The Concord Monitor recently reported that NEO intends to give 70% of the scholarship funds it awards this year to 15 students leaving public schools. However, there is no doubt that the Education Tax Credit statute requires that, in the first two years, 70% of the scholarships – not scholarship funds – goes to public school students.  Over the months that many legislators debated the two tax credit bills and DOE prepared numerous iterations of the Fiscal Note there was never any doubt that the legislation was specifying the percentage of scholarships.

On the other hand, the “70% of scholarship funds” interpretation relies on the assertion that the law might conceivably not mean what it says – that, although there is no other legislative language or history that actually supports the “70% of scholarship funds” interpretation, the law is not quite sufficiently explicit or precise enough to remove all shadow of a doubt that “70% of scholarships” could conceivably mean “70% of scholarship funds.”  Here’s what the law says.  (In all cases below, the emphasis is added.)

Basic definitions in the statute specify scholarships not funds

RSA 77- G:2 (b) says in part,

“In each of the first and second program years, a scholarship organization shall award a minimum of 70 percent of all scholarships issued to eligible students as defined in RSA 77-G:1, VIII(a)(1) and (2)”

Those references, RSA 77-G:1, VIII(a)(1) and (2), say,

“VIII “Eligible student” means a New Hampshire resident who is at least 5 years of age and no more than 20 years of age, has not graduated from high school, and

(a)(1) Who is currently attending a New Hampshire public school, including a chartered public school, and for whom the adequacy grant in the next school year would be reduced if the student were removed from the average daily membership calculation; or

(2) Who received a scholarship under subparagraph (1) or this subparagraph in the prior program year;…”

These sections say that certain public school students – those in towns who’s adequacy grant would be reduced in the student left (thus excluding from the 70% calculation students from the wealthier towns that receive no adequacy grant at all and a those in a number of other towns that already receive less adequacy funding than they would otherwise because of the 105% cap) – must get 70% of the scholarships.

Language requiring the scholarship organization to report numbers of scholarships confirms the “70% of scholarships” interpretation

The law goes on to specify that scholarship organizations must submit a “scholarship organization report” by December 1^st each year to enable the New Hampshire Department of Revenue Administration to monitor whether the scholarship organization is following the rules.  The report asks only for the numbers of scholarship students in each public, private and home school category.  It does not require the scholarship organization to report on the funds granted in each category because that is not relevant under the law.  RSA 77-G:5 II (g) is clear:

“On or prior to December 1, the scholarship organization shall submit a scholarship organization report to the department of revenue administration….The department of revenue administration shall review the scholarship organization report and the scholarship receipts to ensure that…the number of scholarships issued under RSA 77-G:1, VIII(a)(1)and (2) meets the requirements of this chapter,…”

The report refers to “the number of scholarships issued….” If the legislation had been drafted in a more technically explicit way throughout, the phrase would have appeared elsewhere as well, not just in a report definition.  However, in the context of the rest of the bill, this phrase should settle the issue.

The Fiscal Note relies on number of scholarships

If more evidence of legislative intent were needed, the language of the Fiscal Note is consistent with this interpretation as well.

The central fiscal requirement of the bill was that it be essentially “revenue neutral” – cost the State little or nothing.  That was to be accomplished by withholding the adequacy grant from the school district for each student leaving with a scholarship.  The New Hampshire Department of Education projected, taking a number of factors into account, that the adequacy grant withheld averaging a little over $4,100 per student would offset the cost of the tax credits granted to businesses to repay them for the donations they’d made to the scholarship program.

While the bills were being drafted, DOE worked closely  – daily, at times – with the bill’s author to ensure that the complexities and frequent changes in the program were reflected in the each new Fiscal Note.  Here is one sample of the complex spreadsheets DOE produced for its analysis.  The formulas use the 70% as the “Required minimum Percent Public School Students,” as shown here, from the middle of page 4:

The number 2016 is 70% of the 3,610 figure on the spreadsheet line “g.”

The final Fiscal Note to SB 372 puts the same calculation into words.  Here is what it said in explaining its assumptions on this percentage issue:

“…It is assumed the number of scholarships will total 1,544 in FY 2014….. Of these totals, a scholarship organization shall award a minimum of 70% or 1,081 of all scholarships to public school students in FY 2014….”

Again, the bolded figure “1,081” is 70% of the bolded figure “1,544.”

Clearly, this Fiscal Note, used throughout the debate and in the drafting and redrafting of the bills, must be taken to reflect the legislative intent.

There could be no fiscal analysis if scholarship funds were counted instead of scholarships

It is also clear that, if the legislation had stipulated that 70% of the scholarship funds go to public school students, it would actually not have been possible to project the fiscal impact to the State.

Say, for instance, there was $4 million available for scholarships.  Seventy percent of that would be $2.8 million.  The State would save $4,100 in adequacy payments for each child who left public school.  So if scholarship organizations gave that $2.8 million to 1,000 students, the result would be a savings of $4.1 million and the program would have cost the State nothing, meeting the legislative intent.  If the scholarship organizations gave that same $2.8 million, 70% of the funds, to 500 students, the State would save only $2.05 million, leaving a cost of almost $2 million for the State.

So the only way the Legislature could know the fiscal impact of the bill it was passing is to stipulate the percentage of scholarships that would go to qualified students and, therefore, save the State $4,100 apiece.

There would be another very odd result.  This interpretation would make it possible for the scholarship organization to pay out even more than 70% of the scholarship funds to a small group of public school students and ever smaller amounts to private school students, costing the State even more money.

The legislative debate makes the intent to use the “number of scholarships” clear as well

The legislative intent would be clear even if there were no further evidence.  However, there is extensive additional evidence.  First, during the 6 month legislative process, as the House and Senate videos and the committee records demonstrate, there was not one comment made suggesting implicitly or explicitly that 70% of the scholarship funds go to public school students.

The two education tax credit bills were introduced in a press conference on January 23, 2012 and debated a total of 10 times in the two bodies:  HB 1607 was voted on in the House on March 29, 2012 and June 27, 2012 for the veto override vote.  The Senate voted on HB 1607 on May 2, 2012 and May 16, 2012 and on June 27, 2012 for the veto override vote.  SB 372 was voted on in the House on May 16, 2012 and June 27, 2012.  It was voted on in the Senate on March 21, 2012, March 28, 2012 and on June 27, 2012 for the veto override vote.  In addition, the Senate Education Committee and the House Ways and Means Committee each held a hearing on each bill and House Ways and Means held extensive subcommittee meetings making many changes to the bill.

A thorough review of debate videos and hearing records shows no reference to “70% of scholarship funds” concept.

But the “percent of scholarships” concept has been integral to the law from its first introduction to the Legislature.  Here is Senator Jim Forsythe (R-Strafford), the program’s prime sponsor and the person responsible for virtually every provision of the two education tax credit bills, describing the concept at the press conference introducing the bills:

“The program is designed to be revenue neutral to the State or achieve a slight savings.  This is achieved by requiring that a percentage of the scholarships be given to children currently in public schools, saving the State an average of $4,100 per child in state adequacy aid.”

There would be no way to make this statement if the 70% referred to scholarship funds.

Here is Senator Forsythe presenting the bill to the House Ways and Means Committee for the first time, January 23^rd, 2012.  Starting at minute 1:58, he says:

“The program is designed to be revenue neutral…The way we achieve that is to give a percentage of the scholarships to kids currently in public schools…[min 3:50] we require 70% of the scholarships in the first year to go to existing public school students…we make the assumption that once a student who’s in public school leaves, we reduce the adequacy payment for that… If the program uses less than that maximum amount – if we don’t get [the maximum] contributions, we get something less – we still have a savings.  It’s just proportionately less because the requirement is that 70% of the students come from the public schools.  We lower that percentage that have to come from existing public school students by 10% per year…[min 11:42] Also as I said, we reduce the percentage of switchers that are required.  It’s 70% in the first year and then it lowers each year.  The fiscal note presumes that we hit that lower number.  If we hit a higher number, then there’s more savings.”

This entire 25-minute presentation would have been different if the discussion were about requiring 70% of the scholarship funds to go to public school students rather than 70% of the scholarships.

Here is Senator Jim Forsythe again in an oped sent to all newspapers and all legislators:

“…Meanwhile the SO’s would give out scholarships with an average size of $2,500 to children attending a private school, or an out of district public school. A certain number of these scholarships are required to go to children who are switching from public to private school. For these children, the state adequacy aid to the towns (it averages $4,100 per child) would go away since that town is no longer educating that child. The size of the program is capped, and relatively tiny….”

Senator Jeb Bradley says here:

“…Additionally, SB-372 will be revenue neutral or save the State of NH money as the scholarship is less than the State’s adequacy grant….”

Here is Senator Forsythe presenting an early version of his bill to the Senate Education Committee (he was the vice-chair of the committee).  At minute 4:28, he says:

“…We require a certain percentage of the scholarships to go towards children that are currently in public school and would have been counted in adequacy aid in the subsequent years…”

Here is Senator Forsythe presenting again late in the process.  At minute 5:30, he discusses the calculation, saying:

“…more students in the program for the same dollars, which means more money saved through the adequacy aid reduction…”

The discussion here and throughout this session centers on the numbers of scholarships, not the amount of scholarship funds, as a program requirement.

Again, at minute 18:00, Sen. Forsythe says:

“…there was a $700,000 fiscal impact in the second year of the next biennium, so we’ve worked with Senate Finance to put an amendment in that keeps the number of switchers at 70% for the first two years and then drops it more slowly to make sure that the medium term years are closer to budget neutral.  That gives a budget neutral fiscal impact to this bill….and line 18 and 19…that’s where we slowly ramp down the number of switchers by 5% instead of 10%…”

This entire video, but particularly the last five minutes, shows how discussion of the bill centers on maintaining budget neutrality and how integral the fiscal analysis done by DOE is to legislators’ consideration of the bill.  The bill is discussed in terms of DOE’s analysis of the fiscal impact and the numbers of scholarships going to public school students.

Here is the March 28, 2012 debate on the Senate floor.  At minute 2:36, Senator Forsythe says:

“We are holding the percentage of what I colloquially call ‘switchers’ to 70% over the first to years…program years…and then the requirement drops by 5% per year.”

All in all, there can be little doubt about the legislative intent behind this education tax credit statute.