Today's Law As Amended


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SB-64 Education expenses: School Choice Flex Account Act of 2025.(2025-2026)



As Amends the Law Today


SECTION 1.
 The Legislature finds and declares all of the following:
(a) California’s civic, economic, and cultural future requires educational options that prepare every pupil and student for a worthwhile role in our vibrant state.
(b) For years, opponents have tried to undermine efforts to help struggling California pupils and students by stating that adjusting public funds to give pupils and students the best educational chance was wrong. Instead of lifting families out of poverty and inspiring the next generation of entrepreneurs, scientists, and leaders, we have trapped children into a one-size-fits-all system that encourages failure rather than success. Parents watch their children struggle, and our “democratically governed public schools” have stopped investing in our children’s futures and are leaving the most marginalized pupils and students behind.
(c) Educators are forced to “teach to the test,” instead of identifying and cultivating their pupils’ and students’ potential. And yet California has been ranked significantly lower than the national average at least since 2000 and the latest reports show this state once again is not meeting the minimal education standards.
(d) Throughout the years, research has consistently shown that private school students tend to perform better on standardized tests. For example, grade 8 private school students averaged about 20 points higher than public school pupils on the reading assessment in 2022, and grade 4 students had nearly the same advantage in average scores. The most recent National Assessment of Educational Progress data shows that private school students score better in almost all subjects as well.
(e) Pupils, students, parents, and educators increasingly want a learning environment where each pupil and student is uniquely known and valued, with customized learning experiences focused on children’s interests and aptitudes, and trust and respect for the parents’ role in developing and educating their children.
(f) For special education in California, school districts must work with private schools and parents to create the most inclusive and thoughtful services for pupils in special education programs. School districts must spend a proportionate share of federal dollars for these programs, but there are no laws prohibiting school districts from spending additional state funds to help these pupils and parents.
(g) Even though private schools are not obligated to create an individualized education program (IEP), once a student with a disability is enrolled in a religious or other private school, the school district must conduct meetings to develop, review, and revise services that will benefit the child and the plan must go through the same process and procedures required in the development of an IEP.
(h) Yet financial barriers have many parents feeling that they have no options but to send their children to neighborhood schools. Private schools, charter schools, and home schools are achieving better educational results, but these options are unaffordable or unavailable for most pupils and students. ZIP Codes and lotteries determine the educational options available for most low- and middle-income pupils and students.
(i) Before the COVID-19 pandemic, approximately 10 percent of pupils and students in California were using alternative education options, but the pandemic required families to try alternatives. In 2023, a survey of 3,820 parents of schoolage children showed that more than one-half of them either considered or are considering a new school. In that study, a majority of Hispanic, Latino, and Black parents, approximately 65 percent, said they were looking into or thinking about a new learning environment for their kids.
(j) California now spends approximately $24,000 per year for each child in public school, including approximately $18,000 from state funds. Spending more on the current and outdated system has not created better results, and many low- to middle-class taxpaying families are not given a choice but to send their pupils to a school in this system. Allowing parents to decide the school that offers the best options and learning experiences for their pupil or student is a better use of education funds. The increasing demand for alternatives will create a range of exciting educational opportunities that all pupils and students can enjoy.
(k) California is the fifth largest economy in the world and needs to offer a world-class, individualized, and customized education to every K–12 pupil or student in our state in order to continue providing for a sustainable and vibrant economy. As such, the state needs to innovate its education system to encourage our children to discover their unique talents, turn those talents into skills, and use those skills to create value for themselves and for others.
(l) Therefore, the people hereby enact the School Choice Flex Account Act of 2025. The act includes the following provisions:
(1) During the 2027–28 school year, $8,000 will be available to each pupil and each student, and $16,000 will be available to each pupil and each student with exceptional needs, to be used toward tuition and education expenses at an accredited private school of their choice. The annual amount shall be adjusted each year. A School Choice Flex Account or Special Education Flex Account will be established at the request of the pupil’s or student’s parent or legal guardian.
(2) The School Choice Flex Account and Special Education Flex Account will be available to the lowest income families for the first two years after the act becomes operative, low- and middle- income families for the two following years, and all families beginning four years after the act is operative.
(3) All of this will be achieved at no additional cost to taxpayers.

SEC. 2.

 Article 19.2 (commencing with Section 69995) is added to Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code, to read:

Article  19.2. School Choice Flex Account Act of 2025
69995.
 This article shall be known, and may be cited, as the School Choice Flex Account Act of 2025.
69995.01.
 For purposes of this article, the following definitions apply:
(a) “Account beneficiary” means the eligible student for whom an SCFA or SEFA was established by the SCFA Trust Board.
(b) “Administrative account” means the account established within the SCFA Trust pursuant to subdivision (f) of Section 69995.02 from which the costs of administering the SCFA Trust are paid.
(c) “Costs of administration” means the actual costs of the SCFA Trust Board to administer SCFAs and SEFAs, subject to the limit established in subdivision (d) of Section 69995.03.
(d) “Deposit amount” means the amount calculated pursuant to subdivision (d) of Section 69995.02.
(e) “Elementary and secondary eligible education expenses” means the expenses typically associated with the education of a pupil enrolled in a public elementary or secondary school or an eligible student enrolled in an eligible school, other than tuition, including, but not limited to, books, school supplies and equipment, academic tutoring, academic testing fees, special education and related services for students who are individuals with exceptional needs, and transportation to and from school and school functions. Expenses incurred by an eligible student to attend a community college before high school graduation, including tuition, are elementary and secondary eligible education expenses.
(f) “Eligible school” means a private full-time day school, as described in Section 48222, operating in the state and accredited by a regional accrediting agency recognized by the state or the United States Department of Education, or a school that has applied for that accreditation but the application is pending, and the school has not been denied accreditation in the prior two years by the same accrediting agency, that has filed an application with the Superintendent pursuant to Section 69995.09.
(g) “Eligible student” means a child eligible to enroll in a public elementary or secondary school and enrolled in an eligible school, except as follows:
(1) For the 2027–28 and 2028–29 school years, a child is an eligible student only if the child’s parent or guardian’s taxable income is less than fifty thousand dollars ($50,000) per year for a single filer or one hundred thousand dollars ($100,000) per year for dual filers.
(2) For the 2029–30 and 2030–3031 school years, a child is an eligible student only if the child’s parent or guardian’s taxable income is less than one hundred thousand dollars ($100,000) per year for a single filer or two hundred thousand dollars ($200,000) per year for dual filers.
(h) “Individualized education program” has the same meaning as that term is described in Section 56345.
(i) “Participation agreement” means the uniform contract created by the SCFA Trust Board that must be executed by the SCFA Trust Board and the parent or legal guardian of an eligible student that directs the SCFA Trust Board to disburse funds to an eligible school on behalf of the account beneficiary.
(j) “Program account” means the account created in the SCFA Trust pursuant to subdivision (f) of Section 69995.02 from which moneys transferred from the General Fund, investment earnings, and other grants, gifts, or appropriations are maintained and segregated into SCFAs and SEFAs for eligible students.
(k) “SCFA” or “School Choice Flex Account” means an account composed of funds that may be used for elementary and secondary eligible education expenses for the applicable school year. Any funds deposited in an SCFA that are unused, as of June 30 of each year, shall be returned to the state for the benefit of elementary and secondary education, upon appropriation by the Legislature.
(l) “SCFA Trust” means the School Choice Flex Account Trust established by subdivision (a) of Section 69995.02.
(m) “SCFA Trust Board” means the School Choice Flex Account Trust Board established by subdivision (a) of Section 69995.03.
(n) “SEFA” or “Special Education Flex Account” means a School Choice Flex Account for students who are individuals with exceptional needs, as defined by Section 56026. A student for whom funds are expended pursuant to an SEFA shall not also receive funds pursuant to a separate SCFA. Any funds deposited in an SEFA that are unused, as of June 30 of each year, shall be returned to the state for the benefit of elementary and secondary education, upon appropriation by the Legislature.
(o) “Tuition” means the amount charged by an eligible school to enroll a pupil or student at the school for a particular grade level and registration fees associated with application and enrollment.
(p) “Unclaimed funds” means funds remaining in an SCFA or SEFA at the end of the applicable school year.
69995.02.
 (a) There is hereby established an instrumentality of the State of California to be known as the School Choice Flex Account Trust.
(b) Every eligible student whose parent or guardian desires to enroll the child in an eligible school may establish an SCFA, or, if applicable, an SEFA, pursuant to this article.
(c) Every eligible student enrolled in an eligible school shall be entitled to a credit to the child’s SCFA or SEFA for tuition and elementary and secondary eligible education expenses.
(d) The SCFA deposit amount for the 2027–28 school year shall be eight thousand dollars ($8,000). The SEFA deposit amount for the 2027–28 school year shall be sixteen thousand dollars ($16,000). Beginning July 1, 2028, the Department of Finance shall adjust the SCFA and SEFA deposit amounts annually by the same percentage required by the state for the support of school districts in the same fiscal year, pursuant to Section 8 of Article XVI of the California Constitution.
(e) (1) Each school year, the Controller shall transfer an amount of moneys from the General Fund to the SCFA Trust equal to the sum of the following:
(A) The SCFA deposit amount determined pursuant to subdivision (d) multiplied by the number of SCFAs established pursuant to subdivision (b).
(B) The SEFA deposit amount determined pursuant to subdivision (d) multiplied by the number of SEFAs established pursuant to subdivision (b).
(2) The SCFA or SEFA deposit amount for an individual student may be adjusted for an SCFA or SEFA established after the beginning of the school year pursuant to an application submitted pursuant to subdivision (b) of Section 69995.04. The Controller shall make at least three transfers to the SCFA Trust during each fiscal year, with the first transfer occurring on August 1 and the last transfer occurring on or before June 15. The Controller shall adjust the amount of moneys transferred from the General Fund to the SCFA Trust to ensure that the total amount of moneys transferred during the school year equals the amount required to be transferred pursuant to this article. The Controller shall report the total amount of moneys transferred from the General Fund to the SCFA Trust pursuant to this article to the Department of Finance and the Legislature on or before June 15 of each year. This article does not prohibit the Legislature from appropriating additional funds to the SCFA Trust.
(f) The SCFA Trust is hereby established as a fund in the State Treasury. The SCFA Trust Program Account and the SCFA Trust Administrative Account are hereby established as accounts within the SCFA Trust. Notwithstanding Section 13340 of the Government Code, the program account is hereby continuously appropriated, without regard to fiscal years, to the SCFA Trust Board for purposes of this article. Moneys in the administrative account shall be available for expenditure, upon appropriation, for the purposes specified in this article. Moneys in the SCFA Trust shall only be used for purposes of this article and shall not be taken, used, borrowed, or collateralized for any other purpose.
(g) Any unit of federal, state, or local government, or any other person, firm, partnership, or corporation, may make a grant, gift, or other appropriation for deposit into the administrative account or the program account.
69995.03.
 (a) The purposes, powers, and duties of the SCFA Trust are vested in, and shall be exercised by, the School Choice Flex Account Trust Board, which is hereby established.
(b) The SCFA Trust Board shall consist of the following members:
(1) The members of the Scholarshare Investment Board as provided in subparagraph (B) of paragraph (2) of subdivision (a) of Section 69984.
(2) The Superintendent.
(3) One member, appointed by the Governor, representing elementary and secondary private full-time day schools that are parochial or religious.
(4) One member, appointed by the Governor, representing elementary and secondary private full-time day schools that are not parochial or religious.
(c) The SCFA Trust Board shall have all the necessary powers and duties provided to the Scholarshare Investment Board under Article 19 (commencing with Section 69980), including, but not limited to, all of the following:
(1) The power to invest moneys in the SCFA Trust for the benefit of the SCFA Trust and account beneficiaries.
(2) The duty to publicly report investments and investment performance.
(3) The duty to distribute funds from SCFAs and SEFAs and audit the SCFAs and SEFAs to ensure that all funds disbursed to eligible schools are used by and for the account beneficiary and in furtherance of the act.
(4) The power to accept any grants, gifts, appropriations, and other moneys from any unit of federal, state, or local government or any other person, firm, partnership, or corporation for deposit into the administrative account or the program account.
(5) The duty to return unclaimed funds to the state for the benefit of elementary and secondary education, upon appropriation by the Legislature.
(6) The power to adopt regulations to implement this article.
(d) Moneys transferred by the Controller pursuant to subdivision (e) of Section 69995.02 shall be allocated by the SCFA Trust Board to the program account and administrative account. All moneys allocated to the program account shall be promptly invested and accounted for separately for each individual SCFA and SEFA. All costs of administration, including investment management fees, of the SCFA Trust shall be paid out of the administrative account, which shall not exceed, on an annual basis, 1 percent of the total amount of moneys in the program account.
69995.04.
 (a) The Superintendent shall create an online application for a parent or legal guardian to request that an SCFA or SEFA be established for an eligible student and submit an executed participation agreement pursuant to this article. The Superintendent shall also accept applications and executed participation agreements submitted by mail.
(b) The deadline for submitting an application and executed participation agreement for the first school year for which an SCFA or SEFA is to be established for an eligible student shall be April 1 of the previous school year. The Superintendent shall establish at least one additional opportunity and deadline for a parent or legal guardian to submit an application and executed participation agreement during the school year. The SCFA and SEFA deposit amounts for SCFAs or SEFAs established during a school year shall be less than the full SCFA or SEFA deposit amount established pursuant to subdivision (d) of Section 69995.02.
(c) The parent or legal guardian of an eligible student shall identify the eligible student as the account beneficiary of the SCFA or SEFA and execute the participation agreement.
(d) Once an application and participation agreement have been submitted, the Superintendent shall confirm that the child is enrolled in an eligible school and the participation agreement shall be transmitted to the eligible school.
(e) So long as the account beneficiary remains eligible to receive the SCFA or SEFA deposit amount and to direct the expenditure of funds pursuant to this article, no additional application or participation agreement shall be required. However, an application and participation agreement shall be amended by the parent or legal guardian if the account beneficiary enrolls in a different eligible school.
(f) The Superintendent shall create an online process for a parent or legal guardian, public school district, eligible school, or any other person to report that a child is no longer eligible or is no longer enrolled in an eligible school. Upon receipt of this information, the Superintendent shall confirm the eligibility status of the child by providing adequate notice to the parent or legal guardian of the child and to the school, and an opportunity for each to be heard. If the Superintendent determines that a child is no longer eligible, that determination may be appealed by the parent or legal guardian on behalf of the child pursuant to the administrative adjudication procedures described in Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code.
69995.05.
 The Superintendent shall do all of the following:
(a) Create an online application for a school to become eligible to receive funds from an SCFA or SEFA established pursuant to this article.
(b) Publish and periodically update on its internet website a list of eligible schools by name and address.
(c) Provide contact information for each eligible school on its internet website.
(d) Post the tuition and other eligible education expenses charged for each grade level at an eligible school on its internet website.
69995.06.
 The SCFA Trust Board shall do all of the following:
(a) Establish an SCFA or SEFA within the program account for each eligible student who has requested an account from the Superintendent.
(b) Enter into participation agreements pursuant to this article.
(c) Credit each SCFA or SEFA with the appropriate SCFA or SEFA deposit amount for each eligible student.
(d) Credit investment earnings of the program account to each SCFA or SEFA, as appropriate.
(e) Provide parents and legal guardians of account beneficiaries with the ability to securely review online SCFA or SEFA activity, including SCFA or SEFA deposits or credits, SCFA or SEFA investment earnings, and SCFA or SEFA disbursements to an eligible school on behalf of the account beneficiary.
(f) Protect the privacy of parents, legal guardians, and account beneficiaries.
(g) (1) Pursuant to the terms of an executed participation agreement, and except as provided in paragraph (2), disburse funds on behalf of an account beneficiary to an eligible school on a monthly basis.
(2) Notwithstanding paragraph (1), the SCFA Trust Board may enter into an agreement with an eligible school to provide for a different disbursement schedule.
(h) Randomly audit funds disbursed from SCFAs and SEFAs to ensure student eligibility, student enrollment, student attendance, and school eligibility.
(i) Withhold any ineligible disbursement made to an eligible school from any future disbursements.
(j) Create a uniform participation agreement for use by the Superintendent, the SCFA Trust Board, and the parents and legal guardians of eligible students. An eligible school identified in a participation agreement shall be a third-party beneficiary of an executed participation agreement.
69995.07.
 The SCFA Trust Board shall adopt regulations to implement this article.
69995.08.
 (a) The SCFA Trust Board shall only disburse funds from an SCFA or SEFA to an eligible school.
(b) The state shall not limit the number of eligible schools or the number of students enrolled in an eligible school. The state shall not impose conditions on the eligibility of a private school to receive funds, other than conditions based on any of the following:
(1) Periodic certification that an eligible student is enrolled and attending the eligible school.
(2) Periodic certification that the amount disbursed from an SCFA or SEFA is only used for tuition and eligible education expenses.
(3) Accreditation required to obtain status as an eligible school pursuant to subdivision (f) of Section 69995.01.
(4) Public disclosure of the receipt and expenditure of SCFA or SEFA funds as required by the SCFA Trust Board.
(5) The general health and safety standards applicable to the facilities of all private schools operating in the state.
69995.09.
 A private full-time day school may become an eligible school by filing an application with the Superintendent. A private full-time day school that becomes an eligible school may accept funds from an SCFA or SEFA for the tuition and eligible educational expenses of an account beneficiary who is admitted to the eligible school.
69995.1.
 (a) Notwithstanding Section 69995.02, and except as provided in subdivision (b), the child of a parent or legal guardian who chooses to educate the child at home pursuant to an affidavit filed pursuant to Section 33190 shall not be entitled to establish an SCFA or SEFA pursuant to this article. This article shall not prohibit the state from offering financial aid for education-related expenses to the parents or legal guardians of homeschooled children ineligible for an SCFA or SEFA.
(b) Notwithstanding subdivision (a), the parent or legal guardian of a child enrolled in an eligible school to facilitate homeschooling may establish an SCFA or SEFA for the child pursuant to this article.
69995.11.
 (a) An eligible school shall not share, refund, or rebate any funds received from an SCFA or SEFA with or to the parent, legal guardian, or eligible student in any manner.
(b) The SCFA Trust Board may terminate and suspend an SCFA or SEFA, as applicable, and participation agreement if the parent, legal guardian, or eligible student fails to comply with the terms of the participation agreement with the intent to defraud or misuse the funds distributed on behalf of an account beneficiary upon notice to the parent or legal guardian and an opportunity to be heard. If the SCFA Trust Board terminates or suspends an SCFA or SEFA, that determination may be appealed by the parent, legal guardian, or eligible student pursuant to the administrative adjudication procedures described in Chapter 4.5 (commencing with Section 11400) of Part 1 of Division 3 of Title 2 of the Government Code.
69995.12.
 The Legislature shall provide for the allocation of costs associated with this article as follows:
(a) For the cost of providing an SCFA or SEFA deposit amount for an eligible student not enrolled in a public elementary or secondary school before the operative date of this article, the Legislature shall rebase, as necessary, the minimum funding guarantee for school districts, as provided in Section 8 of Article XVI of the California Constitution, to include such eligible students in the definition of “average daily attendance” as defined in Section 8.1 of Article XVI of the California Constitution.
(b) For the costs of providing an SCFA or SEFA deposit amount for an eligible student, the cost for that SCFA or SEFA deposit amount shall be apportioned between the General Fund and the public school district in which the eligible student resides, in the same ratio of General Fund and local property tax revenue that would have been used to educate that eligible student in the student’s public school district. The Legislature shall provide for the transfer of funds from a school district to the state as necessary to carry out this provision.
69995.12.
 This article shall become operative on January 1, 2027, but shall become operative only if Senate Constitutional Amendment ____ of the 2025–26 Regular Session is approved by the voters at the statewide general election on November 4, 2026.

SEC. 3.

 Section 17132.2 is added to the Revenue and Taxation Code, to read:

17132.2.
 (a) For taxable years beginning on or after January 1, 2027, gross income shall not include distributions from a School Choice Flex Account or Special Education Flex Account pursuant to a participation agreement.
(b) For purposes of this section, the following definitions apply:
(1) “School Choice Flex Account” means a School Choice Flex Account established under the School Choice Flex Account Act of 2025 (Article 19.2 (commencing with Section 69995) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code).
(2) “Participation agreement” has the same meaning as that term is defined in subdivision (i) of Section 69995.01 of the Education Code.
(3) “Special Education Flex Account” means a Special Education Flex Account established under the School Choice Flex Account Act of 2025 (Article 19.2 (commencing with Section 69995) of Chapter 2 of Part 42 of Division 5 of Title 3 of the Education Code).
(c) (1) For purposes of complying with Section 41, as it pertains to the exclusions from income provided by this section, the Legislature finds and declares the following:
(A) The goal, purpose, and objective of the exclusion from income is to encourage parents and legal guardians to participate in the School Choice Flex Account or Special Education Flex Account and to maximize the value of the School Choice Flex Account or Special Education Flex Account.
(B) The performance indicators used to determine whether the exclusion from income is achieving its stated purpose shall be the number of taxpayers receiving distributions from a School Choice Flex Account or Special Education Flex Account that, but for this section, would have been included in income, and the average dollar value of income so excluded.
(2) (A) No later than July 1, 2027, and annually thereafter, the Franchise Tax Board shall submit a report to the Legislature, in compliance with Section 9795 of the Government Code, that details the number of taxpayers that received distributions from a School Choice Flex Account or Special Education Flex Account that, but for this section, would have been included in income, and the average dollar value of income so excluded.
(B) The disclosure provisions of this paragraph shall be treated as an exception to Section 19542.
(d) This section shall become operative on January 1, 2027, but shall become operative only if Senate Constitutional Amendment ____ of the 2025–26 Regular Session is approved by the voters at the statewide general election on November 4, 2026.