Analysis: Budget veto would disproportionately affect vulnerable communities

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On Thursday, June 27, lawmakers will vote on a budget proposal that will then go to Governor Sununu’s desk. The proposal includes an additional $138 million in funding for education in the 2020-2021. 

According to the Associated Press, the budget faces a likely veto by the Governor which would kill the proposal. 

“I look forward to supporting Governor Sununu’s veto,” said Republican Leader Chuck Morse said in the statement on June 20. 

Infographic comparing current law to the Committee of Conference proposal. Click to expand.

What would happen to education funding if the Governor vetoes the proposal? Reaching Higher NH ran an analysis that compared two scenarios: first, if the Governor signs the Committee of Conference’s proposal and it becomes law; and second, if the Governor vetoes the proposal and the state continues with current law.

Key findings of the analysis show that:

  • Our analysis assumes that a budget veto would mean that current law would hold: 4% reductions in stabilization grants in 2020 and 2021, with a 2% increase in base adequacy aid to adjust for inflation, resulting in an overall loss of $9.1 million over the two year period; 
  • A budget veto would affect the state’s property-poor communities, meaning those with the least ability to raise money for education through property taxes would be the hardest hit;
  • The proposal by the Committee of Conference (CoC) would create two new funding streams: Enhanced Free and Reduced Lunch Aid and Fiscal Capacity Disparity Aid. The CoC proposal also restores stabilization to 2012 levels in 2020 and beyond;
  • The CoC proposal would concentrate state aid to towns with higher percentages of students in poverty and to property-poor towns.

NOTE: If the Governor vetoes the budget, lawmakers would have to pass a “continuing resolution” that temporarily funds the state government and its agencies for a set amount of time until lawmakers and the Governor can pass a new budget. Lawmakers may put anything into the continuing resolution, including additional funding for education, but this analysis assumes that current law would remain the same under the continuing resolution.

View the town-by-town list of how school funding would be affected under current law here

View the town-by-town list of how school funding would be affected under current law, compared to the proposal put forth by the Committee of Conference, here

Scenario 1: The Committee of Conference Proposal is Adopted

On Thursday, June 24, the House and Senate are scheduled to vote on the proposal put forth by the Committee of Conference that would:

  • Create an “Enhanced Free and Reduced Lunch Aid” program that would provide additional funding for cities and towns with high populations of students in poverty, measured by eligibility for the Free and Reduced Lunch program
  • Create a Fiscal Capacity Disparity Aid program that would provide additional funding for cities and towns that have the lowest ability to raise funds for schools through property taxes
  • Restore stabilization to 100% in 2020 and beyond, fully restoring the grants to 2012 levels before the 4% annual reduction. In 2019, towns received 88% of their 2012 stabilization grant. 
  • Funds kindergarten at the same rates as other grades. Read more about how New Hampshire funds kindergarten here
  • Increase the base adequacy amount to $3,708 (currently at $3,636) in the 2019-2020 school year to adjust for inflation (note that this is current law, but the CoC proposal does not change the increase).

Because the additional aid is targeted at the state’s most vulnerable communities, towns and cities like Berlin, Manchester, and Derry would benefit the most from the Committee of Conference’s proposal.

Berlin would receive an additional $4.2 million, a 21.4% increase over current law. 

Derry would receive an additional $6.9 million, an 11.9% increase over current law. 

Manchester would receive an additional $15.25 million, and Nashua would receive an additional $5.16 million. 

View the town-by-town list of how school funding would be affected under current law, compared to the proposal put forth by the Committee of Conference, here

Scenario 2: Governor Sununu Vetoes the Proposal 

This analysis assumes that if the Governor vetoes the budget, the existing laws and funding formula will continue in place. However, lawmakers may pass a continuing resolution that could include changes to the way the state pays for public schools. 

Under current law, the base adequacy grant, currently at $3,636, will increase to $3,708 in the 2019-2020 school year to adjust for inflation.

Under current law, stabilization grants would continue to reduce by 4% per year. In 2019-2020, districts would lose $6.2 million in stabilization grants, and in 2021, districts would lose another $12.5 million in stabilization grants over 2019 levels. However, the $72 per-student increase in base adequacy grants and fluctuations in student enrollment mean that total state funding would only cumulatively decrease by $9.1 million over the two years. 

The table below shows the change in state funding between the towns that would have the largest cuts in state funding, compared to those towns who would see an increase in state funding.

As shown, many of the towns that would experience the largest cuts are those with lower property wealth per student (meaning they must have a higher tax rate to generate the same amount of property taxes to fund their schools), as well as those with high percentages of students eligible for the federal Free and Reduced Lunch program. 

Derry, for example, would lose $1.7 million over two years, equating to 7.3% of their total state funding. Berlin, Weare, Newport, Somersworth, and Franklin would lose more than half a million dollars over the two year span. 

Towns like Brookline, Keene, and Dover would receive an increase in state funding for education due to increases in student enrollment. Current law does not add any additional revenue streams, but does increase the base adequacy amount per student by 2% to adjust for inflation. 

If the Governor vetoes the budget and the state operates under current law, the commission that is set to study how New Hampshire pays for our schools and would make recommendations on how to make the formula more fair and equitable would also be cut. Lawmakers could introduce another bill in 2020, but would be unable to start the commission in 2019 as planned. 

Statewide impact

The chart below depicts the last few years of state adequacy aid and the coming two years under two scenarios (current law and the Committee of Conference’s budget proposal). 

If the Governor vetoes the budget and the state operates under current law, state funding for education (excluding the Statewide Education Property Tax) would go from $563.1 million in 2019, to $561.7 million in 2020, and further reduced to $555.5 million in 2021– a cumulative loss of about $9.1 million and would put school funding at its lowest level since 2009. 

In contrast, the Committee of Conference’s version of the budget would raise adequacy aid in 2020 (+$35 million over current law) and 2021 (+$103 million over current law), for a combined increase of $138 million over the biennium. 

Vulnerable communities bear the brunt of funding cuts

Under current law, the less economically capable group of communities (“disadvantaged”) experience the deepest cuts in state funding regardless of the metric used:

  • Property wealth per student, often used as an indicator of the ability of a town to raise money for schools);
  • Percentage of students eligible for the federal Free and Reduced Lunch program, often used to measure the rate of students living in poverty; or 
  • Equalized education tax rate, the property tax rate a town has specifically for education. 

The chart below shows how current law affects cities and towns based on these three metrics. Cities and towns are broken out by “disadvantaged,” or “advantaged,” depending on whether they are above or below the state median for that measure. For example, Berlin would be “disadvantaged” in all three metrics because their property wealth per student and equalized education tax rate is higher than the state median, while they have a higher percentage of students eligible for FRL than the state median. 

Cities and towns with property wealth per student below the median ($978,125) will collectively lose $9.5 million in state education funding over the next two years, whereas those cities and towns with property wealth per student above the median will collectively gain $528,393.  

Cities and towns that have more than 25% of their students eligible for Free or Reduced Lunch will lose $8.3 million in state funding for schools, while cities and towns with less than 25% of their students eligible for the program will collectively lose $623,344.

Cities and towns that have an equalized school tax rate (local education tax rate + state education tax rate) above $14.69 per $1,000 of property value, they will lose $9.3 million, while cities and towns with a school tax rate below the median, will gain just over $400,000.

Questions or comments about this analysis? Contact us at staff@reachinghighernh.org. Read more about education funding in New Hampshire: