While turning a blind eye to court rulings that found the state is failing to fulfill its constitutional duty to fund its public schools, Republican lawmakers are again bent on expanding the Education Freedom Account (EFA) program, which distributes tax dollars to families to subsidize the cost of sending their children to private schools or schooling them at home.
The program is open to all school-age children, including those enrolled in private schools and home-schooled, subject only to an income qualification. Initially, eligibility was limited to children of households whose income was no more than 300% of the federal poverty level for a family of four, or $79,500. In 2023, the threshold was raised to 350%, or $109,200 for a household of four.
Both the House and Senate have passed bills that by raising the income eligibility threshold would increase the numbers qualifying for the program to about half of the state’s K-12 students. HB 1665 would raise the income cap to 500% of poverty, or from $71,540 to $102,000 for a family of two, and from $109,500 to $$156,000 for a family of four. SB 442 would raise the income cap to 400% of poverty, or from $71,540 to $81,760 for a family of two, and from $109,200 for a family of two and to $124,800 for a family of four.
Since the program began enrollment, expenditures have consistently exceeded projections. Enrollment has risen from 1,572 in 2021-2022 to 3,025 in 2022-23, and to 4,552 in 2023-24 with more than 500 applications pending for 2024-2025. Since the program began, between three-quarters and two-thirds of those who have enrolled were either attending a private school or being schooled at home, while relatively few students left their public schools to join the program.
Meanwhile, the average value of EFA grants has risen from $4,603 to $5,235 and the annual cost of the program has grown from $8 million to $14.7 million to $23.8 million. Reaching Higher NH projected that SB 442 would increase the cost of the program to $53.4 million, while HB 1665 would raise the cost to $66 million in 2024-2025.
HB 1665 carried the House by a single vote, 190 to 189, shortly after another bill (HB 1634), which would have scrapped the income qualification altogether and opened the program to all families regardless of their means, failed by eight votes, 186 to 194. SB 442 carried the Senate on a straight party-line vote 14 to 10, but was soundly rejected on a voice vote by the House.
The Senate then amended HB 1665 by effectively replacing the bill with SB 442. Apart from increasing the income cap to 400% instead of the 500% voted by the House, the Senate bill would make two other changes. The administrative fee paid to the Children’s Scholarship Fund (CSF) to administer the program would be reduced from 10% to 8%, or from $2.5 million to $2 million. The phase-out grants, awarded to compensate school districts for funding foregone when students leave public schools for private institutions, would be extended to 2029.
The two chambers are expected to settle their differences in a committee of conference, most likely by splitting the difference and raising the income cap to 450%
The EFA program is unique. Unlike all other government programs, EFA expenditures are not limited to an annually budgeted amount. Instead, costs are driven solely by the number of qualified students who enroll in the program. Nor are expenditures overseen and approved by the House and Senate Finance Committees in the course of the budgeting process that all other state appropriations undergo.
The program is administered not by the NH Department of Education but by the Children’s Scholarship Fund, founded in 1993 and headquartered in New York, in partnership with its affiliate, the CSF-NH. Unlike the affiliates in 21 other states, CSF-NH is not incorporated as a nonprofit corporation in New Hampshire.
Under a contract with the state, money from the state’s Education Trust Fund is transferred to the CSF, which deposits the funds in a restricted digital account and disburses funds to private schools and other vendors on behalf of families whose children are enrolled in the program, and in return collects an administrative fee.
In 2022, the Legislature authorized the Audit Division of the Legislative Budget Assistant (LBA) to conduct a performance audit of the EFA program. The scope of the audit includes procedures and controls for ensuring the eligibility of enrollees, identifying and recouping illegitimate expenses and collecting information about the academic performance of students.
Commissioner of Education Frank Edelblut sought to scuttle the audit. He claimed that the information and data compiled by CSF was the property of the contractor not the state, and that the Department of Education could not and would not seek access to it. Elizabeth Brown, legal counsel of the department, explained the firewall was to protect the confidentiality of the personal and financial information participants in the EFA program.
Kate Baker Demers, executive director of CSF-NH, insists the audit “is not necessary, because both EFA law and the state-approved contract already require CSF to undergo a risk-based program audit annually.” She noted that this year’s audit “performed by Grant Thornton, a respected independent public accounting firm, found no concerns, misuse or misstatements,” and posted a link to the audit on the CSF website.
However, the audit in question is not of CSF and its operations in 22 states, but specific to the EFA program in New Hampshire. Currently the LBA is working with the Department of Education to delineate the scope and content of a performance audit tailored solely to the EFA program in New Hampshire.
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