Yesterday, the House Ways and Means Committee held a public hearing on HB 632, a bill that would repeal the Education Tax Credit scholarship program. Over 400 low-income children utilized the program this school year.
The committee room was at maximum capacity with people standing along the walls and in the hallway. It was wonderful to see so many smiling faces and bright yellow School Choice scarves!
Supporters for Repeal Ill-Informed
Very few people spoke in favor of the repeal bill, including the bill sponsors and one retired public-school teacher from Concord. Those that spoke were poorly informed about how the ETC is funded, its accountability requirements, and constitutionality.
The prime sponsor, Representative Joelle Martin, said that private donations through the Education Tax Credit are “state-bound” money, and this was echoed by other sponsors and supporters. Based on the context of their comments, our best guess is that they believe earnings and income belong to the state even before taxes are paid and in the state treasury.
They repeatedly said scholarship organizations “filter” money from businesses, making it sound almost like money-laundering. In fact, businesses may make donations of their own money to approved scholarship organizations using the Education Tax Credit program. They receive a roughly 85% of credit against their Business Enterprise Tax or Business Profit Tax. (Individuals may make donations and receive a credit against their state Interest and Dividends Tax as well as a deduction against their federal income taxes.)
There are five other tax credit programs in NH. The Education Tax Credit is the only one in the state that supports low-income children seeing educational opportunities beyond their local public school. And Families – not the scholarship organizations – select where the funds are directed, which may be used for out-of-district public schools, private school tuition, or approved home education expenses.
Taxes and Transparency
Some bill supporters claimed that these private donations raise their local property taxes, but local property taxes allocated for education remain within the district. They do not follow children.
Opponents to the ETC also claimed that the scholarship organizations, of which there are two in the state are not transparent about the distribution and use of the funds. But scholarship organizations must file annual reports to the Department of Revenue and voluntarily submit to independent audits. That information is available here.
Every dollar donated must be tracked as well as how scholarships are used.
The constitutionality of the Education Tax Credit program was also questioned by opponents. They seemed dismissive of the fact that families, not the scholarship organizations or the state, direct the scholarships, but this is a critical distinction.
There was broad misunderstanding of how a child can qualify for the ETC scholarship. Per statute, eligibility is based on two factors: 1) the family’s annual income cannot exceed 300% of the federal poverty limit, which is $75,300 for a family of four. Over 60% of scholarship children qualify for the Free and Reduced Lunch program, meaning the family earns less than $46,400 for a family of four.
We live blogged the hearing on our Facebook page; you can catch up on what was said here. Make sure you select “all comments” so you see the full report instead of what Facebook deems “most relevant.” Although Chairman Susan Almy claimed to be surprised at the great attendance and therefore didn’t reserve a larger room or allow more time for the hearing, it does not seem plausible given that the committee received well over 200 emails opposed to the repeal bill.
Next up – Voices against Repeal.
Update: Repaired broken link to NH DRA website.