SB 0131

AN ACT establishing a school choice certificate program.

SPONSORS: Sen. Johnson, Dist 2; Rep. Hunt, Ches 7; Rep. Alger, Graf 6; Rep. Slocum, Hills 6

This bill authorizes the state to establish and make appropriations to the 21^st century scholars fund, a non-profit, public and private partnership that will provide educational scholarships to eligible New Hampshire school children in kindergarten through grade 12 to attend a qualified school.

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Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.

Be it Enacted by the Senate and House of Representatives in General Court convened:

1 New Chapter; 21^st Century Scholars Program. Amend RSA by inserting after chapter 193-H the following new chapter:

III. “Educational scholarships” means grants to pupils to cover all or part of the tuition and fees at a private qualified school or all or part of the tuition and fees at a public school outside the school district in which a pupil resides.

IV. “Eligible pupil” means any pupil who is legally allowed to attend a public school in kindergarten through grade 12 and whose family income does not exceed 250 percent of the federal poverty income level.

V. “Parent” includes a guardian, custodian, or other person with authority to act on behalf of the child.

VII. “Qualified school” means a public or nonpublic school in our state that complies with all of the requirements of the program.

VIII. “21^st century scholars fund” or “fund” means an entity that is determined by the Internal Revenue Service to be a tax exempt organization pursuant to section 501(c)(3) of the Internal Revenue Code, as that section now exists or may hereafter be amended, established by the state to collect and administer funds that are to be used for the purpose of providing and managing the delivery of scholarships to eligible pupils.

193-I:2 Corporation Established. There is hereby established a body politic and corporate having a distinct legal existence separate from the state and not constituting a department of state government, to be known as the 21^st century scholars fund corporation to carry out the provisions of this chapter. The corporation shall be a public instrumentality which shall perform public and essential governmental functions of the state as provided in this chapter. The corporation shall be a private nonprofit corporation and shall have all the powers necessary to carry out the purposes of this chapter, including, but not limited to, the power to receive and accept grants, loans, or advances of funds from any public or private agency and to receive and accept from any source, contributions of money, property, labor, or any other thing of value, to be held, used, and applied for the purposes of this chapter.

I. The powers of the corporation shall be vested in 12 members for 3-year terms of office as follows:

(b) One member of the house of representatives, appointed by the speaker of the house of representatives.

(d) Two public members, appointed by the speaker of the house of representatives.

II. The initial terms of office shall be as follows: the member in subparagraph I(e)(3) shall serve for one year; the member in subparagraph I(e)(1) shall serve for 2 years; and the members in subparagraphs I(c), I(d) and I(e)(2) shall serve for 3 years. The members in subparagraphs I(a)-(b) shall serve terms which are coterminous with their terms in office.

III. The members shall elect annually from among their number a chairperson and such officers as they may determine. A member shall hold office until a successor has been appointed and qualified. Members shall receive no salary for the performance of their duties under this chapter, but each member shall be reimbursed for reasonable expenses incurred in carrying out duties under this chapter. Any such expenses by board members shall have prior approval by 6 members of the board of directors before reimbursement. Legislative members shall receive mileage at the legislative rate when attending to the duties of the board. A member of the board of directors may be removed for cause by the official who appointed that member.

IV. There shall be no liability on the part of, and no cause of action shall arise against, any member of the board, or its employees or agents, for any action taken in the performance of their powers and duties under this chapter.

V. The board shall have complete fiscal control over the corporation and shall be responsible for all corporate operations.

VI. Board meetings shall be held at the call of the chairperson or when 3 members so request. Six members of the board shall constitute a quorum and the affirmative vote of 6 members shall be necessary for any action taken by the authority. No vacancy in the membership of the board shall impair the right of a quorum to exercise all the rights and perform all the duties of the corporation.

(a) Notify the department of education of the board’s intent to provide educational scholarships to pupils attending qualified schools, and which public school districts those pupils reside in.

(b) Provide a receipt for contributions to the organization by an individual taxpayer or corporate taxpayer for support of educational scholarships to the department of revenue administration and the taxpayer.

(d) Consult appropriate professional organizations and establish standards providing educational scholarships.

(e) Develop and implement a plan to publicize the program and the procedures for enrollment in the program and to maintain public awareness of the corporation and the program.

(f) Secure staff necessary to properly administer the corporation. Staff costs shall be funded from state funds appropriated by the legislature and such other private or public funds as become available. The board shall determine the number of staff members necessary to administer the corporation.

(g) Ensure that at least 90 percent of its expenditures are for educational scholarships.

(h) Require applicants to provide a tax return, proof of current residence in New Hampshire, and proof that the pupil was continuously enrolled in a public school during the prior school year.

(i) Make every effort to make the program easily accessible and usable by the public.

(j) Inform parents of educational scholarship recipients of their acceptance into the program no later than 30 days after receiving the application.

(k) Ensure that first-time recipients of educational scholarships were continuously enrolled in a public school during the previous year.

(l) In the case of oversubscription to the program, conduct a random selection from scholarship applicants to determine who shall receive an educational scholarship.

(1) $3,500 for families that have a family income of 200 percent or less of the federal poverty income level upon the initial application to the program.

(2) $2,500 for families that have a family income between 201 percent and 250 percent of the federal poverty income level upon initial application to the program.

(n) Ensure that once a pupil receives a scholarship, the pupil is offered a scholarship in any future years, until he or she reaches the age of 21 and provided that he or she meets other necessary requirements for eligible pupils.

(o) Ensure that educational scholarship payments are made out to the parents of the pupil and sent to the qualifying school of choice for endorsement by the parent to the school.

(p) Conduct criminal background checks on all employees of the corporation, and shall exclude from employment any people that might reasonably pose a threat to the safety of children or a risk to the appropriate use of contributed funds.

(q) Ensure that pupils receiving an educational scholarship take either the state tests or nationally recognized norm-referenced tests in math and language arts, or both, and ensure that the pupils’ scores are provided to their parents.

VIII. The program shall not provide educational scholarships for pupils to attend any school with paid staff or board members, or relatives thereof, in common with the staff members of the fund.

IX. Provide an annual report, the first on or before January 1, 2007, to the governor, senate president, speaker of the house of representatives, and commissioner of the department of education on the development of the program. This report shall include information prepared by a certified public accountant regarding grants made in the previous calendar year and shall include:

(a) The total number and total dollar amount of contributions received during the previous calendar year; and

(b) The total number and total dollar amount of educational scholarships awarded during the previous calendar year, the total number and total dollar amount of educational scholarships awarded during the previous year to pupils who are in families that are in each subgroup of qualifying income for the federal poverty income level; and

I. In the first year of the program, parents shall apply for scholarships for their eligible pupils by August 31, 2006. In subsequent years, parents shall apply for scholarships for their eligible pupils by July 31.

II. Parents shall provide a copy of their income tax return, along with any application materials required by the program.

I. The department shall provide a standardized format for a receipt to be issued by the fund to a taxpayer to indicate the value of a contribution received. The department shall require a taxpayer to provide a copy of this receipt when claiming the tax credit for contributions to the fund.

II. The department shall have the authority to conduct either a financial review or audit of the fund if possessing evidence of fraud.

III. The department shall develop a process to make tax credits available for contributions on a first come, first serve basis.

IV. The department shall report to the state treasurer’s office by June 30 of each year the amount of dollars raised from private sources and request that treasurer issue a check to the fund in the amount mandated by this chapter by August 1 of each year.

II. All nonpublic schools shall have nonprofit status under the Internal Revenue Code in order to be qualified under this chapter.

III. Schools shall not refund or rebate any portion of the scholarship to the parent. Any refund for rebate for any portion of the scholarship shall be made to the fund.

IV. Pupils receiving an educational scholarship from the fund shall take either the statewide education improvement and assessment tests pursuant to RSA 193-C, or a nationally recognized norm-referenced test in math and language arts, or both. Pupils’ scores in such tests shall be provided to their parents.

V. No nonpublic school shall apply any funds received under this chapter to the cost of religious classes or other sectarian educational programs or services. The nonpublic school shall return any remaining payment to the pupil’s resident school district.

193-I:7 Special Education Services. No pupil shall be considered an out-of-district placement for the purposes of receiving special education services while participating in the program. Participation in the program shall not affect a pupil’s eligibility to receive special education services upon such pupil’s return to the school district in which he or she resides.

I. A credit applied against the interest and dividend tax due under RSA 77 shall be available on a first-come, first-served basis to qualified individuals in an amount equal to the amount of contributions made to the fund during the taxable period. The total amount of the credit for all qualified individuals in a taxable period shall not exceed $100,000.

II. A credit applied against the business enterprise tax due under RSA 77-E shall be available on a first-come, first-served basis to qualified businesses in an amount equal to the amount of contributions made to the fund during the taxable period. The total amount of the credit for all qualified businesses in a taxable period shall not exceed $400,000.

I. The sum of $1 for the fiscal year ending June 30, 2006 is hereby appropriated to the 21^st century scholars fund established in this act. The governor is authorized to draw a warrant for said sum out of any money in the treasury not otherwise appropriated.

II. The sum of $1 shall be appropriated to the 21^st century scholars fund upon the request of the 21^st century scholars fund corporation board, and certification received by the board from the treasurer of the state of New Hampshire, that private contributions to the 21^st century scholars fund from individuals or businesses equals or exceeds $500,000. The governor is authorized to draw a warrant for said sum out of any money in the treasury not otherwise appropriated.

3 New Section; Taxation of Income; Credit for Contributions to 21^st Century Scholars Fund. Amend RSA 77 by inserting after section 4-f the following new section:

77:4-g Adjustments for Contributions to the 21^st Century Scholars Fund. A taxpayer who pays the interest and dividend tax pursuant to RSA 77 and is not a dependent of another taxpayer may claim a credit for a contribution made to the 21^st century scholars fund established in RSA 193-I:8. An individual, corporation, or non-profit entity who does not file a New Hampshire state tax return may claim a charitable deduction for a contribution made to the fund as may be permitted by law. The credit may be claimed against the interest and dividend tax by an individual taxpayer in an amount equal to the total contributions made to the fund during the taxable year for which the credit is claimed. The credit may be claimed by an individual taxpayer or a married couple filing jointly in an amount equal to the total contributions made to the fund for educational scholarships during the taxable year for which the credit is claimed up to 100 percent of the taxpayer’s tax liability. Individual or corporate donors may give an unlimited amount in contributions above the dollar amount to which they are entitled a credit, but shall only be entitled to the credit as provided in RSA 193-I:7.

4 New Section; Business Enterprise Tax; Adjustments. Amend RSA 77-E by inserting after section 3-a the following new section:

77-E:3-b 21^st Century Scholars Fund Credit. Credit for contributions to the 21^st century scholars fund as provided in RSA 193-I shall be allowed against tax due under this chapter. The credit may be claimed against the business enterprise tax by a taxpayer in an amount equal to the total contributions made to the fund during the taxable year for which the credit is claimed up to 100 percent of the taxpayer’s total liability. Individual or corporate donors may give an unlimited amount in contributions above the dollar amount to which they are entitled a credit, but shall only be entitled to the credit as provided in RSA 193-I:7.

The Departments of Revenue Administration and Education state this bill, as amended by the Senate (Amendment #2006-0468s), will decrease state revenue by an indeterminable amount in FY 2006 and by $500,000 in FY 2007 and each year thereafter. State expenditures will increase by $1,000,000 in FY 2006, $1,030,000 in FY 2007, and by $20,000 in FY 2008 and each year thereafter.

This bill appropriates $1,000,000 from the general fund to the 21st Century Scholars Fund in FY 2006, and $1,000,000 from the general fund to the 21st Century Scholars Fund upon certification by the 21 Century Scholars Fund Board that private contributions to the fund have reached $500,000 for the purposes of this act.

The Department of Revenue Administration assumed the maximum amount of both tax credits; the business enterprise tax credit and the interest and dividends tax credit, will be taken by taxpayers each year, therefore, the $1,000,000 appropriation contingent upon private donations will occur in FY 2007. The Department assumed costs to implement this bill would include modifications to the computer system, changes to the tax forms, tracking the amount of the tax credits, and dealing with taxpayer issues, such as appeals. The Department is not able to determine the impact in FY 2006 since this bill is effective upon passage, and the actual date is not known.

The Department of Education stated there were 22,736 non-public school children in New Hampshire for the 2004-05 school year. The Department does not have the information on family income necessary to determine how many families would qualify for the scholarships and is not able to estimate how many families would apply.