Lawmakers aim to end school-funding ‘shell game’

House Education Committee members have worked nights and weekends lately, chopping and merging new plans to pay for public schools.

The effort comes as taxpayers faced huge fiscal unknowns this month when they voted on town and school budgets and bonds. Some communities stood to lose or gain as much as $20 million in education revenue, depending on which plan prevails.

But this also is the year Gov. John Lynch has asked the Legislature to solve the crisis for good.

One theme remains constant, though, almost a rite of spring, among the five plans still on the table. Most reduce or eliminate the statewide property tax, and generally target more aid to communities that need the help. That certainly describes the governor’s scenario.

Lynch’s plan is House Bill 100, sponsored by House Majority Leader Ken Weyler of Kingston and a bipartisan group of representatives and senators.

HB 100 repeals the statewide property tax and puts heavy weight on a town’s tax base per child and its median income.

Lynch (and Gov. Craig Benson before him) has called the statewide property tax a “shell game” because it shuffles local tax money right back to the towns paying it, except for $30 million or so in new state revenue from the so-called donor towns.

“Our current funding system is broken, it’s divisive and it doesn’t make sense,” Lynch said when he unveiled his plan last month.

His formula looks at median income, tax base per child and the number of kids getting free or reduced price lunches and who are learning English as a second language. It also considers student test scores in grades 3 and 6, high school dropout rates and college acceptance rates. Towns ranked below 120 percent of the statewide average would get points on a given targeting factor toward their education equity index.

A low-income and property-poor city like Berlin, with below-average school achievement, wins under this option. That community gets $8.7 million next year instead of $8.1 million under current law. Berlin now receives $7 million.

Towns that lose, mostly in the central tier below Manchester, would still keep 75 percent of their school grant in the first two years, 50 percent the next two, then 25 percent, then nothing. Those towns have high incomes and tax bases per child, and their schools are relatively successful. All of those factors hurt them in the Lynch formula, which some critics have called rewarding failure. He calls it helping need.

Lynch spokesperson Pamela Walsh said the governor would consider a slower phase-in of cuts, perhaps letting towns keep 90 percent of this year’s grant the first year.

Rep. Mike Asselin of Kingston has filed HB 606, which adds a dollar to the statewide property tax rate, increasing the education trust fund by $168 million. His scenario replaces, by committee amendment, an earlier version of HB 606 sponsored by Rep. Packy Campbell of Farmington.

Asselin said his formula reduces the total property tax bill for nearly all residents — the real issue, in his opinion. New Hampshire homeowners would no longer pay this tax, but businesses and second-home owners would, a way of paying back Massachusetts a bit for its income tax on New Hampshire residents.

According to Frank Sapareto — a former state senator from Derry and one of HB 606’s authors — state law has long recognized a homestead as a different kind of property from a second home, making the plan legal.

The governor’s policy director and legal counsel, Kate Hanna, warned that some lawyers think the Asselin/ Sapareto plan is unconstitutional because it treats two classes of owners differently. She questioned whether lawmakers would take kindly to its $168 million tax hike too.

“I’m hearing quite a lot of support for the governor’s plan on the committee,” Hanna said. “There’s a strong consensus on targeting aid for the communities at greatest risk and on using free lunches and English as a second language as need factors.”

The Business and Industry Association of New Hampshire has urged lawmakers not to hike business taxes to help fund schools or plug a projected $370 million deficit. In reply, Sapareto said HB 606 would reduce the business profits and business enterprise taxes – a change that would largely offset the proposed $1 hike in statewide property tax on businesses.

The donor-town plan embodied in HB 684 got only three of the eight subcommittee votes in a recent secret ballot. But subcommittee chair David Hess of Hooksett said his group left that bill in play out of respect for the large coalition behind it, spearheaded by Portsmouth.

Its prime sponsor, Rep. Ed Gionet of Lincoln, said his legislation is simpler than the bill he filed in 2004, HB 717, which carried in the lower chamber, but was defeated in the Senate.

“Too bad it didn’t fly last time,” Gionet said. “The support was overwhelming in the House. But those receiver towns this year are looking at the whole thing as a lottery to give them as much money as possible.”

He predicted the House would use the best elements of each plan.

“I hope they keep as much of 684 as they can,” he said. “There really aren’t any big losers or winners. But my town of Lincoln, which has the lowest median income in the state, will stop being a donor town.”

A plan sponsored by Rep. Fred King of Colebrook, HB 616, targets transportation costs, free lunches, English as a second language and special education as proxies for need. He would ease the pain for towns losing money too, by phasing in their cuts.

The subcommittee has scrapped a plan by Rep. Daniel Hughes of New Castle, which would have given Berlin $15 million. It created too many losers in towns with big delegations in Concord.

Subcommittee member John Ward of Littleton is fighting for North Country interests too. He wants to block any repeat of what happened last year.

“We lost a bunch of money up here, and it badly impacted how our school and town budgets were set up,” Ward said. “Our officials couldn’t tell voters what we’d be getting from the state.”