By Jason Bedrick

March 2012

(Click here to read the full report)

EXECUTIVE SUMMARY

Access to educational opportunities in New Hampshire is primarily determined by zip code and accident of birth. Though New Hampshire has some of the highest-performing public schools in the nation, performance across school districts is uneven. Public school students in wealthier towns like Windham and Bedford perform highly on standardized tests while their low-income peers in Claremont and Stratford lag behind. Moreover, even New Hampshire’s best public schools are not best for every child. Not all children thrive in the traditional classroom environment. Some students need extra support academically, socially or emotionally. Our public schools may work well for most children, but there is no school that is right for all children.

Unfortunately, tens of thousands of New Hampshire students have only one choice of school. While wealthier families can meet their children’s individual needs by moving to communities with higher-performing public schools or paying tuition at an independent school, most low-income families lack the financial capacity to do either.

In recent decades, legislators and policymakers have implemented several innovative policies to expand educational options, including vouchers, charter schools, education savings accounts, and more.  In the last decade, scholarship tax credit (STC) programs have expanded educational opportunities for hundreds of thousands of students in eight states, particularly those from low-income families. In just the last two years, two states have adopted new STC programs while five others expanded their existing STC programs.

Section I: Scholarship Tax Credits

Nationwide, eight states currently operate corporate scholarship tax credit programs. Program design, levels of funding and student participation vary. STC programs are constitutionally sound and receive strong support from parents and the general public.

  • Scholarship tax credit programs are on firm constitutional ground. STC programs have withstood every single legal challenge to date at both the state and federal levels.
  • Parental satisfaction in STC programs is exceptionally high. More than 95 percent of families participating in Florida’s STC program reported that their schools were good or excellent.
  • Nationwide, support for STC programs is more than double the opposition. Support among parents nationwide is even higher at four-to-one in favor.

Section II: Fiscal Impact

The proposed School Choice Scholarship Act (HB 1607) creates a scholarship tax credit program that is designed to save money by reducing state spending more than it reduces tax revenue. Under even the most conservative assumptions, the proposed STC program will affect approximately one tenth of one percent of the current state and local spending on public education. STC programs in several other states have reduced state government expenditures while expanding choices for families.

Section III: Impact on Performance

  • Studies show that school choice program participants perform as well as or better than their public school peers.
  • Participants in school choice programs graduate from high school at higher rates than their public school peers.
  • School choice programs are associated with a positive impact on public school students’ academic performance.

Section IV: Program Design

While broadly similar, STC programs across the country vary significantly in program design, such as means-testing, disbursement requirements, and corporate credits. These differences affect how well the STC programs are able to effectively and efficiently meet the needs of scholarship recipients. Some of the main findings include:

Means-Testing:

  • Means-testing can help target funds to the truly needy, though evidence suggests that SOs target low-income families even without a means-testing requirement.
  • Income caps that are too low reduce the flexibility of SOs to address the needs of families with exigent circumstances (special needs, serious illness, job loss, etc.).

Disbursement Requirement:

  • Scholarship organizations require some level of allowance for administrative costs, especially when starting up. Over time, most spend less than 10 percent on administrative costs.
  • A more liberal administrative cost allowance allows for the creation of more scholarship organizations. Policymakers should consider greater administrative cost allowances (15 to 20 percent) for new scholarship organizations.

Corporate Credits:

  • Most scholarship organizations reported having little to no trouble soliciting donations from businesses when the tax credits were worth 90 percent of the donations.
  • Policymakers should be able to reduce the tax credit percentage somewhat below 90 percent without a significantly negative impact on fundraising. However, it is not clear at what point there would be a negative effect.

When designed and implemented properly, a scholarship tax credit programs is a constitutional, popular and fiscally sound method to increase educational options for low-income families. STC programs can even improve the academic performance of all students, whether they participate in the program or not. Most importantly, a scholarship tax credit program will move New Hampshire from an educational system where access is primarily determined by a student’s zip code and accident of birth toward a system tailored to meet the individual needs of every child.

(Full Report)

(Appendix)

(Sources)