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Half of scholarship cash from business tax credit donations returned

New Hampshire Union Leader

February 02. 2014 9:23PM

Half of the money donated by New Hampshire businesses to a scholarship fund for schoolchildren last year went unused and had to be returned because of a state court decision barring scholarships for families who choose to send children to church-related schools.

The money was granted as part of a program that gives businesses a credit against 85 percent of their state business profits tax for donations to a scholarship fund. The fund provides scholarships to children who pay tuition to attend private or out-of-district schools or who are home-schooled.

A Strafford County Superior Court ruling last year barred the use of money raised through the tax credit program to provide scholarships to schools affiliated with "any sect or denomination."

Judge John Lewis ruled that the state is "expressly forbidden" by the state Constitution from funding what he termed "religious education."

That decision has been appealed to the state Supreme Court.

Kate Baker, executive director of Network for Educational Opportunity (NEO), one of the groups in the state authorized to raise and spend money under the program, said of $250,000 her group raised by last June's deadline for the current school year, $125,000 had to be given back.

"The legislation says 70 percent of the dollars need to go to children going from public to private schools or for home schooling," Baker said. "One-half to three-quarters of private schools in New Hampshire have some religious affiliation, so based on the metrics in the legislation, we could only use $125,000 of what we had."

The money was refunded to the donors pro rata, which means every business that gave money had part of it returned.

Despite having to return half of the donations it received, Baker said her group is on solid footing with its donor base, which it is working to expand this year.

"We proved our capacity to work with the Department of Education and the Department of Revenue," she said. "We have also been re-approved, which shows our ability to administer the program."

Over the weekend, about 75 of the approximately 100 families that received the $125,000 in scholarship funds allocated for 2013-14 gathered in Laconia to celebrate the program. Baker said 91 percent of the recipients were from families that qualified for free or reduced-price lunches.

"It was a nice opportunity to both celebrate National School Choice Week and to shine the spotlight on out families," Baker said.

Fifty-six of the scholarships were given to children who are home-schooled. Most of that scholarship money will be spent to purchase books for students, Baker said.

The state Supreme Court agreed last August to hear an appeal of the ruling banning use of the scholarship funds for church-related schools. The court has not yet scheduled oral arguments.

While the state Attorney General's Office has the responsibility of defending the constitutionality of a law enacted by the state Legislature, Gov. Maggie Hassan, who appointed Attorney General Joseph Foster, called in a friend-of-the-court brief for upholding the ban on religious school scholarships.

The Attorney General's Office argued in Superior Court that the money donated by businesses never goes into state coffers, so it can't be considered public money.

In their amicus curiae brief, attorneys for Hassan argue that because much of the donations are effectively reimbursed through the tax credit, it is the same as public funding of a church-related school.

"[Public] financial support of religious schools would ,,, violate the constitutional rights of New Hampshire taxpayers who do not wish their tax dollars to subsidize operation of such schools," the governor's lawyers argued.

While waiting for the state constitutional issues to be resolved, NEO is preparing for its second year of awarding scholarships, with a goal of doubling its donations — to $500 million.

"It will be easier to raise the funds this year," Baker said. "We have shown that people want to invest in education and help children where they need it most."

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