HB 1607-FN-L, establishing an education credit against the business profits tax. MAJORITY: OUGHT TO PASS WITH AMENDMENT. MINORITY: INEXPEDIENT TO LEGISLATE.
Rep. Bill Ohm for the Majority of Ways and Means: This bill, with the amendment recommended by the committee, first and foremost promotes school choices for those that might not otherwise be able to afford it. The school choice scholarships, managed by non-profit scholarship organizations, are funded by donations from businesses who receive tax credits when they donate. This bill adds New Hampshireto a program that is successful in eight other states, and was created here by melding the best practices of all the other programs. The program works as follows: if parents of limited means wish to send their kids to a non-public school, or a different public school that agrees to accept them, they may apply for a scholarship from an approved non-profit scholarship organization. The average scholarship would be $2,500. Home schoolers would also qualify, but their scholarship amount would only cover materials and be limited to $750. Businesses who choose to donate to such scholarship organizations would receive a tax credit of 85% of their donation. This tax credit would apply to their BET or BPT. There is no net cost to the state for this program for at least the next two years. New Hampshire currently pays $4,100 per student to local school districts for adequate education funding, and saves that amount for students who leave the public school system. The amount saved offsets the amount lost in the reduced BET/BPT given as tax credits to the businesses who donate. One concern is the effect on local school districts. To mitigate this concern, the amount of scholarships is limited to $4 million in the first year, increasing to $6 million and finally $8 million in subsequent years. For reference, a $4 million cap represents ¼ of 1% of the total dollars spent each year on public education. Given the $4 million cap, the restriction on the average scholarship size, and the percentage of scholarships that must go to public school students, the public school attendance drop will be less than 2,500. The committee felt that this amount is within the normal annual variance of student population. Beginning with the third year, if demand for scholarships exceed 80%, the program will increase by 25% the following year. Vote 16-5.
Rep. Christine C Hamm for the Minority of Ways and Means: This bill would implement a tax credit for businesses offering scholarships to students attending private schools. The minority objects for several reasons, but primarily because this program extracts money from New Hampshire's public schools in favor of funding private, religious and home schools, thus costing the state and school districts important and sparse revenues now used towards public education. The cost of the plan is not, as supporters claim, revenue neutral. Department of Education calculations show that the cost to the state budget would increase yearly in the three years the legislature reviews for fiscal impact, and would continue to increase each year thereafter. While estimates are that it would save the state budget $47,000 in the first year, by Year Three it would cost the state $2 million. It does this by taking full per pupil adequacy aid away from the local school districts the same month they lose a student who is granted a scholarship to a private school. Using conservative numbers, the immediate loss to a school district would be at least $3,500 per pupil; the net loss to the school districts statewide is estimated at $3.6 million the first year, $5.2 million in Year Three. As the program expands, the negative impact on the state and local school budgets will increase an unknown amount, potentially more than $100 million in the first decade. The minority has concerns that any such shortfall would have to be offset local property taxes. In 1967, 1969 and 1992, the state Supreme Court issued opinions that could be used as precedents in cases against this legislation. Part I, Article 6 of our state constitution states in part, “No person shall ever be compelled to pay towards the support of the schools of any sect or denomination,” while Part II, Article 83 states in part, “Provided nevertheless, that no money raised by taxation shall ever be granted or applied for the use of the schools of institutions of any religious sect or denomination.” As the 1969 case dealt specifically with tax credits and as our state constitution is quite explicit on this issue, the success of a legal challenge arguing that businesses are being used only as an intermediary to deny a direct, unconstitutional, connection between the taxpayer and a religious school, is a real possibility--- the recent case of Arizona v Wynn notwithstanding since this decision affected only the federal level. In addition, this bill, as amended, contains a number of stipulations incumbent upon both donors and recipients that would be difficult, if not impossible, to monitor and enforce, thus leaving the law open to abuse. While proponents have expressed hope this legislation would encourage competition, and thus lead to improvements in public education, the minority believes that this bill’s lack of academic accountability from recipients---both students and providers---means that the state could be neglecting its fiscal responsibility by foregoing money that otherwise would be directed towards public schools and allowing it to instead be paid to less-qualified providers. The combination of means testing and the cost of private schools means that only home-schoolers and families located near subsidized private schools are likely to benefit. Even withstanding the other concerns expressed, such benefits to a few seem disproportionate to the negative effects on the greater part of the state’s student population.
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