Tax-Credit Scholarships Evolve in Granite State

By Andrew Ujifusa — April 30, 2012 2 min read
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In my story on the American Legislative Exchange Council, a member of another conservative policy shop, Jonathan Butcher of the Phoenix-based Goldwater Institute, used his group’s consulting work with New Hampshire on tax-credit scholarships as an example of states and wonks not needing ALEC’s services to push education priorities.

With Butcher’s comments in mind, here is how Goldwater’s work with New Hampshire lawmakers on those tax credits has panned out in the legislature, up to this point.

Under the tax-credit scholarship legislation, businesses could donate to nonprofit groups providing public- and private-school scholarship to students coming from families with incomes at a maximum of 300 percent above the federal poverty line. The average value of those scholarships provided can’t exceed $2,500. A business could, in turn, claim up to 85 percent of their contributions to the scholarships programs as a credit against its taxes.

The basic outline of the program is similar to the system in Florida, which this year expanded its tax-credit scholarship program cap by over $50 million, although supporters of the scholarships wanted an even bigger increase. Advocates say it gives parents additional power to choose the best schools for their children.

But one of the main criticisms of tax credit scholarships is that they take money away from state government that could have otherwise gone to traditional public schools. In an earlier Manchester Union-Leader article, a Republican representative, Neal Kurk, argued that even though the state’s per-pupil funding goes down for schools losing students through the scholarships, the school’s expenses do not drop concurrently.

Kurk’s complaint about districts’ savings not matching what they lose in state aid is backed up by a state fiscal analysis of the bill. In fiscal 2013, for example, the state would save $3.1 million in “adequacy payments” to local districts, but that the local districts’ costs due to having fewer students would only decrease by $690,000.

A 2011 report from the Southern Education Foundation argued that Georgia’s tax-credit scholarships were more expensive than advertised; that private schools found ways to avoid allowing only public-school students to use the scholarships, as the law required; and that the scholarships did not live up to promises that they would save the state money. (For those interested in tying this activity back to ALEC, the Peach State’s tax-credit scholarship legislation in 2008 was sponsored by David Casas, now the public-sector chairman of ALEC’s Education Task Force.)

In New Hampshire, the sponsor of the tax credit bill, state Sen. Jim Forsythe, agreed to amend the bill to limit the loss of state funding for schools that would result from the scholarships to a 1 percent drop from funding in the previous year. Losses greater than 1 percent would be offset through a stabilization grant. Kurk had worried that losses in state school funding would be “downshifted” to local taxpayers. A House subcommittee is scheduled to discuss the proposed change May 2.

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A version of this news article first appeared in the State EdWatch blog.