AN ACT to create and enact a new chapter to title 15.1 of the North Dakota Century Code, relating to an education savings account program for students who are not enrolled in public school or a homeschool program; to provide an appropriation; and to provide an effective date.
HB 1540 creates a new education savings account (ESA) program in North Dakota for eligible students who are not enrolled in public school or a homeschool program. The bill authorizes parents to receive state-funded deposits into an account that can be used for a range of education-related expenses, including private school tuition and fees, tutoring, curriculum, online learning, testing, transportation, and certain postsecondary costs. It also requires participating parents to agree to provide instruction in core subjects, not enroll the child in public school or homeschool under the state homeschool law, and use the funds only for approved expenses.
The program is administered through the Bank of North Dakota, with the Department of Public Instruction involved in oversight and the use of a program manager to handle applications, support, and account administration. Beginning with the 2026-27 school year, deposits would be based on household income as a percentage of the state per-pupil payment amount, with larger deposits for lower-income families. The bill also includes auditing, fraud referral, account closure, and carryover rules, and it allows the state to seek federal funds if available. An appropriation of $21.7 million from the general fund is provided for implementation and account funding for the 2025-27 biennium, and the new chapter becomes effective July 1, 2026.
HB 1540 would add a new chapter to Title 15.1 of the North Dakota Century Code establishing a statewide ESA program and creating new duties for the Bank of North Dakota, the Department of Public Instruction, the state treasurer, participating schools, education service providers, and school districts of residence. It would also change how certain state education dollars are directed by transferring funds from the general fund into individual accounts for eligible students, while setting rules for allowable expenditures, accountability, audits, and data reporting. The bill further provides that ESA funds are not taxable income and limits remaining balances to specified carryover and reversion rules.
The bill appears to have been strongly supported by its sponsors and enough legislators to pass both chambers, but it was also clearly controversial, as shown by the close vote margins. House and Senate second-reading votes were positive, yet the House later sustained a veto by a narrow margin, indicating significant opposition remained even after passage. Overall, the discussion reflected a divided sentiment typical of school-choice legislation, with supporters favoring expanded educational options and opponents concerned about public funding and oversight.
The main points of contention are the use of public funds for private or nonpublic education, the scope of parental choice versus state oversight, and the impact on public-school resources. Supporters likely emphasized flexibility for families, especially lower-income households, while opponents likely objected to diverting general-fund dollars into accounts usable at private schools, tutoring providers, and postsecondary institutions. Additional concerns include accountability standards for participating schools, the role of a private program manager, testing and data reporting requirements, and whether the program should apply to students outside public school and homeschool settings.