State education funding is doled out according to a formula that takes into account, among other things, average daily enrollment and the number of students receiving free or reduced-price meals. During the pandemic, the formula was thrown out of whack, resulting in sharp reductions in funding for many school districts.
The federal government changed the lunch law last year to make sure all families received the food, even if their children were learning remotely during the pandemic. Because they were receiving the meals, many families that would have filled out the enrollment applications did not do so, yet the state uses those enrollment figures, as well as attendance figures, to determine state aid to school districts.
Lawmakers had increased state aid to education by $168 million in the biennial budget approved in September 2019 by returning stabilization grants to their original level and providing additional aid to property-poor districts and those with more low-income families. Now, school districts could be losing about $90 million of that state aid.
Keene Senator Jay Kahn is sponsoring legislation — Senate Bill 145 — to preserve current state funding, saying, “Without legislative intervention, these drops would result in decreased funding for our school districts at the worst possible time.”
Governor Chris Sununu, in his budget address last week, said he wants to address the problem with free and reduced lunch figures, but SB 145 and another bill under consideration — House Bill 623 — would make sure the funding remains, regardless of what happens with the governor’s budget.
SB 145 would use the past school year’s attendance and free and reduced lunch figures to determine state adequacy aid to school districts, and resume disparity aid in the second year of the biennial budget to help the 80 school districts with the lowest property valuations per pupil, resulting in the highest tax rates.
HB 623 would have the state distribute the same amount of education aid as last year for the next two fiscal years.
Tax Cap Arguments
The Newfound Area School District operates under a tax cap that limits spending to a level that would not exceed a 2 percent increase in the property tax assessment to the member towns — Alexandria, Bridgewater, Bristol, Danbury, Hebron, Groton, and New Hampton. Because of the anticipated reductions in state education aid, the Newfound Area School District Budget Committee had endorsed a budget that would have eliminated junior varsity sports and reduced music, special education, technology, and other spending.
Voters at the district’s deliberative session voted to break the cap and add nearly a million dollars to the budget in hopes of preserving the programs, resulting in a projected 9 percent increase in taxes. The final decision on the budget will occur during a ballot vote on March 9.
Also on the district ballot in March will be two petitioned articles, one to raise the limit on taxes from 2 to 3 percent and the other to rescind the tax cap.
Newfound’s tax cap, adopted a decade ago, is based on the formula used in Franklin. The City Council there first adopted a spending cap, placing a limit on the increase in the budget. Councilors soon recognized that a cap on spending ignores the revenue side of the budget: Increased revenues, whether through state and federal aid or grant funding, could only be used to reduce taxation, not to help provide needed services, because spending was limited. Once the taxes are reduced, they are capped in future years, making it impossible to catch up.
Franklin amended its cap to focus on the taxes themselves. Now, if there are the revenues to support more spending, the money can be used. The cap only limits the amount of money coming from taxpayers’ pockets.
That is the type of cap that Newfound uses. It means that, in good years, the district can use grants and other revenue to expand educational programs and take care of infrastructure without impacting taxes. In average years, it can keep programs ongoing, but may face a challenge if there are costs beyond its control, such as health insurance increases, higher electric bills, more expensive heating costs, contractual obligations, and building maintenance. It can spend more, as long as the amount coming from taxpayers does not increase by more than 2 percent year-to-year.
Then there are times like the present when a 2 percent increase in the tax assessment cannot make up for reductions in revenues.
Supporters of the tax cap want to make sure that the school district remains “within its means” and does not start spending wildly. Franklin’s tax cap came about because taxpayers were hit with higher taxes to pay for a new middle school building at the same time the city was switching from a calendar-year budget to a July-June fiscal year, meaning that taxpayers had to pay for an 18-month budget in one year during the switchover.
Opponents of the tax cap cite problems such as this year’s where a revenue stream over which the district has no control forces drastic cutbacks in spending and may jeopardize critical educational needs. Another objection to a tax cap is that the formula replaces judgment. In order to insulate against future shortfalls, it becomes necessary to spend the maximum allowed under the cap, regardless of need; otherwise, there is no opportunity to catch up in future years.
The cap does have an “escape valve” that allows voters to override the cap, as they did at this year’s deliberative session.
By increasing the cap from 2 to 3 percent, the district would have a better ability to overcome revenue shortfalls without cutting programs.
By eliminating the cap entirely, officials would be able to assume the authority to weigh needs against taxpayers’ ability to pay, without the artificial constraints of the cap.
Those are the decisions facing voters on March 9.
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