With the passage of the state budget, parents of special-needs children will have access to education savings accounts to help with a variety of non-public school costs.
In the budget bill, first included by the Senate, there is a new Private Educations Savings Account (PESA) program for special-needs students that will annually provide $9,000 for the families of eligible students. The funds will be paid quarterly to a debit account much like a flexible spending account. As with such accounts, the money will not be taxable income.
The plan originally was included in a bill filed by Sen. Michael Lee (R-New Hanover), but the bill was left in the Rules Committee, and the planned program was included in the budget.
The budget appropriates $450,000 in the current fiscal year for administration to start up the program, and then $3 million in the next fiscal year when the state will actually start handing out the money.
Less the $250,000 the state can hold back for administration costs moving forward, the program could fund a little more than 300 PESAs in the 2018-19 fiscal year.
With the passage of the budget, North Carolina became the sixth state to pass education savings account (ESA) legislation. The other states are Arizona, Florida, Mississippi, Tennessee and Nevada.
The program requires that applicants meet a very specific set of requirements to be eligible for the pilot PESA program, but education freedom advocates hope that the PESA program is a first step toward offering the ESAs to more students.
Along with the funds come a host of reporting responsibilities families must meet to continue receiving the funding installments throughout the year. The program also requires audits and reviews of random sets of applications to ensure that the program is not a victim of fraud.
Eligible expenses for the program include tuition to qualifying non-public schools, textbooks, tutoring, testing fees, fees for extracurricular activities and classes, educational therapies and technologies, and student transportation.
The funds are not to be used for unapproved computer hardware or consumable education supplies such as paper, pens and markers. The funds also cannot be used to pay for tuition to colleges or other post-secondary institutions.
Opponents say that the programs undermine the public school system and take money that would be better placed in the school system.
The program’s start here in North Carolina is reminiscent of the Opportunity Scholarship Program, which began by offering scholarships to families of special-needs students and has spread to underprivileged students now as well.
That program is expected to expand to $130 million by 2021, expanding the number of scholarships each year.
NC Policy Watch has criticized the program, calling it a “new and poorly-designed voucher program” that will expand avenues for educational fraud.
A June News and Observer article reported that over a six-month period in Arizona an audit showed $102,600 in misspent ESA funds.
With more than 3,500 students using the ESA program in 2017 and an average account balance of more than $11,000, the total is more than $40 million.
Having $200,000 misspent over the course of a 12-month period comes out to about 0.04 percent of the total amount. The Goldwater Institute called that a “miniscule” amount.