Legislature weighs instituting the most expansive voucher program in U.S.

With Republicans recapturing the majority in the Legislature, the prospect of addressing the school funding problem that has dogged the state for decades is at risk of being eclipsed by an initiative to expand resources and opportunities for school choice.

In December, the Commission to Study School Funding, established by the Democratic majority, issued its report with recommendations intended to resolve the litigation that has defined the issue since the turn of the century. At the same time, the Republican leadership of the House and Senate, with the governor’s blessing, renewed efforts to offer scholarships or vouchers, funded with tax revenues, to assist with enrolling children in private schools.

Disruption to public schools arisen from the pandemic has lent momentum to efforts to widen educational options while rekindling controversy over funding private schools with public money.

New Hampshire is among more than a half-dozen states, including Iowa, Indiana, Colorado, Florida, Georgia, Missouri, Nebraska and Missouri, where school choice is high on the legislative agenda.

“This isn’t about the traditional school choice,” Gov. Chris Sununu said, speaking at a Josiah Bartlett Center event. ”If you’re thinking about it that way, you’re way behind.” He added that “people that traditionally weren’t involved in this discussion are stepping up and saying ‘Wait a minute, where is my money going? Why isn’t my kid in school?’”

Added the governor: “You can sum all this up with:

It’s got to be about outcomes for the kids, not outcomes for the system. We have great public schools here. But there are one, two, three, four percent of the population where it’s not ideal, and giving them that opportunity is huge.”

Kate Baker Demers, executive director of the Children’s Scholarship Fund (CSF), which administers New Hampshire’s only school choice program — the education tax credit program introduced in 2013 — said the current initiative gained currency and urgency with the coronavirus pandemic.

“Schools were closed and parents were looking for solutions,” she said as they looked for the means — computers, internet access, tutors, materials and so on — to teach their children outside the conventional classroom. In the 2020 fiscal year, CSF’s portfolio numbered 512 scholarships, but Demers said that, with the pandemic, applications swelled and the wait list grew to 800.

‘A total shift’

House Bill 20 would establish the Richard “Dick” Hinch education freedom account (EFA) program, named after the late speaker of the House, who fell to Covid-19 days after taking the gavel. The bill is sponsored by Rep. Sherman Packard, R-Londonderry, Hinch’s successor as speaker, as well as Senator Chuck Morse of Salem, the president of the Senate.

HB 20 would entitle parents to open EFAs with registered scholarship organizations for all K-12 students enrolled in a public, private or charter school. Although the bill does not explicitly specify that homeschooled children are eligible for the program, it does not require that students with EFAs be enrolled full or part time in either a public or private school. Similar programs operate in five states — Arizona, Florida, Mississippi, North Carolina and Tennessee — while Nevada enacted a program in 2015, defunded it in 2017 and repealed it in 2019.

Meanwhile, Rep. Kevin Verville, R-Deerfield, has offered a companion bill, HB 607, that would complement HB 20 by enabling school districts to establish local EFAs funded by the share of the cost per pupil funded by local property tax revenue.

The EFAs would be funded by transferring the amount of the per-pupil adequate education grants along with any differential aid allotted to the specific student from the public school district to a scholarship organization. According to Reaching Higher NH, the initial value of scholarships would range from $3,786 to $8,458 per student. In short, the bill envisions the most expansive voucher program in the country.

The funds could be used to defray the cost of tuition and fees to private schools, including religious schools, tutoring services and higher educational institutions as well as costs associated with homeschooling. Qualified costs include textbooks and materials, computer hardware and software, school uniforms and transportation services as well as fees for standardized assessments and entrance examinations.

The bill affirms the “independence” of “education service providers,” on which it confers maximum freedom to provide for the education needs of EFA students without governmental control.” It also expressly exempts them from regulations beyond those required to pursue the program. They are not agents of any government and cannot be required to alter their “creed, practices, admissions policy or curriculum” to qualify for payment. Students with EFAs would not be required to take the statewide assessment administered by public and charter schools or undergo any other assessment of their academic performance.

“It’s a total shift,” said Demers, executive director of the CSF. “The program would be open to every kid in the state. Imagine if this program had existed before the pandemic. It would have provided a way to stabilize the education of every kid.”

The program would be administered by scholarship organizations, nonprofit institutions registered with and overseen by the Charitable Trust Division of the state Department of Justice. Currently, there are two scholarship organizations — CSF, a partner of a nationwide consortium based in New York, and the Giving and Going Alliance, headquartered in Concord.

The scholarship organizations would process applications for EFAs and enter agreements binding parents to provide an education in “the core knowledge domains” and comply with the terms of the program. The organizations would manage disbursement of payments from EFAs to providers of educational services as well as oversee, monitor and audit EFAs.

To meet administrative costs, the organization would be authorized to withhold from deposits or deduct from EFAs as much as 10% a year.

Fiscal impact

HB 20 is a more expansive, less restrictive version of Senate Bill 193, which carried the Senate but was referred to interim study by the House in 2018. In particular, that bill restricted eligibility to students of households with annual income of not more than 300% of federal poverty guidelines. Moreover, SB 193 limited transfers to scholarship funds to 95% of the adequacy grant and differential aid, while providing a “stabilization” grant to school districts to offset a share of the foregone revenue.

HB 607 would take the program a step further. Verville said it is intended to ensure that not only state money but also local property tax revenue appropriated to school districts could be deposited in EFAs.

“All the money should follow the child,” he said. School districts could adopt the program by a petitioned warrant article requiring a three-fifths majority.

The bill calculates the amount per pupil as 85% of the total amount raised by the school portion of the local property tax, less funding for special education, divided by the enrollment for the prior year. The school district would transfer the funds to students’ EFAs with scholarship organizations, which would administer the program according to the rules prescribed by HB 20.

The Legislative Budget Assistant has yet to prepare fiscal notes on the two bills.

In modeling HB 20, the Department of Education has cast the fiscal impact of shunting students from public to private schools with EFAs in terms of “savings to taxpayers.” Over the next decade it projects the total cost of K-12 education to rise from $3.5 billion to $3.9 billion while aggregate enrollment falls by 16,000.

DOE estimates the cost of the EFA program at $4,597 per student, consisting of the adequacy grant and differential aid, while the average cost of a public school student in 2020 was $19,874. The model projects only 28 EFAs to open in FY 2021-20, but the number to climb steadily to 4,150 by the end of the decade. By then, the cumulative savings to taxpayers — the difference between $19,874 and $4,597 along with other cost reduction measures — is projected to be between $360 million and $393 million.

The EFAs would operate alongside the education tax credit program introduced in 2013, the state’s first school choice initiative.

The program allows businesses and individuals to contribute up to $600,000 to registered scholarship organizations in return for credits against their liabilities for the business profits tax, business enterprise tax, and interest and dividends tax equal to 85% of their donation. Credits to particular firms and persons may not exceed 10% of the total credits granted, which are capped at $5.1 million a year and may be carried forward for five years, but not top $1 million in any year.

The average value of scholarships is capped at $2,500, which is adjusted annually in step with the Consumer Price Index. Eligible students must come from homes with household income of no more than 300% of poverty and at least 40% of all scholarships must be awarded to students who qualified for the federal free and reduced-price lunch program in the prior school year.

The program has grown significantly in the last five years. The Department of Revenue Administration reported that 21 taxpayers claimed $93,000 in credits in 2016, but by 2020 the number of contributors grew to 110 and the value of credits to $1,372,000.

In 2019-20, CSF counted 512 scholarship students with awards ranging from a minimum of $47.61 to a maximum of $4,935, with an aggregate value of $991,770 and an average value of $1,937. The largest group of students, 110, were homeschooled while the rest were spread among 67 schools, 40 of them with religious affiliations, which together accounted for 80% of all enrolled scholarship students.

The Giving and Going Alliance, established in 2015, limits its scholarships to four partner schools, all Christian academies in Claremont, Concord, Laconia and Portsmouth. In 2019-2020 the alliance funded 156 scholarships of between $250 and $4,935, with an aggregate value of $378,533.

In the past, school choice legislation has run afoul of provisions in the New Hampshire Constitution and those of some three dozen states, which forbid transferring tax revenues to religious schools. According to Part II, Article 83, dating to 1877, “no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination.” Likewise, Part I, Article 6 declares “no person shall ever be compelled to pay towards the support of the schools of any sect or denomination.”

However, last year the U.S. Supreme Court struck down such provisions, when a Montana family successfully challenged an education tax credit program that withheld scholarships from students enrolling in religious schools. The justices ruled the exclusionary provision violated the free exercise of the First Amendment.

“A State need not subsidize private education,” Chief Justice John Roberts wrote. “But once a State decides to do so, it cannot disqualify some private schools solely because they are religious.”