Committee debates retooling adequacy grants: greater targeting for low‑income and property‑poor districts proposed

The Education Funding Committee examined a cluster of bills that would materially change the state’s school funding formula and the split between non‑targeted base adequacy and targeted grants such as the "extraordinary needs" and "hold‑harmless" allocations.

Why it matters: Committee members considered proposals to reallocate roughly $184 million in extraordinary‑needs funding plus approximately $47 million in hold‑harmless payments into a combination of a fiscal‑capacity disparity grant and a low‑income (free‑and‑reduced) grant — a structural change that could shift significant dollars between districts.

Representative William Ladd, committee chair, and other members walked through a spreadsheet model showing an approach that would raise the differentiated special‑education aid line from the current per‑student level to roughly $3,078 per average caseload, a change Department of Education staff estimated would add about $28 million in annual cost. Committee conversations described the full package modeled as increasing the formula by roughly $55 million over the biennium when combined with targeted adjustments, depending on which line items are changed and whether changes apply in FY26 or FY27.

Representative Luno urged separating the two elements that the current "extraordinary needs" grant combines — namely, (1) lack of fiscal capacity (low equalized property value per pupil) and (2) student need (higher shares of students eligible for free and reduced‑price lunch) — and suggested splitting the roughly $231 million pool into a larger fiscal‑capacity portion and a smaller low‑income grant (Representative Luno suggested, as a model, approximately $184 million for fiscal capacity disparity and $50 million for enhanced free‑and‑reduced support). That approach aims to direct more funds to property‑poor communities while still targeting extra aid for districts serving many low‑income students.

Department staff walked the committee through the special‑education caseload breakdown used in the modeling: 13 categories (autism, emotional disability, speech/language, etc.) with differing recommended caseloads and per‑teacher costs produce a differentiated per‑student cost estimate; the staff noted current differentiated aid totals and how increasing that line would alter the left‑side adequacy pot versus right‑side targeted grants.

Formal committee actions in this block included votes to move bills to ITL or retain for amendment and further work: - HB550 (modify base cost of inadequate education): Committee voted ITL (roll call 18 yes, 0 no). - HB651 (alternative formula elements and resource factors): Committee voted to retain HB651 for further work (roll call 18 yes, 0 no). - HB772 (comprehensive formula package alternative): Committee voted to retain HB772 (roll call 18 yes, 0 no). - HB563 (a major adequacy package containing the proposed differentiated target increases) was discussed at length and scheduled to be taken up next week; members asked for modeling and a single vehicle for any agreed changes. - HB510 (unrelated higher‑education ethics bill) was retained earlier in the afternoon and will be worked on separately (vote recorded 15 yes, 2 no, 1 absent).

Committee members emphasized modeling to understand winners and losers under any reallocation. Representative Ladd described a modest approach tried by staff that targeted the bottom several property‑poor towns to limit large swings elsewhere and capped gains for the largest recipient districts (for example, Manchester), but members said they want multiple models: (1) direct swap extraordinary needs→fiscal capacity; (2) divide extraordinary/hold‑harmless into fiscal‑capacity vs. low‑income grants; and (3) other hybrid approaches.

Next steps: the committee kept HB563 and related bills active for further amendment and asked staff to run additional models showing the distributional impact by municipality and including a version that phases in changes to avoid immediate, large budget swings.

Ending: The committee deferred definitive action, retaining several bills so a single, workably drafted package can be brought back for committee consideration prior to the March executive session cycle.