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Dollars Diverted: The Results of NH’s Education Finance Reform

Dollars Diverted: The Results of NH’s Education Finance Reform. Analyses of Education Funding Reported in the Media and Repeated by Lawmakers Suggest:. The State of NH’s financial support for education is shrinking The results: More of the cost of education falling on local property taxpayers

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Dollars Diverted: The Results of NH’s Education Finance Reform

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  1. Dollars Diverted:The Results of NH’s Education Finance Reform

  2. Analyses of Education Funding Reported in the Media and Repeated by Lawmakers Suggest: • The State of NH’s financial support for education is shrinking • The results: • More of the cost of education falling on local property taxpayers • Tax rates and spending differences between “rich” and “poor” districts continue to widen • A return to ‘pre-reform” level of commitment to education • Claims that NH is “failing to educate its children” • The implied solution: • More state aid through higher and new taxes

  3. Our Research Shows: • “Real” non-property-tax state support (from general fund sources) for education continues to increase - the largest tax increase in NH history • Only about one-half general state aid to education is used for education, the remainder functions as state general revenue sharing with communities • The portion of increased state aid not used for education fuels municipal spending rather than providing tax relief, especially among upper-income towns • Middle and especially upper-income towns received the greatest proportionate increased aid from education finance reform and are more likely to use it for non-education purposes • Increasing the amount of state aid to education alone will not change these dynamics

  4. Annual State Aid To Education Has Quadrupled Since 1998 And It Has Continued To Increase

  5. Since Enactment of Education Finance Reform in 1999, Less Than 40% of the $1.65 Billion in New State Aid Has Been Used for Education

  6. The Portion Of State Education Aid Used To Support Non-Education Expenditures Represents An “Inefficiency” of Nearly $150 Million

  7. The Amount of the New State Aid Used For Tax Relief has Declined to Near Zero, While the Amount Used For Municipal Spending has Increased the Fastest * % Change in the portion of state aid going to each use. Years ‘00-’01 used as base year to calculate % growth rates because many town budgets were set prior to ’99-’00 state aid to towns being determined.

  8. Prior to “Claremont” Reforms, State Education Aid Was Highly Targeted - With Just 15% of NH’s Students, NH’s Lowest-Income Towns* Received Nearly 40% of State Aid 197,956 $97,108,022 3% 14% 59% 71% 37% 15% * “Lowest income towns” are towns where the personal income per capita of residents is at least 20% below the NH statewide average. “Highest income towns” are towns where per-capita income is at least 20% higher than the NH average

  9. “Claremont” Reforms Have Given Middle and Higher Income Towns a Greater Portion of State Education Aid, While Low-Income Towns Now Receive a Smaller % of Total State Aid Than They Did in 1998 (22% in ’03-’04 vs. 37% in ’98) $97,108,022 $451,546,353 3% 7% 59% 71% 37% 22% * “Lowest income towns” are towns where the personal income per capita of residents is at least 20% below the NH Statewide per-capita income. “Highest income towns” are towns where per-capita income is at least 20% higher than the NH average

  10. Twenty of NH’s “High-Income” Towns Received Over $30 Million in Education Grants in 2003-’04, the Remainder of High-Income Towns are “Donors”

  11. NH’s Low-Income Towns Use A Higher Percentage of Their Increased Education Aid For Education Purposes

  12. Low-Income Towns Receive More Total Aid Per-Pupil But Higher-Income Towns Received A Much Larger Percentage Increase In Aid From Claremont Reforms

  13. Conclusions • Neither of the implied objectives of reform (property tax relief or differences in educational resources) is being met • State education aid to lower income communities appears most effective in achieving the objectives of reform • In order to direct $98 million to lowest income towns, the current school funding law requires that an additional $350 million be directed to middle and highest income towns • Middle and especially higher-income communities have disproportionately benefited from reform at the same time they are less likely to use their increased state aid for educational purposes • State education aid not used for tax relief or educational purposes but rather used for municipal and county expenditures, represents an inefficiency of approximately $150 million annually in NH’s system of education finance and it is increasing • Proposals to modify education reform, to date, focus on the amount of state aid and ignore problems with its efficiency • Competing budget priorities at the state level should prompt lawmakers to examine ways to increase the efficiency of state education aid rather than increase the magnitude of its inefficiencies

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