Minnesota 2025-2026 Regular Session

Minnesota Senate Bill SF1007 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	1.1 A bill for an act
2	2	1.2 relating to education; establishing education savings accounts; requiring rules;
3	3	1.3 proposing coding for new law in Minnesota Statutes, chapter 126C.
4	4	1.4BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
5	5	1.5 Section 1. [126C.75] EDUCATION SAVINGS ACCOUNTS FOR STUDENTS ACT.
6	6	1.6 Subdivision 1.Title.This section may be cited as the "Education Savings Accounts for
7	7	1.7Minnesota Students Act" (ESA-4-MSA).
8	8	1.8 Subd. 2.Definitions.(a) For the purposes of this section, the following terms have the
9	9	1.9meanings given.
10	10	1.10 (b) "Commissioner" means the commissioner of the Department of Revenue.
11	11	1.11 (c) "Curriculum" means programs and written plans for a particular content area or grade
12	12	1.12level that provides students with learning experiences that lead to expected knowledge,
13	13	1.13skills, and career and college readiness.
14	14	1.14 (d) "Department" means the Department of Revenue or an organization with which the
15	15	1.15commissioner contracts to implement any portion of this section.
16	16	1.16 (e) "Education savings account" or "ESA" means the account to which funds are allocated
17	17	1.17by the commissioner to the parent to pay for qualifying expenses to educate the ESA student
18	18	1.18pursuant to the requirements of this section.
19	19	1.19 (f) "Educational service provider" means an eligible school, tutor, or other person or
20	20	1.20organization that provides education-related services and products to participating students.
21	21	1.21 (g) "Eligible school" means:
22	22	1Section 1.
23	23	25-03033 as introduced01/30/25 REVISOR KRB/AC
24	24	SENATE
25	25	STATE OF MINNESOTA
26	26	S.F. No. 1007NINETY-FOURTH SESSION
27	27	(SENATE AUTHORS: LUCERO, Drazkowski, Gruenhagen, Eichorn and Mathews)
28	28	OFFICIAL STATUSD-PGDATE
29	29	Introduction and first reading02/06/2025
30	30	Referred to Education Finance 2.1 (1) a nonpublic school, including nonpublic online learning programs, where a student
31	31	2.2can fulfill compulsory education requirements and that is recognized by the commissioner
32	32	2.3or accredited by an accrediting agency recognized by the Minnesota Nonpublic Education
33	33	2.4Council under section 123B.445, paragraph (a); or
34	34	2.5 (2) a public high school, community college, or community and technical college that
35	35	2.6offers one or more individual courses to eligible students in person or online.
36	36	2.7A child receiving instruction in a home school is eligible for an educational savings account
37	37	2.8and may use it for eligible expenses, but the child's parent may not be reimbursed for the
38	38	2.9time a parent spends providing instruction to the child.
39	39	2.10 (h) "Eligible student" means any student who:
40	40	2.11 (1) resides in Minnesota; and
41	41	2.12 (2) is a member of a household whose total annual income does not exceed an amount
42	42	2.13equal to four times the income standard used to qualify for reduced-price meals under the
43	43	2.14National School Lunch Act, United States Code, title 42, section 1751, et seq.
44	44	2.15 (i) "Eligible student participation maximum" means the maximum number of eligible
45	45	2.16students receiving an ESA. In the first year, the eligible student participation maximum
46	46	2.17shall be equal to five percent of the prior year's public school average daily membership.
47	47	2.18For each subsequent year, the eligible student participation maximum shall increase by an
48	48	2.19additional three percent of the prior year's statewide public school average daily membership.
49	49	2.20 (j) "Eligible student selection priority" means the commissioner's acceptance of eligible
50	50	2.21students in the ESA program based on the following order:
51	51	2.22 (1) a student entering kindergarten;
52	52	2.23 (2) a student who attended a public school, including a charter school, for the full school
53	53	2.24year preceding anticipated participation in the ESA program;
54	54	2.25 (3) a student whose sibling is participating in the ESA program; and
55	55	2.26 (4) other eligible students.
56	56	2.27 (k) "ESA program" means the program to implement education savings accounts.
57	57	2.28 (l) "ESA student" means an eligible student who is participating in the ESA program.
58	58	2.29 (m) "Parent" means a resident of Minnesota who is a parent, legal guardian, or other
59	59	2.30person having legal custody of an eligible student under age 18. For an eligible student age
60	60	2Section 1.
61	61	25-03033 as introduced01/30/25 REVISOR KRB/AC 3.118 or over, "parent" means the eligible student unless a guardian or conservator has been
62	62	3.2appointed, in which case it means the guardian or conservator.
63	63	3.3 (n) "Postsecondary institution" means a college or university, including a career or
64	64	3.4technical school, accredited by a state, regional, or national accrediting organization.
65	65	3.5 (o) "Qualifying expense" means any expense used to educate an eligible student,
66	66	3.6including:
67	67	3.7 (1) tuition and fees at an eligible school;
68	68	3.8 (2) payment to a tutor;
69	69	3.9 (3) payment for purchase of curriculum, including any textbook and supplemental
70	70	3.10materials required by the curriculum;
71	71	3.11 (4) fees for transportation to and from an educational service provider paid to a
72	72	3.12fee-for-service transportation provider;
73	73	3.13 (5) tuition and fees for online learning programs or courses;
74	74	3.14 (6) textbooks and fees for nationally standardized norm-referenced achievement tests
75	75	3.15or for alternative assessments, including an assessment for a child with a disability as defined
76	76	3.16in section 125A.02 or an English learner as defined in section 124D.59;
77	77	3.17 (7) textbooks and fees for advanced placement examinations or similar courses and any
78	78	3.18examination related to college or university admission;
79	79	3.19 (8) educational services or therapies, including from paraprofessionals or educational
80	80	3.20aides;
81	81	3.21 (9) services provided by a public school, including extracurricular programs and
82	82	3.22individual classes paid for as a tuition payment and not as an enrolled student in the public
83	83	3.23school or as part of a shared time program under section 126C.19;
84	84	3.24 (10) tuition, fees, and textbooks at a postsecondary institution;
85	85	3.25 (11) no more than $400 in annual consumable school supplies, including school uniforms
86	86	3.26necessary for the student's education;
87	87	3.27 (12) computer hardware and software and other technological devices if an eligible
88	88	3.28school, tutor, educational service provider, or licensed medical professional verifies in
89	89	3.29writing that these items are necessary for the student to meet annual, measurable goals;
90	90	3.30 (13) tuition and fees for summer education programs and after-school education programs,
91	91	3.31but not after-school child care; or
92	92	3Section 1.
93	93	25-03033 as introduced01/30/25 REVISOR KRB/AC 4.1 (14) any other expense approved by the commissioner.
94	94	4.2 (p) "Tutor" means a person who:
95	95	4.3 (1) is certified or licensed by a state, regional, or national certification or licensing
96	96	4.4organization to teach;
97	97	4.5 (2) has a valid teacher's license; or
98	98	4.6 (3) has experience teaching at a postsecondary institution.
99	99	4.7 Subd. 3.Education savings account program.(a) An eligible student may participate
100	100	4.8in the ESA program if the student's parent agrees:
101	101	4.9 (1) to arrange for the provision of organized, appropriate educational services with
102	102	4.10measurable goals to the participating student in at least the subjects of reading, writing,
103	103	4.11mathematics, social studies, and science;
104	104	4.12 (2) not to enroll the participating student in a public school, including a charter school,
105	105	4.13for as long as the student participates in the program;
106	106	4.14 (3) to use the funds deposited in a participating student's ESA only for qualifying expenses
107	107	4.15to educate the student using any of the methods or combination of methods in this paragraph
108	108	4.16that meet the requirement in clause (1); and
109	109	4.17 (4) not to receive cash or cash-equivalent items, such as gift cards or store credit, from
110	110	4.18refunds or rebates from a provider of services or products in the ESA program. Refunds or
111	111	4.19rebates shall be credited directly to the participating student's ESA. Eligible schools,
112	112	4.20postsecondary institutions, and educational service providers that serve participating students
113	113	4.21shall provide parents with a receipt for all qualifying expenses.
114	114	4.22 (b) A parent and a student may satisfy compulsory instruction requirements that the
115	115	4.23student acquires knowledge and skills that are essential for the student's effective citizenship
116	116	4.24and personal flourishing through the student's participation in the ESA program.
117	117	4.25 (c) Payment for educational services through an ESA shall not preclude parents from
118	118	4.26paying for educational services using non-ESA funds.
119	119	4.27 (d) For purposes of continuity of educational attainment, a student who enrolls in the
120	120	4.28ESA program remains eligible to receive monthly ESA payments until the participating
121	121	4.29student enrolls in a public school, graduates from high school, or completes the school year
122	122	4.30in which the student reaches the age of 21, whichever occurs first.
123	123	4.31 (e) Any funds remaining in a student's ESA upon graduation from high school may be
124	124	4.32used to pay for qualifying expenses at an accredited postsecondary institution.
125	125	4Section 1.
126	126	25-03033 as introduced01/30/25 REVISOR KRB/AC 5.1 (f) Upon a participating student's graduation from a postsecondary institution, or after
127	127	5.2any period of four consecutive years after graduation from high school during which the
128	128	5.3student is not enrolled in a postsecondary institution, the participating student's ESA shall
129	129	5.4be closed and any remaining funds shall be returned to the state general fund.
130	130	5.5 (g) A participating student may enroll in the resident school district at any time after
131	131	5.6enrolling in the ESA program, according to rules adopted by the commissioner providing
132	132	5.7the least disruptive process for doing so. The parent must notify the commissioner that the
133	133	5.8student has enrolled in the public school. Upon receiving notice of the enrollment, the
134	134	5.9commissioner must close the student's ESA and return any remaining funds to the state
135	135	5.10general fund.
136	136	5.11 Subd. 4.Students with disabilities.Participation in the ESA program by a student with
137	137	5.12a disability is considered a parental placement under United States Code, title 20, section
138	138	5.131412, the Individuals with Disabilities Education Act (IDEA). Participation in the program
139	139	5.14does not affect the eligibility of a student with a disability for instruction and education
140	140	5.15services under chapter 125A or otherwise affect the student's status under federal special
141	141	5.16education laws.
142	142	5.17 Subd. 5.Commissioner's responsibilities.The commissioner is responsible for the
143	143	5.18establishment and implementation of the ESA program. This may include adopting rules
144	144	5.19and policies and contracting with a service provider to administer the ESA program and to
145	145	5.20prevent ESA funds from being spent on nonqualifying expenses.
146	146	5.21 Subd. 6.Funding.(a) The commissioner must establish a funding amount for eligible
147	147	5.22students in the ESA program that is equal to the state's adjusted per pupil formula allowance.
148	148	5.23 (b) The commissioner may deduct up to a maximum of five percent annually in the first
149	149	5.24two years of the ESA program and up to a maximum of three percent annually thereafter
150	150	5.25from appropriations made to fund ESAs to cover the costs of overseeing and administering
151	151	5.26the ESA program.
152	152	5.27 Subd. 7.Notices.(a) The commissioner must take reasonable actions to annually notify
153	153	5.28all eligible students of:
154	154	5.29 (1) the existence of the ESA program;
155	155	5.30 (2) the amount of available funds per student;
156	156	5.31 (3) the allowable expenses and the procedures to use the funds;
157	157	5.32 (4) the program application procedures;
158	158	5Section 1.
159	159	25-03033 as introduced01/30/25 REVISOR KRB/AC 6.1 (5) educational service providers;
160	160	6.2 (6) the role of the commissioner and outside organizations with which the commissioner
161	161	6.3contracts to administer the ESA program; and
162	162	6.4 (7) other relevant information.
163	163	6.5 (b) The commissioner must take reasonable actions to advise parents in low-income
164	164	6.6families of their potential eligibility for the ESA program. The commissioner must take
165	165	6.7reasonable actions to advise parents of students with disabilities about the rights of parentally
166	166	6.8placed students under the IDEA and any applicable state laws and rules.
167	167	6.9 (c) The commissioner must provide parents of participating students with a written
168	168	6.10explanation of the allowable uses of ESAs, the responsibilities of parents, and the duties of
169	169	6.11the commissioner. The commissioner must make the information available on the
170	170	6.12department's website.
171	171	6.13 Subd. 8.Application process.(a) The commissioner must create a standard application
172	172	6.14form that:
173	173	6.15 (1) allows a parent to establish the student's eligibility and apply for an ESA;
174	174	6.16 (2) requires a parent to agree to the terms and conditions of the ESA. The agreement is
175	175	6.17effective upon the eligible student's acceptance into the ESA program; and
176	176	6.18 (3) is readily available to interested families through various sources, including on the
177	177	6.19department's website, and includes a copy of the procedural safeguards annually given to
178	178	6.20parents.
179	179	6.21 (b) The commissioner must establish reasonable periods of time of not less than 90 days
180	180	6.22during which the commissioner must accept applications to enter the ESA program before
181	181	6.23the start of the school year in the fall and not less than 60 days to enter into the ESA program
182	182	6.24at the start of classes in the spring term.
183	183	6.25 (c) The commissioner must begin accepting applications for the program for the fall
184	184	6.26term of 2026 not later than December 1, 2025.
185	185	6.27 Subd. 9.Acceptance process.(a) The commissioner must establish procedures for
186	186	6.28prioritizing and approving applications monthly consistent with the student participation
187	187	6.29maximum in subdivision 2, paragraph (i), and the eligible student selection priority in
188	188	6.30subdivision 2, paragraph (j).
189	189	6.31 (b) Starting in the second year of the ESA program, the commissioner must automatically
190	190	6.32renew annually the ESA student's participation in the ESA program unless funds are not
191	191	6Section 1.
192	192	25-03033 as introduced01/30/25 REVISOR KRB/AC 7.1available, the ESA student graduates from high school, or the commissioner receives notice
193	193	7.2that the ESA student has withdrawn from the program.
194	194	7.3 (c) Starting in the second year of the ESA program and adjusted each year thereafter,
195	195	7.4the commissioner may meet the eligible student participation maximum by granting
196	196	7.5admittance to a greater number of applicants than the eligible student participation maximum.
197	197	7.6The commissioner must base the additional acceptances on the ESA program's experience
198	198	7.7of students who decline the acceptance.
199	199	7.8 Subd. 10.Student withdrawal from the ESA program.(a) Upon notice to the
200	200	7.9commissioner that the ESA student has enrolled in a public school as a full-time student,
201	201	7.10the commissioner must immediately stop depositing funds into the student's ESA. Funds
202	202	7.11remaining in an ESA account that has been open and active for at least one full school year
203	203	7.12remain available to be used for qualifying expenditures. The commissioner may close the
204	204	7.13ESA when no funds remain in the student's ESA.
205	205	7.14 (b) If an eligible student applies and is accepted into the ESA program after previously
206	206	7.15withdrawing, payments into the student's existing ESA may resume if the ESA is still open
207	207	7.16and active. A new ESA may be established if the commissioner closed the eligible student's
208	208	7.17ESA.
209	209	7.18 Subd. 11.Contracting with service providers.To ensure the successful implementation
210	210	7.19of the ESA program, the commissioner may contract with private organizations to administer
211	211	7.20the ESA program. This authority includes contracting with a private firm to:
212	212	7.21 (1) track and report to a parent a student's enrollment and completion of classes, grades,
213	213	7.22test scores, and similar educational information;
214	214	7.23 (2) perform the payment processing, manage financial functions, or provide financial
215	215	7.24reporting to a parent about a student's ESA; and
216	216	7.25 (3) provide information on a program-wide basis, redacted for information about
217	217	7.26individual students.
218	218	7.27 Subd. 12.Payments.(a) The commissioner must make electronic payments to the ESAs
219	219	7.28of participating students on a monthly basis unless there is evidence of misuse of the ESA
220	220	7.29under this section.
221	221	7.30 (b) Beginning with the 2026-2027 school year, the commissioner must issue ESA cards
222	222	7.31to parents making expenditures under this section on behalf of a participating student. ESA
223	223	7.32cards shall be issued to parents upon enrollment in the ESA program and shall expire when
224	224	7.33the participating student's ESA is closed, except for the periodic expiration and replacement
225	225	7Section 1.
226	226	25-03033 as introduced01/30/25 REVISOR KRB/AC 8.1of cards in the normal course of business. All unexpended amounts shall remain in the
227	227	8.2student's ESA and be combined with the following year's allocation of ESA funds, subject
228	228	8.3to subdivision 3, paragraphs (f) and (g).
229	229	8.4 (c) The commissioner, taking into consideration requests from the parents of participating
230	230	8.5students, must use merchant category classification (MCC) codes, or a similar system as
231	231	8.6practicable and consistent with current technology, to identify categories of providers that
232	232	8.7provide qualifying expenses. The commissioner must make a list of blocked and unblocked
233	233	8.8MCC codes publicly available for purposes of the ESA program.
234	234	8.9 Subd. 13.Fraud prevention.(a) The commissioner must adopt a process for removing
235	235	8.10educational service providers that defraud parents and for referring cases of fraud to law
236	236	8.11enforcement.
237	237	8.12 (b) The commissioner must establish or contract for the establishment of an online,
238	238	8.13anonymous fraud reporting service and an anonymous telephone hotline for fraud reporting.
239	239	8.14 (c) The commissioner may require an education service provider to post a surety bond
240	240	8.15if the provider has operated for less than three years and is projected to receive more than
241	241	8.16$100,000 annually from the ESA program.
242	242	8.17 (d) The commissioner must notify the parent of any amount spent on nonqualifying
243	243	8.18expenses within five business days by United States mail at the parent's home address. The
244	244	8.19notification must explain the suspension, detail the violation, and request that the parent,
245	245	8.20within 15 business days, either: (1) provide additional documentation justifying the
246	246	8.21expenditure; or (2) repay the misspent amount. If the parent repays the amount within the
247	247	8.22requested time frame, the offense must not be recorded and not be held in the parent's file.
248	248	8.23If the parent does not provide sufficient documentation and refuses to repay the amount,
249	249	8.24the commissioner must seek to recover the misspent funds using collections methods allowed
250	250	8.25under state law. A student whose ESA has incurred three offenses within a consecutive
251	251	8.26three-year period is disqualified from further participation in the ESA program.
252	252	8.27 (e) If the commissioner determines that a parent has failed to comply with the terms of
253	253	8.28the agreement as specified in subdivision 3, the commissioner must suspend the participating
254	254	8.29student's ESA. The commissioner must notify the parent in writing within five business
255	255	8.30days that the ESA has been suspended and that no further transactions will be allowed or
256	256	8.31disbursements made. The notification must specify the reason for the suspension and state
257	257	8.32that the parent has 21 business days to respond and take corrective action.
258	258	8.33 (f) If the parent fails to respond to the commissioner, furnish reasonable and necessary
259	259	8.34information, or make a report that may be required for reinstatement within 21 business
260	260	8Section 1.
261	261	25-03033 as introduced01/30/25 REVISOR KRB/AC 9.1days, the commissioner may remove the participating student from the ESA program. A
262	262	9.2decision of the commissioner under this subdivision is subject to judicial review under
263	263	9.3sections 14.63 to 14.69. The decision of the commissioner is stayed pending an appeal.
264	264	9.4 (g) The commissioner must refer cases of substantial misuse of funds to law enforcement
265	265	9.5agencies for investigation if evidence of fraudulent intent and use of an ESA is obtained.
266	266	9.6 Subd. 14.Participation of education service providers.The commissioner must
267	267	9.7establish an application process for an education service provider to request the
268	268	9.8commissioner's approval to offer services under the ESA program. The application must
269	269	9.9require the provider to describe the services it will provide and affirm the services are a
270	270	9.10qualifying expense. The commissioner may investigate the application to determine whether
271	271	9.11the provider is providing services allowed for as qualifying expenses. The commissioner
272	272	9.12must approve an application to become an education service provider and provide services
273	273	9.13that are qualifying expenses unless:
274	274	9.14 (1) the provider notifies the commissioner of the withdrawal of its application or refusal
275	275	9.15to receive payments from ESAs;
276	276	9.16 (2) the commissioner determines that some or all of the provider's services are not
277	277	9.17qualifying expenses; or
278	278	9.18 (3) the provider or its management has been criminally convicted or found liable in a
279	279	9.19civil case related to the provision of educational services, including theft, fraud, deceptive
280	280	9.20trade practices, racketeering, or child abuse.
281	281	9.21 Subd. 15.Scope.An eligible nonpublic school is autonomous and not an agent of the
282	282	9.22state or federal government, and therefore:
283	283	9.23 (1) the creation of the ESA program does not expand the regulatory authority of the
284	284	9.24state, the commissioner, the department, any other government agency or officers, or any
285	285	9.25school district to impose any additional regulation of nonpublic schools or educational
286	286	9.26service providers beyond those necessary to enforce the requirements of the ESA program;
287	287	9.27and
288	288	9.28 (2) upon being recognized by the commissioner, an eligible school shall have the freedom
289	289	9.29to provide for the educational needs of students and be able to offer diverse learning
290	290	9.30opportunities. Upon such recognition, no additional mandates to participate in the ESA may
291	291	9.31be imposed on an eligible school that would require a change to the school's admission
292	292	9.32criteria, employment practices, pedagogy, or curriculum.
293	293	9Section 1.
294	294	25-03033 as introduced01/30/25 REVISOR KRB/AC 10.1 Subd. 16.Parent Review and Advisory Panel.(a) Starting no later than the fall term
295	295	10.2of the 2028-2029 school year a Parent Review and Advisory Panel must be established to
296	296	10.3assist the commissioner and the department. The panel's responsibilities are solely advisory
297	297	10.4or at the commissioner's request and include:
298	298	10.5 (1) collaborating with the commissioner to develop a system for parents to publicly rate,
299	299	10.6review, and share information about education service providers;
300	300	10.7 (2) recommending to the commissioner whether questionable expenditures meet the
301	301	10.8requirements to be considered qualifying expenses to educate the ESA student pursuant to
302	302	10.9subdivision 3; and
303	303	10.10 (3) recommending to the commissioner ways to better implement, administer, and
304	304	10.11increase the usage of the ESA program.
305	305	10.12 (b) The panel shall consist of nine members who are parents of ESA students and
306	306	10.13represent at least four counties in the state. The members shall not be compensated other
307	307	10.14than standard reimbursement for travel expenses. The nine members shall be appointed
308	308	10.15equally by the governor, speaker of the house, and president of the senate and serve at the
309	309	10.16pleasure of their respective appointers for one calendar year. Panel members may be
310	310	10.17reappointed.
311	311	10.18 (c) The commissioner or the commissioner's designee shall serve as the nonvoting chair
312	312	10.19of the panel.
313	313	10.20 (d) The commissioner may request the panel to meet in person or virtually to vote on
314	314	10.21whether:
315	315	10.22 (1) an expenditure of ESA funds is or was a qualifying expense to educate an ESA
316	316	10.23student pursuant to subdivision 3;
317	317	10.24 (2) to review appeals of denial of participation in the ESA program by education service
318	318	10.25providers; or
319	319	10.26 (3) an education service provider should be allowed to receive, or continue receiving,
320	320	10.27payments from ESAs.
321	321	10.28 Subd. 17.Legal proceedings and severability.(a) In any legal proceeding challenging
322	322	10.29the application of this act to an education service provider, the state bears the burden of
323	323	10.30establishing that the law is necessary and does not impose any undue burden on the education
324	324	10.31service provider.
325	325	10Section 1.
326	326	25-03033 as introduced01/30/25 REVISOR KRB/AC 11.1 (b) Except for subdivision 7, no liability shall arise on the part of the state or its agencies;
327	327	11.2a public school, including a charter school; or a school district based on the award or use
328	328	11.3of an ESA under this section.
329	329	11.4 (c) If any part of this act is challenged in state court as violating either the state or federal
330	330	11.5laws or constitutions, parents of participating or eligible students may intervene as of right
331	331	11.6in such lawsuit for the purposes of defending the ESA program's legality or constitutionality.
332	332	11.7For the purposes of judicial administration, a court may require that all parents file a joint
333	333	11.8brief, so long as they are not required to join any brief filed on behalf of any named state
334	334	11.9defendant.
335	335	11.10 (d) If any provision of this law or its application is found to be unconstitutional and void,
336	336	11.11the remaining provisions or applications of this law that can be given effect without the
337	337	11.12invalid provision or application are valid.
338	338	11.13 EFFECTIVE DATE.This section is effective the day following final enactment.
339	339	11Section 1.
340	340	25-03033 as introduced01/30/25 REVISOR KRB/AC