Tax cuts a popular move after school aid boost

Districts around state act after one-time funds OK’d

January 31, 2020

Michael Kitch,

The budget for fiscal years 2020 and 2021 provides the steepest increase in school aid since the New Hampshire Supreme Court ordered the state to fund the cost of an adequate education two decades ago. Altogether, the budget increases aid for the biennium by $139 million and includes another $27.2 million for building aid, transportation costs and special education.

The additional funding, split about evenly between the two years of the biennium, represents an interim measure to shore up the finances of the most hard-pressed school districts. Meanwhile, the Legislature established a study commission that will present recommendations next January with an eye to restructuring the distribution of state aid beginning with the 2022-23 biennium.

In fiscal year 2020, $56.6 million will be distributed to municipalities to restore stabilization grants to their original levels, where the legislation prescribes they will remain every year thereafter.

Stabilization grants were introduced in 2012 to hold districts harmless when several forms of aid targeted to municipalities with relatively low property values and household incomes were eliminated. However, in 2015, legislation provided for reducing the original grants by 4% each year beginning in fiscal year 2017 until they would be eliminated altogether in 25 years.

In 2021, $12.5 million will be distributed based on the share of students eligible for free and reduced price lunch programs, and another $50 million based on the equalized property evaluation per student. Both will be distributed on sliding scales.

Municipalities with between 12% and 48% of students eligible for free and reduced price lunch will receive a minimum of $87.50 and a maximum of $350 per student. Likewise, municipalities with equalized property evaluation of between $1 million and $350,000 will receive a maximum of $1,750 and a minimum of $87.50 per student in “fiscal capacity disparity aid.” These measures are funded by an appropriation from the general fund surplus and are slated to repeal at the end of the biennium.

The budget also provides that, beginning in FY 2020, nearly $20 million will be used to increase per-pupil grants for full-day kindergarten by $1,100 to match those applied to students in grades one through 12, or $3,708.

In addition, the budget appropriates $7 million in school building aid, enough to fund the three projects at the top of the queue, as well as $3.2 million in tuition and transportation costs for students enrolled in career and technical programs and $17 million for special education.

In addition, the budget distributes $40 million to cities and towns — $20 million in each year of the biennium — in “unrestricted municipal aid,” based on school enrollment and the share of students eligible for free and reduced price lunch. The funds may be used to reduce property taxes or to defray any legitimate expenditures.

One-time appropriations

After Governor Sununu’s budget veto last June, several months passed before the stalemate was broken and what became the current budget was not adopted until late September, well after municipal and school district budgets were in place. In light of the timing, many districts chose not to revise their budgets but instead to apply the additional funding against property taxes in FY 2020. At the same time, the aid distributed in FY 2021, based on enrollment eligible for free and reduced price lunch and equalized property valuation per student, will end with the biennium, leaving school administrators wary of investing personnel and programs requiring recurring expenditures.

According to Barrett Christina, executive director of the New Hampshire School Boards Association, because of the uncertainty surrounding future funding, he advised his members to treat the increased aid with caution. In particular, he suggested using the one-time appropriations to fund one-time expenses like capital projects or equipment purchases or to establish capital reserves or trust funds, rather than adding positions and programs requiring sustained funding.

Family income and student success

An extensive report by Reaching Higher NH, a nonpartisan organization committed to enhancing public education, finds that the major factor bearing on the academic proficiency of public school students is relative affluence, reflected directly by their family’s income and indirectly by the educational attainment of their community and the salaries paid to their teachers.

In what Executive Director Evelyn Aissa described as “foundational research,” the report — “The Whole Picture of Education in New Hampshire” — draws on 30 municipal, state and federal data sets to weigh the impact of these social and economic factors on the learning process.

The report points out that, between 2008 and 2017, the share of children living in poverty has risen from 19.5% to 27.3%, while the student population has shrunk by 12%. Among fourth grade students, the higher the concentration of students qualified for the Free and Reduced Price Lunch program — a proxy for poverty — the lower the rates of proficiency in both mathematics and reading, the report found.

For fourth graders, family income proved the best predictor of proficiency, outweighing the student-to-teacher ratio, size of the school district and property wealth of the community.

As students age, the data indicates that the level of education within the community becomes another predictor of academic proficiency. In school districts where a majority of adults have at least an associate degree, 36% of eighth graders are proficient in mathematics. That number jumps to 62% where a high proportion of adults have college degrees, and with them higher household incomes and greater economic security.

By 11th grade, teacher salaries become important factors in graduation and dropout rates, according to the report.

Researchers found that, in 2008, the average teacher salary was $51,586 in the 32 districts where less than 12% of students qualified for free and reduced price lunch, while the average teacher earned $43,223 in the 32 districts with more than 36% of students in poverty. By 2017, the difference had grown by 51%, or from about $8,000 to $12,000. In 20% of districts where salaries were highest, graduation rates were 7% higher and 2.4% lower than in the 20% of the district where salaries were lowest.

The full report, with interactive data visualizations, is posted on Reaching Higher NH’s website (reachinghighernh.org/wholepic) and will soon include profiles of each school district and municipality.

Taking a similar tack, Carl Ladd, executive director of the New Hampshire School Administrators Association, explained that superintendents are concerned about the risks to their budgets from changes in the Medicaid to Schools program.

For two decades, Medicaid has reimbursed schools up to 50% for the costs of services ranging from speech pathology to psychological treatment they provide to eligible students. Reimbursements can top $1 million in the largest districts.

In July, the federal Center for Medicare and Medicaid tightened guidelines by requiring providers to be licensed and certified by an appropriate medical board in order to qualify for reimbursement.

In December, the governor signed an executive order to expedite the licensing process, and legislation has been introduced to address the issue. Ladd said that some districts have adjusted their budgets to absorb costs for which they had billed.

‘Lessen the tax burden’

In the end, many municipalities have chosen to apply some or all of the increased funds to reducing property taxes. “We sent all the money back to the taxpayers this year, and we’re looking at applying the funds we get next year to offsetting the burden on taxpayers,” said Michael Tursi, superintendent of the Shaker Regional School District.

Tursi was echoed by Mark MacLean, superintendent of the Merrimack Valley School District, who noted that although the district enrolls fewer students at less cost than neighboring Concord, school tax rates were higher or comparable in all five towns of the district (Penacook, Loudon, Boscawen, Salisbury and Webster).

“We truly want to lessen the tax burden,” he said. He explained that the district manages its operating budget to meet its needs and relies on a capital improvement plan and expendable trust funds to undertake capital projects proactively.

Franklin Superintendent Daniel LeGallo said additional funding has put the district in its best financial position during his five-year tenure.

“We’re hiring two middle school teachers, a social worker at the elementary school and a music teacher at the high school and making some part-time positions full-time,” he said. At the same time, the school board established capital reserve funds for unanticipated special education expenses and building repairs and maintenance.

The Berlin City Council, anticipating the restoration of stabilization grants, added the funds to the municipal budget in June while the school district cut its budget by about $1 million, expecting to recoup some of the funds after the state budget was adopted.

Superintendent Julie King requested $561,865 to fund a nursing and administrative position at the high school as well as restore a share of the cuts. She explained that the high school added some 250 students when enrollment at the last elementary school was split between the middle and high school following its closure. Moreover, out-of-district special education costs jumped by $136,000, she said.

But Berlin Mayor Paul Grenier offered the school district $130,586, explaining that any more would leave the city unable to maintain its depleted fund balance at a recommended level and replace salt trucks and snow loaders no longer roadworthy without increasing property taxes. King said that, although short of her request, the funds would be sufficient to add one nurse and one administrator, providing two of each at both the middle and high school.

“The schools are underfunded and the residents are overtaxed,” said Superintendent John Freeman in the Pittsfield School District, explaining that the school board chose to apply the additional revenue in the first year of the biennium to trim property taxes.

“We may bring some things back next year,” he said, noting that the board is considering hiring a foreign language teacher, a position lost to recent budget stringencies, and increasing the salaries of support staff.

Freeman acknowledged the risk of adding positions and raising salaries with funds that may or may not be forthcoming in the next biennium. But, he said, the district, which pays its paraprofessional and support staff just $9 per hour, has been unable to recruit and retain personnel in a very tight and competitive labor market.

In Newport, Superintendent Brendan Minnihan said that “we’re just trying to fund our budget.”

In the first year of the biennium, some $470,000 was returned to taxpayers. A share of the one-time monies in FY 2021, he said, would be applied to contracts with classroom teachers and paraprofessionals as well as health insurance and special education costs. He added that the district was considering making the part-time positions of athletic director and special education case manager full time.

He also noted that, after anticipating between $300,000 and $500,000 in Medicaid reimbursements, the district reduced that projection to $90,000, adding to the pressure on next year’s budget.

Michael Tempesta, superintendent in Claremont, said the district will return $650,000 to property taxpayers while investing an equal amount in restructuring its special education program to reduce out-of-district placements while building capacity to accept students from other districts. Out-of-district placements represent about a quarter of the district’s special education budget.

Altogether, Claremont’s plan includes expanding one and introducing two programs. At the elementary school, a second special education classroom, costing $182,000, will provide capacity to accept eight students from other districts, representing as much as $520,000 in potential revenue from tuition fees.

An autism program will forestall placing three students out-of-district in 2020, sparing $270,000 in tuition, enable another three students to return to Claremont in 2021, saving $287,000 in tuition, and provide capacity to accept six students from other districts, he said. With an investment of $300,000, the district expects to reduce out-of-district costs by $557,000 while generating potential revenue of $540,000.

Finally, $175,000 will be applied to an alternative education program at Stevens High School, where some 30 students have been identified at risk of dropping out, half of them special education students. The program is designed to increase graduation rates and prevent court-ordered placements, which may cost between $180,000 and $288,000 a year. At the same time, the program will have capacity for six students from other districts, whose tuition would represent $300,000 in revenue.