New Jersey-2014-S727-Introduced

An Act concerning educational opportunity scholarships for certain students, and supplementing P.L.1945, c.162 (C.54:10A-1 et seq.), chapter 4 of Title 54A of the New Jersey Statutes, and Title 18A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. This act shall be known and may be cited as the "Opportunity Scholarship Act."

2. The Legislature finds and declares that:

a. Parents of limited financial resources are often less able to provide access to quality educational options for their children and are therefore unable to select the learning environment that might best meet the needs of their children, even in those instances in which the public schools are failing to educate their children;

b. Consequently, it is critical to provide a mechanism that will provide children of families that have limited financial resources enrolled in chronically failing schools the opportunity to enroll in different schools chosen by their parents so as to expand the educational opportunities available to these children;

c. The United States Supreme Court in its 2002 decision, Zelman v. Simmons-Harris, found that a program providing tuition aid in the form of scholarships for some students to attend public or nonpublic schools of a parent's choosing did not violate the Establishment Clause of the United States Constitution; and

d. Accordingly, it is appropriate that the State initiate a tax credit scholarship program on a pilot basis to encourage taxpayers to make voluntary contributions to a nonprofit scholarship organization, as well as to assess the impact of such a program on the educational opportunity and achievement of children whose current education options are limited to a chronically failing school.

3. As used in sections 1 through 11 of P.L. , c. (C. ) (pending before the Legislature as this bill):

"Chronically failing school" means any public school, other than a charter school, that is located in a targeted district and meets the criteria of paragraph (1) or paragraph (2):

(1) among all students in that school to whom a State assessment was administered, the percent of students scoring in the partially proficient range in both the language arts and mathematics subject areas of the State assessments was equal to or greater than 40% in each of the prior two school years; or

(2) among all students in that school to whom a State assessment was administered, the percent of students scoring in the partially proficient range in either the language arts or mathematics subject area of the State assessment was equal to or greater than 60% in each of the prior two school years.

(3) A school shall continue to be designated a chronically failing school until such time that the percent of students scoring in the partially proficient range in both the language arts and mathematics subject areas of the State assessments is less than or equal to the Statewide percent of students scoring in the partially proficient range on the corresponding Statewide assessments.

"Eligible school" means an out-of-district public school or an in-district or out-of-district nonpublic school located in this State offering a program of instruction for kindergarten through 12th grade, or any combination of those grades that:

(1) is open to enroll students who are eligible to participate in the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill) on a space-available basis as determined by the eligible school and does not discriminate in its admission policies or practices for scholarship students enrolled in a public school on the date of the scholarship application on the basis of intellectual or athletic ability, measures of achievement or aptitude, status as a person with disabilities, proficiency in the English language, or any other basis that would be illegal if used by a school district; however, nothing shall prohibit a school from qualifying as an eligible school solely because the school limits admission to a particular grade level, single gender, or to areas of concentration at the school, such as mathematics, science, or the arts. Nothing in this paragraph shall be construed to require a school to implement new academic or other programs that the school does not offer at the time that, in the case of a public school, the board of education designates it as a school that will accept scholarship students, or, in the case of a nonpublic school, the school obtains approval from the commissioner to be deemed an eligible school;

(2) provides instruction in all subjects and grade levels that is consistent with the core curriculum content standards or comparable standards, as determined by the commissioner;

(3) in the case of a public school, has been designated by the board of education as a school that will accept students who participate in the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(4) in the case of a nonpublic school:

(a) provides first priority for enrollment in any space made available by the school for scholarship students at that school to students who participate in the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill);

(b) has obtained approval from the Commissioner of Education pursuant to section 16 of P.L. , c. (C. ) (pending before the Legislature as this bill) to enroll students who participate in the pilot program established pursuant to that act; and

(c) obtains written acknowledgment from the parent or guardian that notification has been received that a nonpublic school may not provide the same level of special education instructional programs and support services that may be available in a public school; and

(5) is in full compliance with all federal, State, and local laws.

"Low-income child" means a child from a household with an income that does not exceed 2.50 times the official federal poverty threshold for the calendar year preceding the school year for which an educational scholarship is to be distributed.

"Per pupil expenditure" means the sum of the budget year equalization aid per pupil, budget year adjustment aid per pupil, and the prebudget year general fund tax levy per pupil inflated by the CPI rate most recent to the calculation.

"Scholarship organization" means an organization that has been determined by the federal Internal Revenue Service to be qualified as a tax-exempt organization pursuant to paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.501) and that:

(1) requires that any tax-creditable contributions accepted by it be designated by the contributor at the time of contribution as a contribution pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill);

(2) distributes individual scholarships to the parents or guardians of scholarship students that:

(a) in the case of a scholarship student enrolled in grades kindergarten through 8, are equal to the lesser of:

(i) the actual cost per pupil of the eligible school enrolling a scholarship student, as determined by the Commissioner of Education, or

(ii) the greater of $6,000 or 40% of the average per pupil expenditure among all targeted districts, and

(b) in the case of a scholarship student enrolled in grades 9 through 12, are equal to the lesser of:

(i) the actual cost per pupil of the eligible school enrolling a scholarship student, as determined by the Commissioner of Education, or

(ii) the greater of $9,000 or 59% of the average per pupil expenditure among all targeted districts;

(3) ensures that a child receives in any school year no more than one scholarship pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(4) has complied with such other requirements as the Director of the Division of Taxation in the Department of the Treasury may require.

"Targeted district" means Asbury Park City School District, Camden City School District, Elizabeth City School District, Lakewood City School District, Newark City School District, City of Orange School District, Passaic City School District, and City of Perth Amboy School District.

4. Beginning in the first State fiscal year following the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), the Director of the Division of Taxation in the Department of the Treasury shall establish a five-year pilot program, including an evaluation year in the last year of the pilot program, to provide tax credits to taxpayers that contribute funding to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) to provide educational scholarships to provide a parent or guardian of a low-income child the ability to pay the costs at an eligible school that has been selected by the parent or guardian of the scholarship student. Under the pilot program, a low-income child shall be eligible to receive a scholarship if:

a. the child is enrolled in a chronically failing school;

b. the child received a scholarship pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) in the prior school year and continues to reside in a targeted district;

c. in the subsequent school year, the child would be eligible to enroll in a chronically failing school in the lowest grade level, other than preschool, operated by the chronically failing school. A low-income child currently enrolled in a nonpublic school shall be eligible to receive a scholarship pursuant to this paragraph; or

d. the child attends a public school, other than a chronically failing school, located in a targeted district.

5. a. Subject to the restrictions established pursuant to subsection c. of this section, a taxpayer, upon application to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), and approval of the Director of the Division of Taxation in the Department of the Treasury, shall be allowed a credit against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period, in an amount equal to 100% of the contribution made by the taxpayer to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) during the privilege period; provided that the taxpayer shall designate at the time the contribution is made that the contribution is made pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The order of priority of the credit allowed under this section of P.L. , c. (C. ) (pending before the Legislature as this bill) and any other credits allowed by law shall be as prescribed by the director. The amount of the credit applied under P.L. , c. (C. ) (pending before the Legislature as this bill) against the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) for a privilege period shall not reduce the tax liability to an amount less than the statutory minimum provided in subsection (e) of section 5 of P.L.1945, c.162 (C.54:10A-5). The amount of the credit otherwise allowable under this section which cannot be applied for the privilege period due to limitations of this subsection or under other provisions of P.L.1945, c.162 may be carried over, if necessary, to the seven privilege periods following the privilege period for which the credit was allowed.

c. The value of credits approved by the director pursuant to this section and section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill) to apply to the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5), and the tax imposed pursuant to the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., shall not exceed 120% of the total value of scholarships awarded and administrative fees collected in any State fiscal year, less any funds that were carried forward from the prior fiscal year. If the sum of the amount of tax credits authorized pursuant to this section and section 6 of P.L. , c. (C. ) (pending before the Legislature as this bill) in a State fiscal year exceeds the aggregate annual limits established pursuant to this subsection, tax credits shall be allowed in the order in which contributions are made until the limit is reached.

6. a. Subject to the restrictions established pursuant to subsection c. of section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), a taxpayer, upon application to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill), and the approval of the Director of the Division of Taxation in the Department of the Treasury, shall be allowed a credit against the tax otherwise due for the taxable year under the "New Jersey Gross Income Tax Act," N.J.S.54A:1-1 et seq., in an amount equal to 100% of the contribution made by the taxpayer to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) during the taxable year; provided that the taxpayer shall designate at the time the contribution is made that the contribution is made pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and provided that the contribution is equal to or greater than $100.

b. The order of priority of the credit allowed under this section of P.L. , c. (C. ) (pending before the Legislature as this bill) and any other credits allowed by law shall be as prescribed by the director. The amount of the credit allowed pursuant to this section shall be applied against the tax otherwise due under N.J.S.54A:1-1 et seq. If the credit exceeds the amount of tax otherwise due, that amount of excess shall be an overpayment for the purposes of N.J.S.54A:9-7.

7. a. There is hereby established the Opportunity Scholarship Board. The board shall consist of five public members appointed in the following manner:

(1) three members shall be appointed by the Governor, including one member who shall be a representative of an entity subject to the tax imposed pursuant to section 5 of P.L.1945, c.162 (C.54:10A-5) or an employee of such an entity, one member who shall have experience in the education of low-income children, and one member who shall have experience in the oversight or management of nonprofit entities; and

(2) one member shall be appointed by the President of the Senate, and one member shall be appointed by the Speaker of the General Assembly. Each member shall have demonstrated experience in matters related to the responsibilities of the board.

The members of the board shall serve without compensation for a term equal in length to the duration of the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. The board shall select one scholarship organization to administer the pilot program established pursuant to section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. The board shall establish a procedure for reallocating any scholarships that have not been awarded in a targeted district by July 1 to another targeted district.

d. The board may evaluate and approve a request from the scholarship organization selected pursuant to subsection b. of this section to amend programmatic procedures as necessary to ensure the effective and efficient administration of the pilot program. Amendments that may be considered may include, but need not be limited to, the administration of the tax credits, the necessity to conduct a lottery, and the requirements for reporting information to the entity selected pursuant to subsection j. of section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) to conduct the independent evaluation of the pilot program. The board shall not approve any amendments that would materially alter the goals and objectives of the pilot program.

e. On or before January 1 of the fifth school year of the pilot program, the board shall submit a report to the Governor, and to the Legislature pursuant to section 2 of P.L.1991, c.164 (C.52:14-19.1), on the implementation and results of the pilot program. The report shall be based on the annual reports submitted by the scholarship organization pursuant to subsection h. of section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill), the annual audits conducted pursuant to subsection i. of that section, and the independent study conducted pursuant to subsection j. of that section. The report shall include a recommendation on whether the program should be reauthorized on a permanent basis and whether it should be expanded to include other school districts.

8. a. The scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall award no more than 2,500 scholarships in the first year, 5,000 scholarships in the second year, 7,500 scholarships in the third year, 10,000 scholarships in the fourth year, and 10,000 scholarships in the fifth year.

b. The total number of scholarships available in each school year shall be allocated to each targeted district by multiplying the number of scholarships available in the school year by the percent obtained when dividing the total enrollment, excluding preschool students, in the chronically failing schools in the targeted district by the total enrollment, excluding preschool students, in chronically failing schools located in the targeted districts. For the purposes of this subsection, the total number of scholarships available in each school year shall not include any scholarships that will be awarded to a student who received a scholarship in the prior school year.

c. The scholarship organization shall award scholarships, other than a scholarship awarded to a student who received a scholarship in the prior school year, using the following order of priority:

(1) low-income children who are either enrolled in a chronically failing school or, in the subsequent school year, would be eligible to enroll in a chronically failing school in the lowest grade level, other than preschool, operated by the chronically failing school; and

(2) low-income children who are enrolled in a public school in a targeted district that is not a chronically failing school.

d. If by July 1 of any school year, scholarships available in a targeted district have not been awarded, then the remaining scholarships shall be used to provide scholarships to low-income children residing in another targeted district in accordance with standards established by the Opportunity Scholarship Board. Any scholarship awarded after July 1 shall be awarded using the same order of priority established pursuant to subsection c. of this section.

9. The scholarship organization selected by the Opportunity Scholarship Board pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall require that an eligible school which admits a child receiving an educational scholarship under the pilot program:

a. shall not require any payment in addition to the scholarship from the parent or guardian of the scholarship student for attendance at the school;

b. ensures that a child enrolled in an eligible school who received a scholarship under the program in the prior school year receives a scholarship in each school year of enrollment under the program provided that the child remains a resident of the targeted district. Any child who received a scholarship under the program in the prior school year who is no longer considered a low-income child shall continue to remain eligible to receive a scholarship under the program. A scholarship student shall continue to remain eligible to receive a scholarship in subsequent school years if, as a result of grade progression, the public school in which the child is eligible to enroll is not a chronically failing school.

c. in the event that more children apply for admission under the pilot program than there are openings at the eligible school, determines through a lottery which children are selected for admission, except that preference for enrollment may be given to siblings of students who are enrolled in the eligible school;

d. if the eligible school is a nonpublic school:

(1) upon admitting a scholarship student, agrees to continue enrolling that student for at least two full school years unless the student commits an act that threatens the health or safety of other students, faculty, or staff at the school. Thereafter, the scholarship student shall be subject to the disciplinary and expulsion policy that is applicable to all students; and

(2) if the nonpublic school is a sectarian school, allows a scholarship student to opt out of any classes that provide religious instruction or any religious activities; and

e. shall not use revenue received through the enrollment of scholarship students for construction or capital improvement projects.

10. The scholarship organization selected by the Opportunity Scholarship Board pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall:

a. publicize the pilot program to the parents and guardians of children who are eligible to receive a scholarship pursuant to the provisions of section 4 of P.L. , c. (C. ) (pending before the Legislature as this bill);

b. manage the scholarship application process for each targeted district;

c. review and verify the income and residence of a scholarship applicant;

d. compile an inventory of vacancies in eligible schools available for potential scholarship recipients based on information provided by the eligible schools;

e. in the event that the number of eligible students in a targeted district applying for a scholarship exceeds the number of available scholarships in the targeted district, conduct a lottery in the targeted district to determine which students will receive a scholarship;

f. monitor the enrollment of scholarship students in eligible schools;

g. manage the acceptance of contributions made to the scholarship program, including:

(1) advising a potential contributor of the inability to receive a tax credit due to the limits established pursuant to subsection c. of section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill); and

(2) verifying contributions to the Director of the Division of Taxation;

h. prepare a report to be submitted to the scholarship board, the State Treasurer and the Commissioner of Education by December 1 of each year that includes, but is not limited to, the following information for the prior school year: the amount of scholarship funds received by the scholarship organization; the total number of scholarships awarded, by grade level; the total number of scholarship recipients, by school district; the amount of scholarship funds used by scholarship recipients to attend eligible schools that are public schools, and a listing of those eligible schools; the amount of scholarship funds used by scholarship recipients to attend eligible schools that are nonpublic schools, and a listing of those eligible schools; and the number of scholarship applications for which no scholarships were available;

i. annually enter into a contract with an independent entity to audit the implementation of the pilot program. The scholarship organization shall transmit a copy of the audit to the scholarship board, the State Treasurer, and the Commissioner of Education no later than December 1 of each year; and

j. commission an independent study of the pilot program. The study shall be conducted by an individual or entity primarily identified with expertise in the field of urban education. The individual or entity shall design a comprehensive study of the pilot program which shall include, but not be limited to, consideration of the following:

(1) the academic achievement of scholarship recipients based on test results on the State assessments, other assessments, and other educational indicators comparing scholarship students to students in the eligible school who are not scholarship students, students in the public school previously attended by the scholarship student, students enrolled in other schools in the district in which the scholarship student is a resident, and disaggregated by the subgroups used in reporting the results of the State assessments pursuant to the "No Child Left Behind Act of 2001;"

(2) the financial impact of the pilot program on revenues and expenditures for the State, targeted districts, and the eligible schools in which the scholarship students enroll;

(3) the impact of the program on student enrollment patterns; and

(4) parental satisfaction with the pilot program.

The scholarship organization may carry forward funds in an amount not to exceed 20% of the total value of scholarships awarded and administrative fees collected in the school year. Any contributions not used to award scholarships, administer the program, or carried forward to the subsequent fiscal year shall be returned to the Department of the Treasury.

11. The Director of the Division of Taxation shall adopt rules and regulations in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to implement the provisions of sections 1 through 10 of P.L. , c. (C. ) (pending before the Legislature as this bill).

12. As used in sections 13 through 18 of P.L. , c. (C. ) (pending before the Legislature as this bill):

"Chronically failing school" means any public school, other than a charter school, that is located in a targeted district and meets the criteria of paragraph (1) or paragraph (2):

13. The Department of Education shall annually provide a list of all chronically failing schools to the scholarship organization selected pursuant to subsection b. of section 7 of P.L. , c. (C. ) (pending before the Legislature as this bill). The department shall coordinate with the scholarship organization to determine the earliest feasible time that the list can be developed after the administration of the State assessments.

14. Notwithstanding any provision of section 5 or subsection a. of section 16 of P.L.2007, c.260 (C.18A:7F-47 and C:18A:7F-58) or any other section of law to the contrary, for each scholarship student who resides in the targeted district, the amount of State school aid paid to the district pursuant to the provisions of P.L.2007, c.260 (C.18A:7F-43 et al.) shall be reduced by an amount equal to sum of the amount of the scholarship awarded to the scholarship student and the scholarship organization administrative fee.

The scholarship organization administrative fee shall equal: in the first State fiscal year $750 per scholarship, in the second State fiscal year, $400 per scholarship, in the third State fiscal year, $250 per scholarship, in the fourth State fiscal year, $200 per scholarship, and in the fifth State fiscal year, $210 per scholarship.

15. A targeted district shall provide transportation services to a student who receives a scholarship pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) and attends a nonpublic school or a public school outside the school district of residence pursuant to the provisions of N.J.S.18A:39-1 applicable to nonpublic school pupil transportation.

16. a. The Commissioner of Education shall develop a process for approving a nonpublic school that wants to be classified as an eligible school to enroll a scholarship student pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill). The commissioner shall grant approval to a nonpublic school that meets any one of the following criteria:

(1) the school has been in operation for at least five years, has an end-of-year financial statement for each of the previous five years, and, in the two years prior to the school year for which approval is sought, has undergone an independent financial audit conducted by a certified public accountant that concluded that the school is financially viable;

(2) the school was founded within the prior 12 months by an operator of an existing school that meets the criteria of paragraph (1) of this subsection; or

(3) the school is a current member of the New Jersey Association of Independent Schools.

b. The commissioner may grant approval to a school that does not meet the requirements of subsection a. of this section if the nonpublic school submits an application containing the following information:

(1) a statement of the school's objectives and a written strategy for meeting those objectives;

(2) information that demonstrates the school's financial viability;

(3) a list of the school's faculty, including information regarding each individual's educational attainment and relevant work experience;

(4) a statement regarding the adequacy of the school's equipment and facilities;

(5) documentation that the school has been determined by the federal Internal Revenue Service to be qualified as a tax-exempt organization pursuant to paragraph (3) of subsection (c) of section 501 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.501); and

(6) a list of current board members, their affiliations, and terms of service.

c. As a condition of receiving approval to enroll a scholarship student, a nonpublic school shall:

(1) require a criminal history record check of final candidates for employment in accordance with the procedures established pursuant to P.L.1989, c.229 (C.18A:6-4.13 et seq.)

(2) demonstrate that the school administers an annual assessment to students enrolled in the school; and

(3) provide evidence that the school has received accreditation from a recognized accrediting agency.

17. a. A nonpublic school that enrolls a scholarship student pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) shall administer an appropriate grade level assessment to all scholarship students enrolled in the school. If a nonpublic school administers a State assessment, the Department of Education shall provide the necessary testing materials to the nonpublic school at no cost.

b. In addition to any assessment administered pursuant to subsection a. of this section, an eligible school that enrolls a scholarship student shall administer a grade-level appropriate assessment to all students receiving a scholarship pursuant to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill) within the first 30 days of the scholarship student's enrollment in the first school year in which a scholarship is received, and once in each subsequent school year in which a scholarship is received.

c. Any assessment administered pursuant to subsections a. and b. of this section shall be capable of providing technically accurate measures of a student's academic growth over time. An eligible school that administers an assessment pursuant to subsections a. and b. of this section shall make the results available to the entity selected pursuant to subsection j. of section 10 of P.L. , c. (C. ) (pending before the Legislature as this bill) to conduct the independent evaluation of the program, and to the commissioner. The commissioner shall make the results of the assessments publicly available provided that results are available for at least 10 students in any given grade level and that such a release does not risk disclosing the results of an individual student.

18. The State Board of Education shall adopt regulations pursuant to the "Administrative Procedures Act," P.L.1968, c.410 (C.52:14B-1 et seq.), to effectuate the provisions of sections 12 through 18 of P.L. , c. (C. ) (pending before the Legislature as this bill).

19. This act shall take effect immediately.

STATEMENT

This bill directs the Director of the Division of Taxation to establish a five-year pilot program to provide tax credits to taxpayers that make contributions to a selected scholarship organization that provides scholarships to certain low-income children to attend a nonpublic school or an out-of-district public school. The program would allow a taxpayer to claim a tax credit against the corporate business tax or gross income tax equal to 100% of any contribution made to the scholarship organization; in the case of the gross income tax credit, a taxpayer must contribute a minimum of $100 to the scholarship organization in order to be eligible to receive the tax credit. The maximum amount of tax credits allowable in each State fiscal year would equal 120% of the total value of scholarships awarded and administrative fees collected from school districts. Tax credits would be allowed in the order in which the contributions are received.

The bill creates the Opportunity Scholarship Board and directs it to select one scholarship organization to administer the program. The scholarship organization would receive contributions made to the program and award scholarships to the parents or guardians of eligible students. The maximum number of scholarships that may be awarded each year is: 2,500 in the first year, 5,000 in the second year, 7,500 in the third year, and 10,000 in the fourth and fifth years. The number of available scholarships would be allocated to each targeted district based on the number of students enrolled in the district's chronically failing school relative to the enrollment in chronically failing schools located in targeted districts. If the number of eligible students applying for a scholarship exceeds the number of available scholarships in a targeted district, then the scholarship organization would be responsible for conducting a lottery to determine scholarship awards in that district.

To be eligible to receive a scholarship, a low-income child must either: 1) attend a chronically failing school, 2) received a scholarship in the previous school year and continue to reside in the targeted district, 3) reside in a targeted district and attend one of the district's public schools that is not a chronically failing school, or 4) in the subsequent school year, would be eligible to enroll in a chronically failing school in the lowest grade, other than preschool, operated by the school. The last category of students would include those currently enrolled in a nonpublic school.

The bill defines a chronically failing school as one in which, for the past two school years: at least 40% of the school's students did not pass both the language arts and mathematics subject areas of the State assessments, or at least 60% of the students did not pass either the language arts or mathematics subject areas. Additionally, the school must be located in one of eight targeted districts: Asbury Park, Camden, Elizabeth, Lakewood, Newark, Orange, Passaic, or Perth Amboy. A child is considered low-income if the child lives in a household in which the income does not exceed 250% of the federal poverty threshold. Scholarships would be awarded to eligible students in the following order or priority: 1) low-children either attending a chronically failing school or eligible to enroll in a chronically failing school in the next school year, and 2) children who attend a public school, other than a chronically failing school, in a targeted district.

The scholarship organization selected under the bill must require that an eligible school which admits a child receiving a scholarship under the pilot program:

(1) does not require a parent or guardian to make a payment in addition to the scholarship for a child's attendance at the school;

(2) ensures that a child enrolled in an eligible school who received a scholarship under the program in the prior school year receives a scholarship in each school year of enrollment under the program provided that the child continues to reside in the targeted district;

(3) in the event that more children apply for admission to that school under the pilot program than there are openings, selects scholarship students through a lottery; and

(4) within the first 30 days of a scholarship's student's enrollment in the school, and once each year thereafter, administer a grade-level appropriate assessment to all scholarship students.

Further, if the eligible school is a nonpublic school, the scholarship organization must also require that the school:

(1) administer the appropriate grade level State assessment to scholarship students, and make the results publicly available;

(2) agree to continue enrolling a scholarship student for two school years, unless the student commits an act that threatens the health or safety of other students, faculty, or staff; and

(3) obtains written acknowledgment from the parent or guardian that notification has been received that a nonpublic school may not provide the same level of special education instructional programs and support services that may be available in a public school.

Additionally, if the nonpublic school is a sectarian school, it must provide a scholarship student the opportunity to opt out of any religious instruction or activity.

In the case of public schools, eligible schools will be those schools designated by the board of education to accept students who participate in the program. In the case of nonpublic schools, eligible schools will include those approved by the Commissioner of Education to accept students who participate in the program. The commissioner will develop a process for providing such approval. The commissioner is required to grant approval to a nonpublic school if it: 1) has been in operation for at least five years and has an end of year financial statement for each of the previous five years; 2) was founded within the prior 12 months by an operator of an existing school that meets the first criteria; or 3) is a current member of the New Jersey Association of Independent Schools. The commissioner may approve a school that does not meet the previous requirements if the school submits an application that includes information regarding: 1) the school's objectives and strategy for meeting those objectives, 2) a demonstration of the school's financial viability, 3) a list of faculty, including the individual's educational attainment and relevant work experience, 4) a statement regarding the adequacy of the school's facilities and equipment, 5) documentation that the school is a qualified nonprofit entity; and 6) a list of board members.

The scholarship organization would have a number of program responsibilities, including: managing the application process in each district, verifying applicants' eligibility to receive a scholarship, maintaining an inventory of vacancies in eligible schools, conducting any necessary lotteries to determine scholarship awards, monitoring the enrollment of scholarship students, and managing the acceptance of contributions made to the program. Additionally, the scholarship organization must prepare an annual report, to be submitted to the State Treasurer, Commissioner of Education, and the scholarship board, enter into a contract with an independent entity to conduct an annual audit, and commission an independent study of the pilot program.

The scholarship organization may apply to the Opportunity Scholarship Board to amend programmatic procedures as necessary to ensure the effective and efficient administration of the programs. Amendments that may be considered may include, but need not be limited to, the administration of the tax credits, the need to conduct lotteries, and reporting requirements related to the independent evaluation of the pilot program. The board shall not approve any amendments that would materially alter the goals and objectives of the pilot program.

For each resident student who receives a scholarship, a targeted district's State aid will be reduced by an amount equal to the scholarship awarded to the student plus the scholarship organization's administrative fee. The administrative fee will equal $750 per scholarship in the first year, $400 per scholarship in the second year, $250 per scholarship in the third year, $200 per scholarship in the fourth year, and $210 per scholarship in the final year. The targeted district would also be responsible for providing transportation services to a scholarship student who attends a school outside of the district on the same basis that the district provides transportation services to nonpublic school students pursuant to N.J.S.18A:39-1.