Iowa budgeted for 14,000 education savings accounts. Twice that many applied

Interest among Iowa families for a new taxpayer-funded private school financial assistance program continues to grow — as does the potential cost to the state and the funding implications for public schools.

With just hours left to apply, 25,500 Iowa students had signed up for the state's new education savings account program as of noon Friday.

The state began accepting applications May 31, and families had until 11:59 p.m. Friday to apply for roughly $7,600 per year in public funding to put toward private school tuition or other private school expenses.

The Iowa Legislature allocated $107.4 million to fund the program, which would provide assistance for roughly 14,000 students — the same number the nonpartisan Legislative Services Agency predicted would enroll in the program in its first year. That total included an estimated 4,841 students who would transfer from a public school to a non-public school.

Assuming all 25,576 applications submitted receive funding, that would cost the state roughly $195.3 million.

The Department of Education did not say how many applications had been approved, denied or were pending review. Details will be reported as they are available, state officials said.

Some applications may be pending approval for up to 30 days after June 30.

The final number of education savings account, or ESA, program participants will not be available until certified school enrollment numbers are finalized later this fall, Iowa Gov. Kim Reynolds’ office said.

In addition to applying for an ESA, families apply to the accredited non-public school of their choice and, if accepted, will later update their ESA account indicating the school their child plans to attend.

The school then sends an invoice for tuition and fees to the ESA account. Once parents approve the payment, funds are transferred from the account to the school and the student is considered enrolled, according to the governor’s office.

ESA funds are in the state’s possession until the point when the parent or guardian approves an invoice from the accredited non-public school for payment of tuition and fees.

If a student’s ESA has been funded, but they do not attend an accredited non-public school by Sept. 30, the ESA will be closed and the funds will be retained by the state. ESA funds must be returned by the school for the semester in which the student did not attend, according to the Iowa Department of Education.

No funding ceiling

While lawmakers set aside more than $107 million for the program in its first year, the appropriation — as with public school funding — is a standing unlimited appropriation, meaning all approved educations savings accounts will be funded, said Heather Doe, communications director for the Iowa Department of Education.

State Rep. John Wills, a Republican from Spirit Lake who floor managed the bill (House File 68) in the Iowa House, said there is plenty of money in the state’s rainy day fund to pay for additional scholarships beyond what lawmakers had budgeted.

By the end of the new fiscal year on June 30, 2024, Iowa is projected to have a $2 billion general fund budget surplus and nearly $962 million in cash reserves.

Wills said more money also could be budgeted if needed by lawmakers when the next regular legislative session begins in January.

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“What that tells me is maybe we misunderstood or underestimated the number of people that would want to leave public school for private school, or the number of private school students who fall under the income threshold,” Wills said.

“We won’t really know until” the application window closes, all applications are processed and the Department of Education crunches the numbers, he said.

“But, I do think it demonstrates a pent-up up need in the state of Iowa for this program, and it’s good to see the people who wanted this option are taking advantage of it,” Wills said.

All incoming kindergartners and all K-12 students currently attending a public school who choose to enroll in an accredited non-public school for the 2023-24 school year are eligible for the ESA program, regardless of income. Also eligible are students who attended an accredited non-public school this past school year, if their household income is at or below 300 percent of the 2023 federal poverty level. That equates to $90,000 for a family of four.

By the third year, education savings accounts would become available to all K-12 students statewide with no income limits.

The new law is expected to cost the state $345 million annually by 2027, when fully implemented. In total, over the course of four years, the program would cost the state an estimated $879 million, according to the nonpartisan Legislative Services Agency.

Two views

Supporters said the program will provide greater choice for families in their child’s education.

Opponents say the new law will pull critical resources from public schools, which serve more than 90 percent of Iowa students, and will disproportionately benefit higher-income families.

The law provides $1,205 in state money to public schools for every private school student receiving an education savings account within the public school district's boundaries. The district, though, would lose the $7,600 in per-pupil funding from the state for every student who switches from public to private school.

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“We cannot support this sort of commitment to private schools when we are underfunding our public schools already," State Rep. Sharon Steckman, a Democrat from Mason City and ranking member of the House Education Committee told The Gazette.

Steckman taught in public schools for about 30 years.

“It ends up bankrupting our reserves,” she said. “This is not good budgeting practice at all for our state. … Taxpayers expect their tax dollars to be spent wisely, and I do not believe this is what this is doing.”

Steckman said public schools have always been “the great equalizer.”

“Everyone is welcome and gets the same education, and everyone can progress at their own level,” she said. “I think private schools serve a great purpose, but that is your choice and you should pay for it.”

Additionally, not all Iowans have access to a private school.

Iowa has about 200 non-public schools, but only 58 of Iowa’s 99 counties have an accredited private school, according to the Legislative Services Agency.

Most of the areas without private schools are in rural areas. And several private schools are near or at capacity.

In Cedar Rapids, some private schools have wait lists for certain grades and are turning families away, while others say they’re nowhere near capacity.

Private schools also do not have to admit every student and are allowed to turn away children with special needs, learning disabilities or behavioral issues, and can deny admission to gay and lesbian students.

Such policies are allowed under Iowa's Civil Rights Act, which says religious institutions can impose qualifications based on religion, sexuality orientation or gender identity.

Reynolds and supporters have said the new law empowers parents.

Wills, the Spirit Lake Republican lawmaker, said the number of applications received “demonstrates parents want to be in charge of their kids’ education and are taking charge right now.”

“We don’t fund institutions here in Iowa. We fund the student. We fund the child,” Wills said. “The funding is going where the parent wants that funding to go and is most desirable for their student.

“Schools should compete for those kids, and they’ve now got a year to win those kids back.“

Comments: (319) 398-8499; tom.barton@thegazette.com