SB64 - Education expenses: School Choice Flex Account Act of 2025.

Amended IN Senate February 27, 2025 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Senate Bill No. 64 Introduced by Senator Grove January 09, 2025 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 Section 17132.2 to the Revenue and Taxation Code, relating to education expenses, and making an appropriation therefor. LEGISLATIVE COUNSEL'S DIGEST SB 64, as amended, Grove. Education expenses: School Choice Flex Account Act of 2025. (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. This bill would enact the School Choice Flex Account Act of 2025 and establish the School Choice Flex Account (SCFA) Trust, to be known as the SCFA Trust, as a fund within the State Treasury to be administered by the SCFA 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 SCFA or Special Education Flex Account (SEFA), based on parent or guardian income. The bill would, beginning with the 2031–32 school year, authorize every child eligible to be enrolled in kindergarten or any of grades 1 to 12, inclusive, to establish an SCFA or SEFA. The bill would credit a deposit amount to the account of every eligible student enrolled in an eligible school for tuition and certain school expenses. The bill would specify the deposit amounts for the 2027–28 school year, and require the Department of Finance, beginning on July 1, 2028, to determine the SCFA and SEFA deposit amounts 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 SCFA Trust in those amounts. The bill would require any unused funds remaining in an SCFA or SEFA account on June 30 of each school year to be returned to the state for the benefit of elementary and secondary education, upon appropriation by the Legislature. The bill would specify the membership of the SCFA Trust Board and would vest the SCFA Trust Board with certain powers and duties. The bill would establish 2 accounts within the SCFA Trust, the SCFA Trust Program Account and the SCFA Trust Administrative Account, and would continuously appropriate the moneys in the program account to the SCFA 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 SCFA or SEFA and submit an executed participation agreement. The bill would authorize the SCFA Trust Board to disburse funds from SCFAs or SEFAs to eligible schools, defined as private full-time day schools accredited by, or, except as provided, awaiting accreditation from, a regional accrediting agency recognized by the state or the United States Department of Education. The bill would specify the procedures for participating eligible schools to receive funds disbursed by the SCFA Trust Board. (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 SCFA and SEFA 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 for purposes of computing tax liability. This bill would, for taxable years beginning on or after January 1, 2027, exclude from gross income any amounts received as distribution from an SCFA or SEFA, as defined, as part of a participation agreement. 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 include additional information required for any bill authorizing a new tax expenditure. (4) These provisions would become operative on January 1, 2027, and only if Senate Constitutional Amendment ____ of the 2025–26 Regular Session is approved by the voters at the statewide general election on November 4, 2026. Digest Key Vote: 2/3 Appropriation: YES Fiscal Committee: YES Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. The Legislature finds and declares all of the following: (a) California’s civic, economic, and cultural future requires educational options that prepare every pupil and student for a worthwhile role in our vibrant state. (b) For years, opponents have tried to undermine efforts to help struggling California pupils and students by stating that adjusting public funds to give pupils and students the best educational chance was wrong. Instead of lifting families out of poverty and inspiring the next generation of entrepreneurs, scientists, and leaders, we have trapped children into a one-size-fits-all system that encourages failure rather than success. Parents watch their children struggle, and our “democratically governed public schools” have stopped investing in our children’s futures and are leaving the most marginalized pupils and students behind. (c) Educators are forced to “teach to the test,” instead of identifying and cultivating their pupils’ and students’ potential. And yet California has been ranked significantly lower than the national average at least since 2000 and the latest reports show this state once again is not meeting the minimal education standards. (d) Throughout the years, research has consistently shown that private school students tend to perform better on standardized tests. For example, grade 8 private school students averaged about 20 points higher than public school pupils on the reading assessment in 2022, and grade 4 students had nearly the same advantage in average scores. The most recent National Assessment of Educational Progress data shows that private school students score better in almost all subjects as well. (e) Pupils, students, parents, and educators increasingly want a learning environment where each pupil and student is uniquely known and valued, with customized learning experiences focused on children’s interests and aptitudes, and trust and respect for the parents’ role in developing and educating their children. (f) For special education in California, school districts must work with private schools and parents to create the most inclusive and thoughtful services for pupils in special education programs. School districts must spend a proportionate share of federal dollars for these programs, but there are no laws prohibiting school districts from spending additional state funds to help these pupils and parents. (g) Even though private schools are not obligated to create an individualized education program (IEP), once a student with a disability is enrolled in a religious or other private school, the school district must conduct meetings to develop, review, and revise services that will benefit the child and the plan must go through the same process and procedures required in the development of an IEP. (h) Yet financial barriers have many parents feeling that they have no options but to send their children to neighborhood schools. Private schools, charter schools, and home schools are achieving better educational results, but these options are unaffordable or unavailable for most pupils and students. ZIP Codes and lotteries determine the educational options available for most low- and middle-income pupils and students. (i) Before the COVID-19 pandemic, approximately 10 percent of pupils and students in California were using alternative education options, but the pandemic required families to try alternatives. In 2023, a survey of 3,820 parents of schoolage children showed that more than one-half of them either considered or are considering a new school. In that study, a majority of Hispanic, Latino, and Black parents, approximately 65 percent, said they were looking into or thinking about a new learning environment for their kids. (j) California now spends approximately $24,000 per year for each child in public school, including approximately $18,000 from state funds. Spending more on the current and outdated system has not created better results, and many low- to middle-class taxpaying families are not given a choice but to send their pupils to a school in this system. Allowing parents to decide the school that offers the best options and learning experiences for their pupil or student is a better use of education funds. The increasing demand for alternatives will create a range of exciting educational opportunities that all pupils and students can enjoy. (k) California is the fifth largest economy in the world and needs to offer a world-class, individualized, and customized education to every K–12 pupil or student in our state in order to continue providing for a sustainable and vibrant economy. As such, the state needs to innovate its education system to encourage our children to discover their unique talents, turn those talents into skills, and use those skills to create value for themselves and for others. (l) Therefore, the people hereby enact the School Choice Flex Account Act of 2025. The act includes the following provisions: (1) During the 2027–28 school year, $8,000 will be available to each pupil and each student, and $16,000 will be available to each pupil and each student with exceptional needs, to be used toward tuition and education expenses at an accredited private school of their choice. The annual amount shall be adjusted each year. A School Choice Flex Account or Special Education Flex Account will be established at the request of the pupil’s or student’s parent or legal guardian. (2) The School Choice Flex Account and Special Education Flex Account will be available to the lowest income families for the first two years after the act becomes operative, low- and middle- income families for the two following years, and all families beginning four years after the act is operative. (3) All of this will be achieved at no additional cost to taxpayers. SEC. 2. 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. School Choice Flex Account Act of 2025 69995. This article shall be known, and may be cited, as the School Choice Flex Account Act of 2025. 69995.01. For purposes of this article, the following definitions apply: (a) “Account beneficiary” means the eligible student for whom an SCFA or SEFA was established by the SCFA Trust Board. (b) “Administrative account” means the account established within the SCFA Trust pursuant to subdivision (f) of Section 69995.02 from which the costs of administering the SCFA Trust are paid. (c) “Costs of administration” means the actual costs of the SCFA Trust Board to administer SCFAs and SEFAs, subject to the limit established in subdivision (d) of Section 69995.03. (d) “Deposit amount” means the amount calculated pursuant to subdivision (d) of Section 69995.02. (e) “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 education and related services for students who are individuals with exceptional needs, and 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. (f) “Eligible school” means 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. (g) “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 fifty thousand dollars ($50,000) per year for a single filer or one hundred thousand dollars ($100,000) per year for dual filers. (2) For the 2029–30 and 2030–3031 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 thousand dollars ($100,000) per year for a single filer or two hundred thousand dollars ($200,000) per year for dual filers. (h) “Individualized education program” has the same meaning as that term is described in Section 56345. (i) “Participation agreement” means the uniform contract created by the SCFA Trust Board that must be executed by the SCFA Trust Board and the parent or legal guardian of an eligible student that directs the SCFA Trust Board to disburse funds to an eligible school on behalf of the account beneficiary. (j) “Program [Text truncated for display. Full text available on Congress.gov.]