First published in Business New Hampshire Magazine, October 21, 2026.
Nearly two in every three dollars of public school funds in NH comes from local property tax collections. However, state government provides aid for local public education, called Adequate Education Aid, which is distributed through the state’s education funding formula.
The state calculates aid based on the number of students as well as certain characteristics of the students who live in each community, applies revenue from the Statewide Education Property Tax, and provides additional state funding when required by law.
How Education State Aid is Calculated
Base aid: $4,351 per student
Differentiated aid: students eligible for free and reduced lunch: $2,441 per student students with an individualized
education program (IEP): $2,229 per student
English language learners: $849 per student
SFY 2027 estimated total aid: $817.8 million or $5,492 per student
The state adds base aid and differentiated aid to calculate student-based funding. The state estimates there are approximately 148,900 students in NH’s K-12 public schools during SFY 2027. Based on student counts and characteristics, total calculated student adequacy aid is an estimated $817.8 million, or $5,492 per student statewide. This is approximately 20% of the $4 billion in total revenue received statewide by local school districts.
The second part of the calculation is a main funding mechanism, the Statewide Education Property Tax (SWEPT). SWEPT is a major source of revenue for the Education Trust Fund. The state uses SWEPT as one of its revenue sources to fund public education. State law requires the tax rate be set at a level expected to raise a target amount of $363 million statewide each year.
Although SWEPT is a state tax, municipalities are responsible for raising the revenue. The state compares each municipality’s SWEPT revenue with the aid owed to communities through the education funding formula. If SWEPT covers the entire amount, the state does not provide additional cash from other sources for the education funding formula. If SWEPT does not cover the full amount, the state remains responsible for the difference.
Some municipalities (mostly those with high property values and low student enrollment) raise more SWEPT revenue than is needed to cover the amount owed to their students’ education by the state, and NH law allows them to retain the excess amount.
The third part of the Adequate Education Aid formula involves determining how much the state sends to local governments for education. When SWEPT does not cover the full calculated obligation, the remaining amount is funded through other revenue sources in the Education Trust Fund, including business taxes and profits from the Lottery Commission.
For communities that do not raise excess SWEPT revenue, the state evaluates certain community characteristics and provides grant funding to target additional aid. Extraordinary Needs Grants direct additional aid to municipalities that have lower property wealth and a larger proportion of students from households with low incomes. Fiscal Capacity Disparity Aid supports municipalities with lower taxable property wealth per resident student. Hold Harmless Grants temporarily replace some aid that municipalities lost when the state changed the education funding formula. These grants help municipalities adjust to lower funding and are decreasing over time.
The cost to educate students as reported by school districts far exceeds the state’s contributions, and state aid as a share of total revenue for K-12 education has been dropping while local property taxes have increased to cover the difference. The state has yet to address a 2025 State Supreme Court decision that required more aid be distributed to provide an adequate education. The next state budget, which will take effect in mid-2027, will provide the next best opportunity to make changes to the education funding formula.
Ben Reynolds is senior policy analyst with the NH Fiscal Policy Institute in Concord, a research nonprofit that examines issues related to the state budget, policy and the economy. For more information, visit nhfpi.org.