1.1 A bill for an act
1.2 relating to education; establishing education savings accounts; requiring rules;
1.3 proposing coding for new law in Minnesota Statutes, chapter 126C.
1.4BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.5 Section 1. [126C.75] EDUCATION SAVINGS ACCOUNTS FOR STUDENTS ACT.
1.6 Subdivision 1.Title.This section may be cited as the "Education Savings Accounts for
1.7Minnesota Students Act" (ESA-4-MSA).
1.8 Subd. 2.Definitions.(a) For the purposes of this section, the following terms have the
1.9meanings given.
1.10 (b) "Commissioner" means the commissioner of the Department of Revenue.
1.11 (c) "Curriculum" means programs and written plans for a particular content area or grade
1.12level that provides students with learning experiences that lead to expected knowledge,
1.13skills, and career and college readiness.
1.14 (d) "Department" means the Department of Revenue or an organization with which the
1.15commissioner contracts to implement any portion of this section.
1.16 (e) "Education savings account" or "ESA" means the account to which funds are allocated
1.17by the commissioner to the parent to pay for qualifying expenses to educate the ESA student
1.18pursuant to the requirements of this section.
1.19 (f) "Educational service provider" means an eligible school, tutor, or other person or
1.20organization that provides education-related services and products to participating students.
1.21 (g) "Eligible school" means:
1Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC
SENATE
STATE OF MINNESOTA
S.F. No. 1007NINETY-FOURTH SESSION
(SENATE AUTHORS: LUCERO, Drazkowski, Gruenhagen, Eichorn and Mathews)
OFFICIAL STATUSD-PGDATE
Introduction and first reading02/06/2025
Referred to Education Finance 2.1 (1) a nonpublic school, including nonpublic online learning programs, where a student
2.2can fulfill compulsory education requirements and that is recognized by the commissioner
2.3or accredited by an accrediting agency recognized by the Minnesota Nonpublic Education
2.4Council under section 123B.445, paragraph (a); or
2.5 (2) a public high school, community college, or community and technical college that
2.6offers one or more individual courses to eligible students in person or online.
2.7A child receiving instruction in a home school is eligible for an educational savings account
2.8and may use it for eligible expenses, but the child's parent may not be reimbursed for the
2.9time a parent spends providing instruction to the child.
2.10 (h) "Eligible student" means any student who:
2.11 (1) resides in Minnesota; and
2.12 (2) is a member of a household whose total annual income does not exceed an amount
2.13equal to four times the income standard used to qualify for reduced-price meals under the
2.14National School Lunch Act, United States Code, title 42, section 1751, et seq.
2.15 (i) "Eligible student participation maximum" means the maximum number of eligible
2.16students receiving an ESA. In the first year, the eligible student participation maximum
2.17shall be equal to five percent of the prior year's public school average daily membership.
2.18For each subsequent year, the eligible student participation maximum shall increase by an
2.19additional three percent of the prior year's statewide public school average daily membership.
2.20 (j) "Eligible student selection priority" means the commissioner's acceptance of eligible
2.21students in the ESA program based on the following order:
2.22 (1) a student entering kindergarten;
2.23 (2) a student who attended a public school, including a charter school, for the full school
2.24year preceding anticipated participation in the ESA program;
2.25 (3) a student whose sibling is participating in the ESA program; and
2.26 (4) other eligible students.
2.27 (k) "ESA program" means the program to implement education savings accounts.
2.28 (l) "ESA student" means an eligible student who is participating in the ESA program.
2.29 (m) "Parent" means a resident of Minnesota who is a parent, legal guardian, or other
2.30person having legal custody of an eligible student under age 18. For an eligible student age
2Section 1.
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
3.2appointed, in which case it means the guardian or conservator.
3.3 (n) "Postsecondary institution" means a college or university, including a career or
3.4technical school, accredited by a state, regional, or national accrediting organization.
3.5 (o) "Qualifying expense" means any expense used to educate an eligible student,
3.6including:
3.7 (1) tuition and fees at an eligible school;
3.8 (2) payment to a tutor;
3.9 (3) payment for purchase of curriculum, including any textbook and supplemental
3.10materials required by the curriculum;
3.11 (4) fees for transportation to and from an educational service provider paid to a
3.12fee-for-service transportation provider;
3.13 (5) tuition and fees for online learning programs or courses;
3.14 (6) textbooks and fees for nationally standardized norm-referenced achievement tests
3.15or for alternative assessments, including an assessment for a child with a disability as defined
3.16in section 125A.02 or an English learner as defined in section 124D.59;
3.17 (7) textbooks and fees for advanced placement examinations or similar courses and any
3.18examination related to college or university admission;
3.19 (8) educational services or therapies, including from paraprofessionals or educational
3.20aides;
3.21 (9) services provided by a public school, including extracurricular programs and
3.22individual classes paid for as a tuition payment and not as an enrolled student in the public
3.23school or as part of a shared time program under section 126C.19;
3.24 (10) tuition, fees, and textbooks at a postsecondary institution;
3.25 (11) no more than $400 in annual consumable school supplies, including school uniforms
3.26necessary for the student's education;
3.27 (12) computer hardware and software and other technological devices if an eligible
3.28school, tutor, educational service provider, or licensed medical professional verifies in
3.29writing that these items are necessary for the student to meet annual, measurable goals;
3.30 (13) tuition and fees for summer education programs and after-school education programs,
3.31but not after-school child care; or
3Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC 4.1 (14) any other expense approved by the commissioner.
4.2 (p) "Tutor" means a person who:
4.3 (1) is certified or licensed by a state, regional, or national certification or licensing
4.4organization to teach;
4.5 (2) has a valid teacher's license; or
4.6 (3) has experience teaching at a postsecondary institution.
4.7 Subd. 3.Education savings account program.(a) An eligible student may participate
4.8in the ESA program if the student's parent agrees:
4.9 (1) to arrange for the provision of organized, appropriate educational services with
4.10measurable goals to the participating student in at least the subjects of reading, writing,
4.11mathematics, social studies, and science;
4.12 (2) not to enroll the participating student in a public school, including a charter school,
4.13for as long as the student participates in the program;
4.14 (3) to use the funds deposited in a participating student's ESA only for qualifying expenses
4.15to educate the student using any of the methods or combination of methods in this paragraph
4.16that meet the requirement in clause (1); and
4.17 (4) not to receive cash or cash-equivalent items, such as gift cards or store credit, from
4.18refunds or rebates from a provider of services or products in the ESA program. Refunds or
4.19rebates shall be credited directly to the participating student's ESA. Eligible schools,
4.20postsecondary institutions, and educational service providers that serve participating students
4.21shall provide parents with a receipt for all qualifying expenses.
4.22 (b) A parent and a student may satisfy compulsory instruction requirements that the
4.23student acquires knowledge and skills that are essential for the student's effective citizenship
4.24and personal flourishing through the student's participation in the ESA program.
4.25 (c) Payment for educational services through an ESA shall not preclude parents from
4.26paying for educational services using non-ESA funds.
4.27 (d) For purposes of continuity of educational attainment, a student who enrolls in the
4.28ESA program remains eligible to receive monthly ESA payments until the participating
4.29student enrolls in a public school, graduates from high school, or completes the school year
4.30in which the student reaches the age of 21, whichever occurs first.
4.31 (e) Any funds remaining in a student's ESA upon graduation from high school may be
4.32used to pay for qualifying expenses at an accredited postsecondary institution.
4Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC 5.1 (f) Upon a participating student's graduation from a postsecondary institution, or after
5.2any period of four consecutive years after graduation from high school during which the
5.3student is not enrolled in a postsecondary institution, the participating student's ESA shall
5.4be closed and any remaining funds shall be returned to the state general fund.
5.5 (g) A participating student may enroll in the resident school district at any time after
5.6enrolling in the ESA program, according to rules adopted by the commissioner providing
5.7the least disruptive process for doing so. The parent must notify the commissioner that the
5.8student has enrolled in the public school. Upon receiving notice of the enrollment, the
5.9commissioner must close the student's ESA and return any remaining funds to the state
5.10general fund.
5.11 Subd. 4.Students with disabilities.Participation in the ESA program by a student with
5.12a disability is considered a parental placement under United States Code, title 20, section
5.131412, the Individuals with Disabilities Education Act (IDEA). Participation in the program
5.14does not affect the eligibility of a student with a disability for instruction and education
5.15services under chapter 125A or otherwise affect the student's status under federal special
5.16education laws.
5.17 Subd. 5.Commissioner's responsibilities.The commissioner is responsible for the
5.18establishment and implementation of the ESA program. This may include adopting rules
5.19and policies and contracting with a service provider to administer the ESA program and to
5.20prevent ESA funds from being spent on nonqualifying expenses.
5.21 Subd. 6.Funding.(a) The commissioner must establish a funding amount for eligible
5.22students in the ESA program that is equal to the state's adjusted per pupil formula allowance.
5.23 (b) The commissioner may deduct up to a maximum of five percent annually in the first
5.24two years of the ESA program and up to a maximum of three percent annually thereafter
5.25from appropriations made to fund ESAs to cover the costs of overseeing and administering
5.26the ESA program.
5.27 Subd. 7.Notices.(a) The commissioner must take reasonable actions to annually notify
5.28all eligible students of:
5.29 (1) the existence of the ESA program;
5.30 (2) the amount of available funds per student;
5.31 (3) the allowable expenses and the procedures to use the funds;
5.32 (4) the program application procedures;
5Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC 6.1 (5) educational service providers;
6.2 (6) the role of the commissioner and outside organizations with which the commissioner
6.3contracts to administer the ESA program; and
6.4 (7) other relevant information.
6.5 (b) The commissioner must take reasonable actions to advise parents in low-income
6.6families of their potential eligibility for the ESA program. The commissioner must take
6.7reasonable actions to advise parents of students with disabilities about the rights of parentally
6.8placed students under the IDEA and any applicable state laws and rules.
6.9 (c) The commissioner must provide parents of participating students with a written
6.10explanation of the allowable uses of ESAs, the responsibilities of parents, and the duties of
6.11the commissioner. The commissioner must make the information available on the
6.12department's website.
6.13 Subd. 8.Application process.(a) The commissioner must create a standard application
6.14form that:
6.15 (1) allows a parent to establish the student's eligibility and apply for an ESA;
6.16 (2) requires a parent to agree to the terms and conditions of the ESA. The agreement is
6.17effective upon the eligible student's acceptance into the ESA program; and
6.18 (3) is readily available to interested families through various sources, including on the
6.19department's website, and includes a copy of the procedural safeguards annually given to
6.20parents.
6.21 (b) The commissioner must establish reasonable periods of time of not less than 90 days
6.22during which the commissioner must accept applications to enter the ESA program before
6.23the start of the school year in the fall and not less than 60 days to enter into the ESA program
6.24at the start of classes in the spring term.
6.25 (c) The commissioner must begin accepting applications for the program for the fall
6.26term of 2026 not later than December 1, 2025.
6.27 Subd. 9.Acceptance process.(a) The commissioner must establish procedures for
6.28prioritizing and approving applications monthly consistent with the student participation
6.29maximum in subdivision 2, paragraph (i), and the eligible student selection priority in
6.30subdivision 2, paragraph (j).
6.31 (b) Starting in the second year of the ESA program, the commissioner must automatically
6.32renew annually the ESA student's participation in the ESA program unless funds are not
6Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC 7.1available, the ESA student graduates from high school, or the commissioner receives notice
7.2that the ESA student has withdrawn from the program.
7.3 (c) Starting in the second year of the ESA program and adjusted each year thereafter,
7.4the commissioner may meet the eligible student participation maximum by granting
7.5admittance to a greater number of applicants than the eligible student participation maximum.
7.6The commissioner must base the additional acceptances on the ESA program's experience
7.7of students who decline the acceptance.
7.8 Subd. 10.Student withdrawal from the ESA program.(a) Upon notice to the
7.9commissioner that the ESA student has enrolled in a public school as a full-time student,
7.10the commissioner must immediately stop depositing funds into the student's ESA. Funds
7.11remaining in an ESA account that has been open and active for at least one full school year
7.12remain available to be used for qualifying expenditures. The commissioner may close the
7.13ESA when no funds remain in the student's ESA.
7.14 (b) If an eligible student applies and is accepted into the ESA program after previously
7.15withdrawing, payments into the student's existing ESA may resume if the ESA is still open
7.16and active. A new ESA may be established if the commissioner closed the eligible student's
7.17ESA.
7.18 Subd. 11.Contracting with service providers.To ensure the successful implementation
7.19of the ESA program, the commissioner may contract with private organizations to administer
7.20the ESA program. This authority includes contracting with a private firm to:
7.21 (1) track and report to a parent a student's enrollment and completion of classes, grades,
7.22test scores, and similar educational information;
7.23 (2) perform the payment processing, manage financial functions, or provide financial
7.24reporting to a parent about a student's ESA; and
7.25 (3) provide information on a program-wide basis, redacted for information about
7.26individual students.
7.27 Subd. 12.Payments.(a) The commissioner must make electronic payments to the ESAs
7.28of participating students on a monthly basis unless there is evidence of misuse of the ESA
7.29under this section.
7.30 (b) Beginning with the 2026-2027 school year, the commissioner must issue ESA cards
7.31to parents making expenditures under this section on behalf of a participating student. ESA
7.32cards shall be issued to parents upon enrollment in the ESA program and shall expire when
7.33the participating student's ESA is closed, except for the periodic expiration and replacement
7Section 1.
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
8.2student's ESA and be combined with the following year's allocation of ESA funds, subject
8.3to subdivision 3, paragraphs (f) and (g).
8.4 (c) The commissioner, taking into consideration requests from the parents of participating
8.5students, must use merchant category classification (MCC) codes, or a similar system as
8.6practicable and consistent with current technology, to identify categories of providers that
8.7provide qualifying expenses. The commissioner must make a list of blocked and unblocked
8.8MCC codes publicly available for purposes of the ESA program.
8.9 Subd. 13.Fraud prevention.(a) The commissioner must adopt a process for removing
8.10educational service providers that defraud parents and for referring cases of fraud to law
8.11enforcement.
8.12 (b) The commissioner must establish or contract for the establishment of an online,
8.13anonymous fraud reporting service and an anonymous telephone hotline for fraud reporting.
8.14 (c) The commissioner may require an education service provider to post a surety bond
8.15if the provider has operated for less than three years and is projected to receive more than
8.16$100,000 annually from the ESA program.
8.17 (d) The commissioner must notify the parent of any amount spent on nonqualifying
8.18expenses within five business days by United States mail at the parent's home address. The
8.19notification must explain the suspension, detail the violation, and request that the parent,
8.20within 15 business days, either: (1) provide additional documentation justifying the
8.21expenditure; or (2) repay the misspent amount. If the parent repays the amount within the
8.22requested time frame, the offense must not be recorded and not be held in the parent's file.
8.23If the parent does not provide sufficient documentation and refuses to repay the amount,
8.24the commissioner must seek to recover the misspent funds using collections methods allowed
8.25under state law. A student whose ESA has incurred three offenses within a consecutive
8.26three-year period is disqualified from further participation in the ESA program.
8.27 (e) If the commissioner determines that a parent has failed to comply with the terms of
8.28the agreement as specified in subdivision 3, the commissioner must suspend the participating
8.29student's ESA. The commissioner must notify the parent in writing within five business
8.30days that the ESA has been suspended and that no further transactions will be allowed or
8.31disbursements made. The notification must specify the reason for the suspension and state
8.32that the parent has 21 business days to respond and take corrective action.
8.33 (f) If the parent fails to respond to the commissioner, furnish reasonable and necessary
8.34information, or make a report that may be required for reinstatement within 21 business
8Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC 9.1days, the commissioner may remove the participating student from the ESA program. A
9.2decision of the commissioner under this subdivision is subject to judicial review under
9.3sections 14.63 to 14.69. The decision of the commissioner is stayed pending an appeal.
9.4 (g) The commissioner must refer cases of substantial misuse of funds to law enforcement
9.5agencies for investigation if evidence of fraudulent intent and use of an ESA is obtained.
9.6 Subd. 14.Participation of education service providers.The commissioner must
9.7establish an application process for an education service provider to request the
9.8commissioner's approval to offer services under the ESA program. The application must
9.9require the provider to describe the services it will provide and affirm the services are a
9.10qualifying expense. The commissioner may investigate the application to determine whether
9.11the provider is providing services allowed for as qualifying expenses. The commissioner
9.12must approve an application to become an education service provider and provide services
9.13that are qualifying expenses unless:
9.14 (1) the provider notifies the commissioner of the withdrawal of its application or refusal
9.15to receive payments from ESAs;
9.16 (2) the commissioner determines that some or all of the provider's services are not
9.17qualifying expenses; or
9.18 (3) the provider or its management has been criminally convicted or found liable in a
9.19civil case related to the provision of educational services, including theft, fraud, deceptive
9.20trade practices, racketeering, or child abuse.
9.21 Subd. 15.Scope.An eligible nonpublic school is autonomous and not an agent of the
9.22state or federal government, and therefore:
9.23 (1) the creation of the ESA program does not expand the regulatory authority of the
9.24state, the commissioner, the department, any other government agency or officers, or any
9.25school district to impose any additional regulation of nonpublic schools or educational
9.26service providers beyond those necessary to enforce the requirements of the ESA program;
9.27and
9.28 (2) upon being recognized by the commissioner, an eligible school shall have the freedom
9.29to provide for the educational needs of students and be able to offer diverse learning
9.30opportunities. Upon such recognition, no additional mandates to participate in the ESA may
9.31be imposed on an eligible school that would require a change to the school's admission
9.32criteria, employment practices, pedagogy, or curriculum.
9Section 1.
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
10.2of the 2028-2029 school year a Parent Review and Advisory Panel must be established to
10.3assist the commissioner and the department. The panel's responsibilities are solely advisory
10.4or at the commissioner's request and include:
10.5 (1) collaborating with the commissioner to develop a system for parents to publicly rate,
10.6review, and share information about education service providers;
10.7 (2) recommending to the commissioner whether questionable expenditures meet the
10.8requirements to be considered qualifying expenses to educate the ESA student pursuant to
10.9subdivision 3; and
10.10 (3) recommending to the commissioner ways to better implement, administer, and
10.11increase the usage of the ESA program.
10.12 (b) The panel shall consist of nine members who are parents of ESA students and
10.13represent at least four counties in the state. The members shall not be compensated other
10.14than standard reimbursement for travel expenses. The nine members shall be appointed
10.15equally by the governor, speaker of the house, and president of the senate and serve at the
10.16pleasure of their respective appointers for one calendar year. Panel members may be
10.17reappointed.
10.18 (c) The commissioner or the commissioner's designee shall serve as the nonvoting chair
10.19of the panel.
10.20 (d) The commissioner may request the panel to meet in person or virtually to vote on
10.21whether:
10.22 (1) an expenditure of ESA funds is or was a qualifying expense to educate an ESA
10.23student pursuant to subdivision 3;
10.24 (2) to review appeals of denial of participation in the ESA program by education service
10.25providers; or
10.26 (3) an education service provider should be allowed to receive, or continue receiving,
10.27payments from ESAs.
10.28 Subd. 17.Legal proceedings and severability.(a) In any legal proceeding challenging
10.29the application of this act to an education service provider, the state bears the burden of
10.30establishing that the law is necessary and does not impose any undue burden on the education
10.31service provider.
10Section 1.
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;
11.2a public school, including a charter school; or a school district based on the award or use
11.3of an ESA under this section.
11.4 (c) If any part of this act is challenged in state court as violating either the state or federal
11.5laws or constitutions, parents of participating or eligible students may intervene as of right
11.6in such lawsuit for the purposes of defending the ESA program's legality or constitutionality.
11.7For the purposes of judicial administration, a court may require that all parents file a joint
11.8brief, so long as they are not required to join any brief filed on behalf of any named state
11.9defendant.
11.10 (d) If any provision of this law or its application is found to be unconstitutional and void,
11.11the remaining provisions or applications of this law that can be given effect without the
11.12invalid provision or application are valid.
11.13 EFFECTIVE DATE.This section is effective the day following final enactment.
11Section 1.
25-03033 as introduced01/30/25 REVISOR KRB/AC