LEGISLATIVE SERVICES AGENCY OFFICE OF FISCAL AND MANAGEMENT ANALYSIS 200 W. Washington St., Suite 301 Indianapolis, IN 46204 (317) 233-0696 iga.in.gov FISCAL IMPACT STATEMENT LS 7001 NOTE PREPARED: Jan 21, 2022 BILL NUMBER: SB 331 BILL AMENDED: Jan 20, 2022 SUBJECT: Education Scholarship Account Program. FIRST AUTHOR: Sen. Buchanan BILL STATUS: CR Adopted - 1 st House FIRST SPONSOR: FUNDS AFFECTED:XGENERAL IMPACT: State & Local XDEDICATED FEDERAL Summary of Legislation: (Amended) Qualified Expenses and Schools: The bill provides that "qualified expenses" refers to expenses approved by the Treasurer of State from certain categories. It also amends the definition of "qualified school." Requirement on Spending: The bill provides that a parent of an eligible student or an emancipated eligible student must agree to use all of (instead of part of) the money in the education scholarship account for the student's study in certain subjects or in accordance with the student's individualized education program, service plan, choice special education plan, education scholarship account education service plan, or plan developed under Section 504 of the federal Rehabilitation Act of 1973. Participating Entities: The bill amends the list of individuals or entities that may become participating entities. Provision Removal: The bill removes provisions that do the following: (1) Require the Treasurer of State to provide online services and capabilities that include: (A) a method for parents to rate the parent's experience with a participating entity and the ability for other parents of eligible students to see the rating; and (B) methods that are intuitive and allow for contributions to be easily made to an eligible student's account. (2) Require certain participating entities to post a surety bond or provide the Treasurer of State information regarding unencumbered assets. Program Administration: This bill authorizes the Treasurer of State to deduct up to 10% of funds made SB 331 1 available for the Indiana Education Scholarship Account Program to cover costs of administering the program. It also establishes the Indiana Education Scholarship Account Administration Fund to support the administration of the program. The bill requires any amounts deducted by the Treasurer of State for administration costs to be deposited in the fund. Application Process: It also requires an eligible student with a disability to choose in the application process whether the eligible student will receive special education services from: (1) the school corporation required to provide the special education services to the eligible student; or (2) a qualified school that provides the necessary special education or related services to the eligible student. The bill specifies the annual grant amount calculation for an eligible student based on the eligible student's application choice. The bill also makes technical corrections. Effective Date: Upon passage. Explanation of State Expenditures: (Revised) Summary- The bill’s impact on state expenditures is unknown and is dependent upon the following: 1. The number of students, if any, who would participate in the program who would not have participated under current law. 2. Where the new student participants would have attended school. 3. The appropriation for the program after FY 2023. The bill has two components that could increase the potential number of participants in the program. The Participants who Receive a Certificate of Completion and the Application Deadline sections detail the potential fiscal impact of each of the two provisions. Additionally, the bill has provisions that would impact the administrative costs of the program, detailed in the Program Administration and Website Requirements sections. Any increase in state expenditures would be subject to the $10 M appropriated to the Indiana Education Scholarship Account Program Fund for the ESA program in FY 2023. In FY 2024 and beyond, any change to the appropriation for the program would impact state expenditures. Participants who Receive a Certificate of Completion: Under current law, once students graduate or receive a certificate of completion, they are no longer eligible for the ESA program. The bill would allow students who receive a certificate of completion to continue to be eligible for the ESA program and receive a grant up to the age of 22 in accordance with their individualized education plan, service plan, Choice special education plan, or Indiana education scholarship account education service plan. This matches what current law allows for public school students who receive a certificate of completion. Application Deadline: The bill requires the Treasurer of State to accept applications for the program through September 1 each year for the next school year. Under current law, the Treasurer of State is required to set the date by which an application for the program must be submitted for FY 2023. For FY 2024 and beyond, current law requires applications for the program to be submitted by April 1 for the immediately following school year. The provision could increase participation in the program beginning in FY 2023. If participation in the program increased, the impact on state expenditures is dependent upon where the students would otherwise have attended school. [See Additional Information for further details regarding the impact of additional participants in the program]. Any potential increase in program participation would be subject to SB 331 2 the $10 M appropriated to the Indiana Education Scholarship Account Program Fund for the ESA program in FY 2023. (Revised) Program Administration: The bill permits the Treasurer of State to transfer up to 10% of the funds ($1 M in FY 2023) in the Indiana Education Scholarship Account Program Fund to the newly established Indiana Education Scholarship Account Administration Fund for the purposes of administering the ESA Program. Under current law, the Treasurer of State is allowed to deduct up to 3% of the annual grant amount sent to ESA participants to cover the costs of managing the ESA accounts and administering the program. The Treasurer of State stated that the additional funds will be used to pay for the additional personnel needed to review every expense distribution, account applications, participating entity applications, and to answer questions from students and entities participating in the program. (Revised) Website Requirements: Under current law, the Treasurer of State must provide certain online services and capabilities related to the program. The bill’s elimination of two of the capabilities will reduce state expenditures on the creation of the website by an unknown amount. Additional Information- ESA Program: Under current law, beginning in FY 2023, the program would allow students with a disability who meet an income requirement and who enroll in a nonpublic school to receive a grant that is equal to 90% of the student’s home school corporation’s per student basic tuition support grant. Additionally, if the student chooses to receive special education services from an entity other than the student’s home school corporation, the student would be eligible to receive the special education grant the student’s home school corporation would have received for the student. (Revised) Program Participation: If the bill expands participation in the program, the total statewide impact is dependent upon the number of students who would participate in the program that would not have participated otherwise and where the students would have attended school under current law. Students who would have attended a public school under current law that would participate in the program under the bill would result in a state expenditure decrease of about $950. However, each student who would have been homeschooled or enrolled in a private school without a choice scholarship would increase state expenditures by an estimated $6,250 on average. Explanation of State Revenues: Explanation of Local Expenditures: Explanation of Local Revenues: (Revised) The bill could decrease public schools’ state tuition support revenue beginning in FY 2023. If, under current law, the program’s cost was going to reach the $10 M appropriation, the bill would have limited to no impact on local revenue, as the number of students who might leave public schools to participate in the program would not be impacted. If, under current law, the program’s participation was not going to reach the $10 M appropriation, the bill would likely increase program participation. Many of the students who switched to the program would come from public schools, which would decrease state tuition support revenue for public schools. State Agencies Affected: Treasurer of State. Local Agencies Affected: Public schools. Information Sources: LSA education database, Treasurer of State. SB 331 3 Fiscal Analyst: Austin Spears, 317-234-9454. SB 331 4