This bill enacts the "Education Freedom Act of 2025," which creates an education freedom scholarship program ("program") to be administered by the department of education ("department").  Subject to appropriations and other available funds, the program must provide an education freedom scholarship ("scholarship") to an eligible student who applies for the 2025-2026 school year or any subsequent school year, subject to certain limitations as described below.

SCHOLARSHIP AVAILABILITY – PRIORITIZATION OF AWARDS

2025-2026 School Year

      For the 2025-2026 school year, the department must award a maximum of 20,000 scholarships, to be awarded as follows, in the order in which the department receives completed scholarship applications:

      (1)  10,000 scholarships are available for eligible students (i) whose annual household income does not exceed 300% of the amount required for the student to qualify for free or reduced price lunch; (ii) who are eligible students under state law based on being zoned to attend certain ASD schools and meeting other related criteria; or (iii) who are eligible students under state law based on having certain disabilities and meeting other related criteria; and

      (2)  10,000 scholarships are available for eligible students, regardless of whether the eligible student meets one of the criteria listed in (1) above.

      However, this bill authorizes the department to award a scholarship to an eligible student in an order that does not comply with the order prescribed above, if awarding the scholarship out of order is consistent with the outcome of an administrative appeal adjudicating the denial of the student's scholarship application.

      As used in this bill, "eligible student" means a resident of this state who is entitled to attend a public school, except for a student enrolled in a home school or in a church-related school, with which the student's parent is associated, registered, or is participating as a parent-teacher for purposes of law related to homeschooling.

Future School Years

      Beginning with the 2026-2027 school year, the number of scholarships available for the respective school year is determined by the funds appropriated for scholarships, together with any available funds returned to the state treasurer.  If the number of applications received by the department during a program application period exceeds 75% of the total number of scholarships available for the respective school year, then the number of scholarships available for the next school year must be increased by an additional 5,000 scholarships.

      Beginning with the 2026-2027 school year, if the number of applications received by the department exceeds the number of scholarships available for the respective school year, then the department must award scholarships in the following order:

      (1)  An eligible student who received a scholarship in the immediately preceding school year;

      (2)  An eligible student (i) whose annual household income does not exceed 100% of the amount required for the student to qualify for free or reduced price lunch, (ii) who is an eligible student under state law based on being zoned to attend certain ASD schools and meeting other related criteria; or (iii) who is an eligible student under state law based on having certain disabilities and meeting other related criteria, in the order in which the department receives completed scholarship applications; 

      (3)  An eligible student whose annual household income does not exceed 300% of the amount required for the student to qualify for free or reduced price lunch, in the order in which the department receives completed scholarship applications;

      (4)  An eligible student who, at the time of submitting a completed application, is currently enrolled in a public school, or who is eligible to enroll in kindergarten in a public school for the respective school year, in the order in which the department receives completed scholarship applications; and

      (5)  An eligible student, in the order in which the department receives completed scholarship applications. 

      However, this bill authorizes the department to award a scholarship to an eligible student in an order that does not comply with the order prescribed above, if awarding the scholarship out of order is consistent with the outcome of an administrative appeal adjudicating the denial of the student's scholarship application.

Receipt of Scholarships

      In order to receive a scholarship, an eligible student, or the eligible student's parent, must (i) submit a completed scholarship application to the department; (ii) ensure the provision of an education for the eligible student that satisfies the compulsory school attendance requirement provided in state law through enrollment in a private school; and (iii) not enroll the eligible student in a K-12 public school in any school year for which the eligible student receives a scholarship.

      As used in this bill, a "private school" means a school that is located in this state; and that is a category I, II, or III school approved by the commissioner of education in accordance with rules promulgated by the state board of education.

SCHOLARSHIP AMOUNTS – ALLOWABLE USES

      This bill provides that a scholarship equals the base funding amount, and is solely state funded.  This bill requires that scholarship funds only be used for all of the following educational expenses:

      Tuition and fees required by the private school

      Textbooks, curricula, instructional materials, and uniforms required by the private school

      Tutoring services provided by a tutor or tutoring facility that meets the requirements established by the department

      Fees for transportation to and from the private school, paid to a fee-for-service transportation provider that meets the requirements established by the department

      Computer hardware, technological devices, and other technology fees that meet the requirements established by the department and that are used for the recipient's educational needs

      Tuition, fees, textbooks, curricula, and instructional materials for summer academic programs and specialized afterschool academic programs that meet the requirements established by the department, but not afterschool childcare

      Fees for early postsecondary opportunity courses or examinations, entrance examinations required for postsecondary admission, and industry credentials as approved by the department

      Educational therapy services provided by therapists who meet the requirements established by the department

      This bill requires scholarship funds to first be used to pay the recipient's tuition and fees.  Any outstanding scholarship funds available to the recipient after payment of tuition and fees may be used for one or more of the educational expenses described above.

UNSPENT FUNDS – ACCOUNT CLOSURE

      This bill provides that a recipient's scholarship account remains open, and all available scholarship funds remain in the recipient's scholarship account, from one school year to another unless one of the following events occurs:

      The recipient's graduation from high school or obtainment of a high school equivalency credential approved by the state board of education

      The recipient's enrollment in a K-12 public school

      The recipient's completion of 13 school years as a K-12 student

      The recipient's voluntary withdrawal from the scholarship program

      The department disqualifying the recipient from participating in the program due to the recipient's noncompliance with program requirements

      This bill requires that a recipient's scholarship account be closed, and all remaining scholarship funds returned to the state treasurer to be used to award scholarships to eligible students in future years, upon the earlier of the events described above.

ADMINISTRATION OF ASSESSMENTS FOR RECIPIENTS

      This bill requires, as a condition of receiving a scholarship, recipients in grades 3-11 must be annually administered (i) a nationally standardized achievement test that is aligned to the respective private school's instructional plan, as determined by rules promulgated by the state board of education; or (ii) the TCAP test required for the grade in which the recipient is enrolled.  This bill requires each private school that enrolls recipients to annually administer the test to the recipients enrolled in the school and to provide the results of the test to the recipient's parents.

      This bill also requires each private school to provide the results of the tests to the office of research and education accountability in the office of the comptroller of the treasury.  A private school may provide the test results using aggregated, deidentified data; provided, that the data must be provided in a manner that allows the office of research and educational accountability to group and analyze the results by recipient grade level, household income level, sex, and race.  The office of research and education accountability must submit an annual report to the education committees of the senate and house of representatives detailing the results of the tests.

AUTONOMY OF SCHOOLS THAT HAVE RECIPIENTS ENROLLED

      This bill provides that a private school that enrolls recipients is autonomous and not an agent of this state.  Further, the creation of the program does not expand the regulatory authority of this state, the officers of this state, or the authority of any LEA to impose any additional rules, regulations, or requirements on private schools that enroll recipients beyond the rules narrowly tailored to enforce the requirements of the program.  A private school that enrolls recipients is not required to alter its creed, practices, admission policies, hiring policies, or curriculum in order to accept recipients. 

LIMITATIONS ON PARTICIPATION – CONNECTION TO OTHER EDUCATION PROGRAMS

      This bill requires the department to deny a scholarship to an eligible student for the same school year in which the student is participating in the Tennessee education savings account pilot program, or the individualized education account program. 

      This bill clarifies that a recipient does not retain the right to receive special education and related services from the LEA in which the recipient resides, through an individualized education program.  However, recipients have the same rights under the federal Individuals with Disabilities Education Act to receive equitable services through an individualized service plan as all other students enrolled in non-public schools.

PAYMENT – STATE OR LOCAL PUBLIC BENEFIT – TAX IMPLICATION

      This bill clarifies that a scholarship awarded under this bill (i) must not be paid directly to a recipient or recipient's parent; and (ii) is a state or local public benefit under the "Eligibility Verification for Entitlements Act."  This bill requires the department to deny the scholarship application of an eligible student who cannot establish the eligible student's lawful presence in the United States.

      Funds received pursuant to this bill do not constitute income taxable to the parent of the recipient or to the recipient under state income taxation law.  

DISENROLLMENT EFFECTS ON TISA ALLOCATIONS

      Beginning with the TISA allocation for the 2025-2026 school year, this bill prohibits an LEA's allocated education funding from decreasing from one year to the next year due to the disenrollment of students from the LEA.  If an LEA's calculated TISA allocation decreases from the LEA's TISA allocation for the prior school year, then the department must allocate additional funds to the LEA in an amount such that the LEA's TISA allocation for the current year is not less than the prior school year.  As used in this bill, "disenrollment" means that the LEA's non-virtual average daily membership for the current school year is lower than the LEA's non-virtual average daily membership for the prior school year.

K-12 PUBLIC SCHOOL TEACHERS' BONUS

      Subject to appropriation, this bill requires the department to award a one-time bonus in the amount of $2,000 to each teacher employed in a K-12 public school for the 2024-2025 school year.  A bonus awarded pursuant to this bill is solely state funded.  Bonuses paid to teachers pursuant to this bill are not part of the TISA, and must not be considered salary payments or supplements.  As used in these provisions, "teacher" means an individual who is evaluated pursuant to state law and who provides direct service to students at school sites.

TAXES COLLECTED AND ALLOCATED UNDER THE TENNESSEE SPORTS GAMING ACT

      Present law requires 80% of the privilege tax collected for sports wagering in this state to be distributed by the council to the state treasurer for deposit into the lottery for education account.  As of July 1, 2025, this bill revises this requirement to, instead, require that the state treasurer deposit those funds into an account administered by the state treasurer for use by local education agencies for the construction and maintenance of public school buildings.  When allocating funds for such purpose, the state treasurer must consider all of the following:

      Whether the local education agency is located in a county that is designated as an economically distressed or at-risk county by the department of economic and community development

      The occurrence of any emergency or natural disaster that has resulted in significant damage to an existing public school building or facility

      Other demonstrated need, as identified by the local education agency

RULEMAKING

      This bill requires the department to promulgate rules to effectuate this bill.  Such rules must include an administrative appeal procedure for the denial of scholarship applications.