School Funding

New Education Funding Lawsuit Focuses on City-to-City Property Tax Inequality – New Hampshire Bulletin

The village of Penacook is 6 miles down the road from downtown Concord. In almost every way, its residents are residents of Concord.

But when it comes to education funding, residents face different realities. Landowners in Concord paid $12.46 in annual local property taxes for every $1,000 of their home’s value in 2021. Landowners in Penacook, whose students attend a different school district, paid $15. $.41. For a $400,000 home, the difference between locations is $1,180 per year.

The gap — and others like it between cities across the state — is a central theme of a new lawsuit taking the state’s school funding model. This one, unlike another pending trial in Rockingham County, focuses on the taxpayers.

The New Hampshire Schools Funding Model allocates a minimum of $3,709 per child per year to each school district, a number that averages out to about $4,600 with supplemental aid. The rest comes from local property taxes, collected and budgeted as they see fit.

For Andru Volinsky, lead counsel in the new trial and former Democratic executive adviser, the argument for a new court ruling rests on a simple math: The average total cost per student for New Hampshire students was $18 $434 in the 2020-2021 school. year, according to the Ministry of Education. Limiting the state’s share to $4,600 per student per year is well below the true cost of a student’s education.

“And once you agree to that, that means the balance — whatever the amount — of public education is paid for out of local property taxes,” Volinsky said in an interview. “And that means people suffer disadvantage, injustice and inequality depending on where they live.”

The plaintiffs in the new lawsuit, filed in Grafton County Superior Court on June 28, argue that the taxes they pay are a product of this inequality. They include Robert Gabrielli, Jessica Wheeler Russell and Adam Russell, all of whom pay property taxes in Penacook, as well as Plymouth resident Steven Rand.

Plymouth face an even bigger divide than Penacook. Because it shares a school district with Waterville Valley and Holderness, two property-rich summer and winter destinations, the tax rate Plymouth residents pay is considerably higher. Waterville Valley residents pay $3.33 per $1,000 of property value and Holderness residents pay $6.90, while Plymouth residents pay $13.69 for the same school district. The average tax rate in the state is $11.33 per $1,000.

New Hampshire is already facing legal action over the formula it uses to allocate public funds to public schools. A lawsuit filed by the Contoocook Valley School District in Peterborough (ConVal) in 2019 – which has been joined by 15 other school districts – is pending trial in Rockingham County Superior Court, after the Supreme Court refused to make a major decision and sent it to the lower court to rule on the disputed facts.

But while the two trials address the same formula, their approaches differ. The ConVal lawsuit seeks to force the state to increase the amount of per-student funding it provides to school districts and better define what counts as an adequate education, arguing that the state is not “adequate.” The latest lawsuit makes a similar case but is taxpayer-centric.

“It’s now at the level of simple math,” Volinsky said of the taxpayers’ lawsuit. “…Taxpayers incur different charges depending on the value of their local property.”

Volinsky and co-lawyers Natalie Laflamme and John Tobin, say the purpose of the lawsuit is to reinforce the principles set out in the two Claremont Supreme Court decisions of the 1990s. The first of those cases determined that the constitution of the The state demanded that the state provide adequate education. Since the funds used to provide adequate education came from public funds, they had to be paid for by state taxes. The tax, Volinsky argues, should be imposed at a uniform rate.

The second Claremont case revealed that the state’s funding system fell short of the standard of adequacy – and forced the state to devise a new system to fund adequate education for all students with equal taxes. But the system of matching grants that has emerged since that second Claremont case has left a significant shortfall that isn’t applied consistently, Volinsky says.

School funding advocates say the result is a violation of Part II, Section 5 of the state constitution, which grants the legislature the power to “impose and levy assessments, rates and taxes proportional and reasonable”. This provision formed the basis of the Supreme Court’s decision in Claremont II that the state must create a formula.

In the two decades since that Claremont II decision, the state has tried a few approaches to create a more evenly applied school funding system.

In 1998, then Governor. Jeanne Shaheen endorsed an approach in which the state would impose a standardized tax on residents of each city, but then adjust each city’s tax rate to allow them to retain excess income. This approach, known as the “ABC Plan”, was ruled by the state Supreme Court to be unconstitutional and inconsistent with the Claremont II decision.

The state’s efforts continued with the creation of the statewide education property tax, a system still in place today. This tax is in addition to a city’s local school tax, and the rate varies from year to year. The Department of Revenue Administration sets the rate at the level necessary to raise $363 million each year.

Proponents of the statewide education property tax, known as SWEPT, say it has helped normalize some of the cost of education. But education finance advocates say it still doesn’t prevent inequality.

In 2011, lawmakers removed the mechanism that distributed excess SWEPT revenue from wealthier cities to poorer cities, a process called “donor cities”. This change means that “property-rich” cities – whose most expensive properties and businesses generate significantly more education tax dollars – can now keep one of the extra SWEPT dollars they collect and use. these funds to reduce their other property taxes for residents. It also means that “asset-poor” cities no longer receive aid from their wealthier neighbors.

In 2021, lawmakers passed a budget that temporarily lowered the total amount of SWEPT revenue the state must raise from $363 million to $263 million for the next biennium. The measure was touted by Gov. Chris Sununu and Republicans as a property tax cut. But critics noted that the $100 million statewide cut was accompanied by a halt to targeted aid programs that benefited poorer cities. Poorer towns will have to raise local property taxes to cover the aid loss, while property-rich towns, which don’t need the aid, will benefit greatly from the tax cut, analysis finds of Reaching Higher NH, a left-leaning education think tank.

Christina Pretorius, director of policy at Reaching Higher, noted that many aspects of the state funding formula have remained the same for years. The base adequacy of $3,709 has only increased slightly in recent years, and the funding goal of $363 million has remained the same since 2005.

This means an increasing financial burden for cities, she said.

“As the years went by and costs increased, it was a static number, so year after year cities are even more reliant on local property taxes,” Pretorius said.

Now Volinsky’s taxpayer lawsuit asks the Supreme Court to better define what a constitutionally adequate education looks like and how much the state should raise to achieve it. Volinsky sees a two-step process to success. The first step, Volinsky says, is to have the court declare that $3,709 is not enough. The second step is to get a ruling that concludes that school districts across the state must have comparable funding, a ruling that would upend the current system.

It’s unclear whether the retrial or the ConVal trial could produce the kind of sweeping decision favored by the court in the 1990s.

The Supreme Court did not overturn the Cheshire County Superior Court’s decision in favor of the school districts in the ConVal lawsuit. But by sending the case back to the higher court for review, the Supreme Court delayed a final decision in this case for years. The ConVal lawsuit is scheduled for trial in January 2023 in Rockingham County Superior Court.

For Pretorious, the lawsuits can each help the Supreme Court illuminate the state’s proper constitutional role in funding education — in different ways.

“It’s symbiotic,” she said. “We talk about the real cost of education: the real cost of an adequate education, the real cost of educating our children. While the other talks about how we collect this money.