The New Hampshire Senate recently passed SB 130, a statewide voucher bill that creates “Education Freedom Accounts” for low- and moderate-income families. Immediately after the bill was passed, it was laid on the table with the expectation that it would be included in the state’s 2022-2023 budget “trailer” bill, HB 2.
According to Reaching Higher NH’s previous analysis, the program could cost the state $65 million over three years in new state spending for vouchers for students already enrolled in public and home-school options.
A new analysis by Reaching Higher NH finds that SB 130 could disproportionately affect rural districts, districts that serve large proportions of low-income students, and districts that have lower capacity to raise revenue through taxes (often referred to as “property-poor” communities).
Key Takeaways:
- Districts with large proportions of low-income students are expected to lose the most in state aid; for example, assuming a 3% adoption rate, Manchester would lose approximately $5 million over five years, after accounting for the phase-out grants, and Nashua would lose approximately $3.1 million over five years after accounting for the phase-out grants;
- Rural districts could be disproportionately affected; for example, assuming a 3% adoption rate, Lisbon would have to increase its tax rate by $0.13 per thousand to compensate for the reduction in state aid in the first year of the program; Berlin would have to increase its tax rate by $0.10 per thousand, and Charlestown, Northumberland, Claremont, and Troy would each have to increase their tax rates by $0.09 per thousand to compensate for the lost state revenue in the first year.
- Under the current model, the program would cost the state roughly $69.7 million in new state spending over three years;
- Under SB 130, the independent scholarship organization is responsible for administering, auditing, and overseeing the program with minimal government oversight of public funds, including public oversight of the use of funds or instances of fraud, or whether the funds are being used appropriately;
- 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 environment in the least restrictive environment.
Download the town-by-town analysis on the financial impact of SB 130 (Google Sheet version below)
Download the town-by-town tax impact analysis of SB 130
Background
In February 2021, the New Hampshire State Senate introduced Senate Bill (SB) 130, which creates taxpayer-funded “Education Freedom Accounts” (referred to as “vouchers” in this analysis) for eligible students. If enrolled in the program, families would receive the equivalent state aid, an average of $5,130 per student, in state funds to use for private and religious school tuition, homeschooling costs, and 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 reduction in the state adequacy grant in the first year, and 25% of the reduction in the state adequacy grant in the second year.
Students who enroll in the voucher program cannot be full-time students at their public schools (including charter schools). However, the bill lacks clarity around students’ ability to enroll in their public schools part-time, for specific courses, or for extracurricular activities.
Additionally, there is no cap on the number of students who can participate in the program, nor are there any requirements around when a student may enroll.
Students already enrolled in private and homeschool programs are also eligible to enroll in the voucher program; however, this analysis studies the financial impact on public school districts (excluding charter schools). For more information on the voucher program’s cost to the state, please refer to this analysis.
District Impact of SB 130
According to Reaching Higher NH’s analysis, half of the eligible students are concentrated in the state’s cities. These districts are expected to have the sharpest drops in state funding due to student disenrollment.
According to the analysis, 24 municipalities could lose $30,000 or more in state aid in the first year alone, including the bill’s phase-out grants, assuming a conservative 3% adoption rate.
Manchester could lose roughly $630,000 in state aid the first year of the program, after adjusting for the phase-out grants, assuming that 3% of their current public school students leave their schools for the voucher program. Under this scenario, the city would lose $5 million in state aid over a five-year period, after adjusting for the phase-out grants.
Rochester would lose roughly $140,000 in state aid in the first year, and $1.2 million in state aid over five years, while Somersworth, Franklin, and Berlin would each lose approximately $50,000 in state aid in the first year. These districts would lose between $380,000 and $430,000 in state aid over five years, after accounting for the phase-out grants.
Impact on Local Property Taxes
As amended, Senate Bill 130 would have a disproportionate impact on rural communities like Pittsfield, Franklin, and Allenstown, and cities like Manchester, Rochester, and Berlin due to their limited tax bases.
These communities, which have the lowest equalized valuation per pupil (the amount of tax base per student), would need to raise local taxes by an average of $0.09 in the first year, compared to those communities with the highest equalized valuation per pupil, that would not need to raise taxes at all.
Many of the communities with the highest property wealth, like Tuftonboro, Moultonborough, and Rye, collect excess state property taxes (the Statewide Education Property Tax, or SWEPT), which absorbs the cost of the voucher program on their municipalities. Even without accounting for the excess SWEPT, these communities would have to raise taxes by a fraction of a percent to make up the same amount of state funding as those with lower property tax bases.
Lisbon for example, would need to raise local taxes by $0.12 (per $1,000 in equalized valuation) in the first year in order to compensate for the loss of state aid should approximately 3% of its students choose a voucher. Plaistow, in contrast, would only need to raise its local taxes by $0.01 to compensate for 3% of its students choosing a voucher, despite the fact that both towns would lose the same amount of state aid.
The state’s school funding system relies heavily on local property taxes to fund New Hampshire’s public schools. For every dollar spent on education, an average of 72 cents is raised by local property tax payers, meaning that a school’s operating budget is largely dependent on the property tax base of it’s community.
It also means that a drop in state funding affects towns with limited property tax bases more than those with larger tax bases. For instance, if state funding were to drop $35,000, a town like Portsmouth would have to increase their property taxes by a penny to make up for the difference. However, Charlestown would have to raise their tax rate by $0.12 in order to make up the same difference.
To compensate for the loss in state funding due to student disenrollment, these communities will likely have to raise taxes, cut their operating budgets, or a combination of both.
Read: ‘You do what you’ve got to do.’ As budgets and funding bills unfold, a look behind the ledgers
A note about cost savings
Projections related to associated cost savings of voucher programs are difficult to do with any degree of accuracy. Supporters argue that a drop in the number of students could translate to cost savings and potentially greater efficiency; however, history shows that more often, municipalities raise tax rates, cut programming, and cut staffing.
Consider this example: Reaching Higher NH’s model assumes a 3% adoption rate, and therefore, a 3% reduction in student enrollment. This year, school districts have had to build their budgets around a $45 million drop in state funding due to a 4% reduction in state funding and a decline in the number of students participating in school meal programs.
As a result, school districts, particularly those with high proportions of low-income students and those with lower property tax bases — and those most likely to be affected by a program like SB 130 — have had to raise property taxes, cut teacher and paraprofessional positions, eliminate academic and extracurricular programs, and more.
- Town-by-town analysis on the financial impact of SB 130
- Town-by-town analysis on the financial and tax impact of SB 130 (Google Sheet version)
- Town-by-town tax impact analysis of SB 130
- Methodology
Reaching Higher NH will hold a virtual public information session on SB 130, the statewide voucher bill, on Thursday, April 20 at 3 p.m. Register here.
For more information about this analysis, please contact Christina Pretorius, Policy Director, at christina@reachinghighernh.org.
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