Concord’s dirty little secret

Although Governor Lynch has seldom used the threat of a veto as a way of securing meaningful executive branch participation in the legislative process, he did so at least once last year. That was when he threatened to veto any bill that proposed to fund the cost of an adequate education with a tax that resulted in the creation of so-called “donor towns.”

Donor towns are municipalities that collect more money from the statewide property tax than it costs them to provide an adequate education to their own students. The state requires such towns and cities to send the “surplus” to Concord to be redistributed to other municipalities.

As things turned out, the Legislature last session did pass Senate Bill 539, which requires the state to fully fund the cost of “adequacy,” and the governor did not veto it. (On the other hand, because he still favored a constitutional amendment to restore New Hampshire’s tradition of local control over education policy and funding, the governor — to his credit — simply let the bill became law without his signature.)

That should mean that there will be no donor towns, right? Wrong, although in a separate piece of legislation (SB 530), the obligation of donor towns to send their excess tax collections to Concord was suspended so long as they used the money to pay for the education of their own students (i.e., for costs beyond adequacy).

So, all is well, right? Wrong again. The suspension lasts only two years. In other words, there are no donor towns today, but there will be tomorrow.

Anyone can find out which towns will be on the list by going to the Department of Education’s Web site and pulling up the spreadsheet on state aid to education. If one does the calculations (and assuming my math is correct — which is a dangerous assumption to make about a lawyer), there are 36 towns that are being temporarily spared the executioner’s blade.

They are the usual suspects, the property-rich waterfront towns like Moultonborough, New Castle and Rye and the student-poor rural towns like Errol and Pittsburg.

But this is not the worst of it. On the same date that the donor town reprieve is scheduled to expire (June 30, 2011), something else of consequence is going to happen — the federal stimulus program also expires.

Since the Legislature and the Governor used $160 million in one-time stimulus money to plug a hole in the current biennium’s education budget, the end of the federal program will leave us with future deficits of approximately $80 million per year.

Assuming that a broad-based sales or income tax is still off the table, the Legislature will most likely “fix” the problem by increasing the statewide property tax. The net result will be to add even more municipalities to donor town rolls. (Some have projected that the final 2011 number will exceed 50, or about 20 percent of the state’s municipalities. At least one will surely be Portsmouth.)

This assumes that everything else will stay the same over the next two years, an assumption which is not likely to hold true. Some existing transitional caps and grants will probably go away or be revised; serious inflation may rear its ugly head in the post-bailout economy; and — if the Claremont plaintiffs have their way — the court may get involved again in the determination of the cost of an adequate education.

This means that the statewide property tax will probably continue to go up, which, in turn, means that even more donor towns will be created.

Perhaps this would be tolerable if it made any sense. But would you like to know to whom the taxpayers of the donor towns will be sending their gifts? Try the taxpayers of Amherst, Bedford, Bow and Hollis, among others. Makes sense to me — I live in Bedford. So, thank God for dirty little secrets.

Eugene M. Van Loan III, a practicing attorney in Manchester, is chairman of the board of the Concord-based Josiah Bartlett Center.