SCHOLARSHIP AVAILABILITY – PRIORITIZATION OF AWARDS

2025-2026 school year

      For the 2025-2026 school year, the department must award a maximum of 20,000 scholarships, to be awarded as follows, in the order in which the department receives completed scholarship applications:

      (1)  10,000 scholarships are available for eligible students (i) whose annual household income does not exceed 300% of the amount required for the student to qualify for free or reduced price lunch; (ii) who are eligible students under state law based on being zoned to attend certain ASD schools and meeting other related criteria; or (iii) who are eligible students under state law based on having certain disabilities and meeting other related criteria; and

      (2)  10,000 scholarships are available for eligible students, regardless of whether the eligible student meets one of the criteria listed in (1) above.

      However, this bill authorizes the department to award a scholarship to an eligible student in an order that does not comply with the order prescribed above, if awarding the scholarship out of order is consistent with the outcome of an administrative appeal adjudicating the denial of the student's scholarship application.

      As used in this bill, "eligible student" means a resident of this state who is entitled to attend a public school, except for a student enrolled in a home school or in a church-related school, with which the student's parent is associated, registered, or is participating as a parent-teacher for purposes of law related to homeschooling.

Future school years

      Beginning with the 2026-2027 school year and subject to the funds appropriated for scholarships, together with any available funds returned to the state treasurer, if the number of applications received by the department during a program application period (i) exceeds 75% of the total number of scholarships available for the respective school year, then the department may increase the maximum number of scholarships available for the next school year by no more than 5,000 additional scholarships; or (ii) does not exceed 75% of the total number of scholarships available for the respective school year, then the maximum number of scholarships available for the next school year must remain the same as the maximum number of scholarships available for the prior school year.

      Beginning with the 2026-2027 school year, if the number of applications received by the department exceeds the number of scholarships available for the respective school year, then the department must award scholarships in the following order:

      (1)  An eligible student who received a scholarship in the immediately preceding school year;

      (2)  An eligible student (i) whose annual household income does not exceed 100% of the amount required for the student to qualify for free or reduced price lunch, (ii) who is an eligible student under state law based on being zoned to attend certain ASD schools and meeting other related criteria; or (iii) who is an eligible student under state law based on having certain disabilities and meeting other related criteria or an eligible student who is an eligible student, in the order in which the department receives completed scholarship applications; 

      (3)  An eligible student whose annual household income does not exceed 300% of the amount required for the student to qualify for free or reduced price lunch, in the order in which the department receives completed scholarship applications;

      (4)  An eligible student who, at the time of submitting a completed application, is currently enrolled in a public school, or who is eligible to enroll in kindergarten in a public school for the respective school year, in the order in which the department receives completed scholarship applications; and

      (5)  An eligible student, in the order in which the department receives completed scholarship applications. 

      However, this bill authorizes the department to award a scholarship to an eligible student in an order that does not comply with the order prescribed above, if awarding the scholarship out of order is consistent with the outcome of an administrative appeal adjudicating the denial of the student's scholarship application.

Receipt of scholarships

      In order to receive a scholarship, an eligible student, or the eligible student's parent, must (i) submit a completed scholarship application to the department; (ii) ensure the provision of an education for the eligible student that satisfies the compulsory school attendance requirement provided in state law through enrollment in a private school; and (iii) not enroll the eligible student in a K-12 public school in any school year for which the eligible student receives a scholarship.

      As used in this bill, a "private school" means a school that is located in this state; and that is a category I, II, or III school approved by the commissioner of education in accordance with rules promulgated by the state board of education.

SCHOLARSHIP AMOUNTS – ALLOWABLE USES

      This bill provides that a scholarship equals the base funding amount, and is solely state funded.  This bill requires that scholarship funds only be used for the following educational expenses:

      This bill requires scholarship funds to first be used to pay the recipient's tuition and fees.  Any outstanding scholarship funds available to the recipient after payment of tuition and fees may be used for one or more of the educational expenses described above.

UNSPENT FUNDS – ACCOUNT CLOSURE

      This bill provides that a recipient's scholarship account remains open, and all available scholarship funds remain in the recipient's scholarship account, from one school year to another unless one of the following events occurs:

      This bill requires that a recipient's scholarship account be closed, and all remaining scholarship funds returned to the state treasurer to be used to award scholarships to eligible students in future years, upon the earlier of the events described above.

ADMINISTRATION OF ASSESSMENTS FOR RECIPIENTS

      This bill requires, as a condition of receiving a scholarship, recipients in grades 3-11 must be annually administered (i) a nationally standardized achievement test that is aligned to the respective private school's instructional plan, as determined by rules promulgated by the state board of education; or (ii) the TCAP test required for the grade in which the recipient is enrolled.  This bill requires each private school that enrolls recipients to annually administer the test to the recipients enrolled in the school and to provide the results of the test to the recipient's parents.

      By June 30, 2026, and by each June 30 thereafter, this bill also requires each private school to provide the results of the tests to the office of research and education accountability in the office of the comptroller of the treasury.  A private school may provide the test results using aggregated, deidentified data; provided, that the data must be provided on a form developed by the office of research and education accountability in a manner that allows the office of research and educational accountability to group and analyze the results by recipient grade level, household income level, sex, and race.  The office of research and education accountability must submit an annual report to the education committees of the senate and house of representatives detailing the results of the tests.

AUTONOMY OF SCHOOLS THAT HAVE RECIPIENTS ENROLLED

      This bill provides that a private school that enrolls recipients is autonomous and not an agent of this state.  Further, the creation of the program does not expand the regulatory authority of this state, the officers of this state, or the authority of any LEA to impose any additional rules, regulations, or requirements on private schools that enroll recipients beyond the rules narrowly tailored to enforce the requirements of the program.  A private school that enrolls recipients is not required to alter its creed, practices, admission policies, hiring policies, or curriculum in order to accept recipients. 

LIMITATIONS ON PARTICIPATION – CONNECTION TO OTHER EDUCATION PROGRAMS

      This bill requires the department to deny a scholarship to an eligible student for the same school year in which the student is participating in the Tennessee education savings account pilot program, or the individualized education account program. 

      This bill clarifies that a recipient does not retain the right to receive special education and related services from the LEA in which the recipient resides, through an individualized education program.  However, recipients have the same rights under the federal Individuals with Disabilities Education Act to receive equitable services through an individualized service plan as all other students enrolled in non-public schools.

PAYMENT – STATE OR LOCAL PUBLIC BENEFIT – TAX IMPLICATION

      This bill clarifies that a scholarship awarded under this bill (i) must not be paid directly to a recipient or recipient's parent; and (ii) is a state or local public benefit under the "Eligibility Verification for Entitlements Act."  This bill requires the department to deny the scholarship application of an eligible student who cannot establish the eligible student's lawful presence in the United States.

      Funds received pursuant to this bill do not constitute income taxable to the parent of the recipient or to the recipient under state income taxation law.  

DISENROLLMENT EFFECTS ON TISA ALLOCATIONS

      Beginning with the TISA allocation for the 2025-2026 school year and except as provided below, if an LEA's TISA allocation for the current school year is less than the LEA's TISA allocation for the immediately preceding school year, and if the LEA experienced disenrollment, then this bill requires the department to allocate additional funds to the LEA such that the LEA's TISA allocation for the current school year combined with the amount of any additional funds received by the LEA is equal to the LEA's TISA allocation for the immediately preceding school year.

      Beginning with the TISA allocation for the 2026-2027 school year, if an LEA has ever received additional funds under the provisions above, and if an LEA's TISA allocation for the current school year is less than the sum total of the LEA's TISA allocation for the immediately preceding school year and the amount of any additional funds received by the LEA pursuant to these provisions for the immediately preceding school year, and if the LEA experienced disenrollment, then this bill requires the department to allocate additional funds to the LEA such that the LEA's TISA allocation for the current school year is equal to the sum total of the LEA's TISA allocation for the immediately preceding school year and the amount of any additional funds received by the LEA pursuant to these provisions for the immediately preceding school year.

      This bill provides that any additional funds provided to an LEA pursuant to the provisions above must be solely state funded and places certain limitations, as described in the bill, concerning the department awarding additional funds to an LEA.

K-12 PUBLIC SCHOOL TEACHERS' BONUS

      Subject to appropriation, this bill requires the department to award a one-time bonus in the amount of $2,000 to each teacher employed in a K-12 public school for the 2024-2025 school year.  A bonus awarded pursuant to this bill is solely state funded.  Bonuses paid to teachers pursuant to this bill are not part of the TISA, and must not be considered salary payments or supplements.  As used in these provisions, "teacher" means an individual who is evaluated pursuant to state law and who provides direct service to students at school sites.

TAXES COLLECTED AND ALLOCATED UNDER THE TENNESSEE SPORTS GAMING ACT

      Present law requires 80% of the privilege tax collected for sports wagering in this state to be distributed by the council to the state treasurer for deposit into the lottery for education account.  As of July 1, 2025, this bill revises this requirement to, instead, require that the state treasurer deposit those funds into an account administered by the state treasurer for use by local education agencies for the construction and maintenance of public school buildings.  When allocating funds for such purpose, the state treasurer must consider the following:

      Whether the local education agency is located in a county that is designated as an economically distressed or at-risk county by the department of economic and community development;

      The occurrence of any emergency or natural disaster that has resulted in significant damage to an existing public school building or facility; and

      Other demonstrated need, as identified by the local education agency.

RULEMAKING

      This bill requires the department to promulgate rules to effectuate this bill.  Such rules must include an administrative appeal procedure for the denial of scholarship applications.

ON JANUARY 30, 2025, THE HOUSE ADOPTED AMENDMENT #1, AND PASSED HOUSE BILL 6004, AS AMENDED.

      AMENDMENT requires the state treasurer to invest appropriations for the education freedom scholarship program and other available program funds and to account for such funds in one or more separate accounts in accordance with the bill or other applicable law.  Interest accruing on investments and deposits of the account must be returned to the account and remain part of the account.  Any unencumbered moneys and any unexpended balance remaining in the account at the end of a fiscal year must not revert to the general fund, but must be carried forward until expended.  The money deposited in the account and the interest accruing on the deposited money must be used to provide scholarships to eligible students.

TAXES COLLECTED AND ALLOCATED UNDER THE TENNESSEE SPORTS GAMING ACT

      This amendment rewrites the provisions in the bill regarding the allocation of privilege tax collections for sports wagering in this state to, instead, generally require 80% of such collections to be distributed by the sports wagering council to the state treasurer for deposit into an account, to be known as the disbursement account, which is administered by the state treasurer for use by local education agencies (LEAs), for the construction and maintenance of public school buildings.

      Order of Disbursements

      Subject to the availability of funds in the disbursement account, and upon the LEA's submission of a completed application, this amendment provides the following:

      The state treasurer must disburse, in the order in which the state treasurer receives completed applications, funds to an LEA in an amount equal to $25 for each student enrolled in the LEA, if the LEA is (i) located in a county that is designated as an economically distressed or at-risk county by the department of economic and community development; (ii) an LEA in which 50% or more of the public schools operated or authorized by the LEA received an "A" letter grade for the 2023-2024 school year or any subsequent school year; or (iii) an LEA that is eligible for a fast-growth stipend.

      To the extent any funds remain in the disbursement account after the state treasurer makes the disbursements as described above, if one or more LEAs have sustained significant damage to an existing public school building or facility due to the occurrence of an emergency or natural disaster, then the state treasurer must disburse, in the order in which the state treasurer receives completed applications, funds to such LEAs.  The state treasurer must disburse no less than 15% of any funds remaining in the disbursement account after disbursements have been made to qualifying LEAs pursuant to this amendment, if applicable.

      To the extent any funds remain in the disbursement account after the state treasurer disburses funds as described above, the state treasurer may disburse funds, in the order in which the state treasurer receives completed applications, to an LEA that identifies a demonstrated need for funds for the construction and maintenance of public school buildings that differs from the criteria in this amendment.

Applications

      This amendment requires the state treasurer to establish the application period within which an LEA must apply for a disbursement of funds.  The state treasurer may establish more than one application period in a fiscal year.  Within each application period, an LEA that meets one or more of the criteria described in this amendment may apply for a disbursement of funds for the construction and maintenance of public school buildings by submitting a completed application, as prescribed by the state treasurer.  Each application submitted to the state treasurer must include, at a minimum, (i) a plan detailing how the LEA will expend the funds and (ii) a budget and financial statement for the LEA, which must include each of the LEA's funding sources.

      Maximum Amount of Funds to be Allocated

      This amendment generally requires the state treasurer to determine the maximum amount of funds that may be allocated to an LEA from the disbursement account for purposes described in this amendment.  When determining the maximum amount of funds that may be allocated to an LEA pursuant to this amendment, the state treasurer may consider (i) the severity of the damage caused by an emergency or natural disaster; (ii) the severity or criticality of the demonstrated need identified by the LEA; (iii) the duration of the LEA's construction and maintenance project; or (iv) the amount of funds requested by the LEA, as compared to the funds available for disbursement.  However, the state treasurer is not required to promulgate rules to effectuate these provisions.

      Use of Funds

      This amendment authorizes the state treasurer to disburse funds to LEAs in whole or in part, based on project milestones.  If the state treasurer elects to disburse funds in whole or in part, and the receiving LEA does not complete a project milestone or abandons the project altogether, then the LEA must return any unused funds disbursed to the LEA from the disbursement account to the state treasurer.

      This amendment authorizes the state treasurer to request periodic reports from each LEA that receives a disbursement of funds regarding the use of such funds and the completion of the LEA's construction and maintenance project.  If an LEA fails to comply with the state treasurer's request for periodic reporting regarding an ongoing construction and maintenance project, then the state treasurer may withhold the LEA's next disbursement.

      Personnel

      This amendment authorizes the state treasurer to facilitate procurements and enter into contracts or agreements to effectuate a disbursement of funds for financial consultants; auditors, accountants, and attorneys; third-party administrators; and other contractors, as the state treasurer deems necessary to carry out the duties and responsibilities for establishing, implementing, and administering disbursements.  Payment for such services must come from the disbursement account.

      Disbursement Account

      This amendment requires the disbursement account administered by the state treasurer to be invested by the state treasurer pursuant to present law.  The state treasurer must account for such funds in one or more separate accounts in accordance with this bill or other applicable law.  Interest accruing on investments and deposits of the account must be returned to the account and remain part of the account.  Any unencumbered moneys and any unexpended balance remaining in the account at the end of a fiscal year must not revert to the general fund, but must be carried forward until expended.  The money deposited in the account and the interest accruing on the deposited money must be used by the state treasurer to disburse funds to LEAs.

      In addition to the charge deducted from an account established pursuant to present law to defray the costs of administering the fund, this amendment authorizes the state treasurer to charge and deduct from the disbursement account an administrative fee and to pay all reasonable expenses for legal services, accounting services, auditing services, consulting services, and other necessary services as determined by the state treasurer.

K-12 PUBLIC SCHOOL TEACHER BONUS

      This amendment makes the following changes to the provisions in the bill regarding K-12 public school teacher bonus:

      Clarifies that the bonus must at least be $2,000 but does not have to be exactly $2,000.

      Adds that, in order to receive funds from the department of education for purposes of awarding the teacher bonuses, either (i) the local board of education for the LEA must first adopt a resolution affirming that the LEA would like to participate in the teacher bonus portion of the Education Freedom Act of 2025; or (ii) the governing body of the public charter school must first adopt a resolution affirming that the public charter school would like to participate in the teacher bonus portion of the Education Freedom Act of 2025.  If the public charter school is authorized by an LEA, and the local board of education for the LEA has adopted such a resolution, then the governing body of the public charter school is not required to adopt a separate resolution.  Each local board of education and public charter school governing body that wishes to receive funding from the department must submit its resolution to the department by June 1, 2025.

      Requires the department to award a one-time bonus to each teacher employed in a K-12 state special school managed and controlled by the department.

      Clarifies that a teacher who was employed in a grades K-12 public school in this state for the 2024-2025 school year and who is a member of the general assembly on the effective date of this bill is ineligible for the one-time bonus.

      Requires the bonus to be included as earnable compensation for retirement purposes but is not made for the purpose of increasing a member's retirement benefit or inducing a member to retire.

ADMINISTRATION OF ASSESSMENTS FOR RECIPIENTS

      This amendment makes the following changes to the provisions in the bill regarding the administration of assessments for recipients:

      Clarifies, for the requirement in the bill that, as a condition of receiving a scholarship, recipients in grades 3-11 must be annually administered a nationally standardized achievement test or the TCAP tests for the applicable grade, that TCAP tests means the TCAP test for math and English language arts.