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Subcommittee approves $32 million transfer for Educational Freedom Account amid RSA funding concerns
Summary
The peer subcommittee approved a $32 million restricted-reserve transfer to cover Educational Freedom Account payments for 2025–26. Lawmakers pressed education officials on enrollment growth (agency cited about 44,137 students) and long-term funding via the RSA, warning ongoing costs could approach roughly $310 million when combined with existing RSA funds and one-time transfers.
The Peer Subcommittee of the Legislative Council approved a $32,000,000 restricted-reserve fund transfer to cover expected payments for eligible students enrolled in the Educational Freedom Account program for the 2025–26 school year.
Representative Mary Kavanaugh questioned Department of Education staff about program growth and verification procedures, saying committee members had been told earlier the program would not exceed 28,000 students and asking how the department now expects to fund the larger caseload. "When we were first talking ... I was told that we were never going to hit 28,000," Kavanaugh said, pressuring staff for clearer budget planning. The Department of Education staff said they would provide contract details and described quarterly verification, invoice review, and marketplace-based direct payments as guardrails.
Agency witnesses reported current participation figures in the program at about 44,137 students and described routine checks for duplicate enrollments and anomalous spending. Courtney Salas Ford and Daryl Smith of the Department of Education said marketplace purchases flow directly to vendors, that many purchases are reviewed, and that reporting and flagging tools are used to detect potential misuse.
Addressing long-term budget effects, Secretary Hudson (as cited in committee discussion) summarized the executive branch approach: "The governor will be submitting a proposed balanced budget ... She will include the EFAs in her proposed balanced budget," and staff noted that roughly $187,000,000 is currently in the RSA and that about $122,000,000 of one-time funds are being transitioned into RSA for FY2026, figures that together were discussed in the hearing as roughly $310,000,000 for the next fiscal cycle when combined with the transfers under consideration.
Committee members expressed concern that one-time transfers have been used repeatedly and warned that continued reliance on restricted reserves for an ongoing program risks structural budget strain. Education staff acknowledged the program’s growth and said adjustments to the RSA and the governor’s budget proposal will be part of the upcoming fiscal session.
With no objection, the committee approved the D1 restricted-reserve transfer by voice vote. The spending authority provided by this approval matches the appropriation request taken up earlier in the agenda.
Next steps: the transfer will be implemented per DFA procedures and the governor’s proposed budget will include the program funding proposals for legislative consideration during the fiscal session.
