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The impact of SB 193 on the General Fund will, under any assumptions, larger than the Legislature will accept

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Advocates for and against SB 193 will over the next weeks debate participation rates and the other assumptions that drive the financial impact of SB 193.  However, our analysis is that, even under the most conservative assumptions, the impact of SB 193 on the General Fund will be so large that SB 193 will not make good on its promise to limit the damage to local school districts.  In the end, school districts would be left with most of the bill.

Here’s why.

We’ve done this analysis of the “Potential Impact of SB 193 on the New Hampshire General Fund,” assuming very low participation rates.  This surely is not the last word.  Various factors could change as the Finance Committee analyzes the bill in greater depth and agencies provide more data.   However, the broad basics of the bill are clear from the Potential Impact spreadsheet.

If the SB 193 program started out with a 1% participation rate, less than the current waiting list for the Education Tax Credit program, and grew over 5 years to a only a 2% participation rate, less than in any of the comparison states, SB 193 would have funded almost 13,000 students and spent tens of millions of dollars from the General Fund. 

The 2012 Education Tax Credit (ETC) bill never achieved an impact like this because the business community didn’t support the idea and did not contribute to the program.  SB 193, however, does not depend on public support after it gets started.  There would be no upper limit on the ability of an independent scholarship organization to write checks on the New Hampshire General Fund.

There are a couple of things, though, to notice about the “Potential Impact” spreadsheet.

First, a key reason the impact on the State is so high is the “compounding” that is built into the stabilization fund.  You will see how big that gets in “Follow-on grants from previous years” (line 27) .  As passed by the House, the SB 193 stabilization fund repays the school district for its loss above 1/4% for 5 years, a reasonable average expectation of the length of time a student might go to a private school before graduating or returning to public schools.

If the Legislature wants to pull back from the SB 193 commitment to minimize the impact on neighborhood schools, you might see it here first if the Finance Committee does not maintain that 5 year commitment to the school districts.

A second key factor to notice is that the financial impact shown in the Projected Impact spreadsheet is unrealistically low because it assumes that the ESA grants would be spread evenly throughout the State.  The reality, as Reaching Higher NH and the current Education Tax Credit program have shown, is that the grants would probably be concentrated in a relatively few property poor communities. The result, as we have shown, would be a big enrollment impact on those communities and a greatly increased impact on the General Fund.

To keep the spreadsheet as simple as possible, we give two examples of the impact of concentrating on a relatively small number of communities:

  • If students from Franklin, for instance, got the same proportion of ESA grants that they have received under the ETC program, Franklin’s normal enrollment decline as a result of demographic change would be more than doubled and it’s enrollment would be cut in half over 5 years.  The cumulative cost to the General Fund of creating that kind of disruption in Franklin would be almost $3.7 million.
  • If Manchester students got almost 14% of the ESA grants, as they did from the ETC program, Manchester would lose over 1,700 students over five years, costing the General Fund over $20 million.

Obviously, none of this is going to happen in real life.  First, the Legislature will not want to inflict that kind of impact on New Hampshire’s schools.  But, also, the Legislature would surely not be willing to spend that kind of money – on parental choice, on creating competition in education, or on any other big new program.

So the message of the first cut analysis in the Potential Impacts spreadsheet is that parents, school boards, budget committees, tax payers and students cannot depend on the SB 193 stabilization fund to mitigate the impact of SB 193 on New Hampshire school districts.

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