Cook On Concord: Educational funding, one more time

In the early 1990s, after approximately 20 years of avoiding, remanding and hoping that education-funding cases would go away, the Supreme Court issued its famous Claremont I decision, which declared that it was the state’s obligation to provide for an “adequate education” and pay for it for the schoolchildren of New Hampshire.

After that, a host of controversy, wailing, gnashing of teeth and various ways to comply with the ruling occurred. These all resulted in a system that established a statewide property tax as the financing device, creating a fund of money that largely reclassified local property taxes as state taxes that in most cases resulted in no increase in taxes and, in fact, increased state aid.

In a minority of municipalities, however, the statewide property tax produced more money than the state grant created, and this surplus, which was distributed to other towns, created what was known as “donor towns” and “receiving towns.”

Donor towns hate this plan. This is a strange concern when you consider that any system of taxation has disproportionate amounts of money going from localities to the state and back, just like New Hampshire is a donor state, sending more federal taxes to Washington than it receives back in federal aid. The brouhaha, however, has been deafening.

The statewide property tax has created anomalies, with places like Freedom sending money to the state while places like Amherst receive aid in excess of their contribution. Whole regions have clusters of donor towns in them, most notably the Seacoast, which is “property rich.”

During his campaign and in his inaugural address, Gov. John Lynch proposed that the “educational funding system be fixed this year, no matter who gets the credit.”

On Feb. 8, the governor announced his “targeted” education-funding proposal for New Hampshire, a new plan that does away with the statewide property tax, creates a fund that is then distributed with the aid and according to a formula based on several factors that are called an “Equity Index.”

The formula gives heavy weight to property values and income, valuing the per pupil and median incomes compared to the state median, and measures the percentage of students eligible for free and reduced lunch and those with limited English proficiency in determining the challenge and level of education aid in certain localities.

It also takes into account performance in a district’s schools.

Lynch’s formula would distribute $455 million, which is $22 million more than the present spending but $34 million less than that which school districts were counting on for the next year. Redistribution under the formula would be vastly different, so Lynch has proposed a transition fund and period of time so there isn’t too startling a change in the amounts received.

The plan has received bipartisan support, with notable Republican supporters including Deputy Speaker Kenneth Weyler, Rep. Liz Hager, Sens. Robert Odell and John Gallus and others going out on a limb to support the governor. This seems to reflect the support of Speaker Douglas Scamman, who has promised to solve the problem as well.

The plan was attacked immediately by the lead lawyer for the Claremont Coalition communities, Andru Volinsky, who said that it was just another example of using insufficient resources and having a new formula to spread them around.

Volinsky has long advocated for increased revenue and a more significant state role in paying for the costs of education statewide.

Supporters, however, cite political reality and say that this issue should be resolved with some predictability, and they note the somewhat artificial nature of the statewide property tax, some calling it a “gimmick.”

The political challenges for the plan revolve around the many, many towns that lose significant amounts of money. While Manchester gains over $7 million, Londonderry loses over $3 million. Places like Amherst, Bedford and Goffstown lose significantly compared to the present formula.

Added to that issue is the specter of Supreme Court review. Many in the Senate have indicated that the court should give an advisory opinion on the proposal, with those opposed to that idea saying that every legislative solution to problems should not have to get the OK of the Supreme Court before it is enacted.

Former Gov. John H. Sununu and attorney Eugene Van Loan challenged the governor to submit it for a review by the court and agreed to support it if it passed constitutional muster, asking Lynch to promise to support a constitutional amendment if it did not. Lynch did not go for that bait.

Betting is that it will not go for review prior to legislative action — but it could be close.

But a court challenge after enactment (or successful efforts to send it to the court before enactment) could pose a problem for the plan.

Lynch has been bold, quick and politic in coming up with this plan and in garnering the kind of bipartisan support he has in such a short time since his Jan. 6 inauguration.

Whether the political will exists to solve the problem has yet to be seen, but the governor received high marks at the Legislature for involving everyone in the process in coming up with a proposed solution. Whether citizens and their legislative representatives can see past their pocketbooks to look at policy remains to be seen.

Brad Cook is a partner in the Manchester law firm of Sheehan Phinney Bass + Green and heads its government relations and estate planning groups.

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