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Under Construction: Improving New Hampshire's School Building Aid Program

Executive Summary

Date: January 31st, 2011

Building a new school is a hefty financial undertaking, especially for small districts that lack large tax bases. For more than half a century, New Hampshire has helped local school districts pay for new construction through the School Building Aid program. This program has underwritten the construction and renovation of hundreds of school buildings, with the fundamental policy outline largely in place since the late 1950s.

But in recent years, the program’s cost has increased at a rate far exceeding the rest of the state budget, raising concerns about how to maintain this service to local school districts. In a 2006 report, the Center first identified School Building Aid as one of the top drivers of increased state spending; the description remains true today. Requests from districts will exceed $50 million a year in the coming biennium, up from $25 million in FY2003.

Aside from that long-term growth in the program’s cost, lawmakers three years ago made a major change in the way the state paid for School Building Aid. Rather than drawing annual district reimbursements out of the General Fund, the Legislature bonded the payments for FY2009-11, for a total of $131 million. While that decision was made in response to fiscal pressures from the recession, bonding future School Building Aid payments will add to the state’s debt burden in coming years.

In addition, the state has already committed to spending nearly $540 million over the next 30 years on previously approved school construction projects. That long-term obligation complicates attempts at “quick fixes” of the School Building Aid program, such as extending the moratorium on new projects that the Legislature approved last year.

Accordingly, any attempt to redefine New Hampshire’s School Building Aid program must grapple with two distinct sets of problems: the immediate budgetary considerations in funding the program over the next biennium, and the long-term question of how to better define the program’s goals and craft a policy that best achieves those goals.

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