SB 193, a bill that would create a statewide education savings account (ESA or voucher) program, is now in its third iteration since being passed by the Senate almost one year ago (see 2017-2018 coverage here.)
With the most recently proposed amendment, towns receive a one-time grant to offset the impact of the loss of state funding. Under the bill, most districts stand to lose funds, but some districts could see financial gains from the grants. The exact impact to each district will be determined by the number of students that participate in the program (see Reaching Higher NH’s earlier projections here, we will be updating our model to reflect the latest amendment.)
The discrepancy is largely due to the way New Hampshire funds its public schools. Where other states rely on various streams of revenue to fund their public schools, the Granite State relies primarily on property taxes. The state provides districts with a set amount of funding per student (currently about $3,600) to administer an “adequate education.” If a town cannot raise those funds as part of the statewide education property tax (SWEPT), the state provides funding through the education trust fund. If a town can raise that amount or exceed it through SWEPT, the state does not generally provide any additional funding.
For approximately 35 communities (from cities such as Portsmouth to less populated communities such as Jackson) this is the case. For example, in Moultonborough for FY 2019, the state calculated the required amount of state aid for education as roughly $2,100,000. For the same fiscal year, Moultonborough will raise ~$6,400,000 through SWEPT*, an “excess” of close to $4,400,000.
Because Moultonborough will cover the entirety of the state’s cost, they will not receive any additional state funds (i.e., money from the state education trust fund). But, under the current version of SB 193, Moultonborough would receive a $1,500 state-funded adjustment grant for each student that takes a voucher, despite the fact that it would not lose any state aid. At the same time, communities with the lowest property valuations and cities such as Manchester and Nashua could see significant losses in state aid.
Here is how the program could work in practice:
|10 students select a voucher (assuming $5,454 per voucher)|
|Loss in State Aid||$54,540||$0|
|Net Financial Impact||Loss of $39,540||Gain of $15,000|
*Note: Despite being called a statewide tax, SWEPT actually consists entirely of local property tax dollars that stay in the local community. Towns never send any SWEPT dollars to the state.