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Tax Credit Scholarships Set to Change in N.H.

Concord — A statement released today by the Department of Revenue Administration will change the way scholarships are handed out under the education tax credit law next year.

In a release, the DRA clarified a crucial piece of the law that says 70 percent of scholarships must go to students transferring from public to private schools.

The Network for Educational Opportunity, the only group giving scholarships under the law, took that to mean 70 percent of money awarded must go to public school students. But the DRA said yesterday it actually means that 70 percent of the number of scholarships awarded must go to those students.

The ruling won’t change or take away scholarships awarded this year, but it will have a significant affect on the program going forward.

This year, only 13 out of 103 students receiving scholarships transferred from public to private schools. The NEO gave out about $128,000 in scholarships, meaning roughly $90,000 was split between those 13 students. Some of the largest scholarships include $12,000 between two students to attend Liberty Harbor Academy in Manchester, $6,000 to another to attend Proctor Academy in Andover, and $12,000 for one student to go to Tilton Academy.

The other 90 students — home schoolers and students already in private schools — got the remaining money, and therefore much smaller scholarships. Scholarships for home-schooled students averaged $215, which goes toward the purchase of books and materials.

The law, passed last year, lets businesses that donate to scholarship organizations receive up to 85 percent back in tax credits. It allowed for $4 million in donations this year, but actual donations came in far below that at $235,000. Next year, the maximum goes up to $6 million, with individual businesses facing a donation cap of $600,000, according to the DRA’s release.

Kate Baker, executive director of the NEO, said she’s thankful the DRA is allowing this year’s scholarships to remain intact. Although she was surprised by the DRA’s final interpretation of the law, she’s been in contact with the DRA and was made aware of this decision before it was released yesterday. It’s understandable, she said, that interpretations of a new law need to clarified.

“I’m glad that they put this message out there, so that there is no questioning going forward,” she said.

Whether the NEO has to follow the new interpretation in 2014 depends on whether the state Supreme Court lets the law stand.

Eight plaintiffs, led by education advocate Bill Duncan, challenged the law earlier this year, and a superior court judge struck down a provision allowing scholarship money to go to religious schools.

Those plaintiffs have since filed an appeal with the state Supreme Court seeking a complete repeal. The state attorney general’s office and the NEO are defending the law. Both sides are in the process of filing briefs, and the Supreme Court will likely hear the case in the first half of 2014.

Baker hopes the Supreme Court will let the law stand and strike down the lower ruling that stops money from going to religious schools.

That change stopped many needy families from receiving scholarships this year, she said. But Duncan said the small number of public school students receiving scholarships demonstrates that the demand for this program is low.

Baker, however, said the families who have contacted her demonstrate there is a real need for this program. And she plans to keep awarding scholarships no matter how strict the rules get.

“They can make the mountain as high as they want, and I’m going to climb it,” she said.