Ignoring litigation, NH lawmakers took a stab at addressing ed funding in 2023

Biggest winners from Legislature’s actions this session: largest municipalities, voucher families
Education Disparity Chalk Concept Icon. Educational Inequality Idea. School Funding. Student Loan, Financial Aid. Paid Education. Vector Isolated Chalkboard Illustration

While continuing to sidestep the constitutional issues that have dogged public education for three decades – and are currently playing out in Superior Court – the NH Legislature in the last session has increased the amount and adjusted the distribution of state aid to public schools in the FY 2024-25 biennial budget.

The budget increases the state’s share of funding for public schools from $962.4 million to $1,040.7 billion in FY 2024 and to $1,053.2 billion in FY 2025 while ensuring a 2 percent annual increase thereafter.

The new formula for distributing state aid consists of six factors, beginning with a base amount for each pupil, supplemented by differential aid for those with special needs. The values of all these factors have been increased.

Base adequacy increases from $3,866 to $4,100 per pupil. The amount for each pupil eligible for free and reduced price lunch (FRPL), a proxy for those navigating poverty, rises from $1,933 to $2,300. The allocation for pupils receiving special education services increases from $2,080 to $2,300 and for those learning English from $756 to $800.

This session, the Legislature also replaced several forms of state aid targeted to districts with relatively large numbers of needy pupils and relatively low equalized property valuations with extraordinary need grants. These grants are based on the equalized property valuation per pupil eligible for FRPL.

Municipalities where that number is $1.6 million or less will receive $8,500 for each eligible student. Municipalities with equalized property valuation per FRPL pupil between $1 million and $6.6 million will be allocated $0.0017 for each dollar of difference between its equalized property valuation per FRPL pupil and $6.6 million for each eligible pupil. These grants are slated to increase to $11,500 in FY 2026.

Finally, there is a hold-harmless grant equal to 104 percent of the difference between the grants awarded in each year of the biennium and the preliminary estimated grant for FY 2024. That grant will be phased out by FY 2034.

High-enrollment districts

The $4,100 base adequacy payment $4,100 is a fraction of the average per-pupil expenditure of about $23,000. But it is the most heavily weighted factor in the formula for calculating and distributing state aid, representing more than half of all funding. Consequently, the steepest increases in state aid will accrue to the largest municipalities with the highest enrollment in the first year of biennium followed by modest increases in FY 2025.

In FY 2024, aid to Manchester, easily the largest school district with a disproportionate share of challenged students, will increase 33 percent, from $82.2 million to $109.6 million. Aid to Nashua will increase by 21 percent, from $57.3 million to $69.4 million, and to Concord by 23 percent, from $21.9 million to $27 million.

Aid to municipalities with less enrollment will receive smaller increases in aid in FY 2024 and no further increase in FY 2025.

Thus aid to Berlin will increase 3.7 percent, from $11.1 million to $11.5 million, to Claremont by 3.6 percent, from $15.1 to $15.7 million, to Franklin by 3.5 percent, from $9.8 to $10.1 million and to Pittsfield by 3.5 percent, from $5.1 to $5.3 million. All four are among the districts already saddled with some of the highest property tax rates in the state.

State aid is funded by Education Trust Fund, a grocery basket of state taxes and fees, which includes the $363.7 million raised by the statewide education property tax (SWEPT). Levied at a fixed uniform rate, the SWEPT is a surcharge on the local school property tax, which is collected and retained locally. Masquerading as a source of state aid, the SWEPT represents 35 percent of state aid each year of the next biennium.

Moreover, in some two to three dozen municipalities with relatively high property values – where proceeds from the SWEPT top the cost of an adequate education – any excess is retained locally rather than remitted to the state for distribution as state aid.

In other words, the SWEPT adds to local property taxes in most cities and towns, but spares those with the greatest property wealth from paying the full tax rate and sharing the proceeds.

Even without discounting the SWEPT, state aid of $1.040 billion in FY 2024 and $1.053 billion in FY 2025 represents less than a third of the total educational expenditures, which are projected to top $3.6 billion. Consequently, despite increased state funding, property taxes — both state and local — will continue to fund more than 70 percent of the cost of public education and the disparities among local school tax rates will persist.

Expanded private school vouchers

Meanwhile, the Legislature rejected proposals to constrain the growth and tighten the operation of the Education Freedom Account (EFA) program and instead chose to expand it.

Introduced in 2021, the program provides vouchers — called “accounts” — that mirror the per-pupil costs of state aid and average $4,954 under current law. The accounts are funded with tax dollars and can be used to defray the tuition and expenses of attending private and parochial schools as well as the costs incurred by parents who home school their children.

The program is administered by the Children’s Scholarship Fund, a nonprofit organization – which may withhold up to 10 percent from accounts to cover the cost of its services –and overseen by a legislative oversight committee.

The Legislature has rejected a proposal to place administration of the program with the state Department of Education.

The program is open to all pupils residing in the state and entitled to public education, including those already enrolled in private school or schooled at home, subject only to an income qualification. The program operates as an open-ended entitlement. The state must fund every qualified applicant, and there is no cap on either the enrollment or the budget of the program.

Proposals to limit eligibility to pupils choosing to leave public school and to hold the program to a budgeted amount failed in the House.

Initially, eligibility was limited to those with household income equal to or less than 300 percent of poverty ($90,000). This year, after a bid to raise the cap to 500 percent failed, the Legislature raised it to 350 percent, or $105,000 for a family of four.

Measuring the cost of the program is challenging for want of sufficient data on household income to estimate the numbers eligible for EFAs, which are projected to average nearly $5,000 in the 2023-24 school year. When a pupil leaves a public school for either private or home schooling, the money follows the child at a cost to the school but not the state. However, when pupils enrolled in private schools or schooled at home receive an EFA, the state bears the cost.

Pupils attending private or parochial schools and schooled at home represent 77 percent of those currently enrolled in the EFA program. The nonprofit Reaching Higher NH projects between 7,705 and 11,005 private and home-schooled students could be become eligible for the program in the 2023-24 school year.

Jason Bedrick, who follows education policy at the Heritage Foundation, recently estimated that raising the cap would qualify 45 percent of families, or 9,635 private and home-schooled pupils for EFAs, which Reaching Higher NH estimates would cost taxpayers $48 million.

The Department of Education, following the recommendation of Gov. Chris Sununu, has budgeted $29.8 million in each year of the FY 2024-25 biennium for the program, with funding drawn from the Education Trust Fund, leaving public and private schools to fish from the same pond.

Apart from revising and funding the formula for distributing state aid and debating the parameters of the EFA program, the Legislature also made a number of smaller but significant investments in education.

The budget includes $86 million for school building aid along with $10 million for the Public School Infrastructure Fund to improve security measures in school buildings.

Funding for career and technical education was increased by $4.4 million. Another $4 million was invested in computer science education. And $1 million was allocated to develop a civics textbook. To address the recruitment and retention of teachers a stipend program, drawing on Covid relief funds, was created to assist student teachers complete their higher education.

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