Changes provisions governing educational scholarships

(Increases ESA funding +$25 million, DEI cost variables, EAO expansions statewide, 400% income limit increase)

AN ACT To repeal sections 135.713, 135.714, 135.715, and 166.700, RSMo, and to enact in lieu thereof four new sections relating to educational scholarships.

Be it enacted by the General Assembly of the state of Missouri, as follows: Section A. Sections 135.713, 135.714, 135.715, and 166.700, RSMo, are repealed 2 and four new sections enacted in lieu thereof, to be known as sections 135.713, 135.714, 3 135.715, and 166.700, to read as follows: 135.713. 1. Any taxpayer who makes a qualifying contribution to an educational 2 assistance organization after August 28, 2021, may claim a credit against the tax otherwise 3 due under chapter 143, other than taxes withheld under sections 143.191 to 143.265, and 4 chapter 153 in an amount equal to one hundred percent of the amount the taxpayer 5 contributed during the tax year for which the credit is claimed. No taxpayer shall claim a 6 credit under sections 135.712 to 135.719 for any contribution made by the taxpayer, or an 7 agent of the taxpayer, on behalf of the taxpayer's dependent or, in the case of a business 8 taxpayer, on behalf of the business's agent's dependent. 9 2. The amount of the tax credit claimed shall not exceed fifty percent of the taxpayer's 10 state tax liability for the tax year for which the credit is claimed. The state treasurer shall 11 certify the tax credit amount to the taxpayer. A taxpayer may carry the credit forward to any 12 of such taxpayer's four subsequent tax years. All tax credits authorized under the program 13 shall not be transferred, sold, or assigned, and are [not] refundable. 14 3. The cumulative amount of tax credits that may be allocated to all taxpayers 15 contributing to educational assistance organizations in any one calendar year shall not exceed 16 a maximum of [fifty] seventy-five million dollars[, which]. Such maximum amount shall EXPLANATION — Matter enclosed in bold-faced brackets [thus] in the above bill is not enacted and is intended to be omitted from the law. Matter in bold-face type in the above bill is proposed language. HB 1738 2 17 be annually adjusted from the 2021 maximum amount by the state treasurer for inflation 18 based on the Consumer Price Index for All Urban Consumers for the Midwest region, as 19 defined and officially recorded by the United States Department of Labor or its successor, 20 [such annual increase will cease when the amount of tax credits reach seventy-five million 21 dollars] and shall additionally be annually adjusted by any percentage increase in the 22 amount appropriated for pupil transportation under section 163.161 above the 23 threshold of ninety percent of the projected amount necessary to fully fund 24 transportation aid funding for the current fiscal year. The state treasurer shall 25 establish a procedure by which, from the beginning of the calendar year until August first, the 26 cumulative amount of tax credits shall be allocated on a first-come, first-served basis among 27 all educational assistance organizations. If an educational assistance organization fails to use 28 all, or some percentage to be determined by the state treasurer, of its allocated tax credits 29 during this period, the state treasurer may reallocate these unused tax credits to those 30 educational assistance organizations that have used all, or some percentage to be determined 31 by the state treasurer, of their allocated tax credits during this period. The state treasurer may 32 establish more than one period and reallocate more than once during each calendar year. The 33 state treasurer shall establish the procedure described in this subsection in such a manner as to 34 ensure that taxpayers can claim all the tax credits possible up to the cumulative amount of tax 35 credits available for the calendar year. 36 4. A taxpayer who makes a contribution to an education assistance organization shall 37 not designate the student who will receive a scholarship grant. 38 [5. The provisions of sections 135.712 to 135.719 and sections 166.700 to 166.720 39 shall be effective in any fiscal year immediately subsequent to any fiscal year in which the 40 amount appropriated for pupil transportation under section 163.161 equals or exceeds forty 41 percent of the projected amount necessary to fully fund transportation aid funding for fiscal 42 year 2021. If the amount appropriated for transportation under section 163.161 in any 43 succeeding year falls below such amount, no additional scholarships for newly qualified 44 students shall be awarded.] 135.714. 1. Each educational assistance organization shall: 2 (1) Notify the state treasurer of [its] such organization's intent to provide scholarship 3 accounts to qualified students; 4 (2) Demonstrate to the state treasurer that [it] such organization is exempt from 5 federal income tax under Section 501(c)(3) of the Internal Revenue Code of 1986, as 6 amended; 7 (3) Provide a state treasurer-approved receipt to taxpayers for contributions made to 8 the organization; HB 1738 3 9 (4) Ensure that grants are distributed to scholarship accounts of qualified students in 10 the following order: 11 (a) Qualified students that have an approved "individualized education plan" (IEP) 12 developed under the federal Individuals with Disabilities Education Act (IDEA), 20 U.S.C. 13 Section 1400[,] et seq., as amended, or qualified students living in a household whose total 14 annual income does not exceed an amount equal to one hundred percent of the income 15 standard used to qualify for free and reduced price lunches; 16 (b) Qualified students living in a household whose total annual income does not 17 exceed an amount equal to two hundred percent of the income standard used to qualify for 18 free and reduced price lunches; and 19 (c) All other qualified students; 20 (5) Ensure that: 21 (a) One hundred percent of [its] such organization's revenues from interest or 22 investments is spent on scholarship accounts; 23 (b) At least ninety percent of [its] such organization's revenues from qualifying 24 contributions is spent on scholarship accounts; and 25 (c) Marketing and administrative expenses do not exceed the following limits of [its] 26 such organization's remaining revenue from contributions: 27 a. Ten percent for the first two hundred fifty thousand dollars; 28 b. Eight percent for the next five hundred thousand dollars; and 29 c. Three percent thereafter; 30 (6) (a) Distribute scholarship account payments either four times per year or in a 31 single lump sum at the beginning of the year as requested by the parent of a qualified student, 32 [not to exceed a total grant amount equal to] based on the state adequacy target as defined in 33 section 163.011 and calculated by the department of elementary and secondary education, 34 subject to the following total grant amount limits: 35 a. For a qualified student who meets the criteria to be included in a school 36 district's limited English proficiency pupil count as set forth in subdivision (8) of section 37 163.011, not more than one hundred sixty percent of the state adequacy target; 38 b. For a qualified student who is eligible for free or reduced price lunch as 39 approved by the department of elementary and secondary education in accordance with 40 federal regulations, not more than one hundred twenty-five percent of the state 41 adequacy target; 42 c. For a qualified student who has an approved individualized education 43 program developed under the federal Individuals with Disabilities Education Act 44 (IDEA), 20 U.S.C. Section 1400 et seq., as amended, not more than one hundred seventy- 45 five percent of the state adequacy target; and HB 1738 4 46 d. For all other qualified students, not more than the state adequacy target; 47 (b) Scholarship account payments distributed under this subdivision shall be in 48 the form of a deposit into the scholarship account of the qualified student; 49 (7) Provide the state treasurer, upon request, with criminal background checks on all 50 [its] such organization's employees and board members and exclude from employment or 51 governance any individual who might reasonably pose a risk to the appropriate use of 52 contributed funds, provided that no background check shall be required by the 53 educational assistance organization or the state treasurer for a parent who educates 54 their child at a home school as defined in section 167.031; 55 (8) Demonstrate [its] such organization's financial accountability by: 56 (a) Submitting to the state treasurer annual audit financial statements by a certified 57 public accountant within six months of the end of the educational assistance organization's 58 fiscal year; and 59 (b) Having an auditor certify that the report is free of material misstatements; and 60 (9) Ensure that participating students take the state achievement tests or nationally 61 norm-referenced tests that measure learning gains in math and English language arts, and 62 provide for value-added assessment, in grades that require testing under the statewide 63 assessment system set forth in section 160.518; 64 (10) Allow costs of the testing requirements to be covered by the scholarships 65 distributed by the educational assistance organization; 66 (11) Provide the parents of each student who was tested with a copy of the results of 67 the tests on an annual basis, beginning with the first year of testing; 68 (12) Provide the test results to the state treasurer on an annual basis, beginning with 69 the first year of testing; 70 (13) Report student information that would allow the state treasurer to aggregate data 71 by grade level, gender, family income level, and race; 72 (14) Provide rates of high school graduation, college attendance, and college 73 graduation for participating students to the state treasurer in a manner consistent with 74 nationally recognized standards; 75 (15) Provide to the state treasurer the results from an annual parental satisfaction 76 survey, including information about the number of years that the parent's child has 77 participated in the scholarship program. The annual satisfaction survey shall ask parents of 78 scholarship students to express: 79 (a) Their level of satisfaction with the child's academic achievement, including 80 academic achievement at the schools the child attends through the scholarship program versus 81 academic achievement at the school previously attended;  HB 1738 5 82 (b) Their level of satisfaction with school safety at the schools the child attends 83 through the scholarship program versus safety at the schools previously attended; 84 (16) Demonstrate [its] such organization's financial viability, if [it] such 85 organization is to receive donations of fifty thousand dollars or more during the school 86 year, by filing with the state treasurer before the start of the school year a surety bond payable 87 to the state in an amount equal to the aggregate amount of contributions expected to be 88 received during the school year or other financial information that demonstrates the financial 89 viability of the educational assistance organization. 90 2. The annual audit required under this section shall include: 91 (1) The name and address of the educational assistance organization; 92 (2) The name and address of each qualified student for whom a parent opened a 93 scholarship account with the organization; 94 (3) The total number and total dollar amount of contributions received during the 95 previous calendar year; and 96 (4) The total number and total dollar amount of scholarship accounts opened during 97 the previous calendar year. 98 3. The state treasurer shall: 99 (1) Ensure compliance with all student privacy laws for data in the state treasurer's 100 possession; 101 (2) Collect all test results; 102 (3) Provide the test results and associated learning gains to the public via a state 103 website after the third year of test and test-related data collection. The findings shall be 104 aggregated by the students' grade level, gender, family income level, number of years of 105 participation in the scholarship program, and race; and 106 (4) Provide graduation rates to the public via a state website after the third year of test 107 and test-related data collection. 108 4. An educational assistance organization may contract with private financial 109 management firms to manage scholarship accounts with the supervision of the state treasurer. 135.715. 1. [Notwithstanding any provision in section 135.713 to the contrary, the 2 annual increase to the cumulative amount of tax credits under subsection 3 of section 135.713 3 shall cease when the amount of tax credits reaches fifty million dollars.] The cumulative 4 amount of tax credits that may be allocated to all taxpayers contributing to educational 5 assistance organizations in the first year of the program shall not exceed twenty-five million 6 dollars. 7 2. The state treasurer shall limit the number of educational assistance organizations 8 that are certified to administer scholarship accounts to no more than ten such organizations in 9 any single school year[,]. [with] If the total contributions to educational assistance HB 1738 6 10 organizations exceed twenty-five million dollars in any school year, the state treasurer 11 may certify one additional educational assistance organization to administer scholarship 12 accounts. No more than six of such organizations [having] shall have their principal place of 13 business in: 14 (1) A county of the first classification with more than two hundred sixty thousand but 15 fewer than three hundred thousand inhabitants; 16 (2) A county with a charter form of government and with more than six hundred 17 thousand but fewer than seven hundred thousand inhabitants; 18 (3) A county with a charter form of government and with more than three hundred 19 thousand but fewer than four hundred fifty thousand inhabitants; 20 (4) A county with a charter form of government and with more than nine hundred 21 fifty thousand inhabitants; or 22 (5) A city not within a county. 23 3. The state treasurer may delegate any duties assigned to the state treasurer under 24 sections 135.712 to 135.719 and sections 166.700 to 166.720 to the "Missouri Empowerment 25 Scholarship Accounts Board", which is hereby established. The Missouri empowerment 26 scholarship accounts board shall consist of the state treasurer, who shall serve as chair, the 27 commissioner of the department of higher education and workforce development, the 28 commissioner of education, the commissioner of the office of administration, one member 29 appointed by the president pro tempore of the senate, one member appointed by the speaker 30 of the house of representatives, and one member appointed by the governor with the advice 31 and consent of the senate. The appointed members shall serve terms of four years or until 32 their successors have been appointed and qualified. The board shall have all powers and 33 duties assigned to the state treasurer under sections 135.712 to 135.719 and sections 166.700 34 to 166.720 that are delegated to the board by the state treasurer. Members of the board shall 35 not receive compensation for their service, but may receive reimbursement for necessary 36 expenses. 37 4. Notwithstanding the provisions of subsection 7 of section 135.716 to the contrary, 38 four percent of the total qualifying contributions received by each educational assistance 39 organization per calendar year shall be deposited in the Missouri empowerment scholarship 40 accounts fund to be used by the state treasurer for marketing and administrative expenses or 41 the costs incurred in administering the program, whichever is less. 42 5. Notwithstanding the provisions of subdivision (5) of subsection 2 of section 43 135.712 to the contrary, the term "qualifying contribution" shall mean a donation of cash, 44 including, but not limited to, checks drawn on a banking institution located in the continental 45 United States in U.S. dollars (other than cashier checks, or third-party checks exceeding ten HB 1738 7 46 thousand dollars), money orders, payroll deductions, and electronic fund transfers. This term 47 shall not include stocks, bonds, other marketable securities, or property. 166.700. As used in sections 166.700 to 166.720, the following terms mean: 2 (1) "Curriculum", a complete course of study for a particular content area or grade 3 level, including any supplemental materials; 4 (2) "District", the same meaning as used in section 160.011; 5 (3) "Educational assistance organization", the same meaning as used in section 6 135.712; 7 (4) "Parent", the same meaning as used in section 135.712; 8 (5) "Private school", a school that is not a part of the public school system of the state 9 of Missouri and that charges tuition for the rendering of elementary or secondary educational 10 services; 11 (6) "Program", the same meaning as used in section 135.712; 12 (7) "Qualified school", a home school as defined in section 167.031 or any of the 13 following entities that is incorporated in Missouri and that does not discriminate on the basis 14 of race, color, or national origin: 15 (a) A charter school as defined in section 160.400; 16 (b) A private school; 17 (c) A public school as defined in section 160.011; or 18 (d) A public or private virtual school; 19 (8) "Qualified student", any elementary or secondary school student who is a resident 20 of this state and [resides in any county with a charter form of government or any city with at 21 least thirty thousand inhabitants] who: 22 (a) Has an approved "individualized education plan" (IEP) developed under the 23 federal Individuals with Disabilities Education Act (IDEA), 20 U.S.C. Section 1400[,] et seq., 24 as amended; or 25 (b) Is a member of a household whose total annual income does not exceed an amount 26 equal to [two] four hundred percent of the income standard used to qualify for free and 27 reduced price lunches, and who meets at least one of the following qualifications: 28 a. Attended a public school as a full-time student for at l