individual audits on ESAs and education service providers and establish an appeal process. The board may also refer cases to the Attorney General if the board has obtained evidence of potential fraudulent use of an ESA.

In addition, the bill allows local boards of education to charge tuition to participating students that enroll from outside the student’s resident school district and does not prohibit a participating school from requesting additional funds from a parent to cover ordinary student costs related to attendance at the participating school. The bill requires the resident school district, school district in which a participating student was last enrolled, or participating nonpublic school to provide an education service provider that has enrolled the student with a complete copy of the school records of the student. The bill provides that a participating school district may refuse to provide educational services to a participating student who resides outside of the school district or may establish a policy to provide educational services to nonresident students under certain conditions including payment of reasonable fees for attendance