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Education Tax Credits: HB 1607 and SB 372
HB 1607 is scheduled to be acted upon by the House Ways & Means Committee next Tuesday. The recommendation offered by the subcommittee establishes an 85% education tax credit against the business profits tax and/or the business enterprise tax for businesses that contribute to scholarship organizations that award scholarships (vouchers) to be used by students to defray the educational expenses of attending a nonpublic school or for limited home education expenses. Eligible students are any pupils currently attending a public school, including a charter school, those who already received a scholarship in the prior school year, or any student from a household where the income is less than or equal to 300% of the federal poverty guidelines. The average value of all scholarships awarded shall not exceed $2,500. The Dept. Educ. will use SASIDs to determine the number of pupils receiving scholarships and who were counted in the calculation of the ADM attendance for a school district, and for each such pupil, shall deduct their adequacy aid from the total amount distributed to the district. This calculation shall be completed prior to September 1 of the year in which grants are made, but obviously AFTER budget adoption. The subcommittee favors a "phase-in" approach to allow dealing with unintended issues and "working out the details", suggesting a 3-year phase in, at a maximum of $3.4 million in tax credits for the first year, $5.1 million in the second year, and $6.8 million subsequently. The Dept. of Education estimated a loss of nearly $3.9 million in state aid to local school districts in the first year.
SB 372 is scheduled for a vote before the full Senate next Wednesday, March 21. While basically similar to HB 1607, the Senate version does not contain a "phase-in", allowing an aggregate of $6.8 million in tax credits. Fiscal impact statements prepared by the Department of Education estimate more than a $7 million loss in state aid to school districts. The Dept. of Education will determine reductions in state aid to districts during the summer and prior to the Sept. 1 payment of Adequacy Aid. These losses in revenue come after budget adoption and pose difficult financial considerations for local school boards.
ACTION ITEM
Please contact your local senator and legislators as well as members of the House Ways and Means Committee, expressing your opposition to these bills. Diverting money from the state and local districts for private school purposes is the bottom line of this legislation since tax credits reduce the tax liability dollar for dollar. Local districts will see no reduction in their expenses and fixed costs when small numbers of K-12 students leave the public school, yet will still be required to forfeit $4-$7 million in adequacy funds. It is hard to understand why the legislature would consider a proposal to reduce revenues while not currently paying the bills it owes. Rather than diverting scarce tax dollars away from our public school classrooms, NHSBA urges the legislature and congress to support improvements in our public schools and meet current funding obligations and promises.
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Defined Contribution Plan and the NHRS
SB 229, the Senate proposal to establish a defined contribution retirement plan, was amended by the Senate Executive Departments and Administration Committee. Scheduled for a vote in the full Senate next Wednesday, the 4-0 Committee recommendation is to establish a Study Commission to make recommendations on whether the current NHRS system should be replaced with a defined contribution plan for all new hires. The 17 member commission would consist of three House members, two Senators, the Chair of NHRS, two employee representatives from Group I and another two from Group II, four employer representatives (NHSBA, NH Municipal Assn, NH Assn Counties, State of NH), one public member with expertise in financial management, and finally two public members with expertise in the design and administration of defined contribution plans. The Commission shall evaluate and compare defined contribution plans in other states and evaluate the effect on the state's current retirement account balances, including the unfunded accrued liability. A report on findings and recommendations for proposed legislation is due on or before December 1, 2013.
HB 1460 originally proposed establishing a committee to study additional public employee pension reforms. However, the House Special Committee on Public Employee Pensions Reform is considering an amendment to change the bill to one that implements a Defined Contribution Plan, essentially mirroring the original version of SB 229. While Defined Contribution plans have certain appeal, NHSBA remains concerned that given our current unfunded liability and concurrent transition costs, including payments on behalf of new hires but dedicated for the "defined benefit plan unfunded liability", the NHRS actuary's analysis shows higher costs associated with the new proposal. The analysis also shows that a shortfall in payments to the unfunded liability would require an increase in employer rates. In addition, under current GASB rules when the Defined Benefit plan becomes a closed group (no new members), the actuaries believe contributions on the unfunded accrued liability may no longer be based on a level percent of payroll, but a level dollar method reflecting the declining payroll of the closed active population of the (DB) plan. This results in an estimated increased cost of over $100 million to public employers in the first year alone. The public hearing on this proposed amendment is Monday at 9am, with likely action on a Committee recommendation following the hearing.
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Spiking and the 125% Penalty Assessment
SB 228, repealing the provisions that establish assessments for excess benefits to be paid by employers in the retirement system, has been recommended Ought to Pass on a 7-0 vote by the Senate Finance Committee. The full Senate considers the bill next Wednesday.
ACTION ITEM
Please continue to let your senator know your support for this bill, which repeals the flawed pension spiking provision scheduled to take effect on July 1, 2012. Retirement reform measures adopted last year impacting non-vested and new employees will, over time, address the issues concerning pension "spiking", and school boards have also begun implementing severance package limitations in their negotiated contracts. Please contact your Senator and urge passage of SB 228 to repeal the spiking provision.
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Constitutional Amendment
CACR 12, as amended by the Senate to provide that the legislature has the full power, authority and responsibility to define standards for public education, establish standards of accountability, mitigate local disparities in educational opportunity and fiscal capacity, and have full power and authority to determine the amount of state funding for public education, was rejected by the House on a 54-287 vote, primarily due to the word "responsibility". The House then voted to request a Committee of Conference with the Senate in an effort to reach agreement between the two bodies, and appointed Reps L.Ober, Hess, Balboni, and Renzullo to the negotiations. The Senate must now consider the House request, possibly as early as next week.
CACR 8, scheduled for a House vote this week, was put off until next week. This proposal stipulates that local communities shall make adequate provision at their own expense for their schools, provided that the legislature may supplement that provision in the manner and degree that the legislature finds most beneficial to the general good. The House will be voting on the Committee recommendation of Ought to Pass.
ACTION ITEM
Contact your representative and urge their opposition to this proposal. Specifically share NHSBA's resolution that opposes any effort to amend the constitution in such a way that is contrary to the current interpretation of, and court rulings in, both the Claremont and Londonderry decisions. The state is a partner in providing education, and state funding plays an integral role in its support and delivery. Significantly reducing the amount of state aid will place even more strain on the local property tax, if those lost revenues are indeed replaced. If not replaced but followed by budget cuts, losses and reductions in educational programs will lead to fewer educational opportunities for our youth.
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Default Budgets
Several bills currently remain "alive" that address the issue of Default Budgets for SB 2 (official ballot) districts:
SB 210 provides that the default budget shall not exceed the prior year's operating budget. This bill remains under review in the Senate Public and Municipal Affairs Committee. Such a proposal ignores the fact that school boards may need to respond to unanticipated expenditures and increased costs, such as increases in energy costs (transportation fuel, heating fuel, etc.), increases in new collective bargaining agreements, increases due to changes in enrollments, such as increased costs for services associated with new students, and initial debt service payments when bonds are approved.
SB 269 reduces the default budget by "appropriations contained in the operating budget not likely to recur in the succeeding budget, as determined by the governing body". This bill has passed the Senate and been referred to the House Municipal and County Govt. Committee. A hearing has not yet been scheduled.
HB 1329 reduces the default budget by "Any reductions made by the governing body in the proposed operating budget." This bill passed the House this week and now goes to the Senate for consideration.
SB 238 establishes a committee to assess the form of government in towns that have elected the official ballot process. A committee of 3 senators and 3 representatives shall study the changes that have been made in the law, take testimony from any interested party, and assess how procedures currently in effect are working and whether a quorum requirement should be instituted. The bill has passed the Senate, and a hearing in the House is scheduled for April 12 at 10:45 before the Municipal and County Government Committee.
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