Charles M. Arlinghaus

 March 2012

A proposed School Choice Scholarship Act under its proposed configuration would not start during the current budget cycle but would save the state budget $8 million over the next two budgets. This is not the primary consideration in any debate over school choice or a motivating factor for most supporters. But the budgetary impact of any bill is one of the technical considerations in any current debate.

The precise savings to be realized for the state budget of any school choice scholarship program depend on the exact scholarship amounts, take up rates, tax credits, and aggregate amounts available. This analysis takes as its starting point the details put forth by Sen. Jim Forsythe and Sen. Chuck Morse in the amended version of Forsythe’s proposed Senate Bill 327 in the 2012 session. The House version is quite similar but there are slight differences.

At its base, the School Choice Scholarship Act would allow businesses to make deductions to an approved scholarship organization and receive a credit against their BET or BPT obligation[1]. Scholarships would then be given to students in needy families (below 300% of the poverty level) to use at any approved non-public school or at another public school. Scholarships could also be used for some approved home school expenses (textbooks, for example).

The idea behind the proposal is to allow students greater opportunity by giving them more choices. Upper income students generally have multiple educational choices. This bill would extend those opportunities to lower income students.

Because the scholarship amount per student is less than the state aid cost per student, the state would save money for each student. The state budget would save more money if a student elected homeschooling because of the smaller scholarship available. The exception to budget savings would be students moving from one non-public school to another – which is why that group is limited in current proposals[2].

Consider three students and the budgetary impact of each: (1)a student moving from a public school to a nonpublic school, (2)a student moving from a public school to a home school, and (3)a nonpublic school student. For each of the first two categories, the state would save money previously spent on per pupil student aid. The state saves more money for the homeschool student because that scholarship is more limited. For the third category, the state wouldn’t save money because it wasn’t paying aid to begin with.

 

  Public to Nonpublic Public to Home School Nonpublic to Nonpublic
Avg. Scholarship[3] $2500 $725 $2500
Tax Credit Cost[4] $2125 $616 $2125
Budget reduction[5] $4312 $4312 $0
Saving per student $2187 $3696 ($2125)

With at least 70% of students mandated to be in the first two categories and no more than 30% in the third, you can easily see how the state budget saves money.

To estimate the aggregate amount saved, we have to make some assumptions. Of students who currently don’t go to public school, 22% of them opt for homeschooling and 78% go to a nonpublic school. So for a statewide aggregate, I’ve used a more conservative 80/20 split to estimate an average scholarship of $2145.

Finding the total cost and savings each year is a matter of doing the calculations above and applying the different caps on types of students (switching from public school v. already in private school) and size of program. In addition, I’ve added administrative costs both for the state and scholarship organization to the costs as well as a small secondary impact the credit structure causes on the BPT[6].

My calculation and its assumptions are attached for each of the four years of the next two budgets. I haven’t carried out calculations beyond four years because before too long you get into esoteric arguments about whether or not someone is counted as a “switcher” once they’ve been in the program for five or six years. In addition, the percentages and caps are certain to be tweaked once the state has a few years’ experience under its belt.

 

Projected Savings in Current Budget: ZERO (program not yet in effect)

 

Projected Savings in Budget for FY2014-FY2015: $3.96 million

 

Projected Savings in Budget for FY2016-FY2017: $4.33 million

 

Total Four Year Budget Savings: $8.3 million

 

Click here to view the companion spreadsheet

 

Click here to read the full report

 


[1] Both SB 327 and HB 1607 (the similar House version) give business a credit worth 85% of their donation to the scholarship organization

[2] The proposal in SB327 would require 70% of recipients to be coming from a public school. Currently 89% of students attend public school, 9% nonpublic school, and 2% are homeschooled.

[3] Scholarships granted by approved scholarship organizations will average $2500 across non-homeschooling students. Homeschool students are calculated separately and can receive up to $725 for approved expenses.

[4] Although the scholarship is drawn from donated funds, the donor receives a credit for only 85% of the amount donated. So the cost to the state budget of each scholarship is 85% of the average amount.

[5] State per pupil aid for each student includes a number of categories. Because only students at 300% FPL or below are eligible, I’ve included the base amount of $3450 for all students and the additional aid for free and reduced lunch eligible students of $1725 for 50% of students but nothing else.

[6] Because of the format of our tax reporting, the credit will also reduce the size of taxable income for some filers paying the Business Profits Tax. In the spreadsheet analysis, I estimate these filers as about 2/3 of the total credits (in practice it will likely be a smaller number) and calculate the additional lost BPT revenue.

By Eugene van Loan and Martin Gross

The New Hampshire Senate recently passed and sent to the House of Representatives yet another proposed constitutional amendment designed to specify our state Legislature’s authority and responsibility regarding state aid to local education, including the ability to use “targeted” aid as the basic form of education funding.

So, is this just deja vu all over again?

No, this time things are different. The Senate-passed proposal, known as CACR 12, is truly a bipartisan, multi-branch product.

Despite years of pronouncements by politicians of all stripes about how much a constitutional amendment is needed to restore stability and common sense to education funding, the various participants in the debate have never been able to agree on specifics.

CACR 12, however, not only received overwhelming Republican support in the Senate, but it was also supported by Democratic Sen. Lou D’Allesandro, of Manchester, and has since been endorsed by Democratic Gov. John Lynch.

Further, within days of the Senate action, a number of business and community groups publicly signed on in support. Included within this group were the Business and Industry Association, New Hampshire Auto Dealers Association, the Greater Nashua Chamber of Commerce and representatives of the so-called Coalition Communities.

Even so, some say CACR 12 still faces an uncertain future in the House. This is because a three-fifths vote is required to pass any legislative proposal for a constitutional amendment and, thus, any combination of “no” votes – despite being based upon objections that could not be more different from each other – would thwart the proposed amendment from receiving the necessary supermajority vote.

We two join today to urge our fellow citizens who serve in the House not to let this happen. One of us is a Democrat, and one of us is a Republican. Both of us have dedicated much of our time and energies over the years to public service of one type or another.

Both of us are lawyers who supposedly know a thing or two about constitutional law. And both of us ardently support the notion that quality education is critical to our state’s economic success and the vitality of its civic institutions.

We join in common cause because we believe CACR 12 is just plain good public policy. We do not base our support for this proposal upon what “the framers intended” or whether the Supreme Court got it right or wrong in the Claremont cases. We just know that where we are is not where we ought to be.

Each of us would perhaps emphasize different features of CACR 12. On the one hand, Mr. Gross would emphasize its elimination of the court-dictated requirement that the state provide the same amount of aid to all school districts in the form of “adequacy payments” and, thus, he would focus upon its substitution of legislative authority and responsibility to target state aid to communities that truly need it.

He would point out that, especially in these days of scarce public resources, there is no real justification for force-feeding funds to communities that can support a high level of educational effort with their own local resources.

Mr. Van Loan, on the other hand, would emphasize that CACR 12, while not eliminating the courts from the equation, restores the responsibility for making educational policy to the democratically elected branches of government.

He would point out that, also especially in these days of scarce public resources to which Mr. Gross refers, determining how much to spend on various public policy objectives – including but not limited to education – should be the business of the Legislature, not the courts.

But these are only differences in emphasis, not points of disagreement. On the contrary, we agree on the general need for a constitutional amendment and on the language for such an amendment that is contained in CACR 12.

Accordingly, we urge members of the House not to let your own points of emphasis determine whether you will support this particular constitutional amendment. Much has been said recently about the perfect being the enemy of the good, and it certainly applies here.

Just remember: If there is no amendment at all, none of us gets the perfect; what we get is what we have right now, and that is no good at all.

Eugene Van Loan is a frequent author of articles on constitutional law and past chairman of the Josiah Bartlett Center for Public Policy. Martin Gross is a longtime Democratic activist and former mayor of Concord.

In recognition of School Choice Week, we are releasing the study below on Scholarship Tax Credit programs across the country and how they might work here in New Hampshire. The study is authored by Center Research Fellow Jason Bedrick.

 

Scholarship Tax Credit Programs Analysis

The second issue of our series published jointly with the Milton and Rose D. Friendman Foundation includes an essay by Milton Friedman on “The Role of Government in Education” and an explanation of the principles of a well designed program.
Issue 2: Milton Friedman and the principles behind school choice

POLICY IN BRIEF


The Josiah Bartlett Center for Public Policy

Let families of modest means choose a school
By CHARLES M. ARLINGHAUS

The following was written for the New Hampshire Union Leader and appeared on Wednesday, Mar. 8, 2006

WHEN 25 PERCENT of New Hampshire’s high school students drop out something needs to change.

Politicians of every stripe agree that the state’s dropout rate is a tremendous problem and the solution must include alternatives, particularly for children from lower-income families. Tellingly, the dropout rate at high schools with a wealthier population, like Hollis or Amherst, is close to zero, while it is much higher at schools with lower-income populations.

Everyone admits that the choices enjoyed by those who can afford them lead to better outcomes for their children. For more than two years the Josiah Bartlett Center has been fighting to extend those same choices to parents of lesser means.

Despite an excellent public school system, no one school will be just right for every single child. The economic power of wealthier families lets them make individual choices for individual children. But for the 25 percent of our children who drop out, their limited educational options will serve to limit their options in life.

After working for years to increase educational opportunities, the New Hampshire Legislature is poised to provide real alternatives to lower-income families. The Senate passed a bill in January that would provide a certificate to lower-income families that they could use at the school that they feel best meets their child’s needs. The House Education Committee passed its own version of a means-tested school choice bill last month.

Despite a barrage of misleading criticism, this debate is fundamentally about creating alternatives for parents of modest means, the same alternatives that wealthy families already enjoy.

A school administration lobbyist said to me during a discussion that our traditional public schools do the best possible job for the greatest number of children. And of course he’s right. In general, they do a terrific job for most children. However, no one school can possibly be right for all children. Even with tube socks, one size does not fit all.

For parents with economic means, this isn’t a problem. If one child has different needs, tuition at another school is easily accessible. As one wealthy parent described it to me, “I already have school choice for my kids.”

But parents with limited income have limited choices. All too often there is no alternative for the child that doesn’t fit into the system. School choice proposals in the Legislature are designed to create a small program for parents and students with the greatest economic need.

The city of Milwaukee has a similar targeted program that has significantly raised graduation rates. It may have been possible at one time to succeed in life without a high school diploma, but in today’s world, a child without a diploma will have few opportunities and almost certainly live on the fringes of the economy. We should have a strong economic interest and an equally strong human interest in helping at-risk children get the education they need.

Because a school choice certificate program makes so much good common sense, opponents throw up a smokescreen of misleading criticisms. They allege constitutional concerns, citing a recent case down in Florida. Yet Florida’s court has struck down only one of that state’s many choice programs by depending on a uniformity clause that does not exist in New Hampshire’s constitution. More importantly, a Josiah Bartlett Center study found the program under consideration meets the tests suggested by past New Hampshire rulings on the subject.

Some lobbyists have suggested non-public schools have a competitive advantage because of the regulations on public schools. The obvious solution is not to deny alternatives to lower-income pupils, but to work together to reduce those regulations.

Finally, some opponents of school choice will try to pretend school choice is an attack on the public school system. But the attempt to provide greater opportunities to the neediest students is nothing of the sort. New Hampshire’s public schools do a terrific job for the vast majority of students, but no system can be perfect for everyone.

Far too many of the students who need the benefit of a good education fall through the cracks and drop out. A targeted school choice program can provide students whose only current option isn’t working with an opportunity to find another choice to help them succeed.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy in Concord.