House Education recommends an overhaul of the funding formula, bringing back old elements

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On February 19, the House Education Committee introduced its proposal to address the way we pay for our public schools. Four funding-related bills were introduced to the House Education Committee this year, and a subcommittee worked on all four bills to present a single proposal.

The committee laid out their major proposal in HB 709, which would keep the amount that the state provides for adequate education grants and differentiated aid the same, but would provide additional funding for the state’s most vulnerable communities.

For the long term, the committee recommended creating an independent study commission that would review the current funding formula and make recommendations by 2021.

Here’s what you need to know:

1. HB 709 makes several changes to how the state calculates adequate education grants. Among all of them, the key highlights are as follows:

  • 2020: Restoring stabilization grants to 2016 levels, no change to adequacy formula
    • Communities that receive stabilization grants get 100% of their FY2012 grant amount, instead of the 84% they are scheduled to receive under current law, and the annual 4% reduction through 2041 ends.
  • 2021: Stabilization grants eliminated, Fiscal Capacity Disparity Aid reinstated, and additional funding stream for state’s most vulnerable communities kicks in
    • The stabilization grants referenced above will no longer be awarded.
    • Two new components are introduced:
      • Fiscal Capacity Disparity Aid: This form of state funding is dependent on the property wealth of a community. Cities and towns with property wealth of $1,000,000 per student or greater are not eligible for this assistance. The maximum a municipality could receive is $6,000 per student, if their property wealth is at or below $350,000 per student. Any community with property wealth between $350,000 per student and $1 million per student, would receive a Fiscal Capacity Disparity Aid grant that would be proportional based on the total property wealth of the city or town. The NH Department of Education posts the property value per student for each town and city here, under “Equalized Valuation Per Pupil”.
      • Additional Free and Reduced Lunch Aid: This element is a function of a community’s concentration of poverty. If a municipality has less than 12% of its public-school students eligible for free or reduced lunch (F&R) financial support, it will not receive additional aid. Communities with a free and reduced lunch population between 12% and 48% would receive an additional amount up to $3,708 per F&R student. If a city or town has at least 48% of its students eligible for free or reduced lunch, it receives the maximum amount of aid under this new feature, which is $3,708 per F&R student.

cost of adequate education per pupil rates

2. The changes in HB 709, as adopted by House Education, would increase education aid by $143 million over the next two years. This money would come from the education trust fund.


July 2019-June 2020: $25.1 million
July 2020-June 2021 : $117.9 million

 

3) Under this legislation, the vast majority of New Hampshire towns and cities would get more state education funding over the next two years, relative to current law.

 

Town and cities that will receive more money: 193
Town and cities that will receive the same amount of money: 48
Town and cities that will receive less money: 4

 

proposed changes to adequacy formula

Additional information about HB 709:

1. Excess Statewide Education Property Tax (SWEPT):

Under current law, municipalities raise and keep any “excess” SWEPT amount. In 2019, roughly 40 communities kept nearly $30 million of excess SWEPT. Prior versions of HB 709 would have required that these towns return excess SWEPT to the state, but that was removed in the final version of the bill.

2. Town by town fiscal impacts for 2020-2021:

Below is a table of those communities that would receive the most additional state dollars, relative to current law, on both a dollar and percentage basis.

In a separate PDF, we show the fiscal impact for every New Hampshire city and town over the next biennium.

 

3. 2021: 20% cap

If HB 709 were to become law, a community’s total education grant in 2021 cannot be more than 20% of what it would receive in 2020. This cap applies only to the two new components (Fiscal Capacity Disparity Aid and Additional F&R Aid), and does not apply to what the community currently receives in state funding per student (base adequacy plus differentiated aid).

Several communities would be impacted by this hard cap in 2021. The total dollar amount in state education dollars to municipalities that would not be distributed due to this ceiling is approximately $77 million.

Note: You will notice in the table above, that some towns will experience an increase of over 20%. That table is comparing current law versus proposed, in which there the cap does not apply. The cap only applies to changes in proposed from 2020 to 2021.

Other funding-related bills

The subcommittee originally studied four bills: HB 709, which they amended and used as the primary funding bill for the 2019 session, HB 713, which changes the responsibilities of districts regarding transportation, HB 551, which creates an independent study commission, and HB 711, which would have changed the funding formula but the committee ultimately rejected.

Though HB 713 would have increased the amount of money the state provides in adequate education grants, the committee amended the bill to deal solely with transportation. As amended, HB 713 would require school districts to provide transportation for kindergartners who live more than 2 miles from their school. Right now, the law requires districts to provide transportation to students in grades 1 through 8 who live more than 2 miles from school, and transportation for all other students (including kindergarteners) is optional. Since the committee removed the fiscal impact statement, this bill will not go to the House Finance Committee if it passes and will instead go straight to the Senate Education  & Workforce Development Committee.

HB551 establishes a new school funding study commission that would begin this summer and be responsible for a set of recommendations by the end of September 2020. The purpose of this commission is multi-faceted, with the overall theme being a thorough review of the existing adequacy formula and whether it provides every New Hampshire community with the financial support for districts to provide an adequate education to their children.

Next steps:
The House will vote on the amended version of HB 709 on Wednesday, February 27. If it passes, it will head to the House Finance Committee where they will hold another public hearing and the process starts again.

They will also vote on HB 713, the transportation bill, HB 551, which creates the independent study commission, and HB 711, which also increases the amount the state pays in adequate education grants on February 27. The House Education Committee recommended passing HB 713 and HB 551, and recommended killing HB 711. All three bills are on the consent calendar, meaning that Representatives will adopt the entire calendar in one single voice vote.

We will be posting updates and analysis on these and other funding-related bills. Follow us on Facebook and Twitter, and sign up for our newsletter to stay up to date!

Have specific questions about the proposals? Email us at staff@reachinghighernh.org or leave a comment on Facebook.