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N.H. Senate Rejects Tax Credit Repeal

Concord — Repealing New Hampshire’s controversial business education tax credit, a legislative priority for Gov. Maggie Hassan and fellow Democrats, ran headlong into the resistance of Senate Republicans who used their slim majority Thursday to block those efforts.

The Senate voted 13-11 along party lines to take no action on a bill to repeal the program giving businesses a tax credit for donating to a scholarship organization that sends students to private and religious schools.

The tax credit was originally passed into law last session when Republicans controlled both houses of the Legislature over a veto by former Democratic Gov. John Lynch.

Republicans are adamant that the program provides educational choice to low-income students who would otherwise not have access to private and religious schools, but Democrats decry it as a backdoor voucher system at odds with the needs of the state’s public schools. The Democrat-controlled House had already approved the bill.

Hassan expressed disappointment with the Senate’s actions.

“At a time when the state and local communities are struggling to adequately fund K-12 education, diverting taxpayer dollars to religious and private schools with no standards or accountability puts an added burden on our communities and sends the wrong message to our young people,” she said in a statement.

Though Thursday’s vote to set aside repeal in the Senate is a blow to Democrats, the fight over the education tax credit program isn’t over.

House lawmakers included a provision repealing it in their companion bill to the budget, meaning repeal will come up again later in the session and could become a bargaining chip in budget negotiations between the two chambers.

Sen. Peggy Gilmore, D-Hollis, called the credit “terrible tax policy” that is overly complex and lacks transparency.

She added that the education credit is 85 percent larger than any other tax credit and grows automatically each year. Democrats fear that if too many of the up to $2,500 scholarships are awarded it will siphon money out of the public education system under which school districts receive payments on a per-student basis. School districts stand to lose on average $4,100 per student that leaves through the program.

Senate Republicans said that the tax credit isn’t being given a chance. The program is capped at $4 million for the first year, but thus far businesses have only donated $140,000. They said that sum isn’t larger because of the uncertainty created by repeal efforts.

“This program is just getting started,” said Sen. Nancy Stiles, R-Hampton, arguing that the programs effect on state aid dollars to school districts won’t be any greater than students relocating out of the district.

“School choice isn’t just about those with means,” said Sen. Andy Sanborn, R-Bedford. The maximum income for eligibility is $57,000 for a family of three and $69,000 for a family of four.

Democrats also said that the tax credit is unconstitutional because it diverts state funds to religious schools. The program is being challenged in Strafford County Superior Court on those grounds.

Republicans said legal challenges to the constitutionality of similar programs in other states have failed.

Stiles said even if the legal challenge is successful the scholarships could still be used at private nonreligious schools.