DNHPE Analysis: The Cost of the Proposed Voucher Program

Summary

The New Hampshire school voucher program proposed in SB 372 and HB 1607 is in a constant state of flux as the committees and sponsors look into the details of how this large and complex program would work.  

Since the bill is changing daily, there is at this point (3/16/12) no official Fiscal Note or Fiscal Impact Statement detailing the costs of the program to the state and the school districts.  There is a draft Fiscal Note from the Department of Education, attached below.

It is clear, however, that the program would have a large fiscal impact on the state and that it could grow dramatically over time, compounding at over 25% per year.

In order to understand the fiscal impact on the state not only over the 3 year period of immediate concern to the Legislature, but over the longer term of concern to educators in New Hampshire, DNHPE has extended the 3 year spreadsheet provided by the Department of Education.

State Losses
The costs to the state and the school systems will vary as the bill changes but they grow every year.  The program could break even in the first year but then would lose more each year, up to $2.6 million in the first 3 years and up to $126 million in the first 10 years, depending on how fast it grows and to whom the vouchers are awarded.

The legislation would authorize the program to give up to $143 million in tax credits over its first 10 years (here).  If the sponsors assert that the program is "revenue neutral," these funds are coming out of the school system.  If not, they are coming out of the state's general fund.  

This amounts to an open checkbook on New Hampshire's general fund, since there is no way to project the actual impact of the plan over time.

School Losses are larger than they appear
Under normal circumstances, a school does not get state aid for a child for the first three years the child is in the school, but when the child leaves, the school continues to get state aid for next three years, so the school comes out even in the end. 

The Education Tax Credit program changes the funding for voucher students.  The school loses the state aid right away, in the year the child leaves, and in the following years.  The loss to the school, if the student continues to receive a voucher, is not just the $4,112 that shows up in the DOE Fiscal Note for the first year, but the whole $12,336 the school would have received if the child had left under normal circumstances.

And, the program provides vouchers to students who would have left for private or home school anyway, without the voucher. The creates an extra financial loss to the school system. 

All of these losses result in equivalent additions the next year to the local property tax.  See more about the impact on the schools here.

The DNHPE version of the Department of Education 2/14/12 draft fiscal note calculations is attached.  Readers can enter their own assumptions and see the impact on the results.

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Bill Duncan,
Mar 18, 2012, 12:44 PM