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House limits some recent education formula increases, creates 'fiscal-capacity' aid and reroutes lottery revenue to education
Summary
Representative Jess Edwards said the House left FY2026 adequacy funding unchanged, increased per-pupil special education funding in FY2027 and created a new fiscal-capacity aid to direct money toward low-property-value towns while capping a recent extraordinary-needs grant that had heavily favored large districts.
Representative Jess Edwards, chair of Division 3 for the House Finance Committee, described several changes the House made to the education adequacy formula and to how lottery proceeds are accounted for.
Edwards said the House did not change core adequacy funding for FY2026, but added just over $1,000 per pupil for special education in FY2027 — a change he estimated would cost about $28 million in the second year of the biennium. He also said the House set a proration floor for catastrophic/special-education aid at 80% to avoid the unusually low 68% proration in the current year.
On the new formula components, Edwards said the prior biennium introduced an "Extraordinary Needs Grant" that combined equalized property valuation per pupil and counts of students eligible for free and reduced-price lunch; that change produced large increases for several big districts (he cited Manchester receiving more than $30 million in one year). To address perceived skewing toward larger districts, the House capped the extraordinary-needs grant increase and added a new "fiscal-capacity aid" component tied strictly to equalized property valuation, directed toward lower-valuation towns.
Separately, the House allocated new or higher video-lottery-terminal (VLT) and lottery receipts into a restricted account specifically for public education rather than letting those sums flow fungibly into the overall Education Trust Fund. Representative Dan McGuire told senators the House moved all lottery money, including the additional VLT receipts, "straight to adequate education." McGuire said this accounting move removes constitutional concerns raised in some quarters about how lottery receipts are used.
Edwards said the net effect of the changes to the formula was broadly budget-neutral across the biennium but redistributed roughly $12 million away from Manchester and toward lower-valuation towns; he said Manchester would still remain well above its pre-reform funding baseline. The Senate Finance Committee said it would review the adjustments and ask the Department of Education for technical estimates as it hears testimony during its markup.
