On Tuesday, March 21, House Finance Chairman Ken Weyler (R-Kingston) proposed a budget amendment that would decrease the state’s contribution to the Education Trust Fund (ETF) and could leave less money in the fund for public and charter schools.
The “Weyler Amendment” was proposed to the House Finance Division II subcommittee, which is a nine-member subcommittee of the full House Finance Committee that works on education-related sections of the state budget. The subcommittee voted along party lines to recommend its inclusion in House Bill (HB) 2, which includes policy changes as part of the FY2024-2025 state budget. On March 27, the full Finance Committee voted to include it in the full House Finance amendment, and it is expected to be voted on by the full House on or before April 6, 2023.
The net effect of the proposal, which reduces the percentage of state business taxes deposited into the fund, would be about $223 million less in the ETF in FY2024, and $225 million less in the fund in FY2025. Ultimately, the changes in the amendment would shrink the fund’s projected surplus from $184 million in FY2023 to $100 million in FY2024, and $3.4 million in FY2025. The effect beyond that is unclear.
There are several considerations with this move: First, if the cost of public and charter school adequacy payments and the statewide school voucher program exceed the Trust’s balance, the funds are automatically pulled from the General Fund, so those programs will always receive the funds that they are allocated. However, lowering the contribution to the fund is expected to eliminate the surplus in it, which could significantly hinder school funding decisions in the future. Additionally, the ballooning cost of the statewide school voucher program may eventually require a draw on General Funds.
Is it sustainable?
According to revenue estimates and projected appropriations, the ETF will end the year with an estimated $183 million surplus. Under the current budget proposal, the surplus would shrink to $96 million by FY2025. However, under the Weyler Amendment, the surplus would shrink to $3.4 million, meaning that the state may have to rely on General Funds to cover the difference in future years, if expenditures exceed projections, or if revenues are lower than projected.
Lawmakers have pointed to the ETF surplus in several of their proposals this session: House Bill 529, which would have increased need-based aid by $100 million per year beginning in FY2024, and several proposals to increase funding for the school building aid program. The Division II subcommittee also talked about using the surplus to increase need-based funding, and before the amendment was introduced, voted to recommend an additional $40 million in need-based aid for public schools in FY2024-2025.
Subcommittee members raise concerns
Weyler received heavy pushback from some members of the subcommittee, who questioned the long-term effects of the move. Ranking Democrat Mary Heath (D-Manchester) noted that the state currently faces two separate lawsuits over the lack of state funding for New Hampshire public schools.
“How will it look to the courts for us to be taking money from the Trust, instead of putting money into the Trust — or leaving it as is — and using those funds. I would encourage you to look at this proposal in terms of how the courts will perceive your actions,” she said.
“I spoke to almost every constituent in my district, and the number one concern was with protecting public schools and the funding mechanisms for that,” Representative Mary Hakken-Phillips (D-Hanover) asked Weyler. “I’m wondering, this proposal seems to be a monumental shift in the way our state chooses to fund public education, and I’m wondering if maybe you could share your perspective on why this is such a priority in your district?”
Weyler pushed back on the criticism. “We’ve never really cut back on the education part of our schools. As long as the money is coming in, nobody really cares what column it comes in… those of us that deal with the financial part of it care. The people who are getting the money, they don’t care. We’ve always funded special education, we’ve always funded building aid,” he said.
Other programs would move back to the General Fund
The amendment would also move certain education-related programs from the ETF to the General Fund, raising questions about their viability in the future. Special education aid, which provides funding for school districts that have especially high special education costs, Career and Technical Education (CTE), and the state’s school building aid program would all be funded from the General Fund.
This section also received heavy pushback from members of the subcommittee.
“There’s a sense of a guarantee if it’s funded by the Education Trust Fund, and that goes away if it’s taken out of the Education Trust Fund,” said Representative Kate Murray (D-New Castle).
But Weyler pushed back, saying that those programs weren’t funded through the ETF before, and should “compete” with other state priorities.
“I want to bring [the Education Trust Fund] back to what it was intended for, it’s off the tracks and I want to bring it back to what it was intended for,” he told the committee.
In 2020, lawmakers voted to fund those programs from the ETF because it was running a surplus. The change freed up General Funds for other non-education programs and ended the school building aid moratorium, which was in effect from 2011 to 2020.
Allocating administrative fees to the NH Department of Education
The Weyler Amendment would provide the NHED with an additional $6.3 million in administrative fees over the biennium to administer the ETF programs, in addition to the $22 million in operational funds it has requested from the state for the biennium. This is the first time that the NHED has been given administrative fees for this type of work.
At an agency presentation on March 13, the NHED said that ETF administrative fees would allow them to expand capacity to fulfill statutorily required reporting, program administration, and more.
As written, the amendment would also allow the NH Department of Education (NHED) to additionally request administrative fees, on top of the funds allocated to the NHED through the state budget, from the Fiscal Committee.
The Governor’s proposed budget would allow the NHED to retain “up to 1 percent of the total annual appropriation of the Education Trust Fund, unless otherwise specified, to be used to administer the programs funded in the Education Trust Fund,” but the Division II subcommittee voted on a recommendation to remove that language. Representative Heath, the former Deputy Commissioner of the NHED, was adamant in her opposition of giving the NHED unrestricted funds.
“I know of no other department [that] would get it, without specifications of what you’re going to spend it on,” Representative Heath told the NHED at a subcommittee meeting on March 13. “I can’t support it… one percent, without any specification of how you’re going to use it, is too much for me.”
One percent of the total appropriations of the ETF in FY2023 was $11 million.
The amendment was adopted by the full House Finance Committee, and will be introduced to the full House as part of the amended version of HB 2. The House must vote on HB 1 and 2 on or before April 6, 2023, and if passed, it will go to the Senate.
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