DNHPE 3/27/12 Alert: Projections are unreliable. Refer HB 1607 for interim study

posted Mar 27, 2012, 11:40 AM by Bill Duncan
From
Defending New Hampshire Public Education
Contact: Bill Duncan, 603-682-4748

Honorable Members of the New Hampshire Legislature,

New Hampshire legislators have seen a wide variety of projections of the financial impact of HB 1607, the education tax credit, but nothing yet that the sponsors have been willing to stand behind. The impact of HB 1607 is completely uncertain at this point. It should be referred for interim study. 

The Josiah Bartlett Center released a study today saying that the education tax credit program would save the State substantial money. The question for legislators is why the Bartlett Center differs so with the New Hampshire Department of Education Fiscal Note on the bill.

The first reason is that the Bartlett studied SB 372 rather than HB 1607. The Senate Finance Committee has recommended referring SB 372 for interim study. It is HB 1607 that the House will vote on tomorrow. The bills differ in material ways that affect the Bartlett Center projections. For instance, the HB 1607 program would grow faster than Bartlett shows.

More importantly, though, Bartlett uses incorrect numbers for the amounts of money recovered from school districts to off-set the state tax credits. The Bartlett Center says that, using "the minimum set by the bill," 70% of the kids will come from public schools in the first two years, then 65% and 60% in the third and fourth years.

These are not the minimums set by the bill. Using the bill's actual numbers, the program costs the State significant amounts of money. Here's why:

In the first year, the bills require that 70% of the children come from public schools. The sponsors refer only to this number in defending the program. However, the requirement actually reduces to 60% in the second year, 50% in third year and 40% in the fourth. And by stopping in the fourth year, the Bartlett study does not show that the public school requirement goes to zero a few years later and leads to even larger losses. Here is my 10 year projection based on NHDOE numbers.

This error in the percentages of public school students results in very large errors in the Bartlett projections. Using the correct figures in year four, for instance, the program would not make the $2 million surplus that Bartlett shows, but would cost over $3 million.

The costs would continue to increase in subsequent years. However, the private scholarship organizations actually decide how the scholarships are allocated between public and private school children, so the Legislature would not know when budgeting for each biennium how great future losses would be. Here is more on why.

The sponsors worked closely with the New Hampshire Department of Education, revising the bill and ensuring that DOE understood the tax credit plan. The NHDOE Fiscal Note says that HB 1607 would break even in the first year but lose a total of $2.7 million in the first 3 years. The Bartlett figures, using incorrect numbers for a different bill, should be disregarded.

HB 1607 has proven more complex than anyone probably expected. With amendments and cost projections changing frequently, if there were ever a candidate for Referral to Interim Study, it's HB 1607. The House should do as the Senate Finance Committee has recommended - refer the bill for interim study and take it up next year after a detailed study of its impact on the State.

Respectfully,

Bill Duncan, for Defending New Hampshire Public Education


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