House budget writers propose reducing education trust fund
CONCORD – The budget being proposed by the House Finance Committee would slash the money going into the Education Trust Fund, while reducing its obligation to fund special education, school building aid and other programs.
The proposal from House Finance Chair Rep. Ken Weyler, R-Kingston, would reduce the amount of business tax money going into the trust fund by more than half.
Currently the money from the business profits and business enterprise taxes is split evenly between the trust fund and the state’s general fund, but Weyler’s plan would reduce the trust fund’s share to 22.5 percent.
The change will reduce the money going into the education trust $222 million in fiscal 2024 and $225 million in 2025, but increase the general fund by that amount.
The Education Trust Fund totaled $1.22 billion in fiscal 2022, and $1.06 billion in the current fiscal year, 2023.
Over the last seven or eight years, the fund has had a substantial surplus after years of deficits and contributions from the general fund to cover the cost of state adequacy grants to school districts and per pupil grants to charter schools.
Weyler said over the years the fund has been used to pay for other costs such as special education, building aid, court ordered services, and tuition and transportation to regional technical centers.
He said he wants to return the fund to its original purpose to fund adequate education and the other programs would be paid for with general fund money.
He was asked by Rep. Laura Telerski, D-Nashua, why move special education from a fund confined to education services to the general fund where it will compete with all other needs.
Weyler said traditionally special education costs were paid through the general fund before they were moved to the trust fund.
But Telerski asked if special education would not be competing with other needs, and Weyler eventually said yes.
One obligation not moved to the general fund, was covering the Education Freedom Accounts program.
Rep. Mary Heath, D-Manchester, asked why that was not moved to the general fund.
Weyler said because EFA grants are part of the adequacy grants. Under the proposed budget, the program is allocated $30 million in each of the next biennium’s fiscal years, a significant increase over the approximately $24 million for the current biennium.
Rep. Mary Jane Wallner, D-Concord, also questioned the wisdom of moving court-ordered placements to the general fund, but Weyler said he was putting things back to the way they were when the legislature devised its funding plan to address the Claremont lawsuit and Supreme Court orders.
“There is no reduction in the money spent for education, there is no harm to education,” Weyler said, “We’re putting things back to the way we have always funded them.”
Rep. Kate Murray, D-New Castle, asked Division II subcommittee chair Tracy Emerick, R-Hampton, to read the amount of money in school building aid that would be transferred from the trust fund to the general fund noting people watching on live stream could not see the figures.
Under the plan $86.95 million would move in fiscal 2024 and $87.17 million in fiscal 2025 for a total of $174.12 million.
The change in the Education Trust Fund was not the only concern as others questioned how effective the new education funding formula is when many of the state’s most needy communities like Berlin and Rochester receive less state aid than they do now.
Emerick said the subdivision took the governor’s education funding plan and accelerated the shift of money to the most needy communities in the state.
The major change to his plan is increasing the amount of extraordinary aid from $600 per pupil in the free and reduced lunch program to $3,750 per student.
The change increases the cost from the governor’s estimate of about $10 million a year in aid to about $57 million.
Both plans would eliminate the current stabilization grants that have held cities and towns harmless since the last major change in the formula in 2011.
Stabilization grants would be replaced with hold harmless grants that would be reduced 20 percent in each consecutive biennium.
The stabilization grants total $157 million a year and the House plan would provide $58.7 million in fiscal 2024 and $52.8 million in fiscal 2025 which is about $30 million a year less than the governor’s proposed.
The House plan would spend $2.083 billion for the biennium on education aid including the Statewide Education Property Tax (SWEPT) which raises $363 million annually. The governor’s plan would spend $2.044 billion.
Heath, looking at a spreadsheet with what each community would receive in state education aid under the House’s plan, said she is not seeing what they had hoped to see with the change.
The subtraction of the stabilization grants, although she understands why they want to do that, is what reduces the state aid for the poor communities, she said.
Retaining some form of the grants may be a way to produce more relief for the most needy districts, she said.
“I’m really worried some of these towns are going to get a double whammy,” Heath said, noting the state has been using the same data for three years due to COVID and the change in the formula.
Parents have not had to fill out the free and reduced lunch applications and not all the students who left public schools due to COVID have returned, she noted. “You still have to run a school. You have the same number of classrooms, and you still have transportation (costs),” Heath said.
Emerick noted both the governor and the House plan have the hold harmless provision so no one will receive less than they did this year, but others noted the additional aid the poorer communities will receive under the plan in some cases is less the stabilization grants communities received.
“We are paying for students that don’t exist,” Weyler said about the stabilization grants. “We can’t keep paying for a population that goes down.”
Subcommittee member Rep. Daniel Popovic-Muller, R-Windham, said the members spent a lot of time trying to reach the goal of more help for the neediest communities, but the current system is so fundamentally broken with patches and Bandaids that the only way to help the outliers is to put much more money into the system.
Another subcommittee member, Murray, said they worked hard to try to give additional funds to the communities that really need it, but noted “we were not successful in reaching the poorest communities.”
Emerick acknowledged the end result does not look like what they thought they were going to accomplish.
The subcommittee also decided to include $6 million in the budget to do rehabilitation work on the Whittemore Center at the University of New Hampshire, and beat back an attempt to remove the money.
And they added $2 million to the University System of New Hampshire in order to freeze tuition for two more years.
Additional money was also provided for the Dual and Concurrent Enrollment Program for the Community College System of New Hampshire to allow high school students to take college courses.
The full House Finance Committee accepted the division’s report on a 14-11 vote.
The subcommittee decided to “right a wrong” done to state retirement system’s Group II members when changes were made about a decade ago.
The change reduced the “multiplier” from 2.5 stepping down to 2 percent for those who were not vested in the system or had been a member for 10 years of more.
That meant people were hired believing their retirement benefits would be larger than they are under the change, explained Rep. Dan McGuire, R-Epsom.
The change restores the 2.5 percent multiplier for those members of the system who were not vested at the time.
The cost is about $25 million a year in general fund money, so the division decided to fund that by retaining the communications tax, which the governor wants repealed and accelerating the phase out of the interest and dividends tax by one biennium.
The change will affect about 1,800 group II members, many in the Department of Corrections, which supporters believe will help with retention as the agency has about half the staff needs.
The division also approved a retention plan for the agency.
The division also included a $50 million, one-time reduction in the retirement system’s unfunded liability as opposed to reinstating a state contribution to the system for non-state governmental agencies such as cities, towns, school districts and counties.
McGuire said over 10 years the $50 million will produce more than $100 million in savings.
The subcommittee also significantly reduced what the governor proposed for a new men’s prison and for new housing.
The subcommittee did include the state employee pay raise the governor wanted of 10 percent for fiscal 2024 and 2 percent for fiscal 2025.
The raise will cost $44.9 million for 2024 in general funds and $101 million in total funds, and $54 million of general funds in fiscal 2025 and $123 million in total funds.
“That’s a significant amount of money for this division,” said subcommittee chair, Rep. Peter Leishman, D-Peterborough,, “and the division supports it and believes all employees should get it.”
The full House Finance Committee voted 15-10.
The committee will resume work on the budget Tuesday morning.
Garry Rayno may be reached at firstname.lastname@example.org.