Senate works through state budget proposal, some districts hang in the balance

Next week, the Senate Finance Committee will work on its proposal for the state budget that will dictate spending in New Hampshire over the next two years. They will have to work through different priorities: mental health needs, highways and infrastructure, and how much money the state will provide for its public and charter schools, among many others.

The budget proposal that the House passed included a $34.4 million increase in state education funding for the 2019-2020 school year through restoration of stabilization grants and fully funding full-day kindergarten at the same rates as other grades. In 2020-2021, it included a $130 million increase through two new funding streams that provide targeted state aid to 193 of 245 communities, with the most aid going to vulnerable communities, and fully funding full-day kindergarten.

Anticipating that the Senate may consider cutting some of the programs that were included in the House’s proposal, many school administrators and school board members, educators, parents, and students asked Senators to, at minimum, restore stabilization grants and reverse their gradual reductions at the Senate Finance Hearing on Tuesday, May 7.

“We’re at the point now where we are going to collapse,” Berlin Mayor Paul Grenier told the committee last week, saying that the annual 4% cut is putting his schools and his community in a significant bind.

What stabilization grants mean for vulnerable communities

Lawmakers have spent decades drafting ways to pay for our public schools. Trying to strike the right balance between providing state funding and reliance on local property taxes has proven a difficult task.

In the late 2000’s, lawmakers crafted the education funding formula to target aid to the towns and cities that have the most difficulty to raise property taxes–and therefore, revenue for education–and the highest concentrations of students in poverty. In 2012, they removed the element that considered a community’s fiscal capacity and altered extra aid based on poverty concentration from a graduated schedule (the higher your F&R population, the more $ per F&R student you received) to a flat, per-student amount.

The formula change, if fully instituted, would have resulted in a sharp drop in state funding–$158 million, to be exact. However, to prevent that type of shock to many schools and property taxpayers, who would have had to make up the difference through local taxes, lawmakers instituted stabilization grants that ensured that a town or city wouldn’t receive less state funding between 2011 (before the formula change) and 2012 (after the formula change). That difference is what we know as stabilization grants, and the amount remained static–districts received that same block grant every year–until lawmakers passed a bill in 2015 to reduce them by 4% each year beginning in 2016.

What does that mean for communities?

“Because stabilization grants were instituted in 2012 to replace fiscal disparity aid and other changes to differentiated aid, by definition, stabilization dollars were and are targeted to those communities with the least fiscal capacity, or put differently, to property and income poor communities,” says Greg Bird, Senior Data Analyst at Reaching Higher NH.

“Additionally, these places that rely heavily on stabilization grants are also communities that have some of the highest education property tax rates in the state. So, it’s not too surprising that taking this form of aid away is causing some financial stress. For example, under current law, in FY2020, Claremont will have lost around $1 million (cumulatively since FY2016) in stabilization grants,” Bird explains.

Effects on schools

“Every year we’re set up to lose more and more and at some point there is going to be nothing left,” Pittsfield Middle High School student Stefne Ricci told the Senate Education Committee at the state budget hearing on Tuesday, May 7.

“In the end there is only so much Pittsfield can do. We can scrounge and beg and get creative, but unless there is real and meaningful change at the state level, Pittsfield and other students like it are going to set students up to fail.”

An analysis from Reaching Higher NH shows that the districts that receive the most in stabilization grants per student are also the districts that have the lowest ability to raise education revenue through property taxes due to low property values, a limited number of taxable properties, or other factors in their communities.

The districts that rely the most in stabilization grants received an average of $4,229 per student in FY2016, the last year stabilization grants were 100% of their intended amount or before they began being cut. This does not include the per-student adequacy funding.

These districts that depend heavily on stabilization grants also have about half of the property wealth per student as other NH communities, meaning they have to have higher tax rates to make up the difference. As seen in the chart below, these communities have an average of $512,160 in property wealth per student, compared to the state average of $1 million. This means that their property tax rates–specifically their education taxes–are 30% higher than state average.

Their choices are limited–raise taxes even more, which city and town officials have told the Senate Finance Committee is risks driving some residents out of their homes–or, cut programs.

What is enough?

Much of the testimony at the hearing focused on restoring stabilization. But given the complexity of school district needs, many would still need to make challenging cuts.

Berlin is working on a proposal to cut their school budget by $1 million, on top of municipal budget cuts to make up the difference. These proposals are in addition to closing their only remaining elementary school, a move that is scheduled for this coming fall.

Pittsfield has eliminated educators and school staff, merged classrooms, and has eliminated departments–including their foreign language department, so that students take courses through the online program Rosetta Stone in a classroom monitored by support staff.

We will be exploring the effects of the cuts, and what various proposals may mean for district budgets over the next biennium, next week. Follow us on Facebook and Twitter, and sign up for our general newsletter, to get notified of updates.