Stabilization Grants: A vital part of the formula for NH’s most vulnerable communities

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Stabilization grants are a substantial source of state aid to many New Hampshire communities. In the third segment on our state’s education funding formula, we’ll review their intended purpose and what’s being proposed in 2019.

Let’s begin with the basics:

  • Stabilization grants were intended to stabilize property-poor towns that would lose money due to the funding formula changes that went into effect in 2012. The change in the funding formula resulted in $158 million cut in state education funding.
  • Two-thirds of New Hampshire’s communities receive stabilization grants, ranging from $12,435 (Durham) to $12,454,439 (Manchester) in 2012.
    • In 14 towns, the stabilization grant is at least half of their total amount of state funding.
  •  These grants were established to be a set amount of funds that did not fluctuate with student enrollment.
  • From 2012 to 2016, districts received that set amount of stabilization money.
  • In 2017, an amendment to the state budget led to a decrease in the stabilization grants by 4% per year, or $6.5 million every year, for the next 25 years.
  • There are several proposals for 2019, including freezing the cuts at 2018 levels and repealing the stabilization grants all together (detailed below).

Why were they created?

Check out this infographic to learn the about why and how stabilization grants were created.

In 2011, the state legislature significantly changed the education funding formula. The revised formula removed the Fiscal Capacity Disparity Aid and changed the formula for differentiated aid .

This change would have resulted in a loss of $158 million in total state aid between 2011 and 2012. Recognizing that districts might be unable to sustain such large losses in state funding, lawmakers created “stabilization grants” to ensure that districts would not receive less in 2012 than they did in 2011.

Districts continued to receive the same amount of funding each year after that – regardless of changes in enrollment or property values (or other factors that determine state aid). The amount the town received in 2012 would be the same amount in 2013 and 2014, no matter what. Again, this was meant to “stabilize” district budgets, which would have received less money under the new funding formula.

In 2015, lawmakers added an amendment to the state budget that would reduce the amount of stabilization by 4% of the original grant each year starting in 2017, eventually phasing out the program completely by 2042. The cuts were intended to make up for the additional funds necessary to remove the state’s cap on growth in per-pupil spending, per the City of Dover v. State lawsuit.

Where are they now?

In 2019, the state issued stabilization grants at 88% of the 2012 levels. Statewide, that meant a loss of $6.5 million. And they’re set to lose another 4% next year.

In about 70 communities, stabilization accounts for at least 40% of their state aid. These districts are property-poor, have large numbers of students in poverty, and typically have higher taxes than the state average.

With a 4% decrease in the stabilization grant annually, Berlin incurs a $220,000 loss in state aid per year, compelling the city to raise taxes by $0.55 every year to make up the difference.

On January 17, 2019, the House Education Committee held a public hearing on HB 177, which freezes the annual cuts to stabilization grants and holds them at 2018 levels. Administrators and local officials from many of the state’s hardest-hit districts, including Derry, Berlin, Franklin, and Pittsfield, testified in support of the bill. (Reaching Higher NH streamed the hearing, and you can watch it here.)

 

The cuts have been devastating and “demoralizing” to the city, according to a letter submitted to the House Education Committee by the Berlin Board of Schools, read by the city’s mayor at the hearing on January 17:

“The loss of stabilization grants at a loss of $220,000 per year has had devastating consequences. Three years in, we have lost over $875,000. This has placed inexcusable burdens on our teachers and staff who have been tasked with additional duties without compensation… Now, we are left with closing our last neighborhood elementary school… the third school [in Berlin] to close since 2009.”

“We need to have funds restored until a new and just formula is enacted to ensure all students across our state have adequate resources for education, not just property-rich communities.”

School board members were unable to attend the House Education Committee hearing on January 17, as they were meeting to vote to close the city’s last remaining elementary school.

Dr. John Freeman, the Superintendent of Pittsfield School District, said at the same hearing on January 17 that stabilization grant cuts have contributed to rising budget pressures, reduced funds for materials and technology, and reductions in staffing. In Pittsfield, 4 out of 20 elementary school teachers have been laid off, they have eliminated one of their two guidance counselors, all of their school resource officers, and offer foreign languages through the software-based Rosetta Stone program supervised by a paraprofessional.

What’s Next for Stabilization

There have been several proposals put forth for the 2019 legislative session. Among the proposals are:

  • HB 177 proposes a freeze to stabilization grant cuts and restores them to their 2016 levels.
  • HB 711 proposes repealing the stabilization grants altogether while increasing the base adequacy per student on a sliding scale.
  • HB 734 proposes suspending the 4% annual reduction for 2 years, beginning in 2020.
  • Members of the Committee to Study Education Funding and the Cost of an Opportunity for an Adequate Education issued a recommendation in November 2018 to eliminate stabilization grants all together in favor of increased base adequacy, increased differentiated aid, and a proposal to create a new grant program for property-poor towns, similar to the fiscal capacity disparity aid program.
    • HB 709 proposes repealing the stabilization grants altogether while increasing the base adequacy per student, establishing a fiscal capacity disparity aid program, and requiring school districts to report on the use of adequate education grant funds
    • HB 713 also proposes repealing the stabilization grants altogether, while increasing the base adequacy per student, establishing a fiscal capacity disparity aid program, and requiring school districts to report on the use of adequate education grant funds, but it provides slightly less funding per pupil and allows districts to decide whether to provide transportation for students.

Follow Reaching Higher NH on Facebook and Twitter, and sign up for our newsletter, to stay informed about the many proposals regarding the way we pay for our schools, including changes to stabilization grants. Next week, we will explain another component to the formula: the state education property tax known as SWEPT!

Check our five-part series breaking down education funding in New Hampshire and stay tuned to learn more about how we are paying for school in New Hampshire: