Education Freedom Accounts continue to expose a deep partisan divide, and that chasm was on full display Tuesday as state lawmakers held dueling public hearings on the policy.
One hearing before the House Ways and Means Committee addressed legislation that would strip language from the EFA law declaring the funds are not “taxable income.”
Another, before the Senate Education Finance Committee dealt with a much larger proposal to remove the current income caps on EFA eligibility, which is currently limited to families earning less than 350 percent of the federal poverty line.
HB402, sponsored by Rep. David Luneau (D-Hopkinton), would repeal the statement that education freedom account funds shall not constitute taxable income to the parent of the education freedom account student. It also requires the timely delivery of IRS 1099 forms to parties responsible for tax liabilities incurred from payments made from an education freedom account.
The line in the law that’s in question is “funds deposited into an EFA shall not constitute taxable income to the parent or EFA student.” Luneau’s bill would repeal that line.
“It’s about being truthful,” he told the House Ways and Means Committee. “It’s about being honest to taxpayers who are taxed to pay for the voucher program and honest to families who participate in the voucher program.”
Republicans like former state Rep. Packy Campbell (R-Rochester) said the bill is unnecessary and suggested it could open the door to creating a tax liability for families using the EFA program.
“This bill is a solution looking for a problem,” he said. “It’s a regressive tax targeting a program that has wonderful benefits.
“This is foolish legislation.”
Tax attorney Bill Ardinger with Rath, Young and Pignatelli dismissed the notion that taking out the language would create a new tax, adding that when it comes to declaring income “taxable,” the federal government had little interest in what the state of New Hampshire had to say about it.
Meanwhile, Ardinger told the committee that some of the expenditures allowed under EFA, such as study materials, might be taxable. And by having the law claim the income isn’t taxable, the state may be misleading families. If a family ends up paying a penalty or being punished by the IRS because they followed the guidance of the law regarding “taxable income,” the state could be sued, Ardinger pointed out.
“That’s where it can bite,” Ardinger said. “By leaving this sentence in the law, you’re biting on a risk that you don’t have to. The state doesn’t have to speak on the federal taxability. It can’t.”
In the state Senate’s Education Finance Committee, GOP supporters of EFAs, like Sen. Victoria Sullivan (R-Manchester), were pushing to expand access to the program by removing income limits.
EFA’s currently reimburse parents and households an average of around $5,200 per student. Current law stipulates that only families and households earning within 350 percent of the federal poverty level are eligible. The current federal poverty level is a little more than $31,000 for a family of four. To be eligible to access EFAs, a New Hampshire family of four would have to make less than $109,200 annually.
EFAs allow families to take that $5,200 of the state’s portion of their child’s public school funding and put it toward alternatives like private school or homeschooling. EFA supporters point out public schools facing declining enrollment still retain the local per-pupil revenue, typically twice or even three times the state dollars, but shed the expenses of educating the EFA students.
Sullivan’s bill, SB 295, would wipe out eligibility requirements entirely.
Pushback by Democrats was heated at times during Wednesday’s public hearing.
“The way EFA is designed, it’s going to be sucking the life out of public schools,” said Cornelia Schneider, an anti-EFA activist from Moultonborough. “What I consider a death by a thousand cuts.”
Sullivan, in her testimony, pointed to polling data showing a large majority of voters support the state’s EFA program. And the fact that parents choose to continue to participate proves they are satisfied with the quality of the education their children are getting.
But parental satisfaction isn’t enough for critics like committee member Sen. Debra Altschiller (D-Stratham), who demanded to see data proving the EFA program’s success.
“How do we justify spending thousands and thousands and millions and millions of dollars more on a program that has no measurable success attached to it?” Altschiller asked.
Sullivan countered that students learning via EFAs must still complete various standardized tests. And, she said, Altschiller is imposing a double standard when it comes to parental choice.
“Public schools have to take assessment and proficiency tests, and in many cases they are failing the children across this state,” Sullivan added. “What happens there? We keep giving those schools more and more money.
“Are you suggesting that if the proficiency is down, we don’t fund that anymore?” Sullivan asked.
The testy exchange prompted Chairman Keith Murphy (R-Manchester) to interject and point out the hearing was a forum for “public information” and not debate.
Companion legislation in the House eliminating requirements also prompted similar testimony during a public hearing last month.
At one point, Luneau — who serves on the House Education Finance Committee — asked Rep. Ross Berry (R-Weare) if he and other Republicans would support EFA accountability audits.
“In Manchester you have proficiencies (percentages) in the teens — in the teens — who is accountable for that?” Berry fired back. “So you can push forward the amendment all you want, but if you’re going to make an accountability argument, my counterpoint would be to start with the failing public school systems first, which cost five times as much as this program does.”
Luneau said his legislation “is honest, transparent, and responsible to voucher families and to taxpayers.”
Committee member and Rep. Jordan Ulery (R-Hudson) responded by calling it “a 10-pound sledge when a finish hammer may be necessary.”
Yet if Democrats are looking to take a sledgehammer to the EFA program, they’ll first have to overcome a large GOP House and Senate majorities, in addition to Republican Gov. Kelly Ayotte.
Ayotte is slated to unveil her administration’s proposed state budget Thursday morning. She has been an outspoken supporter of the EFA program. During last month’s inaugural address, Ayotte voiced her support for the program.
In her testimony, Sullivan referenced Ayotte’s nearly ten-point trouncing of former Manchester Mayor Joyce Craig during the gubernatorial election.
“There is no bigger statement here than the election of Gov. Ayotte,” Sullivan said. “She ran on expanding education freedom and having universal accounts while her opponent ran on ending them.
“The voters made their voices heard.”
