Senate committee reviews House Bill 1540 to create educational savings accounts; sponsors propose $40M appropriation

The Appropriations — Education and Environment Division reviewed House Bill 1540, a proposal to establish state-funded educational savings accounts (ESAs) for students to use on approved educational expenses outside the public-school system. Sponsors and committee members spent significant time on fiscal assumptions, program mechanics and administration.

Senator Wolvenin (speaking as a sponsor) opened the discussion: "House Bill 15 40 is an educational savings account, bill to provide for the opportunity for, parents to be able to have the personal choice of what education system best suits their children and the educational savings account being that avenue whereby they can make use of that." He said the fiscal note attached to the bill called for a $40,000,000 appropriation for the first year; the bill also allocates roughly $3,000,000 for program establishment costs in year one.

Sponsors explained how the amount per ESA was calculated. They said the bill uses an average per-student cost to the state — roughly $8,168 in testimony — and proposes paying about 50% of that average into each ESA (about $4,084 per account in the fiscal note). Committee members queried the participation assumptions: witnesses noted roughly 8,000 students currently in nonpublic schools could be eligible; fiscal-note scenarios ranged from full participation in early drafts to lower assumed take-up in subsequent notes. Senator Koppelman framed the long-term fiscal view, saying "every 1 of these students that doesn't attend the public school, even with this program in place, saves the state in North Dakota on average about $4,000 a year after providing these resources."

Members asked about administration and vendor selection. The bill envisions the Bank of North Dakota contracting with a third-party administrator to manage accounts and transactions; committee members noted that other states often run similar programs through education departments or nonprofit administrators. Sponsors and representatives said the bank would handle financial transactions and contract with an experienced vendor to operate day-to-day administration.

Committee members raised equity and access questions: private schools would not be required to accept all students, and sponsors said the program does not include an income means test — the sponsor argued ESAs should be available to all parents regardless of income. Senators also asked whether private schools could decline to enroll students with special needs or behavior issues; witnesses said private schools would retain discretion and that the bill does not require private schools to accept every student.

Fiscal estimates presented to the committee have varied across drafts: an early fiscal note put costs in the hundreds of millions if broader components were included; subsequent scoring narrowed the program and produced lower totals (sponsors identified current scoring in the $36–40 million range for the biennium). Committee members emphasized uncertainty about participation rates and advised caution before final appropriations.

Ending: Committee members did not take final action. Sponsors and staff will refine fiscal assumptions and administrative language; the committee plans to revisit the bill in a subsequent session.