Regulatory creep is coming for EFAs

School choice in New Hampshire has become increasingly popular, with more and more Granite State families accessing Education Tax Credit (ETC) scholarships and Education Freedom Accounts (EFAs) to shop the best learning environments for their children in the state’s growing educational marketplace. 

But as the program becomes more popular, the governmental instinct to impose controls is growing. This year, legislators will consider more than half a dozen bills to layer new regulations on the state’s young EFA program. 

Of the 13 EFA-related bills filed for this year’s legislative season, seven would impose new state controls on the program or its participants:

• HB 1418: “This bill prohibits the use of education freedom account funds to purchase school uniforms.”
• HB 1512: “This bill limits the amounts of funds appropriated from the education trust fund to the education freedom account program to budgeted sums.”
• HB 1592: “This bill prohibits the use of education freedom account funds at religious schools or for religious education or training, and repeals provisions relating to independence of and legal proceedings concerning education freedom account providers.”
• HB 1594: “This bill requires annual determination of eligibility for awarding of education freedom account funds.”
• HB 1610: “This bill requires all students to participate in standardized statewide assessments.”
• HB 1654: “This bill requires the state board of education to annually review education freedom account service providers for continued compliance with all state and federal anti-discrimination laws.”
• SB 525: “This bill changes income eligibility and reporting requirements for the education freedom account program and modifies the program’s administration and oversight.”

How the bills would impose new controls on the EFA program

House Bills 1418 and 1592 seek to restrict the type of schools EFA participants can use. HB 1418 would prohibit participants from purchasing school uniforms with their EFA funds. HB 1592 would forbid EFA families from using their funds to pay for religious education or training of any sort, including paying tuition at a religious school. HB 1592 is clearly unconstitutional. The U.S. Supreme Court ruled against a similar Maine law in 2022’s Carson v. Makin. 

In addition to its unconstitutional exclusion of religious education from the EFA program, HB 1592 repeals entirely the independence of the EFA program’s education service providers. The bill would strike provisions under RSA 194-F:7 that prohibit EFA providers from becoming extensions of the state education bureaucracy. Specifically, it removes the following from the law:

II. Education service providers shall be given maximum freedom to provide for the educational needs of EFA students without governmental control.

III. Nothing in this chapter shall be construed to expand the regulatory authority of the state, its officers, or any school district to impose any additional regulation of education service providers beyond those necessary to enforce the requirements of the EFA program.

IV. Any education service provider that accepts payment from an EFA under this chapter is not an agent of the state or federal government.

V. An education service provider shall not be required to alter its creed, practices, admissions policy, or curriculum in order to accept payments from an EFA.

These protections exist to clarify that EFA money belongs to parents, not the state, and that EFA providers are independent organizations rather than agents or extensions of the state. Providers include vendors ranging from local tutors to Amazon.com. These protections make clear that vendors are providing products and services to parents, who are purchasing those products and services with their own money. Erasing these provisions allows the state to treat providers as extensions of the state bureaucracy.

In a similar vein, HB 1512, 1610, and 1654 would limit EFA growth, add rules to the program, and increase governmental oversight of the program and its service providers. 

HB 1512 would limit appropriations to the EFA program from the Education Trust Fund to a maximum of $19.8 million for fiscal year 2024 and allotted amounts in the state budget for subsequent fiscal years, regardless of actual enrollment figures. 

For context, appropriations for the program are upwards of $22 million to meet the needs of the more than 4,000 enrolled students this academic year based on average per-pupil adequate education grants of $5,255. 

Enrollment has increased by 158% since the program first began. Limiting the program to set dollar amounts, regardless of future demand and enrollment, would hamstring the program’s ability to meet the needs of the many current and future Granite State families seeking educational opportunities outside of their government-assigned district public schools.

HB 1610 would require all New Hampshire students, including those enrolled in the EFA program, to take standardized statewide tests. Parents may choose alternative educational environments specifically because those environments assess student progress with measures other than standardized tests. Those tests wouldn’t be aligned with the curricula or program of every provider, so they wouldn’t necessarily provide an accurate measurement of every student’s learning. 

Education service providers in the EFA program are required by state law to comply with state and federal anti-discrimination laws. HB 1654 would subject providers to annual reviews for compliance with those laws. This would further discourage provider participation by adding an additional layer of compliance costs.

HB 1594 and Senate Bill 525 would apply to participants, not providers. Both proposals would require participants’ household incomes to remain at or below 350% of the federal poverty level each year during their participation in the program. Existing law requires that this income threshold be met at the time of application. Under these bills, an EFA student would be removed from the program if their single parent making $68,000 a year received a Christmas bonus.

SB 525 would also impose reporting requirements and annual income verification audits. Reporting mandates include annual reporting on the number of EFA students to the Legislature. Income verification would be pursued by subjecting ⅓ of EFA families to “randomized annual EFA income verification auditing” by the legislative budget assistant audit division. 

The EFA program is succeeding to a significant degree because it was structured to give families a large degree of autonomy while maintaining state oversight of expenditures through basic financial tracking and reporting requirements. 

The regulatory expansion in these seven bills would have the cumulative effect of discouraging participation of both families and providers, shrinking the variety of options available through the EFA program, and burdening all players (the state, families, and providers) with costly and unnecessary compliance costs. 

This legislative season offers a reminder that the existence of lightly regulated public education alternatives is no guarantee that such alternatives will continue to exist. Pressure will always come from lawmakers who distrust markets and parents to expand bureaucratic control and limit or even eliminate access to alternatives.