Fiscal Note
Fiscal Services Division
HF 847 – Education Programs, Tax Credits, and Information (LSB2474HZ.3)
Staff Contact: Lora Vargason (515.725.2249) lora.vargason@legis.iowa.gov
Fiscal Note Version – Final Action
Description
House File 847 makes a variety of changes to the Iowa Code regarding education. A brief
description by division is below, and the following pages include assumptions and fiscal impact
where it can be estimated.
DIVISION I — Education Program Standards and Funding: Creates a flexible student and
school support program to be administered by the Department of Education (DE), allows for an
additional categorical source to be eligible for use within the school district flexibility account,
and directs school districts and area education agencies (AEAs) to expend unobligated funds
from the teacher salary supplement in FY 2022.
DIVISION II — Education Tax Credits and Deductions: Increases the annual amount of
classroom expenditures that Iowa elementary and secondary school teachers may deduct from
gross income for income tax purposes from the current $250 to $500. Also expands the Tuition
and Textbook Tax Credit by doubling the allowed expense amount to $2,000 per qualified
student and extending the credit to students educated through private instruction.
DIVISION III — Open Enrollment: Modifies several provisions relating to open enrollment and
athletic eligibility including:
• Amending rules for participation in extracurricular activities.
• Designating a deadline for prekindergarten students enrolled in special education programs
and adding additional good cause provisions to open enrollment for such students after the
deadline.
• Expanding the good cause definition to include students who attend attendance centers
identified as in significant need of improvement and defining such attendance centers.
• Providing an opportunity for an additional appeal to the State Board of Education for a late
open enrollment application that does not meet the definition of good cause for a student
whose resident district consistently failed to respond reasonably to a student’s academic
failure to meet basic academic standards.
• Clarifying language regarding the resident district responsibility for paying open enrollment
tuition.
• Establishing minimum standards of economic eligibility requirements for transportation
assistance of open enrolled students.
• Adding to the list of circumstances in which an open enrolled student may immediately
participate in varsity athletics.
DIVISION IV — School Board Powers and Duties: Clarifies school board member
responsibilities.
DIVISION V — Shared Operational Functions: Adds a work-based learning (WBL) coordinator
and special education director to the list of eligible operational functions and positions eligible
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for supplementary weighting funding from FY 2023 through FY 2025. Additional provisions of
the Bill reduce the weighting for all positions generating a weighting of five to four, and reduce
the weighting for all positions generating a weighting of three to two.
DIVISION VI — Pledge of Allegiance: Provides that the board of directors of each public school
district will administer the pledge of allegiance in grades 1 through 12 each school day and that
each classroom will display the United States flag in each classroom where the pledge is
recited. A student will not be required to recite the pledge.
DIVISION VII — Facial Covering Policies — Counties, Cities, and Schools: Prohibits a school
district, school administrator, or authority of a nonpublic school to adopt, enforce, or implement
a policy requiring employees, students, or members of the public to wear a facial covering while
on the school district’s or accredited nonpublic school’s property unless for a specific
extracurricular or instructional purpose. Prohibits a county from adopting an ordinance, motion,
resolution, or amendment, or use any other means to require the owner of real property to
implement a policy regarding facial coverings that is more stringent than a policy imposed by the
State. Prohibits a city from adopting an ordinance, motion, resolution, or amendment, or use
any other means to require the owner of a real property to implement a policy regarding facial
coverings that is more stringent than a policy imposed by the State.
DIVISION VIII — School Tuition Organization Tax Credit: Raises the deduction allowed for
contributions made by a taxpayer to a School Tuition Organization Tax Credit (STO) from 65.0%
to 75.0% and raises the STO cap from $15.0 million to $20.0 million beginning January 1, 2022.
DIVISION IX — Charter Schools: Subjects the governing board of a charter school to Iowa
Code chapter 22 open records regulations. Requires the chief administrator of a charter school
to hold a valid State administrator license, a valid teacher license, or a newly established charter
school administrator license. Requires a charter school to notify the public school district of a
student enrolled in a charter school by March 1 of the school year preceding the school year of
enrollment. Requires the charter school to submit an annual report to the State Board of
Education to support the evaluation of the charter school’s performance and compliance with
the performance framework.
EFFECTIVE DATES — The Bill takes effect upon enactment with retroactive provisions in
Division II, Division III, and Division VIII and an applicability provision in Division V.
Division I
Background
Education Program Standards and Funding — School districts and nonpublic schools are
currently allowed to waive high school offer and teach requirements by applying for and
receiving an innovative waiver available in Iowa Code section 256.11. The Flexible Student and
School Support Program (FS3) would allow the waiver of offer and teach requirements for
grades 1 through 12 to create programs that focus on a certain area of academics or on student
well-being. Potential high school FS3 programs could include a focus on the following:
• Advanced science, technology, engineering, and math (STEM) courses.
• Advanced science, technology, engineering, art, and math (STEAM) courses.
• Student voice, well-being, and mental health.
• Work-based learning.
The FS3 program would also allow for a waiver of the minimum school calendar requirements in
Iowa Code section 279.10.
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2017 Iowa Acts, chapter 154, increased district flexibility in how unexpended and unobligated
amounts from certain categorical funds can be used through the creation and utilization of a
flexibility account within a school district’s general fund. Use of this flexibility account requires
formal action by the district’s school board. Statewide in FY 2020, 276 school districts carried
forward $45.0 million in teacher leadership funds.
In FY 2020, school districts and AEAs carried forward an estimated $10.5 million in teacher
salary supplement funds.
Assumptions
Education Program Standards and Funding:
• School districts will increase transfers to the flexibility account of unobligated or unexpended
teacher leadership supplement funds. In FY 2020, 40 school districts made expenditures
from their flexibility accounts.
• Additional school districts may submit an adopted resolution authorizing expenditure from
their flexibility accounts.
• It is not known how much of the carryforward funds for the teacher salary supplement will be
unobligated in FY 2022. Using FY 2020 data for estimation purposes, it is assumed the
FY 2022 carryforward amount will be similar, and all carryforward funds will be unobligated.
• Under current law, 5.0% of the estimated FY 2022 teacher salary supplement funds equals
$15.9 million.
• There will be 119 school districts and 3 AEAs with an estimated unobligated carryforward of
more than 5.0% of the FY 2022 teacher salary supplement funds received.
• Any teacher salary supplement funds not carried forward from FY 2022 may reduce a
school district’s spending authority in FY 2023.
Fiscal Impact
The allowance for FS3 programs will have no fiscal impact to the State; however, additional DE
administration and oversight may be required.
Changes to districts’ flexibility accounts under the provisions of this Bill will have no fiscal impact
to the State. School districts may increase expenditures from their flexibility accounts; however,
the extent cannot be determined.
School districts and AEAs will expend an additional estimated $4.7 million from unobligated
teacher salary supplement funds in FY 2022. These additional expenditures will have no fiscal
impact to the State.
Division II
Background
Education Tax Credits and Deductions — For information on the Tuition and Textbook Tax
Credit, please read Fiscal Topic: Tax Credit: Tuition and Textbook. Information on the
Teacher Expense Deduction is available here.
Assumptions
Teacher Expense Deduction:
• Current Iowa law allows teachers to deduct up to $250 in qualified classroom expenses from
their Iowa income. The deduction is per taxpayer, so married taxpayers are allowed to
deduct up to $250 each. This deduction lowers Iowa taxable income and therefore the
income tax paid by teachers utilizing the deduction. The Bill increases the deduction
maximum to $500 per taxpayer. The deduction increase is first effective beginning tax year
(TY) 2021.
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• The Iowa Department of Revenue (IDR) utilized a model of Iowa tax returns to develop the
fiscal impact projection for this provision. The model is based on actual tax returns filed for
TY 2019.
• For TY 2019, 33,628 households claimed a total of $8.6 million in Teacher Expense
Deductions (an average of $256 per household).
• In determining the fiscal impact of the change, it is assumed that increasing the deduction
will not increase the number of households utilizing the deduction and will not cause current
claimants to increase their classroom expenses.
• Modeled tax returns in which the TY 2019 deduction was $250 (the maximum for a single
taxpayer) or higher (indicating two eligible taxpayers) were randomly assigned projected
deductions between $250 and $1,000.
• Modeled tax returns in which the TY 2019 deduction was below $250 were assumed to have
deductions for future years equal to their TY 2019 deduction.
• The fiscal impact of teacher expense deduction was computed by comparing the model
results under current law (maximum $250 deduction) to the model results assuming a
maximum $500 deduction.
• The tax reduction associated with the enhanced deduction is assumed to occur when tax
returns are filed (decreased final tax payments and increased tax refunds).
Tuition and Textbook Tax Credit:
• Current Iowa law allows taxpayers to claim a nonrefundable tax credit equal to 25.0% of up
to $1,000 in qualified elementary and secondary (K-12) school expenses paid by the
taxpayer for each dependent attending an accredited K-12 public or nonpublic school.
Qualified expenses include:
• Tuition to an accredited school.
• Textbooks.
• Specialized play, concert, and sports clothing.
• Driver education fees paid to a K-12 school.
• Certain dues, fees, and admission charges.
• Materials for extracurricular activities.
• Rental of musical instruments and other music expenses.
• Required supplies for shop and other specialized classes.
• Fees and charges for transportation if paid to the school.
• Band and athletic uniforms.
• The Bill expands the Tuition and Textbook Tax Credit by increasing the maximum basis of
the credit from $1,000 per student to $2,000 and by extending eligibility to include private
instruction students (home schooling and other nonaccredited education options).
• Projection Assumptions and Methods:
• The changes to the tax credit are effective beginning TY 2021.
• The IDR utilized a model of Iowa tax returns to develop the fiscal impact projection for
this provision. The model is based on actual tax returns filed for TY 2019.
• For TY 2019, 111,800 households claimed a total of $14.9 million in Tuition and
Textbook Tax Credits.
• The expansion of the credit is projected to increase the number of taxpayers benefiting
from the credit and the amount claimed by taxpayers. The tax reduction and the
resulting projected State General Fund revenue reduction is the summation of three
separate impacts:
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 • The annual benefit to a portion of the 111,800 current claimants is projected to
increase due to the increase in the expense cap to $2,000.
• Usage of the current credit is low, at around 40.0% of eligible households.
Enhancing the tax credit is projected to encourage additional taxpayers who are
currently eligible but do not claim the credit to change behavior and claim the credit
in the future.
• The expansion of the credit to include private instruction households is projected by
the Legislative Services Agency to add an additional 22,050 private instruction
students.
• The tax reduction associated with the enhanced tax credit is assumed to occur when
tax returns are filed (decreased final tax payments and increased tax refunds).
• Nonrefundable tax credits reduce the income raised by the local option income
surtax for schools by an amount that is assumed to equal 3.0% of the reduction in
State individual income tax liability.
Fiscal Impact
Teacher Expense Deduction — Increasing the maximum classroom expense deduction from the
current $250 to $500 per taxpayer is projected to reduce net General Fund revenue by
$410,000 each year, beginning FY 2022.
Tuition and Textbook Tax Credit — The expansion of the Tuition and Textbook Tax Credit is
projected to reduce annual General Fund revenue by $11.1 million beginning FY 2022. The
change is also projected to reduce the statewide amount of income raised by the local option
income surtax for schools by $300,000 per year.
Division III
Background
Open Enrollment — Open enrollment is the process by which parents or guardians residing in a
school district may enroll their children into another Iowa school district under the provisions set
in the Iowa Code and Iowa Administrative Code. The deadline for parents to submit open
enrollment applications for grades 1 through 12 is March 1. The deadline for students entering
kindergarten is September 1. For information on open enrollment, please see here.
Assumptions
Open Enrollment:
• The DE does not collect data on denied or approved open enrollment applications.
• School districts may experience an increase in open enrollment applications; however, the
extent is unknown.
• Resident districts may experience a decline in net revenue, while receiving districts may
experience an increase in net revenue.
• Revenue includes the previous year’s State cost per pupil amount and the resident district
teacher leadership supplemental cost. Additional revenue may include funding for additional
weighting applicable to the pupil.
• The number of open enrolled students in contiguous districts that qualify for transportation
assistance may increase. The resident school district will continue to be responsible for
payment of transportation assistance to the parent or guardian if the resident district
chooses this option. The cost of transportation reimbursements incurred by the resident
district will continue to be deducted from the tuition sent to the receiving district.
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Fiscal Impact
Open Enrollment — Changes to open enrollment under the provisions of this Bill are expected
to have no fiscal impact to the State. Open enrollment applications and transportation
reimbursements are expected to increase; however, the extent to which each district may
experience a fiscal impact cannot be determined.
Division IV
Background
School Board Powers and Duties — The Iowa Code provides for powers and duties of school
boards.
Fiscal Impact
School Board Powers and Duties — This Division clarifies school board member responsibilities
and is expected to have no fiscal impact to the State.
Division V
Background
Shared Operational Functions — School districts that share certain job positions with one or
more districts, with an Area Education Agency (AEA), or with another authorized authority under
an Iowa Code chapter 28E agreement may be eligible to receive supplementary weighting. To
be eligible, the function’s sharing must be for at least 20.0% of the contract time during the fiscal
year for the district and at least 20.0% for one sharing partner. For more information on
operational function sharing, see Operational Function Sharing Guidance.
Assumptions
Shared Operational Functions:
• Under current law, the State cost per pupil for FY 2023 and all future years is $7,227.
• Based on supplementary weighting data for FY 2022, reducing the weighting generated for
all positions, except superintendent, will reduce supplementary weightings for shared
operational functions by 589 weightings beginning in FY 2023.
• A total of 247 school districts will see a reduction in funding ranging from $7,227 to $36,820.
• A total of 80 school districts will remain revenue neutral under the provisions of this Division.
• Of the 80 school districts, 63 districts do not currently generate weighting for shared
operational functions. The remaining 16 school districts will continue to submit operational
sharing weighting data to the DE that exceed a weighting of 21.0. These districts’