Tennessee Education Officials Will Use Unspent Funds To Start School Vouchers This Year

More details are coming out as Tennessee prepares to launch the Education Savings Account program in Shelby and Davidson counties.

In a legislative hearing Monday, the state’s Department of Education said it’s using money from a dormant career initiative to be able to start school vouchers this year.

According to education officials, the money will pay for an outside vendor to be in charge of processing school voucher payments.

The amount charged by Florida-based ClassWallet is $1.2 million — twice as much as what was initially appropriated for the first year of implementation.

But, Angie Sanders, the general counsel at the state Board of Education, told lawmakers that’s not a reason to worry.

“The runway for the costs and the project implementation would be the same whether or not we were implementing this year, or next year or even in the third year,” Sanders said. “And it’s comparable to other costs in other states.”

Officials with the Tennessee Department of Education said the agency will use leftover funds from a program that has ended to pay for the rest of the cost.

But some lawmakers, including Rep. Kent Calfee, R-Kingston, are questioning the decision to hire an outside vendor.

“We ought to have people in the department of education that could implement it, that could manage it, and we got a great comptroller who will audit it,” Calfee said.

The decision of the agency also received pushback from Democrats in the legislature, who hinted the move of transferring funds from one program to another might be unconstitutional.

“Once again just every rule is tossed to the side,” Rep. Mike Stewart, D-Nashville, said. “It seems like there’s not a rule we have for fiscal management that hasn’t been broken in connection with the vouchers.”

But the Department of Education says the vendor will help track spending and identify families who might need to pay federal taxes on a portion of the vouchers.

The Department of Education has struggled to come up with a definitive answer on whether the school voucher money will count as income under federal law. But Amity Schuyler, the deputy commissioner of the Tennessee Department of Education, conceded to lawmakers that some families might have to pay federal taxes on the voucher.

“In the rare case that a student has fees left over in their account, or they’ve used them for other things other than tuition and fees to the participating schools, we’ll be working with finance and accounting to determine how to handle the situation,” Schuyler said. “But, we are not anticipating issuing large numbers of 1099s to parents.”

Schuyler said that the department’s goal is for none of the voucher money to be considered taxed under federal law. But when asked by lawmakers whether the department has asked the Internal Revenue Service to opine on the law, she said the agency has not.