Good News for Educational Opportunity: New Hampshire Education Tax Credit

A sea change is taking place within the educational paradigm in the United States. Stagnant test scores accompanied by ever-increasing per-pupil costs over the last 40 years have driven American ingenuity to pursue educational solutions outside of the conventional school system. In various states, programs are sprouting to deal with the mounting challenge to deliver a quality education to every student. 

In 2012, New Hampshire passed the Education Tax Credit to provide more options to students and parents in New Hampshire. As one of the fifty laboratories of democracy in action, this state has committed itself to crafting solutions to the crumbling American education system.

The New Hampshire Education Tax Credit (ETC) (HB 1607) allows businesses to write off up to 85% of donations to recognized charitable 501(c)(3) organizations that provide educational scholarships to children of families with incomes up to 300% of the federal poverty line ($69,150 for a family of four). The law also allows for the creation and recognition of these new non-profits by the department of revenue administration. Recognized organizations must provide 40% of their scholarships to students who are eligible for the federal free-or-reduced lunch program, and must limit their administrative costs to 10% of donations. Where the average scholarship value must not exceed $2500, a home schooled student is eligible for only $625, a mandated one-quarter of the normal average.

Although not perfect, the program enables educational entrepreneurs to develop best practices in the delivery of scholarships to low-income students. By utilizing voluntary donations from the private sector, it assumes no cost to taxpayers and circumvents potential bureaucratic waste in the NH Dept of Education. Not only does the ETC enable funds to be tied to students and parents instead of schools, it mandates scholarships to be doled out through non-profit organizations which by law must use 90% of their donations for scholarships.

An arbitrary rule that plagues many fledgling non-profits around the country, this restriction on administrative costs could hurt prospective organizations in their early years where expenses center around acquiring adequate staff and resources, a natural reflex in order to build for the future.

Despite these challenges, the free market-oriented approach of New Hampshire's Education Tax Credit is a grand step forward in the assurance of choice for families looking for the highest quality education available in their area, specifically for those without the wherewithal to pay for it.

Successful implementation of the New Hampshire ETC program over the next session will be key to the preservation of the tradition of educational freedom and school choice in the Granite State. It would do policymakers and pundits well to pay close attention to its implementation over the coming session and the results that follow.

Shout out to Kate Baker and the Network for Educational Opportunity!