Explaining Tennessee’s ESA Bill

We are excited to soon welcome Tennessee to the school choice family. Tennessee is on the verge of joining Arkansas and Nevada, two of our nation’s newest school choice states, by becoming the 27th state to enact its first school choice program.

Having worked with dedicated policymakers and parents in Tennessee for many years, we are pleased to share news of their success.

The Tennessee legislature passed Tennessee’s ESA bill, Senate Bill 27/House Bill 138, the Individualized Education Act (IEA), an education savings account (ESA) program for children with disabilities. These companion bills are now headed to Gov. Bill Haslam’s desk for signature. Senate Bill 27 was authored by Sen. Dolores Gresham, with Co-Prime Sponsors Senators Bill Ketron, Ferrell Haile, Brian Kelsey,John Stevens and Janice Boling. House Bill 138 was authored by Representative Debra Moody, with Co-Prime Sponsors Representatives Roger Kane, Andy Holt, Terri Lynn Weaver, Timothy Hill, Curry Todd, Kelly Keisling, Martin Daniel, Tilman Goins, and Dennis Powers

With Governor Haslam’s signature, Tennessee, after Arizona, Florida, and Mississippi, will become the fourth state to adopt ESAs, which allow parents to withdraw their children from public schools and receive an allowance of public funds with restricted, but multiple, uses.

Funds in this new IEA can cover:

  • private school tuition and fees
  • textbooks
  • tutoring services provided by an accredited tutor
  • curriculum
  • transportation paid to a fee-for-service transportation provider
  • a nonpublic online learning program or course
  • nationally standardized norm-referenced achievement tests
  • Advanced Placement examinations or any examinations related to college or university admission
  • contributions to a Coverdell education savings account established under 26 U.S.C. § 530 for the benefit of the participating student
  • educational therapies or services from a licensed or accredited practitioner or provider
  • services provided under a contract with a public school, including individual classes and extracurricular programs
  • tuition, fees and textbooks at an eligible postsecondary institution
  • management fees for the IEA by private financial management firms
  • computer hardware or other technological devices approved by the department of education or a physician and necessary to meet the student’s educational needs.

The Tennessee Department of Education will administer the program and may deduct up to 3 percent from appropriated IEA funds to cover costs of program oversight and administration.


The Tennessee House substituted Senate Bill 27 for House Bill 138, adopted amendments, and passed SB 27, as amended; the Senate then concurred in the House amendments, sending SB 27 directly to the Governor. The sections below represent the key parameters of this ESA legislation.


The Tennessee Department of Education will disburse payments to the student’s Individualized Education Account (IEA) on a quarterly basis. Each student’s IEA will be funded at the level of per-pupil state and local funds from the basic education program (BEP) for the local education agency (LEA) the student is zoned to attend plus special education funds from the BEP to which the student would otherwise be entitled under the student’s Individualized Education Plan (IEP).

Any funds remaining in a graduating high school student’s IEA may be used to fund tuition, fees or textbooks for postsecondary education.

Parents may provide additional funding for educational programs and services not covered by the IEA. Any funds still remaining in an IEA after the student’s graduation from a postsecondary institution, or four years after high school graduation, shall be placed in the state’s BEP account by the state treasurer, and the IEA account closed.


As reported by Jeff Spalding, executive director of the Tennessee General Assembly Fiscal Review Committee, over 18,000 students will be eligible for an IEA in the first year of the program.

To qualify, students must have any of the following disabilities: autism, deaf-blindness, hearing impairments, intellectual disability, orthopedic impairments, traumatic brain injury or visual impairments. Students must also have an active IEP, and 1) have been enrolled in a Tennessee public school during the two semesters immediately preceding the semester when the student receives an IEA, 2) be enrolling in a Tennessee public school for the first time, or 3) have received an individualized education account (IEA) in the previous school year. A student may remain eligible for an IEA until the student returns to public school, graduates from high school, or reaches the age of 22, whichever occurs first.

Eligible students in grades 3 through 8 must also take a nationally norm-referenced test or the Tennessee state test each year, with results reported to the parent. If standardized testing is not appropriate according to the student’s IEP, the student will be exempt from this requirement.


The legislation requires participating schools to do the following:

  1. comply with health and safety laws that apply to nonpublic schools,
  2. certify they will not discriminate against students or applicants based on race, color, or national origin,
  3. exclude from employment anyone not permitted by state law to work in a nonpublic school or who might pose a threat to the safety of students, and
  4. conduct criminal background checks on employees.

The department of education will provide parents of participating students with a written explanation of the allowable uses of lEAs, information about the responsibilities of parents and the duties of the department, and will ensure that lower-income families are made aware of the program and their children’s potential eligibility. The department will adopt rules and policies necessary for the administration of the IEA program, including the following: conducting or contracting for random, quarterly, and annual reviews of accounts; establishing or contracting for the establishment of an online anonymous fraud reporting service; and establishing an anonymous telephone hotline for reporting fraud.

The legislation affirms that the department of education shall not regulate the educational program of a nonpublic school or service provider under the program; that the regulatory power of the state is not expanded as a consequence of this program. Nonpublic schools remain autonomous; they are not agents of state or federal governments, and they have maximum freedom to provide for educational needs of students without governmental control.


Now, this ESA will head to Gov. Bill Haslam (R) for signature.

UPDATE – December 10, 2015

On May 19, 2015, Gov. Bill Haslam signed Tennessee’s Individualized Education Act into law. Currently, the state’s legislators are working out rules for the State Board of Education. These should be finalized in January 2016.

For more information on the history of this ESA, click here. To get the most up-to-date information on the program, including rules and regulations, eligibility data, and more, click here.