HB 1540 — AN ACT to create and enact a new chapter to title 15.1 of the North Dakota Century Code, relating to an education savings account program for students who are not enrolled in public school or a homeschool program; to provide an appropriation; and to provide an effective date.

TheB. state treasurer annually shall transfer the funds required for education savings accounts from the general fund to the Bank of North Dakota for quarterly deposit in each education savings account.

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1540 - PAGE 3 25.1055.03000Bank Sixty-ninthof LegislativeNorth AssemblyDakota 9.- State treasurer - Duties - Transfer.

Funds, not to exceed twenty-five percent of the amount under subsection 1, not expended over the course of a school year may be carried forward for use in the following school year for a child who remains in the education savings account program.

If a parent removes a child from the education savings account program before the end of the school year, any remaining funds from that school year must be returned to the state and be allocated to fund other accounts.

A student may transfer to another nonpublic school or home school and retain the funds in the education savings account.

10.

Funds deposited in an education savings account do not constitute taxable income to the parent or the education savings account student.

Bank of North Dakota - Administrator - Administration.

The Bankadministrator of North Dakota shall:

QualifyBeginning privatewith financialthe management2026-27 firmsschool toyear, manageannually anddeposit administerinto each education savings accounts.account:

(1) Thirty-five percent of the state per-pupil payment amount distributed per student under subsection 3 of section 15.1-27-04.1, if the eligible student's household has an annual income less than or equal to two hundred percent of the most recently revised poverty income guidelines published by the United States department of health and human services.

(2) Twenty percent of the state per-pupil payment amount distributed per student under subsection 3 of section 15.1-27-04.1, if the eligible student's household has an annual income greater than two hundred percent but less than or equal to four hundred percent of the most recently revised poverty income guidelines published by the United States department of health and human services.

(3) Ten percent of the state per-pupil payment amount distributed per student under subsection 3 of section 15.1-27-04.1, if the eligible student's household has an annual income greater than four hundred percent of the most recently revised poverty income guidelines published by the United States department of health and human services.

ConductQualify or contract for the auditing of accounts and, at a minimum,program conductmanager randomto auditsmanage ofand accountsadminister oneducation ansavings annualaccounts. basis.

The Bank of North Dakota may make a parent of an eligible student ineligible for the education savings account program if the parent substantially misuses the funds in the account.

ReferEstablish casesthe ofrole substantialand misuseresponsibilities of fundsa toprogram lawmanager. enforcement for investigation if evidence of fraudulent use of an account is obtained.

MakeConduct paymentsor tocontract eligiblefor students'the educationauditing savingsof accounts onand, at a quarterlyminimum, conduct random audits of accounts on an annual basis.

A program manager may conduct the audits.

The administrator may determine a parent of an eligible student is ineligible for the education savings account program if the parent substantially misuses the funds in the account.

AdoptRefer rulescases andof proceduressubstantial asmisuse necessaryof funds to law enforcement for theinvestigation, administrationif evidence of thefraudulent educationuse savingsof an account program.is obtained.

UponMake thedeposits student'sinto graduationeligible fromstudents' higheducation school,savings theaccounts superintendenton ofa publicquarterly instructionbasis. shall close the student's account and transfer any remaining money in the account to the general fund in the state treasury.

g.

Adopt rules and procedures under chapter 28-32 for the administration of the education savings account program, as necessary.

h.

Upon a participating student's graduation from high school or termination of participation in the education savings account program, close the participating student's account and transfer any remaining money in the account to the general fund in the state treasury.

The administrator shallmay providebar to the parent of a participating studentschool aor writteneducation explanationservice ofprovider from the allowableeducation usessavings ofaccount educationprogram savingif accounts, the responsibilitiesadministrator ofdetermines the parent,participating andschool theor dutieseducation ofservice theprovider administrator.has:

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4Routinely 25.1055.03000failed Sixty-ninthto Legislativecomply Assemblywith Participatingthe schoolsaccountability -standards Accountabilityestablished standards.under this chapter;

or b.

Failed to provide a participating student with the educational services funded by the education savings account.

3.

If the administrator bars a participating school or education provider from the education savings account program, the program manager shall notify eligible students and parents of H.

B.

NO.

1540 - PAGE 4 the decision as quickly as possible.

A parent may appeal a decision of the administrator under chapter 28-32.

4.

The state treasurer annually shall transfer the funds required for education savings accounts from the general fund to the Bank of North Dakota for quarterly deposit in each education savings account.

5.

Funds, not to exceed twenty-five percent of the amount under subsection 1, not expended over the course of a school year may be carried forward for use in the following school year for a child who remains in the education savings account program.

If a parent removes a child from the education savings account program before the end of the school year, any remaining funds from that school year must be returned to the state and be allocated to fund other accounts.

A student may transfer to another nonpublic school and retain the funds in the education savings account.

6.

Funds deposited in an education savings account do not constitute taxable income to the parent or the education savings account student.

7.

The superintendent of public instruction may apply to a federal agency for additional funds to support this program.

These funds must provide an additional benefit to each participating student's education savings account.

If necessary to become eligible for the receipt of federal funds, the Bank of North Dakota, with consideration of advice provided by the superintendent of public instruction, shall adopt rules that supersede any conflicting law under this chapter.

Participating schools - Department - Accountability standards.

ToA ensure students are treated fairly and kept safe, each participating nonpublic school shall:

Comply with all health and safety laws or codes that apply to nonpublic schools;schools.

Obtain certification of approval under section 15.1-06-06.1;15.1-06-06.1.

Hold a valid occupancy permit if required by the school's municipality;municipality.

and d.

Certify the school complies with the nondiscrimination policies under [4242 U.S.C.

1981].1981.

e.

Provide a parent with a receipt for all qualifying expenses at the school.

f.

Refund any payment for which a good or service was not provided to the student due to a participating student terminating participation in the education savings account program.

A tuition payment must be refunded pro rata determined by the school days remaining in the term for which the tuition was paid.

A refund must be paid to the administrator who shall deposit the funds into the appropriate student's education savings account.

g.

Ensure the eligible student takes the state assessments, or other nationally norm- referenced tests, which measure learning gains in mathematics and English language arts, and provide for value-added assessment.

If a parent selects the state assessment, the department shall pay associated costs and materials.

h.

Ensure the results of the tests are provided to the department.

ToThe ensuredepartment, fundsor arean spentorganization appropriately,chosen aby participatingthe schooldepartment, shall:

ProvideEnsure acompliance parent with a receipt for all qualifyingstudent expensesprivacy atlaws. the school.

DemonstrateCollect theall school'stest financialresults. viability, if the school is to receive fifty thousand dollars or more during the school year, by filing with the administrator before the start of the school year:

(1)H. A surety bond payable to the state in an amount equal to the aggregate amount of the funds from education savings accounts expected to be paid during the school year from students admitted at the participating school;

orB. (2) Financial information demonstrating the school has the ability to pay an aggregate amount equal to the amount of the funds from education savings accounts expected to be paid during the school year to students admitted to the participating school.

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1540 - PAGE 5 c.

Provide the test results, associated learning gains, and graduation rates to the public on the department's website after the third year of test and graduation-related data collection.

The findings must be aggregated by the student's grade level, gender, family income level, number of years of participation in the education savings account program, and race.

Data aggregation related to assessments may be limited to the state assessment, as determined necessary by the department.

d.

Provide rates for high school graduation for participating students to the public on the department's website after the third year of test and test-related data collection.

ToA allowparticipating parentsnonpublic andschool taxpayersor toother measureeducation theservice achievementsprovider is autonomous and not an agent of the educationstate savingsor accountfederal program:government and, except as provided under this chapter and in related rules, the:

ParentsDepartment shallmay ensure:not regulate the educational program of a participating nonpublic school or education service provider that accepts funds from an education savings account;

(1) The eligible student annually takes the state achievement tests, nationally norm-referenced tests, or equivalent tests that measure learning gains in mathematics and language arts, and provide for value-added assessment.

If a parent selects the state achievement test, the department shall pay associated costs and materials;

(2) The results of the tests are provided to the department or an organization chosen by the state on an annual basis;

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5 25.1055.03000 Sixty-ninth Legislative Assembly (3) The student information is reported in a way that allows the department to aggregate data by grade level, gender, family income level, and race;

and (4) The department, or an organization chosen by the department, is informed of the eligible student's graduation from high school.

TheCreation department,of the education savings account program does not expand the regulatory authority of the state, its officers, or a school district to impose an organizationadditional chosenregulation byof nonpublic schools or education service providers beyond the department,regulations shall:necessary to enforce the requirements of the education savings account program;

(1) Ensure compliance with all student privacy laws;

(2) Collect all test results;

(3) Provide the test results, associated learning gains, and graduation rates to the public on the department's website after the third year of test and graduation-related data collection.

The findings must be aggregated by the student's grade level, gender, family income level, number of years of participation in the education savings account program, and race;

(4) Provide rates for high school graduation, college attendance, and college graduation for participating students to the public on the department's website after the third year of test and test-related data collection;

and (5) Administer an annual parental satisfaction survey requesting each parent of a student receiving an education savings account program grant indicate the number of years the child has participated in the education savings account program and express the parent's:

(a) Satisfaction with the education savings account program;

and (b) Opinions on other topics, items, or issues that may indicate the effectiveness of the education savings account program.

4.

A participating nonpublic school or other education service provider is autonomous and not an agent of the state or federal government and:

a.

The department may not regulate the educational program of a participating nonpublic school or education service provider that accepts funds from an education savings account, except as provided under this chapter and chapter 15.1-23;

b.

The creation of the education savings account program does not expand the regulatory authority of the state, its officers, or a school district to impose an additional regulation of nonpublic schools or education service providers beyond Page No.

6 25.1055.03000 Sixty-ninth Legislative Assembly the regulations necessary to enforce the requirements of the education savings account program;

DepartmentProgram ofmanager public instruction - Administrator - Duties.

The program manager shall:

The administrator shall:

a.

b.2.

The administratorprogram manager shall ensure the application is readily available to interested families through various sources, including the department's website.

c.3.

d.4.

e.5.

2.6.

TheProvide departmentto maythe barparent of a participating schoolstudent ora educationwritten serviceexplanation providerof from the allowable uses of education savings accountaccounts, programthe ifresponsibilities of the departmentparent, determinesand the participatingduties schoolof orthe educationprogram providermanager. has:

7.

Ensure the department is informed of a participating student's graduation from high school or a participating student's termination of participation in the education savings account program.

8.

Coordinate with the administrator to develop procedures to implement the program in accordance with this chapter and related rules.

9.

Upon request, determine whether an expense is allowable.

H.

B.

NO.

1540 - PAGE 6 10.

Establish a procedure for a participating school to provide data to the department as required under this chapter.

11.

Administer an annual parental satisfaction survey requesting each parent of a student receiving an education savings account program grant indicate the number of years the child has participated in the education savings account program and express the parent's:

RoutinelySatisfaction failed to comply with the accountabilityeducation standardssavings establishedaccount underprogram; this chapter;

orand b.

FailedOpinions toon provideother thetopics, eligibleitems, studentor withissues thethat educationalmay servicesindicate fundedthe byeffectiveness of the education savings account.account program.

3.

If the department bars a participating school or education provider from the education savings account program, the department shall notify eligible students and parents of Page No.

7 25.1055.03000 Sixty-ninth Legislative Assembly the decision as quickly as possible.

A parent may appeal a decision of the department under chapter 28-32.

4.

The department shall adopt rules and procedures as necessary for the administration of the education savings account program.

Shall provide a participating school or education service provider that has admitted an eligible student under this chapter with a complete copy of the student's school records, while complying with the Family Educational Rights and Privacy Act of 1974 [20 U.S.C.

May provide transportation for an eligible student to and from the participating school or education service provider under the same conditions as the school district of residence is required to provide transportation for other resident students to nonpublic schools.

There is appropriated out of any moneys in the general fund in the state treasury, not otherwise appropriated, the sum of $40,000,000,$21,700,000, or so much of the sum as may be necessary, to the Bank of North Dakota for the purpose of fundingimplementing the education savings account program and funding education savings accounts beginning in the 2026-27 school yearyear, 2026-27, for the biennium beginning July 1, 2025, and ending June 30, 2027.

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8B. 25.1055.03000

NO.

1540 - PAGE 7 ____________________________ ____________________________ Speaker of the House President of the Senate ____________________________ ____________________________ Chief Clerk of the House Secretary of the Senate This certifies that the within bill originated in the House of Representatives of the Sixty-ninth Legislative Assembly of North Dakota and is known on the records of that body as House Bill No.

1540.

House Vote:

Yeas 49 Nays 43 Absent 2 Senate Vote:

Yeas 27 Nays 20 Absent 0 ____________________________ Chief Clerk of the House Received by the Governor at ________M.

on _____________________________________, 2025.

Approved at ________M.

on __________________________________________________, 2025.

____________________________ Governor Filed in this office this ___________day of _______________________________________, 2025, at ________ o’clock ________M.

____________________________ Secretary of State H.

B.

NO.

1540 - PAGE 8 Honorable Michael Howe Secretary of State Bismarck, North Dakota I certify this Act, House Bill No.

1540, together with the objections of Governor Armstrong, was returned to the House, being the body in which it originated, on April 24, 2025;

that the objections of the Governor were entered upon the Journal on April 24, 2025;

that the Bill was taken up for reconsideration;

that the motion for reconsideration failed on April 25, 2025, at 12:50 p.m.;

and the roll was called and the Bill failed to pass, with less than two-thirds of the members-elect voting in the affirmative.

Vote:

Yeas 45 Nays 48 Absent and not voting 1 ____________________________ Speaker of the House ____________________________ Chief Clerk of the House