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SB 2540

AN ACT RELATING TO EDUCATION -- EDUCATION FREEDOM ACCOUNT PROGRAM

2026 Regular Session Introduced by Elaine Morgan

Establishes Education Freedom Accounts that redirect per-pupil funds to a private administrator to pay for a wide range of eligible private and non-public education expenses.

05/19/2026 Committee recommended measure be held for further study
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Bill Summary · SB 2540

Overview

SB 2540 proposes an Education Freedom Account (EFA) program in Rhode Island. The program would allow eligible students to redirect a portion of state per-pupil education funds to an account managed by the Children’s Scholarship Fund of Rhode Island (CSF). Funds from the EFA could be used to pay for a range of private- or non-public-education options and related services, rather than exclusively supporting the public school in which a student would otherwise be enrolled.

Main purpose and intent

  • Create an Education Freedom Account program to empower parents to choose alternative learning options for their children.
  • Redirect per-pupil state education funds to an EFA administered by the CSF for eligible students.
  • Allow funded purchases and services that support a student’s education outside the traditional public school setting, while maintaining accountability and oversight.

Key provisions and changes

  • Establishment and administration
    • Creates Chapter 117 of Title 16 (Education), the Education Freedom Account Program.
    • The CSF of Rhode Island will administer and implement EFAs.
  • Definitions
    • Defines terms including “adequate education funds,” “EFA,” “education service provider,” “eligible student,” and related concepts.
    • Eligible student: Rhode Island resident eligible to enroll in a public K-12 school with household income up to 250% of the federal poverty guideline (threshold applies only to initial eligibility; no ongoing threshold in subsequent years if the student remains eligible).
    • EFA: an account funded with per-pupil base funds and used for qualifying expenses.
  • Funding and eligible uses (16-117-4)
    • The Commissioner transfers the per-pupil annual education fund amount to the CSF for each participating student.
    • Qualifying expenses to be paid from the EFA include:
    • Tuition and fees for private elementary/secondary schools.
    • Tuition and fees for non-public online programs.
    • Tutoring services.
    • Services contracted by public districts, public schools, or independent/private schools (e.g., classes and curricular activities).
    • Textbooks, curriculum, and instructional materials, including online components.
    • Computer hardware, internet connectivity, and other tech used for education.
    • Educational software and apps.
    • School uniforms.
    • Fees for standardized assessments, AP exams, college-admission tests, and related prep.
    • Summer and specialized education programs.
    • Career or technical school tuition/fees and related materials.
    • Educational therapies (occupational, behavioral, physical, speech, audiology).
    • Transportation fees paid to transport providers.
    • Any other éducational expense approved by CSF.
    • Funds cannot be refunded or shared with parents/students; they must be credited to the EFA.
    • Parents may pay for expenses not covered by the EFA, but cannot make personal deposits into the EFA.
    • EFA funds are not taxable income to the parent or student.
    • Unused EFA funds roll over each quarter/year until withdrawal, graduation, or closure for misuse; upon permanent closure, remaining funds go to the local educational account of the city/town.
    • EFA participation does not require full-time enrollment in private/nonpublic online school.
  • Eligibility and enrollment (16-117-5)
    • Parents may apply to CSF to establish an EFA; CSF handles fall and spring applications and must process expeditiously.
    • A standard application form will be provided; applications may be submitted electronically or in hard copy.
    • Approval criteria:
    • Adherence to CSF procedures.
    • Student is an eligible student.
    • Funds are available.
    • Parent signs an agreement committing to core-knowledge education, not full-time public-school enrollment, annual progress reporting, and use of funds for qualifying expenses.
    • Annual renewal of an EFA is contingent on funds availability.
    • Parents may withdraw the student to enroll full-time in public school; this suspends further EFA deposits but may allow continued use of remaining funds.

  • CSF responsibilities and oversight (16-117-6)

    • Maintain a list of education service providers (ESPs) and make it publicly available.
    • Inform parents about allowable uses, responsibilities, and any third-party financial management arrangements.
    • Notify parents of IDEA-related rights and placement implications for students with disabilities.
    • Determine eligibility for differentiated aid in compliance with relevant laws.
    • May withhold or deduct up to 10% to cover administrative costs.
    • Implement a payment system that supports direct payments to ESPs; may pre-approve reimbursements but must have receipts for disbursed funds.
    • May contract with private entities to manage payments; may implement a provider rating/review system.
    • For ESPs requiring upfront deposits to reserve space, CSF may cover these if funds are available; amounts advanced are deducted from future deposits.
    • Deposits into EFAs continue unless:
    • EFA student becomes ineligible,
    • Substantial misuse is found,
    • Withdrawal occurs,
    • Student enrolls full-time in public school,
    • Student graduates high school.
    • Random audits and/or audits of EFAs may be conducted; misuse can lead to ineligibility.
    • Potential actions against ESPs for misrepresentation, refunds, or failure to deliver promised services; procedures for barring ESPs and appealing decisions.
    • CSF may accept gifts/grants to fund administration, public information, or additional EFAs.
    • Department (RIDE) to adopt necessary rules; CSF to adopt internal policies including fraud reporting mechanisms, surety bonds for high-value ESPs, and refund procedures.
    • CSF cannot discriminate against ESPs based on religious character or affiliation.

Who is affected

  • Eligible Rhode Island students and their families who seek an alternative to traditional public school education.
  • Parents/guardians of eligible students, who must sign agreements and oversee an autodidactic/portfolio-style or test-based progress record.
  • The CSF as the administrator and administrator of payments, oversight, and provider interactions.
  • Education service providers (private schools, tutoring, online programs, and other services) that participate in EFAs and receive payments from EFAs.
  • Public and private schools may adjust offerings or participate via contracted services.
  • The Rhode Island Department of Education (RIDE) through rulemaking and oversight.

Procedural and timeline aspects

  • Effective date: The act would take effect upon passage.
  • Implementation process:
    • CSF to process applications for EFAs in fall and spring semesters annually.
    • Annual renewal of EFAs subject to funds availability and compliance.
    • Ongoing oversight, including audits and monitoring for misuse.
    • Rules and regulations to be adopted by CSF and department to implement program specifics.
  • Accountability and remedies:
    • Tools for fraud reporting, provider sanctioning, and appeals to the department.
    • Potential depots of funds and penalties for substantial misuse.
    • Mechanisms to ensure that EFA funds are used for approved educational purposes and that attendance requirements are met.

Practical considerations and potential impacts

  • Expands school choice by enabling direct funding to EFAs for a broad set of educational goods and services.
  • Introduces administrative complexity and oversight requirements (CSF governance, audits, fraud controls).
  • Creates a structure for direct funding to ESPs, with accountability provisions and potential cost controls (up to 10% administration).
  • Requires ongoing funding visibility, eligible expenditure definitions, and compliance with broader education laws (including IDEA considerations for students with disabilities).

If you’d like, I can provide a side-by-side comparison with current Rhode Island education funding or outline potential fiscal implications based on assumed enrollment scenarios.

Compiled from official sources — confirm details with the bill’s official record.

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