Education Savings Accounts increase choice but could cost city $430K or more

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NH State House.

MANCHESTER, NH – The controversial “Education Freedom Savings Account” bill, SB 193, is scheduled for a House vote in the first week of January. Intended to expand educational choices available to parents and students, it creates an Education Savings Account (ESA) program which enables the transfer of public funds from public schools to parents, who can spend it on private schools or services related to homeschooling.

Opponents say it has the potential to financially cripple public education, if enough students opt for ESAs and exit the system. Supporters, like Kate Baker of Manchester, say it will open up educational opportunities for students.

Kate Baker, Executive Director of Children’s Scholarship Fund NH.

“I am excited about individualizing education for children whose needs are not being met in the public schools,” said Baker, who serves as Executive Director of the New Hampshire office of the non-profit Children’s Scholarship Fund (CSF).

Baker started a local scholarship organization in 2012, and then joined CSF in January, 2016. She works with a varied group of students, including the very bright, and victims of bullying. 11 percent have IEPs for learning disabilities and 77 percent qualify for free or reduced-price lunch.

A November report by The Josiah Bartlett Center for Public Policy, Debunking the Top Five Myths about SB 193, Education Savings Accounts, defends the proposed program against its detractors:

“Rather than being a giveaway to rich families with involved parents, scholarship programs tend to serve low-income families who are desperate to find educational alternatives for their children.  This is because ESAs provide options for families who otherwise have none.”

State Rep. Victoria Sullivan (R-Manchester), a member of the Education Committee and proponent of the bill, wrote that the ESAs, “will help low income families in the Granite State to pursue a greater number of educational choices.  A child’s zip code should not be the only determining factor of the school that they may attend.  We have great schools in New Hampshire, but even a great school is not always the right fit for every single child.  Each child deserves the opportunity to pursue an education that supports their individual gifts, talents, and abilities.”

State Rep. Mary Heath (D- Manchester), also a member of the Education Committee disagreed with Sullivan, saying, “I would like to see more choice in public schools. I would love to see a committee to look at choice, funding, and the options.”

State Education Commissioner Edelblut expresses support for ESAs

Frank Edelblut, NH Commissioner of Education.

Karin Cevasco, co-founder of Gate City Charter School for the Arts in Merrimack, recently wrote an op/ed about her experience while interviewing with Education Commissioner Frank Edelblut for a new charter school leadership position.

Cevasco says Edelblut told her, “We have to get ESAs passed, and that it is the role of this charter school position to advocate for school choice.”

Cevasco contrasted Edelblut’s assertion with the stated purpose of the new position, which is to work with chartered public schools.

Wrote Cevasco, “That floored me. As far as I knew, the Department of Education was not supposed to lobby that way. And the new charter school position as envisioned by the Legislature provides a great opportunity to help New Hampshire charters flourish and to work with district schools to improve education for all our children. Politicization of the charter school office – and of the department, if my interview is any indication – can only be harmful to our schools and the state.”

Edelblut posted a job description that says its goal is to, “provide assistance to stakeholders in other school choice opportunities . . . and developing or revising school choice policies,” according to Cevasco, who said the description later describes working with “charter schools, home schools, and nonpublic schools,” and focuses on “school choice.”

Cevasco, who felt the position was too politicized, has since withdrawn her application. On Dec. 21, the Concord Monitor reported that Edelblut denied the politicization of that position.

Most Manchester students would qualify but the number of applicants is unknown

Most Manchester students would qualify for the program, though it is not possible to estimate how many would apply. To be eligible, K-12 students must meet any of these requirements:

  • Come from households earning less than 300 percent of the Federal Poverty Line ($73,800 for a family of four).
  • Attend a poor-performing school.
  • Have an Individualized Education Plan (IEP).
  • Applied and was not admitted to a public charter school, or been denied for an education tax credit scholarship.

With Manchester’s high poverty rate, most students would meet the financial qualification. In Manchester, 7,737 students out of 13,887, or 56 percent, are eligible for free or reduced-price lunch, a common measure of poverty. 11 percent are English language learners. There is no definition in the bill for a poor-performing school.

Sullivan wrote, “The opponents of this bill have you believe it will decimate our tradition [sic] public schools.  This is simply not true, and has not been the case in states that have similar programs. On average less than 3 percent of eligible students actually take advantage of the program.”

Another Bartlett Center report, Will Education Savings Accounts Decimate Public Schools? Putting ESA Funding in Context, compares the potential reduction in enrollment due to ESAs with natural fluctuations, statewide: “The average change in enrollment from 2010-2015 was a decline of 7 percent.”

City loses up to $8,121 per student who opts for an ESA

An Education Savings Account (ESA) can be used for private and religious school tuition, homeschooling costs, tutoring, and other education-related expenses.

For each student who leaves Manchester schools with an ESA, the school district would lose at least $3,636. The amount would be $5,400 for Manchester students who qualify for the free or reduced cost lunch subsidy. If the student is also an English Language Learner, the district would lose another $711, and for a learning-disabled student with an IEP, it would be another $1,956.

Advancing New Hampshire Public Education writes, “For a child who qualifies in all those categories, unlikely as that is, the district would lose $8,121 to the voucher program.”

The money for each child’s ESA is diverted from the state’s “adequacy grant” to the public school district where the student lives.

About two thirds of the adequacy grant comes from the state’s general fund.

The other third comes from the Statewide Education Property Tax (SWEPT), the tax on local property characterized as state revenue, but normally left in place locally as part of the adequacy payment per child. Manchester currently raises over $20 million via SWEPT. Therefore, for students who opt for an ESA, local taxpayers would be funding private education.

$430,000 loss to Manchester hinges on unfunded state aid to districts

An analysis of SB 193 published in December by Reaching Higher NH, a nonpartisan policy group, predicts that, “Manchester will lose about $430,000 in state aid if just 1 percent of eligible students select a voucher.” The report states that the bill would have a “disproportionate impact on cities.”

“The stabilization grants intended to protect these districts from catastrophic funding losses would cost the state at least $31 million in new spending over the next 5 years,” the report states. The allocation of these funds is not in the bill, and would have to be appropriated separately.

Executive Councilor Andru Volinsky.

Executive Councilor Andru Volinsky of Concord echoes concerns about such stabilization grants.

“My fear is that this provision is illusory. The state currently fails to meet its responsibility to fund the programs it has on the books,” Volinsky wrote. Among these programs, he cites special education (“Catastrophic Aid”), Building Aid, Stabilization Aid for the poorest districts, and phased-out state contributions to pension costs.

Heath said, “This bill could end up costing a lot for local taxpayers. It is very problematic. We need to do our homework better and evaluate the consequences for taxpayers, and most importantly, for children.”

Art Beaudry, Vice Chairman of the Board of School Committee for Manchester, said, “The board never took an official vote on the bill so I can’t speak on of behalf of the board. In my personal opinion and with the research I have done, this will be financially detrimental to the district of Manchester. With the budget crisis we have right now, every dollar is essential.”

Dr. Bolgen Vargas, Superintendent of the Manchester School District, declined to make a statement because the Manchester Board of School Committee has not taken an official position on this bill.

A Bartlett Center report points out that, “School districts, like all organizations, have both fixed costs and variable costs. Fixed costs cannot be changed in the short term, variable costs can be. School districts adjust their variable costs annually based on enrollment figures, which vary year to year, as this paper shows. If it were true that all costs are fixed, then there would be no need to fund enrollment growth, but of course that is not the case. Assertions that any enrollment decline will lead to a tax hike are based on the faulty assumption that all school costs are fixed, none are variable, and enrollments are stable.”

State Representative Connie Van Houten (D-Manchester) explained that if all ESA students came from one class, it would be easy to simply eliminate the class. However, students would come from scattered schools and classes, so the school district would be unable to reduce overhead costs for buildings, salaries, and transportation.

Evidence of improvement?

A fact sheet published by National Education Association (NEA), a statewide union which represents education professionals, states, “There is no valid evidence that such schemes improve the performance of either the students receiving vouchers or those left behind in de-funded public schools.”

Baker said, “Parent surveys indicate that 90 percent see improved academic performance. Standardized test scores are not always the best indicator, particularly when children are set back a grade when entering private school.”

The Bartlett report points to a Florida State University study, in which a Florida program, “attracted higher proportions of minority and low-income students (about 70 percent of participants), and applicants had lower test scores on average than eligible non-applicants before entering the program. The study also found that participants came from lower-performing schools.  Moreover, after receiving a scholarship, these low-income students improved their performance to that of the national average for students from all income brackets.”

Concerns raised about students with disabilities

According to the Reaching Higher report, “Services are not required to be individually tailored to the student, and families are not guaranteed input regarding the services and supports provided. When the funding for the service plan runs out, the school is not obligated to continue to provide support, even if the school year is still in session.”

Rep. Mary Heath

SB 193 specifies that students with disabilities waive their rights under federal and state disability laws, including the right to an IEP, the right to services, and the right to a free and appropriate education in the least restrictive environment.

If parents understood, there would be little incentive to apply. Most students with disabilities would remain in the city’s public schools. If other students exited, this would increase the ratio of disabled students, changing school and classroom dynamics.

However, the bill does not require the Department of Education or scholarship organization to brief parents and students. Reaching Higher NH refers to a Federal report, stating, “The experience of programs comparable to SB 193 in other states indicates parents of students with disabilities may not be aware of the manner in which their student will be treated differently under parental placement.”

Heath said, “Most private schools won’t take children with disabilities. Public schools take every single child.”

NEA states, “Private schools can cherry pick who they want to educate by limiting services for students with learning disabilities and enforcing strict academic or discipline entry requirements.”

“11 percent of the students I’ve worked with have IEPs. The school doors are wide open. Private schools are recruiting and want them,” Baker said.

Bill may encourage discrimination and violate separation of church and state

NEA-NH states, the bill will “promote discrimination. Despite receiving tax dollars, private voucher schools are often free to turn away students who are gay or transgender and students who don’t subscribe to a religious doctrine.”

Baker said, “I have not had the experience of discrimination. I do hear from parents who are dealing with bullying, and I have helped.”

NEA-NH states that the ESAs “violate separation of church and state. Once money leaves the public system, there’s no public accountability for what the school teaches to students, including religious doctrine such as biblically inspired explanations for the origin of the universe and life and views of American history that distort the truth about slavery and the importance of civil disobedience in a democracy.”

If SB 193 becomes law, it would likely face a court challenge. Rep. Mel Myler (D-Hopkinton) said, “The issue is whether tax money should, in essence, go to religious schools.”

Critics assert SB 193 detracts from attention needed to improve public education

“What troubles me the most is that New Hampshire doesn’t fund public schools in the way we should,” Heath said.

NEA-NH views tax credit vouchers and education tax credits as “just the latest in a long list of schemes diverting attention and investment away from essential programs and funding” that should go toward:

  • Recruit, training, and retaining the best teachers
  • Smaller classes for more individualized attention
  • High-quality early childhood readiness programs
  • Tutoring to ensure that those who fall behind aren’t left behind
  • The active involvement of parents and the community

Outsourced financial management raises issues

The ESAs would be managed by a “scholarship organization,” which in return, takes 5 percent in fees. CSF, a nonprofit with 2 employees in New Hampshire, is the only scholarship organization qualified to operate in the state.

Members of the CSF local board with Manchester ties include:

  • Ovide Lamontagne is an attorney with Bernstein, Shur, Sawyer and Nelson, and a board member with Granite Institute, a nonprofit supporting educational choice. He was chairman of the New Hampshire State Board of Education from 1993-1996.
  • Jean Mathieu is a financial advisor who served on the board for Downtown Manchester and the Granite YMCA.
  • Raymond E. Pinard is a management consultant and a board member with Granite Institute. He was formerly Executive VP for St. Mary’s Bank and chairman of the Greater Manchester Chamber of Commerce.
  • Lance Turgeon is a CPA with Howe, Riley & Howe.
  • Harold Turner is the president of H.L. Turner Group Architects and is the chairman of Granite Institute.

The Bartlett Center report states that “the 5 percent fee is about half what the public school system currently spends on administration.” Using a Department of Education financial statement, the report estimates that over 9 percent of NH public school spending is dedicated to administration.

Reaching Higher expresses several concerns about ESA oversight from a scholarship organization:

  • Because the 8-member oversight commission would include the administrator of the scholarship organization, “this may impact the overall rigor and nature of that oversight.”
  • The bill does not prohibit scholarship organization board members or staff, “from having financial interests in education providers, (e.g., private schools, education technology programs, and tutors) eligible for public dollars.”
  • Oversight would rely heavily on annual reviews or reports to identify potentially inappropriate or fraudulent spending. “A 2016 performance audit by the Arizona Auditor General on Arizona’s Empowerment Scholarship Accounts Program recommends forward-looking financial oversight measures (i.e., prevent fraud as opposed to retroactively identify misspending).”

Baker said CSF is currently exploring “Class Wallet” software that will include approved vendors and track purchases for each ESA. She said CSF keeps copies of receipts to share with the Department of Education.

The bill is backed by Wal-Mart heirs, hedge fund executives, and investment bankers.

The Children’s Scholarship Fund champions the bill through its New Hampshire office. Its website states:

“Since 2013, the New Hampshire Education Tax Credit Program has given tax credits to businesses that donate to scholarship-granting nonprofits. Families who meet the income limits can receive scholarships they may use toward private schooling or homeschooling expenses. Children’s Scholarship Fund is the main scholarship granting organization in the Granite State, and is providing scholarships for 122 children during the 2016-17 school year.”

The organization was founded in 1988 by John T. Walton, an heir to the Wal-Mart fortune, and investment banker Ted Forstmann. Both are now deceased. Christy Walton, another Wal-Mart heir, is a board member emeritus. Board members include executives for hedge fund management firms and investment banking firms.