CONCORD, N.H. (AP) -- A fledgling New Hampshire program that gives businesses a tax credit for donating to scholarship organizations that send students to private or public schools is under assault on two fronts.
Three civil liberties groups sued this month to block the program as unconstitutional because students could attend religious schools, and now legislators are considering repealing it.
And the House Ways and Means Committee is holding a hearing Thursday on the bill to repeal the tax credit law, passed last summer by Republicans over a Democratic governor's veto. Under the law, the first scholarships cannot be used until the 2013-2014 school year.
The total amount of tax credits that could be issued the first year is $3.4 million and $5.1 million the second year.
The law provides for increases in tax credits in subsequent years. The business donations would go to organizations created to provide scholarships of up to $2,500 to eligible students. The scholarship amount would be adjusted for inflation.
Students attending private schools, public schools outside the student's home district and students schooled at home would qualify for scholarships. Income limits are set on who qualifies to receive a scholarship.
Districts losing state aid above a certain threshold would receive additional money to partially offset the loss of funding when students leave their schools.
So far, only about $120,000 has been pledged toward scholarships for next school year, according to the Department of Revenue.
To date, the Network for Educational Opportunity is the only organization approved to award scholarships, and Executive Director Kate Baker said Tuesday she already has 260 applicants. Baker said she has commitments from companies to contribute $500,000 to the program. Her goal is to raise $1 million and to have 1,000 applicants by June.
"People are looking for options for their families," she said.
She said 60 percent of the applications she has received are from poorer families whose children qualify for subsidized meals at school. The scholarship won't pay the entire tuition at some private schools but could make a difference in the family being able to send their children to the school, she said.
"I'm finding that families make incredible sacrifices for their children's education," she said.
Baker is confident the law will be upheld and eventually will win bipartisan support from lawmakers.
But House Education Chairwoman Mary Gile, a Concord Democrat and the repeal bill's prime sponsor, insists the program will hurt public schools by siphoning off money that could be used to improve them.
"Our primary responsibility as legislators is to ensure New Hampshire's children, our children, have access to the best system of public education we can provide," she said.
She said if 100 Concord students were awarded scholarships and left the public school system, the city could lose several hundred thousand dollars in state aid, she said.
"What people don't realize is if money is reduced, the fixed costs remain," she said. "The fiscal impact of this law is significant," she said.
A hearing is scheduled on the lawsuit on April 26, said Barbara Keshen, staff attorney at the New Hampshire Civil Liberties Union. She said the court has ordered that scholarship organizations be made aware they might not be able to distribute money to students, depending on the outcome of the lawsuit.
"Any business that contributes under the law ... may have to pay their taxes in full to the state," she added.