On Thursday, March 18, the New Hampshire Senate will vote on Senate Bill (SB) 130, a bill that would create a taxpayer-funded “Education Freedom Account,” or voucher, program in the state. Families would be able to use the voucher for private school tuition, homeschool costs, or other education-related expenses.
An amendment passed by the Senate Education Committee would limit eligibility to students from households that earn less than 300% of the Federal Poverty Guidelines, which for a family of four was $77,250 in 2019. (Source: U.S. DHHS ASPE 2019 Poverty Guidelines) The amendment also includes a “phase-out grant” that provides the student’s home district with 50% of the state adequacy grant in the first year, and 25% of the state adequacy grant in the second year.
Key findings of Reaching Higher NH’s analysis included:
- 38% of New Hampshire students would be eligible for the voucher, or 69,272 students in grades kindergarten through 12th grade;
- The current model, which assumes a 50% adoption rate among eligible nonpublic school students and 2% of eligible public school students, would cost the state roughly $69.7 million in new state spending over three years;
- Districts are estimated to lose $13.6 million over three years, a projection that includes the bill’s phase-out grants. Districts with higher proportions of low- and middle-income students, like Manchester and Littleton, are more likely to lose students and state aid because more of their students would be eligible; and,
- Under SB 130, students with disabilities may waive their rights under federal and state disability laws, including the right to an Individualized Education Program (IEP) and the right to a free and appropriate education in the least restrictive environment.
Student Eligibility
According to the U.S. Census Bureau’s American Community Survey, about 38% of the state’s children between the ages of 6 and 18 have household incomes of less than 300% of the Federal Poverty Guidelines. (Source: American Community Survey, 2019) An analysis by Reaching Higher NH estimates that roughly 69,272 New Hampshire students would be eligible for a voucher, as shown in Table 1.
Using that figure, we can estimate that roughly 60,873 of current public school students would be eligible, and 8,399 current private and homeschool students would be eligible. Note: These figures are estimates and assume that the income distributions between the three groups are similar.
Table 1: Estimated Number of Eligible Students
Assuming that 50% of eligible private and home educated students would enroll in the first year, and 2% of eligible public school students would disenroll from their public schools to enroll in the program, the total costs would be:
- $21.5 million in new state spending for scholarships in year 1 for current private and home school students;
- $3.1 million in new state spending for phase-out grants in year 1 for current public school students; and
- $3.1 million in lost state funding for public schools due to drops in enrollment
Note: for explanations of assumptions, please see the methodology section below.
Table 2: New Spending and District Losses, Assuming 50% Adoption Rate for Nonpublic School Students and 2% Adoption Rate for Public School Students
A 50% adoption rate for nonpublic school students is an estimate: There are no comparable voucher programs for current nonpublic school students in the U.S. Given the limited restrictions on allowable uses and accountability requirements, we can estimate that about half of the eligible students would opt for a voucher program. Private schools have also testified during public hearings that these programs would help their students, indicating that they may also market the program to their current and future students.
New Students
Under the SB 130 amendment, all children in the state whose families earn less than 300% of the Federal Poverty Threshold (77,250 for a family of 4 in 2019) qualify for an “Education Freedom Account,” or voucher, as long as they are not enrolled full-time in their public school. The original bill included all children who were not enrolled in public school, but the amendment was introduced to limit the availability to low- and moderate-income families.
Under current law, nonpublic school students “opt-out” of the public education system and therefore do not receive state education funding. However, passage of SB 130 would mean that the state would be obligated to fund eligible students’ education through the vouchers, through the state’s Education Trust Fund (ETF). Therefore, 100% of their accounts would constitute new state spending.
Table 3 models the cost to the state given various adoption rates, between 10% and 100% of participation in the voucher program. While it is unlikely that any non-mandated program would have 100% participation, especially in the first year, a 50% participation rate is feasible given the breadth of allowable uses of the program.
Table 3: New State Spending for Education Freedom Accounts
For the purposes of this model, we assume that the distribution of children in the three categories (public school, private school, and home school) is equal; however, research suggests that private school students tend to be from wealthier families, and therefore may have lower eligibility.
Phase-Out Grants
The SB 130 amendment includes “phase-out grants,” which provide funding to local school districts for the students that leave their public schools for the voucher program. Local school districts are given a grant equal to 50% of the state funding in the first year, 25% of the state funding in the second year, and 0% in the third year.
Table 2 below shows the estimated cost of the phase-out grants in years 1 through 3, assuming various adoption rates.
Other studies of voucher programs have estimated a roughly 2% participation rate, pointing to Arizona specifically. However, other states with similar income-based programs have adoption rates as high as 11%. Therefore, we included those estimates in our model in order to show the potential costs.
The estimated three-year cost of the “phase-out grants” is roughly $5.2 million, assuming a 2% adoption rate among current public school students.
Table 4: 3-Year Cost of Phase-Out Grants
Assuming that there is no net growth in the program beyond year 1 (that the number of students graduating from the program is equal to the number of new students entering the program), the state would incur the most cost in year 1, and then the cost would level out in year 3.
Loss of State Aid to Local School Districts
According to our analysis, if 2% of eligible public school students enroll in an Education Freedom Account, or voucher, it would cost local school districts roughly $13.6 million in lost state aid during the first three years after accounting for the phase-out grants.
Because the program is targeted to low- and middle-income students, these costs would likely impact districts with the highest concentrations of students navigating poverty, and therefore these losses would disproportionately impact our most vulnerable communities. These communities depend on state funding due to lower-than-average equalized valuation per pupil (meaning a lower ability to raise revenue through local property taxes). For example, a reduction in state aid in Franklin has a more discernible impact on their local budget than a reduction in state aid in Rye.
Table 5: Three-Year Impact to Local School Districts
There are a number of districts where more than 38% of the student population would be eligible for a voucher. For example, in Littleton, 53% of the student population qualifies for Free and Reduced-Price Lunch, which has a threshold of 185% of the Federal Poverty Guideline. If 2%, or seven students, enrolled in the voucher program, the district would lose approximately $19,141 in state funding in the first year, after accounting for the phase-out grant. That does not include the students who are eligible for the voucher who have family incomes between 185% and 300% of the Federal Poverty Guidelines.
In that scenario, the district is unlikely to be able to reduce costs because of a loss of seven students. More likely, Littleton’s local tax rate will increase to make up for the $19,141 loss in state funding.
Methodology
These models are built using the provisions of Senate Bill 130, introduced on February 3, 2021, and Amendment #2021-0769s, introduced on March 11 and voted Ought to Pass with Amendment by the Senate Education Committee.
The amount of the vouchers are based on figures published by the New Hampshire Department of Education, in their estimated FY 2022 Municipal Summary of Adequacy Aid. Therefore, the figures above do not include impacts to charter schools. Charter school students would be eligible for vouchers only if they disenroll full-time from their public charter school.
Assumptions:
- Each voucher under the new amendment would cost roughly $5,130. Students who qualify for Free and Reduced-Price Lunch (FRL) differentiated aid are overrepresented in the eligibility (48% of students, compared to 27% of students in all income brackets in SY2020), meaning that the average voucher is higher than estimates of $4,603 in previous analyses.
- There is no change in the base adequacy aid or differentiated aid categories. There is a statutorily scheduled increase in state aid in year 3 due to inflation; however, that figure is not yet available.
- There is no change in overall Average Daily Membership (ADM) or enrollment in private schools and home school programs between years 1 and 3.
- There is no change in the income distribution of children ages 6-18 between the years 2019 and 2024; in other words, 38% of students remain eligible throughout the entire study period. However, it is estimated that child poverty rates have increased since the onset of the pandemic, meaning that there may be a greater percentage of eligible students.
- There is no net change in the participation rate of the voucher program between years 1 and 3. This assumption means that the number of students in each grade is evenly distributed, and the number of students who graduate from high school in years 2 and beyond are equal to the numbers of kindergarten students who enroll in year 2 and beyond. It is important to note that enrollment in both public and private schools has been steadily declining; in addition, we could expect that the number of current private- and home-school students would increase over time as the program became more well-known. We kept enrollment steady to simplify the model.
- The proportion of students who qualify for SB 130 vouchers is equal between the three categories of students (public school, private school, and home school). The Census Bureau does not have data aggregated across these three categories, so we are making the assumption that the income distribution is the same across the groups. However, research suggests that there is a positive correlation between family income and enrollment in private schools. A 2016 study indicated that home educated students were more likely to live below the poverty line.
- The 1-Year American Community Survey (ACS) estimates from the U.S. Census Bureau include margins of error. For the purposes of this analysis, we used the estimates provided and did not account for margins of error.
For more information about this study, please contact Christina Pretorius, Policy Director, at christina@reachinghighernh.org
Dr. William Jamieson, Assistant Professor of Mathematics at Southern NH University, contributed to this report.
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