Bill Summary – FastDemocracy

Fiscal Note
                                       Fiscal Services Division
HF 2612 – Area Education Agencies Act (LSB6302HV.4)
Staff Contact: Ron Robinson (515.281.6256) ron.robinson@legis.iowa.gov
Fiscal Note Version – Final Action
Description
House File 2612 relates to education, including modifying provisions related to the duties and
powers of Area Education Agencies (AEAs), the membership of the boards of directors of AEAs,
the Department of Education (DE), AEA funding, the calculation of the teacher salary
supplement (TSS) district cost per pupil (DCPP) and minimum teacher salaries, Iowa Public
Employees’ Retirement System (IPERS) bona fide retirement requirements, and property tax
replacement payments (PTRP), establishing the State percent of growth and the categorical
State percent of growth for supplemental State aid calculations for FY 2025, and including
transition, effective date, and applicability provisions.
Division I — Division of Special Education of the Department of Education
Current law requires the Director of the DE to provide guidance and standards to AEAs for
federal and State education initiatives that the AEAs must implement statewide. The Bill
requires the DE to perform the following additional duties:
•   Develop and distribute to school districts a list of evidence-based professional development
    services that AEAs can provide to public or nonpublic schools.
•   Oversee the operations of the AEAs to ensure compliance with federal and State special
    education laws beginning with FY 2025.
•   Develop and distribute to school districts and accredited nonpublic schools a process to
    facilitate the development of Individualized Education Programs (IEPs) and assist IEP teams
    with decisions regarding free appropriate public education and placement for students
    enrolled in accredited nonpublic schools.
•   Provide professional learning and other support materials and tools for IEP teams, including
    students, families, teacher service providers, and administrators of both school districts and
    accredited nonpublic schools, to help such individuals understand the processes required
    under the federal law that are relevant to students enrolled in accredited nonpublic schools
    and to promote informed participation in IEP meetings of students enrolled in accredited
    nonpublic schools.
•   Provide information to IEP teams and public agencies that nonpublic schools will be
    considered a placement option so long as the IEP of a child with a disability does not require
    some other arrangement.
•   Develop and distribute to school districts professional learning and other materials for
    meaningful consultation for representatives of AEAs, school districts, and accredited
    nonpublic schools.
•   Establish sustainable accountability and data collection systems related to special education
    that meet federal and State legal requirements and encourage innovative models for
    meeting the needs of students.
•   Develop and distribute to school districts and accredited nonpublic schools an
    implementation plan related to identifying, evaluating, and promoting strategies and models
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    for providing special education and related services with accredited nonpublic schools that
    improve the experiences and outcomes for students with disabilities.
The Bill requires the Division of Special Education (DSE) of the DE, during FY 2025, to devote
at least 13.0 full-time equivalent (FTE) positions within the DE’s location in Des Moines to
oversight of the AEAs, including the accreditation of AEAs.
The Bill also requires the DE to devote an amount of FTE positions, as determined by the DSE
of the DE, not to exceed 40.0 FTE positions in the aggregate, to ensure that the AEA complies
with all applicable federal and State laws related to special education and to review the services
the AEA provides.
Division II — Area Education Agencies — General Provisions
The Bill makes the following changes:
•   The Bill requires each AEA to have an AEA board of directors that serves in an advisory
    capacity. The Bill establishes that this provision is effective in FY 2026.
•   Authorizes the AEAs to furnish evidence-based professional development services to public
    or nonpublic schools located within each AEA’s boundary, subject to the approval of the
    Director of the DE. The Bill establishes that this provision is effective in FY 2026.
•   Authorizes an AEA to provide services to public and nonpublic schools located within the
    AEA’s boundaries or located within the boundaries of a contiguous AEA, or if the school
    district shares a superintendent with another school district that receives services from the
    AEA. The Bill establishes that these provisions are effective in FY 2026.
•   Requires AEA boards to charge reasonable costs that are consistent with market rates for
    the educational services, special education services, professional development services,
    and media services provided by the AEA.
•   Requires AEAs to prepare and submit to the DE and each school district within the AEA’s
    boundaries an annual report on or before January 1 of each year containing information
    related to an accounting of payments and a description of services provided. Each AEA is
    also required to provide a quarterly report on the services provided to all school districts that
    receive services from the AEA.
•   Limits the salary for an AEA administrator to 125.0% of the average salary of all
    superintendents of school districts that are located within the boundaries of the AEA. This
    provision applies to employment agreements entered into or renewed beginning in FY 2025.
•   Requires each AEA to submit a proposed budget to the Director of the DE for approval no
    later than March 1 of each year. The Director must either approve or reject the budget for
    changes within 10 days of submission.
•   Requires the director of special education to be an employee of the DSE and changes the
    makeup of the AEA boards of directors and the process for filling positions.
•   Modifies several provisions related to the accreditation of AEA programs to incorporate the
    DSE of the DE into the accreditation process and to incorporate additional standards related
    to accreditation. The Bill provides that an AEA that was accredited on or before July 1,
    2025, will remain accredited unless the DSE takes action to remove accreditation. The Bill
    establishes that these provisions are effective in FY 2026.
•   Requires the Legislative Council to convene an AEA Task Force. The Bill establishes the
    AEA Task Force’s membership, required areas of study, and areas of recommendations.
    The AEA Task Force is required to submit a report of its findings and recommendations to
    the General Assembly on or before December 31, 2024. Any expenses incurred by a
    member of the AEA Task Force are the responsibility of the member or the respective entity
    represented by the member.
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•   Requires each AEA, on or before January 1, 2025, to submit a report to the DE and the
    General Assembly that contains information related to progress the AEA has made in
    reducing expenditures associated with certain positions by at least 30.0% by July 1, 2026; a
    proposal for the reorganization of services provided by AEAs; and the AEA’s progress
    related to student outcomes and use of moneys.
The Bill requires the DSE to employ at least one person to serve as the director of special
education in each AEA beginning in FY 2025.
Division III — Area Education Agencies — Funding
Under current law, amounts calculated for special education support services, media services,
AEA TSS district costs, AEA professional development supplement district costs, and
educational services are deducted by the Department of Management (DOM) from State aid for
each school district and instead paid to the school district’s AEA. The Bill eliminates the AEA
professional development supplement district cost funding deduction.
Beginning in FY 2026, school districts are required to use at least 90.0% of the funds the school
district receives for special education support services district cost for special education support
services contracted from an AEA.
The Bill provides that the funds calculated under Iowa Code section 257.10(7) (Special
Education Support Services District Cost) and received by a school district or an AEA must be
used for special education support services.
The Bill changes the allocation to each AEA of the $7.5 million statutory reduction specified in
Iowa Code section 257.35(2) from an allocation based on the AEA reductions for FY 2002 to the
proportional amount of funding the AEA receives.
The Bill provides that beginning in FY 2025, the DOM must deduct the following amounts from
the State aid due to each school district and pay the amounts to the respective AEAs:
• The amount calculated for special education support services for the school district.
• 40.0% of the amount calculated for media services for the school district.
• The AEA TSS district cost.
• 40.0% of the amount calculated for educational services for the school district.
• AEA shared operational functions.
The Bill provides that beginning with FY 2026, and each fiscal year thereafter, the DOM must
deduct the following amounts from the State aid due to each school district and pay the
amounts to the respective AEAs:
• The AEA TSS district cost.
• AEA shared operational functions.
The Bill modifies provisions related to the funding of media services and educational services
provided by a school district or through an AEA. The Bill provides that funds for FY 2025 that
are not required to be paid to the AEA pursuant to Iowa Code section 257.35 (AEA Payments)
may be used by the school district for any school district general fund purpose.
The Bill provides that, for purposes of Iowa Code section 257.37 (Funding Media and
Educational Services), “enrollment served” means the basic enrollment of all school districts
within the boundaries of the AEA plus the number of nonpublic school pupils served by the AEA.
Division III is effective upon enactment and applies July 1, 2024, for school budget years
beginning on or after that date.
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Division IV — Teacher Compensation and IPERS
The Bill provides that a licensed teacher who retires and begins receiving a retirement
allowance under IPERS, effective July 1, 2024, through June 30, 2027, may return to IPERS-
covered employment after one month of retirement benefits, instead of the current four months
of retirement benefits, and continue to receive retirement benefits after reemployment with an
IPERS-covered employer.
The Bill increases the minimum annual salary for an initial teacher who has successfully
completed an approved practitioner preparation program or holds an initial or intern teacher
license issued by the Board of Educational Examiners (BOEE), as specified in Iowa Code
chapter 284 (Teacher Performance Compensation, and Career Development), from $33,500 to
$47,500 in FY 2025 and to $50,000 in FY 2026.
The Bill also establishes a minimum teacher salary for a career teacher, model teacher,
instructional coach, curriculum and professional development leader, mentor teacher, or lead
teacher who holds a valid license and who has been a teacher for at least 12 years of $60,000
in FY 2025 and $62,000 in FY 2026.
Division V — Teacher Salary Supplement District Cost Per Pupil
The Bill provides that, for FY 2025, the TSS DCPP must be determined as follows:
•   The DOM must categorize each school district into no more than 10 tiers, based on each
    school district’s actual enrollment.
•   The DOM must calculate the TSS DCPP for each tier based, in part, on the average cost to
    school districts within the tier to meet the requirements of Division IV.
•   The DOM must also set the TSS DCPP for a school district above the average TSS DCPP
    for the tier if the average is insufficient to comply with the teacher salaries and associated
    costs related to complying with Division IV.
•   The Bill provides that, for FY 2026, the DOM must set the TSS DCPP for each school district
    in the same manner as described above and adjust for the increased teacher salaries and
    associated costs related to complying with Division IV.
Additionally, the Bill provides that for FY 2027 and succeeding budget years, the TSS DCPP for
each school district for a budget year is the TSS DCPP for the base year plus the TSS
supplemental State aid (SSA) amount for the budget year.
Division V is effective upon enactment.
Division VI — State Percent of Growth
The Bill modifies and establishes provisions related to the funding of school districts, including
establishing an SSA amount based on a State percent of growth rate and the categorical State
percent of growth rate for the budget year beginning July 1, 2024 (FY 2025), and provides for
other changes to the school aid formula.
Division VI has three provisions with a fiscal impact, as follows:
•   Establishes a 2.50% State percent of growth rate to be applied to the State cost per pupil
    (SCPP) for FY 2025, for an SSA of $191 per pupil. The growth rate will also increase the
    amount of each Education Savings Account (ESA).
•   Establishes a 2.50% State percent of growth rate to be applied to each of the State
    categorical cost per pupil amounts for FY 2025.
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•   Provides additional property tax replacement funding based on the per pupil increase that
    results from the establishment of the State percent of growth in FY 2025. The Bill requires
    the additional levy portion of the FY 2025 SCPP amount to be frozen at $685 per pupil,
    regardless of the per pupil increase for FY 2025.
The Bill specifies that the current requirements that allowable growth rates must be enacted
within 30 days of the transmission of the Governor’s budget submission, which is required by
February 1 during the regular legislative session, do not apply to the Act.
Division VI is effective upon enactment.
Division VII — Education Support Personnel Salary Supplement
The Bill provides a method to distribute an Education Support Personnel Salary Supplement for
FY 2025 if funding is appropriated by the General Assembly to the DE for FY 2025.
Division VII is effective upon enactment.
Division VIII — State Mandate
The Bill makes inapplicable Iowa Code section 25B.2(3), which would relieve a political
subdivision from complying with a State mandate if funding for the cost of the State mandate is
not provided or specified. Therefore, political subdivisions are required to comply with any State
mandate included in the Bill.
Background
The Internal Revenue Service (IRS) requires public pension plans to impose a bona fide
retirement (BFR) period. A BFR period is a set time when retirees demonstrate that they have
ended their employment and are entitled to retirement benefits. The standard BFR period for
IPERS is four months. For the first month, the retiree must not work, regardless of whether the
job is covered by IPERS. A retiree also must stay out of an IPERS-covered job for an additional
three months.
The current requirement to wait four months before returning to IPERS-covered employment
means that from a practical standpoint, a teacher typically must wait one school year before
returning to work. However, reducing the four-month waiting period to one month would allow
teachers to retire and return to work in covered employment the following school year.
All regular members contribute 6.29% (40.0% of the total rate) of pay and employers contribute
9.44% (60.0% of the total rate), for a total contribution rate of 15.73% of pay. This provides
enough contributions to fund the ongoing accrual of benefits (the normal cost rate) of 10.62%
and the scheduled paydown of the Unfunded Actuarial Liability (UAL) (the amortization rate)
plus a 1.84% margin that helps pay down the UAL more quickly. However, the 10.62% normal
cost rate is an average across all regular members. The normal cost rate varies by age at hire,
sex, and employer type (education, State, and other).
State Cost Per Pupil. The school aid formula provides funding to school districts and AEAs
through a mix of State aid and property taxes. In general, funding is generated on a per pupil
basis, with the per pupil amounts providing an overall budget limitation (or spending authority).
Five SCPP funding levels would be increased by a 2.50% State percent of growth for FY 2025
with the enactment of the Bill.
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Figure 1 provides the SSA amounts (also referred to as per pupil growth amounts) and SCPP
amounts for FY 2025 based on a 2.50% growth rate. The SSA amounts will be applied to all
corresponding district and AEA cost per pupil amounts.
Figure 1 — FY 2025 State Cost Per Pupil Calculations
                                         FY 2024           FY 2025           FY 2025          FY 2025
                                      State Cost         State Percent   Supplemental     State Cost
                                         Per Pupil         of Growth         State Aid    Per Pupil
  Regular Program                    $        7,635             2.50%    $          191   $      7,826
  Special Education Program                   7,635             2.50%               191          7,826
  AEA Special Education Services             333.59             2.50%              8.34         341.93
  AEA Media Services                          62.19             2.50%              1.55          63.74
  AEA Education Services                      68.63             2.50%              1.72          70.35
In addition to the State percent of growth and SSA amounts for FY 2025, enrollments,
weightings, and taxable valuations within each school district have an impact on total school aid
funding, including the amount of State aid and local property tax required to generate the total
funding.
State Categorical Supplements. The State categorical supplements are funded entirely
through State aid and generate funds for each school district and AEA through the school aid
formula on a per pupil basis. The FY 2025 SCPP funding levels for t