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HB 4537 Bill Analysis

HB 4537 by Rep. Middleton is the identical companion bill of Sen. Bettencourt’s SB 1968

Analysis by Texas Public Policy Foundation staff:

H.B. 4537 amends the Education Code to add Subchapter J which creates the Family Educational Relief Program for the purpose of giving children from low-income households more choice in education. The program would fund education-related expenses of participants.

A child is eligible to participate in the program if the child is eligible to attend public school and qualifies for the national free or reduced lunch program or is a sibling of a child who qualifies and is eligible to attend public school. A child is no longer eligible for the program if he or she graduates high school, is no longer eligible to attend public school, enrolls in a public school, or is declared ineligible by the comptroller.

Certain organizations will be designated as certified educational assistance organizations; to be eligible for certification, organizations must be able to perform the functions and administration required by the program and have 501(c)(3) status. A parent of an eligible child can apply to enroll the child in a certified educational assistance organization and must include eligibility verification information. Organizations may not keep information obtained to qualify the child beyond the period necessary to determine eligibility. The certified educational assistance organization must include on their website the expenses allowed under the program, the expense reporting requirements, and the descriptions of the responsibilities of both the participants and the organization. Priority for admission will be given to students who participates in the program the previous year, siblings of participants from the previous year, and children with the greatest financial need.

The comptroller will provide to certified educational assistance organizations and include on the website a list of preapproved providers and vendors. If the vendor is a private school, in order to be approved, the private school must be accredited by the Texas Private School Accreditation Commission, administer annual assessment under Sec. 39.023, provide evidence of certain policies, and allow participants in the program to apply for any other scholarship offered by the school. If the vendor is a private tutor, therapist or teaching service, in order to be approved the vendor must be certified, hold relevant licenses, be employed (as a teacher or tutor) in an institution of higher education, and complete a national criminal history record review. If the vendor is an online educational course or program, the vendor must be accredited by an organization recognized by the Texas Private School Accreditation Commission. All other types of vendors must present documentation and qualifications. An education service provider may not be required to change practices, policies, curriculum, or assessments to receive money under the program.

Parents of the participants must agree to only spend the money from the program on allowed expenses and notify the certified education assistance organization within 30 days of the child losing eligibility. Funds from the program may not be paid to any anyone related within the third degree or household member of the participant. An education service provider cannot charge a child participating in the program an amount greater than the standard amount and refunds or credit to the participant are not allowed. The following fees are approved education related expenses:

  • Private school, institution of higher education, or online course tuition;
  • Textbooks, uniforms or other required materials by the school;
  • Tutoring or teaching services; and
  • Educational therapy not covered by any federal, state, or local government (such as Medicaid or Children’s Health Insurance Program) or private insurance.

90% of state’s average maintenance and operations expenditures per student in daily attendance will be placed in an account per participant. Any remaining money at the end of the fiscal year will be carried forward unless the account is closed. In the event the child no longer qualifies, the account will be closed, and funds returned to the Family Education Relief Program Fund. The fund may not be financed by federal money or money from the school fund, but the comptroller can solicit and accept gifts, grants, and donations from public and private sources. The comptroller will make quarterly equal payments to the account.

The comptroller will also make quarterly payments to each certified educational assistance organization to cover the organization’s administration cost though the total amount to all certified education assistance organizations cannot exceed 5% of the funds appropriated. Prior to the payment, each certified education assistance organization must compare participant and public school enrollment lists and notify the comptroller of any overlap. The comptroller may contract a private entity to conduct random auditing to verify compliance with the program.

An account will be suspended if the participant fails to comply with the rules of the program as adopted by the comptroller. Upon receiving notification of suspension of the account, a participant has 10 days to respond and take corrective action. On the 10th day, the comptroller will either close the account and remove the participant from the program, temporarily reinstate the account on a specified condition, or reinstate the account in full. The comptroller may recover money used for not authorized expenses from the participant or entity. If there is evidence of fraudulent uses of the account, the comptroller or organization may refer the case to the attorney general.

Every certified educational assistance organization must post on their website and send to each parent of a child with a disability who applies a notice stating private schools are not subject to the same laws regarding special education and a child with disability may not receive the same services at a private school along with a list of rights under federal and state law children with disabilities have at public schools.

H.B. 4537 amends the Government Code to add subsection (c) to allow the comptroller to obtain criminal history records for private tutors, therapists, and employees of teaching services who intend to provide services to a child in the program.

H.B. 4537 amends the Insurance Code to add Chapter 230 to create a tax credit for contributions to the Family Educational Relief Program that entities can apply for. The amount of credit an entity receives is equal to the lesser of the amount contributed during the period covered by the tax report or 50% of the entity’s state premium tax liability for the report. For the 2022 fiscal year, the total amount of credit cannot exceed $200 million and following years, the credit available will stay the same unless 90% of the available credit was awarded the previous year, then the credit available will increase to 125% of the previous year’s credit. The comptroller can require an entity to estimate the amount of credit it intends to apply for at any point in the year.

Prior to making a contribution to the fund, an entity can apply for preliminary approval of credit by filling out a form for the comptroller. The comptroller will grant preliminary approval on a first-come, first-served basis for as long as there is credit available without exceeding the year’s credit limit. For a standard credit application, the entity must apply within the tax period the contribution was made through a form created by the comptroller. The comptroller has discretion in choosing who receives credit and reasoning for denial cannot be requested though an entity can request a reconsideration within 30 days which is final. Credit awarded cannot be transferred to another entity unless all assets of the entity are transferred to the other.