Amendment to statewide voucher bill increases financial burden on districts, according to Reaching Higher NH analysis

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The House Finance subcommittee has released an amendment to SB 193, the bill that would create a statewide voucher bill, on Wednesday. According to an analysis by Reaching Higher NH, school districts could lose between $2.4 million and $6.3 million in the first year, with the highest losses concentrated in the state’s largest districts, including Manchester, Nashua, Rochester, Laconia, and Claremont.

The amended version removes the stabilization grants that would have protected districts from some of the financial impacts of the vouchers, changes the eligibility requirements, places enrollment caps on the number of students who can receive a voucher, and makes changes to the way schools, parents, and students are held accountable for the state-funded savings account.

Under the amendment:

  • School districts could lose between $2.4 million and $6.3 million in state aid in year 1;
  • The state could incur new costs (adjustment grants) of between $900,000 and $2.4 million in year 1;
  • The private scholarship organization could receive between $110,000 and $290,000 of public dollars in year 1; and,
  • Financial impacts of the new amendment would likely be most challenging for some of NH’s largest and least affluent districts. Manchester, Nashua, Rochester, Laconia, and Claremont are each projected to lose between $95,000 and $850,000, annually should the maximum number of students allowable participate.

According to the analysis, more than 20 districts could lose more than $40,000 in state aid in the first year if the districts see maximum student participation in the voucher program. Find the full list of year 1 here.

The analysis considers three important changes to the bill: eligibility, participation caps, and the removal of stabilization grants.

Background

SB 193 allows eligible families to receive 95% of the state funding (about $3,600 per student plus differentiated aid) in the form of an education freedom savings account, or voucher. The funds can be used for private and religious school tuition, homeschooling costs, tutoring, and other education-related expenses. The remaining 5% reimburses a third-party scholarship organization for administrative costs.

The original bill passed the Senate in the Spring of 2017, and the House Education Committee studied the bill for the latter half of the year. In early January, the full House voted to send that version of the bill to the House Finance Committee, where a subcommittee has been addressing concerns with costs to the state’s general fund and to local school districts.

Eligibility Changes

To be eligible for the education savings account (voucher), students must be a public school student in grades 2-12, and one of the following:

  • Come from a family with incomes below 185% of the Federal Poverty Level ($45,510 for a family of 4), OR
  • Attend a school that has not met state accountability standards for 2 consecutive years.

This version removes two of the qualifiers in the House Education Committee’s version that was passed in November. In that version, students could also qualify if they have an Individualized Education Program (IEP) for special education services or accommodations, or were not admitted into a charter school or had an education tax credit scholarship that went unfunded.

Students and families still waive their rights to the planning, screening, services, and accommodations that are guaranteed to students under federal disability laws. The removal of that qualifier does not change the “parental placement” provision in the bill.

Stabilization Grants

The amendment removes the “stabilization grants” and replaces them with one-time “adjustment grants.” The adjustment grants provide $1,500 to the municipality for each student that participates in the voucher program for the first time.

This increases the financial impact on many districts from the previous version that the House Education Committee proposed and the House passed in November. Under the Education Committee’s bill, districts were reimbursed for losses greater than ¼ of 1% of their prior year’s budget. This placed a substantial cost burden on the state, but cushioned any negative financial impacts to already financially-squeezed districts.

Adjustment grants would still be new costs for the state and would have to be approved in the state’s biennial budget process.

According to the analysis, the grants would cost the state $2.4 million in the first year if the maximum number of eligible students took a voucher based on the participation caps. Over the 5 year period that the program would be in place (it must be renewed after 5 years or else the program expires), the total cost to the state for grants would be $11.5 million.

Participation Caps

The amendment creates caps based on district enrollment. Previous versions of the bill didn’t include any caps, meaning that there were no limits on the number of students who could leave their public schools and take up a voucher.

If a district has less than 101 students, no more than 5% of students who are eligible for free and reduced-price lunch (FRL) can receive a voucher. For districts with between 101 and 300 students, the cap is 4%, and for those over 300 students, the cap is 3%. The amendment states that the minimum participation cap for any district is 3 students (in practice most districts will have much higher caps). No single school can have more than 5% of its students select a voucher in any given year.

Other Changes

There were also significant changes to the accountability requirements and responsibilities of the scholarship organization under the bill. Reaching Higher NH will release a thorough analysis to those in the next few days. Get notified when we release the analysis, follow us on Facebook and Twitter, and sign up for our weekly newsletter.

About the Models

In the first scenario (Scenario 1), Reaching Higher analyzed financial impacts assuming conservative participation rates that range from 0.5% to 2.5% of eligible students per year based upon the concentration of private schools in a given districts geographic footprint. In the second scenario (Scenario 2), Reaching Higher analyzed financial impacts assuming school districts saw maximum participation allowable (per the new caps proposed in the amendment).

For both models, the basic inputs are:

Average Per Pupil ESA: $5,454 (adjusted over time with inflation)
Per Pupil Adjustment Grant: $1,500 (stays constant over time)

The Summary PDF Shows 4 Main Financial Impacts:

  • New Annual State Costs: This reflects the new expenses the state will need to incur to provide adjustment grants to municipalities;
  • Annual Costs to Districts (Net of Adjustment Grants): This reflects the amount of state adequacy aid districts will lose – after accounting for any adjustment grants the state may provide – as a result of new students signing up for vouchers in a given year;
  • Cumulative District Loss in State Aid (Net of Adjustment Grants): This reflects the total amount of state adequacy aid that districts will lose over time as students sign up for vouchers – for example, in year 1 if 10 students sign up for vouchers, the district will lose ~$40,000; in year 2, if 10 new students sign up for vouchers, the cumulative loss in state aid will be ~$120,000 ($40,000 in year 1 + $80,000 in year 2);
  • Annual $ to Scholarship Organization: This reflects the amount of public money that will go to the private scholarship organization for administrative costs.

 Models:

Questions about the study? Email Dan Vallone, Policy Director, at dan@reachinghighernh.org.