New Hampshire's Scholarship Tax Credit Program

March 14, 2014

New Hampshire's program of scholarship tax credits (STCs) has been a massive success and other states should look to the program as an example, says Jason Bedrick, a policy analyst with the Cato Institute's Center for Educational Freedom.

STC programs are one way of expanding opportunities for students. Basically, an STC program gives tax credits to individuals or businesses that donate to these organizations.

Currently, there are 14 STC programs operating in 11 states (Arizona, Florida, Georgia, Indiana, Iowa, Louisiana, New Hampshire, Oklahoma, Pennsylvania, Rhode Island and Virginia), serving more than 150,000 students. Not only do the programs benefit students, but they save taxpayer dollars.

New Hampshire's program has been especially successful.

  • In 2012, the state legislature passed the Opportunity Scholarship Act (OSA), which allowed scholarships to cover homeschooling expenses. Corporations (there is no individual income tax in New Hampshire) receive a 75 percent tax credit for their contributions to scholarship organizations.
  • Scholarship organizations cannot use more than 10 percent of the donations for administrative expenses -- a minimum of 90 percent must be disbursed as scholarships.
  • All recipients must be between the ages of 5 and 20 years old and cannot have a household income greater than 300 percent of the federal poverty line (in 2013, this would have been $70,650 for a family of four).
  • The Network for Educational Opportunity (the only scholarship organization that is active in the state of New Hampshire) distributed $128,340 to 103 students in the 2013-2014 school year.
  • Of those students, 91 percent are from families with incomes that qualify for the federal school lunch program.
  • In a survey, 97 percent of parents were satisfied with the private or home schools that they chose. Sixty-eight percent saw measurable academic improvement since the receipt of the scholarship. Three quarters of private school parents said that they would not have been able to afford tuition without the scholarship.

STC programs decrease state revenue with the tax credits, but they save the state money when a child switches from the public school system into a private system. In all states with STC programs, the average scholarship size is significantly less than the cost per-pupil in public schools. Parents have been extremely satisfied with the program and have been able to choose schools that best meet their children's needs.

Source: Jason Bedrick, "Live Free and Learn: A Case Study of New Hampshire's Scholarship Tax Credit Program," Show-Me Institute, February 2014.

 

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