Education expenses: Education Choice and Parental Empowerment Act of 2025.

This bill would enact the Education Choice and Parental Empowerment Act of 2025 and establish the Education Savings Account (ESA) Trust, to be known as the ESA Trust, as a fund within the State Treasury to be administered by the ESA Trust Board. For the 2027–28 to 2030–31, inclusive, school years, the bill would authorize certain children eligible to be enrolled in kindergarten or any of grades 1 to 12, inclusive, to establish an ESA, based on parent or guardian income. The bill, beginning with the 2031–32 school year, would authorize every child eligible to be enrolled in kindergarten or any of grades 1 to 12, inclusive, to establish an ESA. The bill would credit a deposit amount to the account of every eligible student enrolled in an eligible school for tuition, elementary and secondary eligible education expenses, and undergraduate or graduate eligible education expenses, as defined. The bill would specify the deposit amounts for the 2027–28 school year, and would require the Department of Finance, beginning on July 1, 2028, to determine the ESA deposit amount annually for the upcoming school year, as provided. The bill would require the Controller to transfer an amount of money from the General Fund to the ESA Trust in those amounts.

The bill would specify the membership of the ESA Trust Board and would vest the ESA Trust Board with certain powers and duties. The bill would establish 2 accounts within the ESA Trust, the ESA Trust Program Account and the ESA Trust Administrative Account, and would continuously appropriate the moneys in the program account to the ESA Trust Board for purposes of the bill, thereby making an appropriation.

The bill would require the Superintendent of Public Instruction to establish a procedure for the parents and legal guardians of eligible students to apply to establish an ESA and submit an executed participation agreement. The bill would authorize the ESA Trust Board to disburse funds from ESAs to eligible schools. The bill would define "eligible school" as a campus of the California Community Colleges, the California State University, and the University of California, a full-time private school accredited by, or, except as provided, awaiting accreditation from, a regional accrediting agency recognized by the state or the United States Department of Education, a private college or university, a public college or university, or a vocational educational or training institution, as specified. The bill would specify the procedures for participating eligible schools to receive funds disbursed by the ESA Trust Board. Once an eligible student graduates from high school or obtains a high school equivalency certification, the bill would impose a $50,000 cap on the balance in any ESA available for an eligible student's use for tuition, undergraduate or graduate eligible education expenses, or expenses associated with vocational education. The bill would require the Department of Finance to adjust this limit annually for inflation using the California Consumer Price Index.

(2) The Classroom Instructional Improvement and Accountability Act, an initiative approved by the voters as Proposition 98 at the November 8, 1988, statewide general election, amended the California Constitution to, among other things, set forth a formula for computing the minimum amount of revenues that the state is required to appropriate for the support of school districts and community college districts based on one of 3 tests in any given fiscal year, one of which is based on the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in the 1986–87 fiscal year, and 2 of which are based on, among other things, changes in enrollment.

This bill would require the Legislature to recalculate that minimum education funding guarantee by including eligible students not enrolled in a public elementary or secondary school before the operative date of the act in those minimum funding guarantee calculations based on average daily attendance, as provided. The bill would also require the costs of providing ESA deposit amounts for eligible students to be apportioned between the General Fund and the public school district in which those eligible students reside in the same ratio of General Fund and local property tax revenue that would have been used to educate those eligible students in their public school district.

(3) The Personal Income Tax Law, in modified conformity with federal law, generally defines "gross income" as income from whatever source derived, except as specifically excluded, and provides various exclusions from gross income, and deductions from income, for purposes of computing tax liability.

This bill, for taxable years beginning on or after January 1, 2026, would exclude from gross income any amounts received as distribution from an Education Savings Account, as defined, as part of a participation agreement, as defined.

This bill, for taxable years beginning on or after January 1, 2026, would also allow a deduction in an amount equal to the amount contributed by a taxpayer to an Education Savings Account.

Existing law requires a bill authorizing a new tax expenditure to contain, among other things, specific goals, purposes, and objectives the tax expenditure will achieve, detailed performance indicators, and data collection requirements.

This bill would state the intent of the Legislature to include additional information required for any bill authorizing a new tax expenditure.

(4) These provisions would become operative on January 1, 2027, only if Assembly Constitutional Amendment ____ of the 2025–26 Regular Session is approved by the voters at the statewide general election on November 3, 2026.