HOUSE BILL 480
56th legislature - STATE OF NEW MEXICO - first session, 2023
T. Ryan Lane and James G. Townsend and Luis M. Terrazas and Alan T. Martinez and Mark Duncan
RELATING TO EDUCATION; ENACTING THE EDUCATION FREEDOM ACCOUNT ACT; PROVIDING POWERS AND DUTIES; PROVIDING FOR EDUCATION FREEDOM ACCOUNTS; PROVIDING ALLOWABLE USES; PROVIDING PROCEDURES AND APPLICATION REQUIREMENTS FOR PARENTS AND EDUCATION SERVICE PROVIDERS; CREATING A REVIEW COMMISSION; MAKING APPROPRIATIONS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Education Freedom Account Act"."
SECTION 2. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] DEFINITIONS.--As used in the Education Freedom Account Act:
A. "curriculum" means a complete course of study for a particular primary or secondary content area or grade level;
B. "education" means a primary or secondary education;
C. "education freedom account" means the account into which money is deposited by the department to pay for qualifying education expenses of a participating student;
D. "education service provider" means a private school located in New Mexico that is qualified to provide educational goods and services to participating students and that receives payments from education freedom accounts; provided that "education service provider" does not mean an online school;
E. "eligible student" means a school-age person who is a resident of New Mexico, who has not received a high school diploma or a high school equivalency credential and who is eligible for enrollment or re-enrollment in a public school;
F. "participating student" means a student who is participating in the program; and
G. "program" means the education freedom account program."
SECTION 3. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] EDUCATION FREEDOM ACCOUNT PROGRAM-- CREATED--FUNDING USES.--
A. The "education freedom account program" is created in the department to allow the department, in contract with parents of participating students, to pay for private school and other eligible expenses through "education freedom accounts". The department:
(1) shall establish education freedom accounts for students who qualify for the program;
(2) shall determine the amount each participating student is eligible to receive, which amount is equal to the average amount spent by school districts and charter schools on public school students in the same grade, weighted by special education and at-risk program units, if applicable; provided that a participating student shall not receive more than the student's qualifying educational expenses;
(3) shall make monthly deposits into each education freedom account; and
(4) may contract for financial management services for education freedom accounts.
B. Money in a participating student's education freedom account shall be used by the department, in contract with parents of participating students, only in accordance with the provisions of the Education Freedom Account Act and only for the following qualifying education expenses:
(1) tuition and fees at a private elementary or secondary school that teaches, among other courses, reading, language arts, mathematics, science and social studies appropriate for the grade level of the participating student;
(2) tutoring services provided by a qualified person;
(3) textbooks and other instructional materials, including computer hardware and software, required by the education service provider to deliver education to the participating student;
(4) fees for nationally standardized assessments, advanced placement examination fees and other assessments required by the education service provider;
(5) tuition or fees for summer and after-school elementary or secondary programs;
(6) public transportation to and from school; and
(7) other educational charges approved by the department.
C. The department and the parent of a participating student shall enter into an annual contract that specifies what qualifying education expenses will be purchased each semester or other term, the cost of the educational services to be provided and by whom the educational services will be provided. The department shall not deposit into an education freedom account more than the combined cost of educational services provided to the participating student in that year. A parent shall not pay more for educational services than the parent of a similarly situated school-age person pays. Money in an education freedom account shall not be refunded, rebated or shared with a parent or participating student in any manner. A refund or rebate for educational services purchased through an education freedom account shall be credited directly to that account. A parent may make payments for the cost of educational services not covered by an education freedom account, but in no case shall a parent deposit personal funds into a participating student's account.
D. Money in a participating student's education freedom account shall be issued at the direction of the participating student's parent to an education service provider, in the name of the student.
E. If an education service provider requires partial payment of tuition or fees prior to the start of the academic year to reserve space for a participating student admitted to the education service provider, such partial payment may be paid by the department prior to the start of the school year in which the education freedom account is awarded and deducted in an equitable manner from subsequent monthly account deposits to ensure that adequate funds remain available throughout the school year; provided that if the participating student does not attend the education service provider to which partial payment was made, the partial payment shall be returned to the department by the education service provider for credit to the account.
F. Funds deposited in an education freedom account shall not constitute taxable income for state tax purposes of the parent or the participating student.
G. Except as provided in Subsection H of this section, any unexpended or unencumbered balance in an education freedom account may remain in the account until one of the following occurs, at which time the department shall close the account and the unexpended or unencumbered balance shall revert to the general fund:
(1) the parent withdraws the participating student from the program;
(2) the student graduates from high school; or
(3) the account is closed by the department because of misuse of funds as determined by the department.
H. The department shall revert unexpended or unencumbered balances every two years unless it waives the reversion of a specific education freedom account for extenuating circumstances.
I. Nothing in the Education Freedom Account Act shall be construed to require a participating student to be enrolled only in a private school, but the participating student must be in compliance with the Attendance for Success Act."
SECTION 4. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] EDUCATION FREEDOM ACCOUNT--APPLICATION PROCESS--RENEWAL--SUSPENSION.--
A. A parent may apply to the department to establish an education freedom account for an eligible student.
B. The department shall accept and approve applications year-round and shall establish procedures and rules for approving applications in an expeditious manner.
C. The department shall create a standard form that parents shall submit to establish a student's eligibility for the program and shall ensure that the application is publicly available and may be submitted through various sources, including the internet.
D. The department shall approve an application for an education freedom account if:
(1) the parent submits an application for an education freedom account in accordance with the application procedures established by the department;
(2) the student, on whose behalf the parent is applying, is an eligible student;
(3) funds are available for the program or the education freedom account; and
(4) the parent signs a contract with the department agreeing:
(a) to provide an education for the participating student in at least the subjects of reading, language arts, mathematics, science and social studies;
(b) not to enroll the student as a full-time student in a public school while participating in the program;
(c) to use the funds in the education freedom account only for qualifying education expenses to educate the student; and
(d) to comply with the rules and requirements of the program.
E. The department shall annually renew a student's education freedom account if funds are available.
F. Upon notice to the department, a participating student may choose to stop receiving education freedom account funding and enroll full time in a public school. Enrolling as a full-time student in a public school shall result in the immediate suspension of payment of additional funds into the student's education freedom account; provided that, for education freedom accounts that have been open for at least one full school year, the department may allow an education freedom account to remain open and active for the parent to pay qualifying education expenses to educate the student from money remaining in the account. The department shall revert unexpended or unencumbered balances in a student's education freedom account and close the education freedom account at the beginning of the next school year if the student is enrolled in a public school.
G. If an eligible student decides to return to the program, payments into the student's education freedom account may resume if the education freedom account is still open and active. A new education freedom account may be established if the student's education freedom account is closed.
H. The department may adopt rules to provide the least disruptive process for a student who chooses to stop participating in the program and enroll full time in a public school."
SECTION 5. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] ADDITIONAL POWERS AND DUTIES--ALLOWABLE USES OF FUNDS--EDUCATION SERVICE PROVIDERS.--
A. The department shall:
(1) maintain an updated list of qualified education service providers and ensure that the list is publicly available through various sources, including the internet;
(2) provide parents with a written explanation of the allowable uses of education freedom account funds, the responsibilities of parents in ensuring the education of their children, the duties of the department and the role of any private financial management firms or other private organizations that the department may contract with to administer the program or any aspect of the program;
(3) ensure that parents of students with disabilities receive notice that participation in the program is a parental placement pursuant to the federal Individuals with Disabilities Education Act, along with an explanation of the rights that parentally placed students may possess under federal law and any applicable state laws and rules;
(4) implement a commercially viable, cost-effective and user-friendly system for processing payments for services from an education freedom account to an education service provider by electronic or online funds transfer; provided that the department:
(a) provides flexibility to parents by facilitating direct payments to education service providers as well as requests for preapproval of and reimbursements for qualifying education expenses; and
(b) may contract with private institutions to develop the payment system;
(5) implement, as soon as practicable, a commercially viable, cost-effective and user-friendly system, as part of the same system that facilitates the electronic or online funds transfers, for parents to publicly rate, review and share information about education service providers;
(6) continue making deposits into a student's education freedom account until the:
(a) department has been notified or determines that the student is no longer a participating student;
(b) department determines that there was misuse of the funds in the education freedom account;
(c) student withdraws from the program;
(d) student enrolls full time in a public school; or
(e) student graduates from high school;
(7) audit individual education freedom accounts;
(8) make a parent or participating student ineligible for the program in the event of misuse of education freedom account funds; provided that if a parent is determined to be ineligible for the program and the participating student is free from personal misconduct, that student may be eligible for an education freedom account if placed with a new guardian or other person with the legal authority to act on behalf of the student;
(9) refer suspected cases of misuse of education freedom account funds to law enforcement if evidence of fraudulent use of education freedom account funds exists;
(10) create procedures to ensure that a fair process exists to determine whether a misuse of education freedom account funds has occurred; and
(11) create procedures to ensure that a fair process exists to determine whether an education service provider may be barred from receiving payments from education freedom accounts; provided that an education service provider may appeal the department's decision to bar the education service provider from receiving payments from education freedom accounts; and provided further that if the department bars an education service provider from receiving payments, the department shall notify parents of participating students of the department's decision.
B. The department may:
(1) contract with private organizations to administer the program or specific functions of the program, including contracting with private financial management firms to manage education freedom accounts;
(2) withhold from deposits or deduct from an education freedom account an amount to cover the costs of administering the program, in an amount up to a maximum of five percent annually in the first two years of the program and up to a maximum of three percent annually thereafter;
(3) bar an education service provider from accepting payments from education freedom accounts if the department determines that the education service provider has:
(a) substantially misrepresented information or failed to refund any overpayments in a timely manner; or
(b) failed to provide participating students with sufficient educational goods or services;
(4) accept gifts, grants and donations from any source to cover administrative costs, to inform the public about the program or to fund additional education freedom accounts; and
(5) adopt rules in accordance with the State Rules Act that are consistent with the Education Freedom Account Act and necessary for the administration of that act, including rules:
(a) establishing or contracting for the establishment of an online anonymous fraud reporting service;
(b) establishing an anonymous telephone hotline for fraud reporting;
(c) requiring a surety bond for education service providers receiving more than one hundred thousand dollars ($100,000) in education freedom account funds; or
(d) for refunding payments from education service providers to education freedom accounts."
SECTION 6. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] EDUCATION SERVICE PROVIDERS--APPLICATIONS--AUTONOMY--NOT ACTING FOR THE STATE.--
A. The department by rule shall provide the application process and procedures for prospective education service providers to apply for listing as an eligible education service provider. An application form signed by a prospective education service provider warrants that the education service provider:
(1) will not refund, rebate or share money from education freedom accounts with parents or participating students and shall return refunds to the department; and
(2) will provide the education services contained in the agreement entered into with a parent.
B. An education service provider is not an agent of the state or federal government, a local school board or school district or governing authority or charter school. No action of an education service provider shall be construed as an action by the state or any of its departments, institutions or political subdivisions.
C. An education service provider shall not be required to alter its creed, practices, admissions policy or curriculum to accept payments pursuant to the Education Freedom Account Act except as provided in that act."
SECTION 7. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] STUDENT RECORDS.--Upon being notified that a participating student is enrolled with an education service provider, a public school that previously enrolled the participating student shall provide the education service provider with the student's school records. The public school and the education service provider shall comply with the provisions of the federal Family Educational Rights and Privacy Act of 1974 when sharing student records."
SECTION 8. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] EDUCATION FREEDOM REVIEW COMMISSION.--
A. The department shall create the "education freedom review commission" to assist the department in determining what expenditures meet the requirements to be considered qualifying education expenses to educate a participating student and to provide recommendations to the department on how to implement, administer and improve the program.
B. The education freedom review commission shall consist of nine voting members who shall be:
(1) five parents of participating students and represent no fewer than four counties of the state; and
(2) four New Mexico licensed educators.
C. The voting members shall be appointed by the secretary and shall serve at the pleasure of the secretary. The secretary, or the secretary's designee, shall serve as the nonvoting chair of the education freedom review commission.
D. The department may request that the education freedom review commission meet, in person or through a virtual or telephonic platform, to:
(1) determine whether an expenditure from an education freedom account is or was a qualifying expense; and
(2) review appeals of denials of an education service provider and make a recommendation to the secretary.
E. When requested, the education freedom review commission shall, by majority vote, recommend to the department:
(1) if a particular use of funds constitutes a qualifying expense; and
(2) if an education service provider should be allowed to receive, or continue receiving, payments from education freedom accounts."
SECTION 9. A new section of the Public School Code is enacted to read:
"[NEW MATERIAL] REPORT TO LEGISLATURE AND GOVERNOR.--The department shall report to the legislature and the governor by December 1 of each year on the program and its participants. The report shall include the number, grades and ages of participating students and where they attend school or receive other educational services; the geographic distribution of participating students by county; other demographic and economic data about participating students and parents; the number and locations of education service providers, the services they provide and the number of students they serve; the total amount of deposits into education freedom accounts and the cost of financial management contracts; the total expenditures for education service providers and the average cost of educational services being provided to participating students, by type of service and geographic region; and other information requested by the legislature or governor and considered reportable by the department."
SECTION 10. A new section of the Public School Code is
enacted to read:
"[NEW MATERIAL] EDUCATION FREEDOM ACCOUNT FUND--CREATED.--
A. The "education freedom account fund" is
created in the state treasury. The fund consists of money
appropriated by the legislature, federal money granted to the
state for the purposes of the fund, income from investment of
the fund and money otherwise accruing to the fund. Money in
the fund shall not revert to any other fund at the end of a
fiscal year. The department shall administer the fund, and money in the fund is appropriated to the department to carry out the purposes of the Education Freedom Account Act.
B. Money in the fund shall be disbursed on warrants
signed by the secretary of the department pursuant to vouchers signed by the secretary or the secretary's authorized representative."
SECTION 11. APPROPRIATIONS.--
A. The following amounts are appropriated from the general fund to the education freedom account fund for expenditure in fiscal years 2024 and subsequent fiscal years for the following purposes:
(1) five hundred eighty thousand dollars ($580,000) for the public education department to administer the education freedom account program; and
(2) one hundred million dollars ($100,000,000) to carry out the purposes of the Education Freedom Account Act.
B. Any unexpended or unencumbered balance remaining at the end of a fiscal year shall not revert to the general fund.
SECTION 12. SEVERABILITY.--If any part or application of the Education Freedom Account Act is held invalid, the remainder or its application to other situations or persons shall not be affected.
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