Panel debates major rewrite of House Bill 1540 creating education savings accounts; questions linger on testing, administration and account controls

The Senate Education Committee spent much of its hearing reviewing a reworked amendment to House Bill 1540, a proposal to create education savings accounts (ESAs) and assign administration duties to the Bank of North Dakota and a hired administrator.

Lawmakers and witnesses debated structural changes to the amendment, testing and data-collection requirements, whether the program should use a marketplace model or a third‑party administrator, and how the bill should handle refunds and account closures.

The amendment reorganization presented by Senator Wabamah directed a number of clarifications: rewriting the “eligible student” definition, specifying that participating nonpublic schools are those that charge tuition, changing allowance of “professional tutoring services” language, lengthening the acceptable replacement cycle for purchased hardware from one year to three, and specifying that refunds must be deposited back into the student’s education savings account rather than refunded to parents. Representative Ben Koppelman, the bill sponsor, told committee members the draft was intended to give the Bank of North Dakota flexibility to hire an administrator or a marketplace vendor.

Committee members pressed officials on several operational gaps. Senators asked how the Department of Public Instruction (DPI) would collect results if parents could select nationally norm‑referenced tests different from the state assessment, and whether DPI’s data systems could aggregate those different test results for statewide reporting. Adam Tesher, school finance officer for DPI, said school districts operate on a July 1–June 30 fiscal year and explained how summer school generally counts toward the next school year, but he said DPI’s existing reporting is designed around state assessments.

Kelvin Hollett, chief business development officer at the Bank of North Dakota, testified that the bank expects to hire a third‑party administrator to handle the non‑tuition portions of accounts (for example, reimbursements for tutors or educational products) and sought clarity whether the committee intended a marketplace model. Hollett warned that if the law precluded using marketplace services the bank would likely have to build or buy a bespoke platform, increasing costs. “If we’re going to be involved very much, our perspective, because we don't have expertise in administering this type of program, is that administrator is really within what they call the marketplace concept,” Hollett said.

Representative Koppelman said his intent was not to require a marketplace and that the Bank of North Dakota should be allowed to decide whether to hire a marketplace or a financial‑management firm. He also said the bill’s testing language aimed to respect parents’ choices while acknowledging DPI’s limited ability to aggregate non‑state assessments; the amendment includes language allowing DPI to limit data aggregation to state assessments “as determined necessary by the department.”

Lawmakers also raised practical concerns about identifying when to close accounts and reclaim unspent funds. The draft directs participating schools to notify DPI when a student graduates, so DPI can forward that information to the Bank of North Dakota; committee members and witnesses noted redundancy and asked whether the administrator or the school should be the primary reporter. The sponsors and several senators suggested requiring both school and parent notification to reduce the risk that an account remains active after a student withdraws or graduates.

Committee members also discussed rollover rules and “plan‑year” mechanics. The amendment text allows up to a 25 percent carryover above the yearly allocation; lawmakers debated whether the program should instead use a fixed plan year and a hard annual certification to reduce administrative ambiguity and to help both schools and the administrator plan budgets.

No formal committee vote was taken on the amendment. Members agreed to continue work: the committee recessed and planned to produce a cleaner amendment before acting. Senators asked staff and the bill sponsor to produce a revised draft that clarifies whether testing responsibility rests with parents or schools, how DPI will handle aggregations, the administrator’s role (marketplace versus financial manager), and the notification flow for graduations and withdrawals.

The committee signaled it would take up the item again for amendment and final action after additional drafting and consultation with DPI and the Bank of North Dakota.