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: Feb 21, 2022 BILL NUMBER: SB 331 BILL AMENDED: Feb 17, 2022 SUBJECT: Education Matters. FIRST AUTHOR: Sen. Buchanan BILL STATUS: CR Adopted - 2 nd House FIRST SPONSOR: Rep. Behning FUNDS AFFECTED:XGENERAL IMPACT: State & Local DEDICATED FEDERAL Summary of Legislation: Teacher Compensation Calculation: This bill provides that, for purposes of determining the funding floor for teachers of a school corporation, the amount a school corporation expends for full-time teacher salaries shall include the amount the school corporation expends for participating in a special education cooperative or a career and technical education cooperative that is directly attributable to the salaries of full-time teachers employed by the cooperative, as determined by the Department of Education (DOE). Teacher Compensation Report: The bill requires the DOE to annually report to the Legislative Council and the Budget Committee on certain matters regarding full-time teacher salaries and benefits and the issuance of waivers of the requirement that a school corporation expend a specified percentage of tuition support for full-time teacher salaries. Program Administration: The bill also authorizes the Treasurer of State to deduct up to 10% of funds made available for the Indiana Education Scholarship Account Program to cover costs of administering the program in the first year and up to 5% of funds made available in each year thereafter. 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 for administration costs to be deposited in the fund. Qualified School: The bill makes changes to the definition of "qualified school". Miscellaneous: The bill 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; SB 331 1 or (2) a qualified school that provides the necessary special education or related services to the eligible student. This bill specifies the annual grant amount calculation for an eligible student based on the eligible student's application choice. It also amends the list of individuals or entities that may become participating entities. The bill removes provisions that do the following: (1) Require the treasurer to provide certain online services and capabilities. (2) Require certain participating entities to post a surety bond or provide the Treasurer information regarding unencumbered assets. It makes technical corrections. Effective Date: Upon passage; July 1, 2022. Explanation of State Expenditures: 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. Finally, the bill would result in small workload changes for DOE, outlined in the Teacher Compensation Report and the Teacher Compensation Calculation sections. 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 the $10 M appropriated to the Indiana Education Scholarship Account Program Fund for the program in FY SB 331 2 2023. Program Administration: Under current law, the Treasurer of State is allowed to deduct up to 3% of the annual grant amount sent to program participants to cover the costs of managing the participants’ accounts and administering the program. The bill eliminates that funding source and instead 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 program. Beginning in FY 2024, the bill specifies that 5% of the funds can be transferred annually. 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. 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. Teacher Compensation Report: Beginning in FY 2023, the bill requires DOE to provide an annual report on teacher compensation (including benefits) at the school corporation level. This workload increase would be completed with existing staff and resources. Teacher Compensation Calculation: Under current law, beginning in FY 2022, school corporations are required to spend an amount equal to 45% of the state tuition support they receive on full-time teacher salaries. If the school corporation does not meet this requirement, the superintendent must submit a waiver to the DOE explaining why they were not able to meet the requirement. If DOE grants the waiver, the school corporation must work with the DOE to create a plan that would allow the school corporation to meet the 45% requirement in the future. By including teacher salaries that may have otherwise been excluded from the calculation, some school corporations that would have failed to meet the requirement under current law might meet the requirement under the bill. This could result in a small workload decrease for DOE. Additional Information- Indiana Education Scholarship Account 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. 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: Teacher Compensation Calculation: The bill’s provisions could allow SB 331 3 more school corporations to meet the requirement that at least 45% of the state tuition support they receive is spent on full-time teacher salaries. This could result in a minor workload decrease for school corporations. [See Explanation of State Expenditures for additional details.] Explanation of Local Revenues: 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; Department of Education; Legislative Council; Budget Committee. Local Agencies Affected: Public schools. Information Sources: LSA education database, Treasurer of State; Department of Education. Fiscal Analyst: Austin Spears, 317-234-9454. SB 331 4