AB19 - Education expenses: Education Choice and Parental Empowerment Act of 2025.

Amended IN Assembly March 28, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 19 Introduced by Assembly Member DeMaio December 02, 2024 An act to add Article 19.2 (commencing with Section 69995) to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, and to add Sections 17132.2 and 17210 to the Revenue and Taxation Code, relating to education expenses. expenses, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST AB 19, as amended, DeMaio. Education expenses: education savings accounts. Education Choice and Parental Empowerment Act of 2025. Existing (1) Existing law establishes a system of elementary and secondary education in this state. This system consists of the public and private schools that provide instruction in kindergarten and in grades 1 to 12, inclusive. Existing law establishes a system of higher education in this state, consisting of 4 segments: the University of California, under the administration of the Regents of the University of California; the California State University, under the administration of the Trustees of the California State University; the California Community Colleges, under the administration of the Board of Governors of the California Community Colleges; and independent institutions of higher education. This bill would state the intent of the Legislature to enact subsequent legislation, to be known as the Education Choice and Parental Empowerment Act of 2025, to empower parents to send their children to better performing schools by providing them with education savings accounts. This bill would enact the Education Choice and Parental Empowerment Act of 2025 and establish the Education Savings Account (ESA) Trust, to be known as the ESA Trust, as a fund within the State Treasury to be administered by the ESA Trust Board. For the 2027–28 to 2030–31, inclusive, school years, the bill would authorize certain children eligible to be enrolled in kindergarten or any of grades 1 to 12, inclusive, to establish an ESA, based on parent or guardian income. The bill, beginning with the 2031–32 school year, would authorize every child eligible to be enrolled in kindergarten or any of grades 1 to 12, inclusive, to establish an ESA. The bill would credit a deposit amount to the account of every eligible student enrolled in an eligible school for tuition, elementary and secondary eligible education expenses, and undergraduate or graduate eligible education expenses, as defined. The bill would specify the deposit amounts for the 2027–28 school year, and would require the Department of Finance, beginning on July 1, 2028, to determine the ESA deposit amount annually for the upcoming school year, as provided. The bill would require the Controller to transfer an amount of money from the General Fund to the ESA Trust in those amounts. The bill would specify the membership of the ESA Trust Board and would vest the ESA Trust Board with certain powers and duties. The bill would establish 2 accounts within the ESA Trust, the ESA Trust Program Account and the ESA Trust Administrative Account, and would continuously appropriate the moneys in the program account to the ESA Trust Board for purposes of the bill, thereby making an appropriation. The bill would require the Superintendent of Public Instruction to establish a procedure for the parents and legal guardians of eligible students to apply to establish an ESA and submit an executed participation agreement. The bill would authorize the ESA Trust Board to disburse funds from ESAs to eligible schools. The bill would define “eligible school” as a campus of the California Community Colleges, the California State University, and the University of California, a full-time private school accredited by, or, except as provided, awaiting accreditation from, a regional accrediting agency recognized by the state or the United States Department of Education, a private college or university, a public college or university, or a vocational educational or training institution, as specified. The bill would specify the procedures for participating eligible schools to receive funds disbursed by the ESA Trust Board. Once an eligible student graduates from high school or obtains a high school equivalency certification, the bill would impose a $50,000 cap on the balance in any ESA available for an eligible student’s use for tuition, undergraduate or graduate eligible education expenses, or expenses associated with vocational education. The bill would require the Department of Finance to adjust this limit annually for inflation using the California Consumer Price Index. (2) The Classroom Instructional Improvement and Accountability Act, an initiative approved by the voters as Proposition 98 at the November 8, 1988, statewide general election, amended the California Constitution to, among other things, set forth a formula for computing the minimum amount of revenues that the state is required to appropriate for the support of school districts and community college districts based on one of 3 tests in any given fiscal year, one of which is based on the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in the 1986–87 fiscal year, and 2 of which are based on, among other things, changes in enrollment. This bill would require the Legislature to recalculate that minimum education funding guarantee by including eligible students not enrolled in a public elementary or secondary school before the operative date of the act in those minimum funding guarantee calculations based on average daily attendance, as provided. The bill would also require the costs of providing ESA deposit amounts for eligible students to be apportioned between the General Fund and the public school district in which those eligible students reside in the same ratio of General Fund and local property tax revenue that would have been used to educate those eligible students in their public school district. (3) The Personal Income Tax Law, in modified conformity with federal law, generally defines “gross income” as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income, and deductions from income, for purposes of computing tax liability. This bill, for taxable years beginning on or after January 1, 2026, would exclude from gross income any amounts received as distribution from an Education Savings Account, as defined, as part of a participation agreement, as defined. This bill, for taxable years beginning on or after January 1, 2026, would also allow a deduction in an amount equal to the amount contributed by a taxpayer to an Education Savings Account. Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements. This bill would state the intent of the Legislature to include additional information required for any bill authorizing a new tax expenditure. (4) These provisions would become operative on January 1, 2027, only if Assembly Constitutional Amendment ____ of the 2025–26 Regular Session is approved by the voters at the statewide general election on November 3, 2026. Digest Key Vote: MAJORITY 2/3 Appropriation: NO YES Fiscal Committee: NO YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Article 19.2 (commencing with Section 69995) is added to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, to read: Article 19.2. Education Choice and Parental Empowerment Act of 2025 69995. This article shall be known, and may be cited, as the Education Choice and Parental Empowerment Act of 2025. 69995.01. For purposes of this article, the following definitions apply: (a) “Account beneficiary” means the eligible student for whom an ESA was established by the ESA Trust Board. (b) “Administrative account” means the account established within the ESA Trust pursuant to subdivision (f) of Section 69995.02 from which the costs of administering the ESA Trust are paid. (c) “Costs of administration” means the actual costs of the ESA Trust Board to administer ESAs, subject to the limit established in subdivision (d) of Section 69995.03. (d) “Elementary and secondary eligible education expenses” means the expenses typically associated with the education of a pupil enrolled in a public elementary or secondary school or an eligible student enrolled in an eligible school, other than tuition, including, but not limited to, books, school supplies and equipment, academic tutoring, academic testing fees, special needs services of a special needs account beneficiary, transportation to and from school, and school functions. Expenses incurred by an eligible student to attend a community college before high school graduation, including tuition, are elementary and secondary eligible education expenses. (e) “Eligible school” means any of the following: (1) A campus of the California Community Colleges, the California State University, or the University of California. (2) A private full-time day school, as described in Section 48222, operating in the state and accredited by a regional accrediting agency recognized by the state or the United States Department of Education, or a school that has applied for that accreditation, but the application is pending, and the school has not been denied accreditation in the prior two years by the same accrediting agency, that has filed an application with the Superintendent pursuant to Section 69995.09. (3) A private college or university accredited by a regional accrediting agency recognized by the state or the United States Department of Education. (4) A public college or university accredited by a regional accrediting agency recognized by the state that operates it or the United States Department of Education. (5) A vocational education or training institution accredited by a regional accrediting agency recognized by the state or the United States Department of Education and operating in California. (f) “Eligible student” means a child eligible to enroll in a public elementary or secondary school and enrolled in an eligible school, except as follows: (1) For the 2027–28 and 2028–29 school years, a child is an eligible student only if the child’s parent or guardian’s taxable income is less than sixty-five thousand dollars ($65,000) per year for a single filer or one hundred twenty thousand dollars ($120,000) per year for dual filers. (2) For the 2029–30 and 2030–31 school years, a child is an eligible student only if the child’s parent or guardian’s taxable income is less than one hundred thirty thousand dollars ($130,000) per year for a single filer or two hundred fifty thousand dollars ($250,000) per year for dual filers. (g) “ESA” means Education Savings Account. (h) “ESA deposit amount” means the amount calculated pursuant to subdivision (d) of Section 69995.02. (i) “ESA Trust” means the Education Savings Account Trust established by subdivision (a) of Section 69995.02. (j) “ESA Trust Board” means the Education Savings Account Trust Board established by subdivision (a) of Section 69995.03. (k) “Participation agreement” means the uniform contract created by the ESA Trust Board that must be executed by the ESA Trust Board and the parent or legal guardian of an eligible student that directs the ESA Trust Board to disburse funds to an eligible school on behalf of the account beneficiary. (l) “Program account” means the account created in the ESA Trust pursuant to subdivision (f) of Section 69995.02 from which moneys transferred from the General Fund, investment earnings, and other grants, gifts, or appropriations are maintained and segregated into ESAs for eligible students. (m) “Tuition” means the amount charged by an eligible school to enroll a pupil or student at the school for a particular grade level and registration fees associated with application and enrollment. (n) “Unclaimed funds” means funds remaining in an ESA that are not disbursed to an eligible school after the eligible student becomes either ineligible or attains 30 years of age, whichever comes first. (o) “Undergraduate or graduate eligible education expenses” means the expenses typically associated with the education of an undergraduate or graduate student in an eligible school, other than tuition, including, but not limited to, books, school supplies and equipment, academic tutoring, special needs services of a special needs student, any additional school fees, and room and board. 69995.02. (a) There is hereby established an instrumentality of the State of California to be known as the Education Savings Account Trust. (b) Every eligible student whose parent or guardian desires to enroll the child in an eligible school, may establish an ESA pursuant to this article. (c) Every eligible student enrolled in an eligible school shall be entitled to a credit to the child’s ESA for tuition, elementary and secondary eligible education expenses, and undergraduate or graduate eligible education expenses. (d) The ESA deposit amount for the 2027–28 school year shall be eighteen thousand five hundred dollars ($18,500). Beginning July 1, 2028, the Department of Finance shall adjust the ESA deposit amount annually by the same percentage required for the support of school districts in the same fiscal year, pursuant to Section 8 of Article XVI of the California Constitution. (e) Each school year, the Controller shall transfer an amount of moneys from the General Fund to the ESA Trust equal to the ESA deposit amount determined pursuant to subdivision (d) multiplied by the number of ESAs established pursuant to subdivision (b). The ESA deposit amount for an individual student may be adjusted for an ESA established after the beginning of the school year and for a partial school year pursuant to an application submitted pursuant to subdivision (b) of Section 69995.04. The Controller shall make at least three transfers to the ESA Trust during each fiscal year, with the first transfer occurring on August 1 and the last transfer occurring on or before June 15. The Controller shall adjust the amount of moneys transferred from the General Fund to the ESA Trust to ensure that the total amount of moneys transferred during the school year equals the amount required to be transferred pursuant to this article. The Controller shall report the total amount of moneys transferred from the General Fund to the ESA Trust pursuant to this article to the Department of Finance and the Legislature on or before June 15 of each year. This article does not prohibit the Legislature from appropriating additional funds to the ESA Trust. (f) The ESA Trust is hereby established as a fund in the State Treasury. The ESA Trust Program Account and the ESA Trust Administr [Text truncated for display. Full text available on Congress.gov.]