New Jersey-2010-S1872-Introduced

An Act concerning educational opportunities for students who reside in a district in which a chronically failing school is located and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.) and Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Sections 1 through 9 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be known and may be cited as the "Opportunity Scholarship Act."

2. The Legislature finds and declares that:

a. It is an undeniable fact that parents of limited means are less able to provide educational options for their children, even in those instances in which the public schools are failing their children, and to select the learning environment that might best meet the needs of their children;

b. The Appellate Division of the Superior Court of New Jersey in a 2009 decision, Crawford v. Davy, ruled that children enrolled in schools in which the majority of students failed at least one subject area of the State assessments in multiple consecutive years currently have no entitlement to better educational opportunities in another school district or nonpublic school;

c. Consequently, it is critical to provide a mechanism that will provide students enrolled in these failing schools the opportunity to receive a quality education;

d. The United States Supreme Court in its 2002 decision, Zelman v. Simmons-Harris, found that a program providing tuition aid in the form of scholarships for some students to attend public or nonpublic schools of a parent's choosing did not violate the Establishment Clause of the United States Constitution; and

e. In light of New Jersey's constitutional commitment to ensuring educational justice for every child, regardless of the relative wealth or poverty of a child's parents, it is appropriate that the State initiate a tax credit scholarship program on a pilot basis to assess its impact on the educational opportunity and achievement of children whose current education options are limited to a poorly performing school.

3. As used in sections 1 through 9 of P.L. , c. (C. ) (pending before the Legislature as this bill):

"Chronically failing school" means any school that meets the criteria of paragraph (1) or paragraph (2):

(1) among all students in that school to whom a State assessment was administered, the percent of students scoring in the partially proficient range in both the language arts and mathematics subject areas of the State assessments exceeded 40% in each of the prior two school years; or

(2) among all students in that school to whom a State assessment was administered, the percent of students scoring in the partially proficient range in either the language arts or mathematics subject area of the State assessment exceeded 65% in each of the prior two school years.

(3) A school shall continue to be designated a chronically failing school until such time that the percent of students scoring in the partially proficient range in both the language arts and mathematics subject areas of the State assessments is less than or equal to the Statewide percent of students scoring in the partially proficient range on the corresponding Statewide assessments.

"Eligible school" means an in-district or out-of-district public school or an in-district or out-of-district nonpublic school located in this State offering a program of instruction for kindergarten through 12th grade, or any combination of those grades that:

(1) is open to all students who are eligible to participate in the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) on a space-available basis and does not discriminate in its admission policies or practices for scholarship applicants enrolled in a public school on the date of the scholarship application on the basis of intellectual or athletic ability, measures of achievement or aptitude, status as a handicapped person, proficiency in the English language, or any other basis that would be illegal if used by a school district; however nothing shall prohibit an eligible school from limiting admission to a particular grade level or to areas of concentration of the eligible school, such as mathematics, science, or the arts; and,

(2) is in full compliance with all federal, State, and local laws.

"Household income" means income as defined for the purposes of determining eligibility for a free or reduced price lunch pursuant to the State School Lunch Program.

"Low-income child" means a child from a household with an income that does not exceed 2.50 times the official federal poverty level based on family size, established and adjusted under Section 673(2) of Subtitle B, the "Community Services Block Grant Act," Pub. L.97-35 (42 U.S.C.s.9902(2)), for the school year preceding the school year for which an educational scholarship is to be distributed.

"Scholarship organization" means an organization that has been determined by the federal Internal Revenue Service to be qualified as a tax-exempt organization pursuant to paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C.s.501) and that:

(1) requires that any tax-creditable contributions accepted by it be designated by the contributor at the time of contribution as a contribution pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) distributes not less than 95% of the tax-creditable contributions that it accepts pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) as educational scholarships to low-income students;

(3) distributes individual scholarships that:

(a) in the case of a scholarship student enrolled in grades kindergarten through 8, are equal to the greater of $6,000 or 40% of the prior school year's actual average comparative cost per pupil, as reported in the Department of Education's Comparative Spending Guide, among all school districts in which a chronically failing school is located; and

(b) in the case of a scholarship student enrolled in grades 9 through 12, are equal to the greater of $9,000 or 59% of the prior school year's actual average comparative cost per pupil, as reported in the Department of Education's Comparative Spending Guide, among all school districts in which a chronically failing school is located;

(4) ensures that a child receives in any school year no more than one scholarship pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(5) has complied with such other requirements as the Director of the Division of Taxation in the Department of the Treasury may require.

4. a. Beginning in the first State fiscal year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the Director of the Division of Taxation in the Department of the Treasury shall establish a five-year pilot program to provide tax credits to corporations which contribute funding for scholarship organizations which provide educational scholarships to help low-income children who reside in a district where a chronically failing school is located pay tuition at an eligible school.

b. Subject to the restrictions established pursuant to subsection d. of this section, a taxpayer shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, in an amount equal to 100% of the contributions made by the taxpayer for a scholarship organization during the privilege period; provided that the taxpayer shall designate at the time the contribution is made that the contribution is made pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).

c. The order of priority of the credit allowed under P.L. , c. (C. ) (pending before the Legislature as this bill) and any other credits allowed by law shall be as prescribed by the director. The amount of the credit applied under P.L. , c. (C. ) (pending before the Legislature as this bill) against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). An unused amount of credit shall expire at the end of the privilege period.

d. In aggregate, the total tax contribution of all participating corporations shall not exceed $24,000,000 the first State fiscal year, $48,000,000 the second State fiscal year, $72,000,000 the third State fiscal year, $96,000,000 the fourth State fiscal year, and $120,000,000 the fifth State fiscal year. If the sum of the amount of tax credits authorized pursuant to this section in a State fiscal year exceeds the aggregate annual limits established pursuant to this subsection, tax credits shall be allowed in the order that contributions are made until the limit is reached.

5. There is hereby established in the Department of the Treasury a separate fund entitled the "Opportunity Scholarship Fund." The fund shall be maintained by the Treasurer separate and apart from any other funds. The fund shall be credited with contributions made by taxpayers for scholarship organizations pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill). All interest or other income or earnings derived from the investment or reinvestment of moneys in the fund shall be credited to the fund. The moneys in the fund are specifically dedicated to help low-income children who reside in a district where a chronically failing school is located pay tuition at an eligible school.

6. a. There is hereby established the Opportunity Scholarship Fund Board. The board shall consist of three public members, one appointed by the Governor, one appointed by the President of the Senate, and one appointed by the Speaker of the General Assembly. Each of the members shall be a representative of an entity subject to the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) or an employee of such entity.

b. The board shall select one scholarship organization in each of the counties where a chronically failing school is located to administer the scholarship funds made available through contributions received pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) and on deposit in the Opportunity Scholarship Fund. The board may select a scholarship organization to administer scholarship funds in more than one county.

c. (1) The board shall allocate funds on deposit in the Opportunity Scholarship Fund to the selected scholarship organizations. The total funds available for scholarships for each school year shall be allocated to the scholarship organization selected in the county in which a chronically failing school is located as follows: the total enrollment, excluding preschool students, of all chronically failing schools in the county divided by the total enrollment, excluding preschool students, of all chronically failing schools Statewide, and the result shall be multiplied by the total funds available for that school year.

(2) No more than 25% of a scholarship organization's scholarship allocation in any school year shall be used to provide scholarships to low-income students enrolled in nonpublic schools on the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) who reside in a district where a chronically failing school is located; except that if by August 1 of any school year, scholarship funds available for the scholarship organization remain unallocated, then the funds may be used to provide additional scholarships for that school year to low-income students enrolled in nonpublic schools on the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) who reside in a district where a chronically failing school is located.

(3) If by August 15 of any school year, scholarship funds available for the scholarship organization remain unallocated, then the unallocated funds shall be used to provide scholarships for that school year to low-income children residing in other counties. Priority shall be given to low-income children who reside in a district where a chronically failing school is located. The board shall determine the apportionment of unallocated funds to the other counties.

d. The board shall publicize the pilot program to the parents of children who reside in a district where a chronically failing school is located.

e. The board shall commission an independent study of the pilot program. The study shall be conducted by an individual or entity primarily identified with expertise in the field of urban education. The individual or entity shall design a comprehensive study of the pilot program which shall include, but not be limited to, consideration of the following:

(1) the academic achievement of scholarship recipients based on test results and other educational indicators;

(2) the impact of the pilot program on achieving savings for State taxpayers;

(3) the impact of the program on student enrollment patterns; and

(4) parental satisfaction with the pilot program.

The board shall not use any funds on deposit in the Opportunity Scholarship Fund to pay for any cost associated with the study. The board may raise funds privately for this purpose.

f. On or before January 1 of the fifth school year of the pilot program, the board shall submit a report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the implementation and results of the pilot program. The report shall be based on the annual reports submitted by the scholarship organizations pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) and the independent study conducted pursuant to subsection e. of this section. The report shall include a recommendation on whether the program should be reauthorized on a permanent basis.

7. a. A scholarship organization selected by the board pursuant to subsection b. of section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall require that an eligible school which admits a child receiving an educational scholarship under the pilot program:

(1) accept the scholarship as payment in full for a child's tuition and any other costs of attendance payable to the school;

(2) ensure that a child enrolled in an eligible school who received a scholarship under the program in the prior school year receives a scholarship in each school year of enrollment under the program provided that the child remains eligible; except that any child who received a scholarship under the program in the prior school year who is no longer considered a low-income child shall continue to remain eligible to receive a scholarship under the program until the child completes the eighth grade or the twelfth grade, whichever occurs first, provided that the child continues to meet all other eligibility requirements;

(3)in the event that more children apply for admission under the pilot program than there are openings at the eligible school, determine through a lottery which children are selected for admission, except that preference for enrollment may be given to siblings of students who are enrolled in the eligible school; and,

(4) if the eligible school is a nonpublic school, administer an annual test to scholarship recipients that is aligned with the core curriculum content standards.

b. A selected scholarship organization shall:

(1) manage the scholarship application process for the school district in which students who are eligible to participate in the scholarship program reside;

(2) review and verify the income and residence of a scholarship applicant;

(3) compile an inventory of vacancies in eligible schools available for potential scholarship recipients;

(4) conduct necessary student selection lotteries in accordance with the requirements of paragraph (3) of subsection a. of this section;

(5) monitor the enrollment of scholarship students in eligible schools and allocate scholarship funds to those schools; and,

(6) prepare a report to be submitted to the State Treasurer by December 1 of each year that includes, but is not limited to, the following information for the prior school year: the amount of scholarship funds received by the scholarship organization from the Opportunity Scholarship Fund; the administrative costs of the scholarship organization; the amount of scholarship funds dispersed on behalf of scholarship recipients to eligible schools that are public schools, and a listing of those eligible schools; the amount of scholarship funds dispersed on behalf of scholarship recipients to eligible schools that are nonpublic schools, and a listing of those eligible schools; and the number of scholarship applications which exceeded available scholarship funds.

The board shall make the annual report available to the parents or guardians of scholarship recipients and to members of the public.

8. The Department of Education shall annually provide a list of districts where a chronically failing school is located to the Opportunity Scholarship Fund Board established pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill). The department shall coordinate with the board to determine the earliest feasible time that the list can be developed after the administration of the State assessments.

9. The Director of the Division of Taxation shall adopt rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to implement the provisions of sections 1 through 8 of P.L. , c. (C. ) (pending before the Legislature as this bill).

10. Notwithstanding any provision of subsection a. of section 16 of P.L.2007, c.260 (C:18A:7F-58) or any other section of law to the contrary, for each scholarship recipient who was enrolled in a public school of the district at the time that the student first received a scholarship pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill), the amount of State school aid paid to the district pursuant to the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) shall be reduced by an amount equal to the district's equalization aid, security categorical aid, special education categorical aid, transportation aid, and adjustment aid divided by the district's resident enrollment.

11. There is hereby established in the Department of Education a fund entitled the "Educational Innovation Fund." The fund shall be credited with the amount of any per pupil State school aid reduction made pursuant to section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) that is in excess of the applicable scholarship awarded pursuant to section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill) to a scholarship recipient who was enrolled in a public school of the district at the time that the student first received a scholarship. All interest or other income or earnings derived from the investment or reinvestment of moneys in the fund shall be credited to the fund. The moneys in the fund are specifically dedicated to fund the Educational Innovation Pilot Program established pursuant to section 12 of P.L. , c. (C. ) (pending before the Legislature as this bill).

12. a. As used in this section, "chronically failing school" means any school that meets the criteria of paragraph (1) or paragraph (2) of this subsection:

b. The Commissioner of Education shall establish a five-year Educational Innovation Pilot Program. The program shall award competitive grants to chronically failing schools to finance the adoption of innovative educational practices with the objective of improving student performance. The grants shall be funded by moneys on deposit in the Educational Innovation Fund established pursuant to section 11 of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. The commissioner shall develop an application process to select the chronically failing schools which will receive an innovation grant. The application shall be prepared and submitted by the superintendent of the district in which the chronically failing school is located. The application shall include, but not be limited to, the following information:

(1) a description of the innovative programs or practices which would be implemented in the chronically failing schools;

(2) a budget proposal for the use of any grant award; and

(3) a list of program objectives and a description of how the district will assess the program's implementation and outcomes.

d. A superintendent may submit a grant application that does not include all chronically failing schools in the district.

13. The State Board of Education shall adopt regulations pursuant to the "Administrative Procedures Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the provisions of sections 10 through 12 of P.L. , c. (C. ) (pending before the Legislature as this bill).

14. This act shall take effect immediately.

STATEMENT

This bill directs the Director of the Division of Taxation to establish a five-year pilot program to provide tax credits to corporations which contribute funding to nonprofit organizations which provide scholarships to low-income children who reside in a district where a chronically failing school is located to pay tuition at in-district or out-of-district public schools or in-district or out-of-district nonpublic schools located in the State. The bill defines a chronically failing school as one in which, for the past two school years: more than 40% of the school's students did not pass the language arts and mathematics subject areas of the State assessments; or more than 65% of the students did not pass either the language arts or mathematics subject areas. A child is considered low-income if the child lives in a household in which the income does not exceed 250% of the federal poverty level.

Under the pilot program, a tax credit will be equal to 100% of the contribution a corporation makes to a qualified scholarship organization. While there is no limit on the amount that can be contributed for credit, a corporation may not apply the credits to reduce its tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162; and the total tax credit of all participating corporations is capped at $24,000,000 the first State fiscal year, $48,000,000 the second State fiscal year, $72,000,000 the third State fiscal year, $96,000,000 the fourth State fiscal year, and $120,000,000 the fifth State fiscal year. If the sum of the amount of tax credits authorized in a State fiscal year exceeds the aggregate annual limits, tax credits will be allowed in the order that contributions are made until the limit is reached.

The bill establishes the Opportunity Scholarship Fund to be credited with contributions made by taxpayers to nonprofit scholarship organizations. The bill directs the Opportunity Scholarship Fund Board to select one scholarship organization in each of the counties in which a chronically failing school is located to administer the scholarship funds, or the board may select a scholarship organization to administer the funds in more than one county. The board, in consultation with the State Treasurer, is to distribute the funds to the selected scholarship organizations.

The scholarship organizations selected under the bill must require that an eligible school which admits a child receiving a scholarship under the pilot program:

(1) accept the scholarship as payment in full for the child's tuition and other costs of attendance;

(2) in the event that more children apply for admission to that school under the pilot program than there are openings, that students will be selected through a lottery;

(3) ensure that a child enrolled in an eligible school who received a scholarship under the program in the prior school year receives a scholarship in each school year of enrollment under the program provided that the child remains eligible; and

(4) in the case of an eligible school that is a nonpublic school, that the school administer an annual test to scholarship students that is aligned to the core curriculum content standards.

The scholarship organization selected in each county will manage the scholarship application process; review and verify the residence of scholarship applicants; compile an inventory of vacancies in eligible schools; conduct necessary student selection lotteries; monitor the enrollment of scholarship students in eligible schools; and prepare an annual report to be submitted to the State Treasurer that provides information on the program for the prior school year.

The bill directs the board to commission an independent study on the implementation of the pilot program by an individual or entity with expertise in the field of urban education. The study will consider issues such as the academic achievement of scholarship recipients, the impact of the pilot program on achieving savings for State taxpayers, the impact of the pilot program on student enrollment patterns, and parental satisfaction with the program.

On or before January 1 of the fifth school year of the pilot program, the board is directed to submit a report to the Governor and the Legislature on the implementation and results of the pilot program. The report will include a recommendation on whether the program should be reauthorized on a permanent basis.

Finally, the bill establishes a five-year Educational Innovation Pilot Program in the Department of Education. Under the program, the Commissioner of Education will develop a program to award competitive grants to chronically failing schools, with the objective of providing the schools with resources to implement innovative educational programs to improve student performance.

For each of a district's students who obtains a scholarship, the district's State school aid would be reduced by the per pupil amount awarded to the district pursuant to the "School Funding Reform Act of 2008." The portion of that reduction that exceeds the scholarship amount will be deposited into the Educational Innovation Fund and used to support the grant program.