SB 193: Analysis of Potential Impact on Tax Rates in Rural New Hampshire


On November 8, the House Education Committee will vote on SB 193, a bill to establish an education freedom savings account program (hereafter, we use the shorthand “voucher” to describe the program). In order to inform the public discussion on the legislation, Reaching Higher is continuing its analysis of the potential financial implications should be the bill become law. Last week, we analyzed the potential financial implications for school districts. In this analysis, we look at the potential impacts on local tax rates. Our analysis shows that rural or property-poor municipalities would be disproportionately impacted by SB 193. Berlin for example, would need to raise local taxes by $0.12 (per $1,000 in equalized valuation) in order to compensate for the loss of state aid should approximately 1% of its students choose a voucher; Moultonborough, in contrast, would only need to raise its local taxes by $0.01 to compensate for 1% of its students choosing a voucher.


New Hampshire relies primarily on local property taxes to fund public education. As a result, it is helpful to consider municipalities’ equalized valuation per pupil. This measure shows how much of a tax base (in terms of taxable property value) a community has to provide for each of its students. Communities with a high equalized valuation per pupil can impose lower tax rates, relative to communities with a low equalized valuation per pupil, as they are able to spread the taxes over a much larger base. There are considerable differences in equalized valuation per pupil across the state. For example, in 2016-2017, Berlin had the lowest equalized valuation per pupil ($297,606) and Moultonborough had the highest ($6,528,967). (Note: we only examined communities with more than 100 students as measured by Average Daily Membership or ADM.)

Figure 1. plots all municipalities with ADM greater than or equal to 100, ranked by equalized valuation per pupil (using 2016 tax data and 2016-2017 ADM). The median value for New Hampshire is around $900,000, but there is significant variation. In the bottom left are communities where the average is closer to $500,000 and in the upper right are towns where the average exceeds $3,500,000. This disparity in property wealth across towns is critical to understanding how SB 193 could impact NH’s unique context.

Figure 1. Equalized Valuation Per Average Daily Membership (ADM)

How We Conducted Our Analysis:

We looked at all of the municipalities in New Hampshire with ADM greater than or equal to 100 and modeled how much state adequacy aid the municipalities would lose if between 1% and 5% of the municipalities’ students select a voucher. We used the state base adequacy aid for FY 2018 (~$3,636) as the per student amount municipalities would lose when a student opts for a voucher (this is a conservative figure as municipalities would also lose most differentiated aid, such as state aid provided for students who are eligible for free or reduced-price lunch). We then calculated how much the municipality would need to increase local property taxes in order to compensate for the lost state aid. We used municipalities’ equalized valuation (with utilities) as this provides for comparability across localities.


As shown in Figure 2., SB 193 as proposed, would have a more discernable impact on communities such as Berlin, Pittsfield, Franklin, Penacook, and Allenstown, relative to more property-wealthy towns such as Wolfeboro, Rye, Tuftonboro, and Moultonborough. If 1% of students across New Hampshire chose a voucher, communities with the lowest equalized valuation per pupil would need to raise local taxes by an average of $0.08 vs. $0.01 for communities with the highest equalized valuation per pupil to sustain existing programs. Similarly, if 5% of students chose vouchers, communities with the lowest equalized valuation per pupil would need to increase local taxes by an average of $0.38 vs. $0.06 for property-wealthy towns.

Figure 2. Potential Tax Impact of SB 193

What About Cost Savings?

Over time, if significant numbers of students chose vouchers, municipalities may be able to lower some educational expenses; reducing the number of teachers employed by the district, for example. Reaching Higher has not run an associated analysis, however, as one cannot be conducted with a reasonable degree of accuracy. This is because state adequacy aid is completely variable (i.e., will fluctuate with every change in ADM) whereas school expenses include both fixed (e.g., building costs) and variable (e.g., the number of educators) costs. There are few true per pupil expenses (i.e., expenses that will immediately go down if the student population decreases). This means that if students select a voucher, the amount of state aid going to a community will decrease, but educational expenses may not. For example, if there are 45 third-graders grouped into 2 classes at an elementary school and 5 students chose a voucher, the school would likely not see any reduction in expenses, but would lose approximately $20,000 in state aid. Compounding this is the fact that SB 193 would allow students to select a voucher at any point during the school year, with no cap on the numbers eligible to do so, and voucher students could likewise return to the public school at any point. As a result, schools and districts could experience volatile swings in student enrollment. Accordingly, any associated budgetary savings related to SB 193 cannot be projected with accuracy.

Technical Note:

We use ADM to measure the number of pupils living in a given municipality because the New Hampshire Department of Education uses ADM to calculate the distribution of adequacy aid. However, it is important to note that ADM does not equal enrollment. Enrollment measures the whole number of students in a school district for specific points in time (e.g., school districts report fall enrollment as the student count as of October 1) whereas ADM reflects the number of students who live in a municipality and it incorporates fluctuations over the course of a year. As a result, ADM typically reports fractions of students to account for students who move in or out of the municipality. For example, in 2016 Berlin school district reported an October 1 enrollment of 1,174 whereas Berlin the municipality’s 2016-2017 ADM was 1,058.61. For additional information, please see the New Hampshire Department of Education’s FY 2018 Adequate Education Aid memo.

View the full analysis here: