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School choice, scholarship tax credits clear legislature

Ky Capitol

Full-day kindergarten funded for one year

Kentucky School Advocate
May 2021

By Brenna R. Kelly
Staff writer

After many years of trying, proponents succeeded during the 2021 General Assembly in passing a bill to allow school choice-related tax credits. The money donated in return for the credits can be used to pay for private school tuition in several of the state’s most populous counties.

In addition to the tax credits, House Bill 563 also contained a provision to enable students who live in one public school district to attend another district even if the boards of the districts do not have a non-resident student agreement.

To help secure the votes needed for final passage, including several House members who voted against the bill when it initially passed, lawmakers promised to fund full-day kindergarten. On the second to last night of the session, the House voted 51-42 to override the governor’s veto of HB 563 by just one vote. The Senate then easily overrode the veto with a 23-14 vote.

While the tax credit portion of the bill will take effect in June, the non-resident enrollment portion of the bill will not go into effect until the 2022-23 school year. Under the new law, boards will be required to adopt a non-resident policy by July 1, 2022, and after that date non-resident students can be counted in average daily attendance for SEEK funding purposes.

House Bill 405, which established a School Funding Task Force to look at all aspects of public school funding, also directs the Kentucky Department of Education to submit a report to the task force that includes “options on how to ensure the equitable transfer of education funds so that funds follow a non-resident student to a school district of enrollment from a school district of residence.”

While state funding could easily follow students to other districts, it remains to be seen how local tax dollars could move from one district to another without violating the state constitution, Chuck Truesdell, director of Government Relations for KDE, said during the April 7 Kentucky Board of Education meeting.

“That will be somewhat controversial and tricky because there’s a great amount of legal precedence that local funds are local funds and they can’t be transferred between the two districts,” he said.

Under the new law, boards that choose to allow non-resident enrollment cannot pick and choose which non-residents students attend but can limit the total number of students by setting enrollment capacity. Districts would also be able to continue charging tuition.

The tax credit portion of the bill allows for the creation of account granting organizations which would then distribute the funds. Families whose income is 75 percent of the level to qualify for free and reduced-price lunch, about $84,000 for a family of four, can apply for the scholarships to pay for educational expenses including private school tuition in counties with more than 90,000 residents (currently Boone, Kenton, Campbell, Daviess, Fayette, Jefferson, Hardin and Warren counties).

The tax credits are capped at $25 million per year for five years for a total cost to the state of $125 million.

When he vetoed the bill on March 24, Beshear said he believes the bill is unconstitutional in that it diverts public money to private schools – and only schools in some counties.

“The General Assembly has abandoned its obligation under the constitution to ‘provide for an efficient system of common schools throughout the state,’” he said, noting that the bill would lead to the same disparities that Ky. Supreme Court declared unconstitutional in the 1989 decision in Rose v. Council for Better Education.

Though Beshear did not say he would file a lawsuit, he said he expects the bill to be challenged in the courts either by a school district or by a citizen.  

KSBA’s Director of Advocacy Eric Kennedy agreed that there could be a lawsuit over HB 563.

“It is likely that someone, either an interest group or a school board or group of boards or even the governor himself, will challenge the tax credit portion in court,” he said. “And if and when that happens, it may tie the entire bill up in court.”

For now, boards do not need to change any polices related to non-resident students, said KSBA’s Director of Policy Katrina Kinman. Any changes needed will be included in the 2022 policy update, she said.

As promised, after the legislature overrode Beshear’s veto of HB 563 on the final day of the session, the General Assembly passed House Bill 382 which provides $140 million to fund full-day kindergarten for one year. The state currently only funds half-day kindergarten by counting kindergarteners as half a student. Most districts in the state provide full-day kindergarten with the district or parents making up the difference.

Because legislators did not change the statute regarding SEEK funding, there’s no guarantee the full-day kindergarten funding will continue past the 2022-23 school year.

“So now, this would mean that every year or two in the budget process, we would ask the legislature to keep paying for the full-day kindergarten, just as we ask them to cover full transportation reimbursement as part of SEEK,” Kennedy said. Each budget session, KSBA and the Kentucky Department of Education advocate for full transportation funding but it remains only about 60 percent funded currently, he said.

Senate President Robert Stivers told WHAS-11 that he believes that full-day kindergarten will continue to be funded after next year.

“Any time you start a program … you plant seeds and it grows roots,” Stivers told the television station. “So the reality is, it’s probably there unless something else supplants it or removes it.”

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