New Hampshire school-funding bill gets a closer look before House panel
Ways and Means Committee to consider boosting property tax relief
The House Ways and Means Committee will be holding a work session on Wednesday to look at a bill that’s an ougtrowth of the Commission to Study School Funding’s recommendations, which sought to craft a plan to provide more equitable opportunity for schoolchildren while more equitable treatment of property taxpayers.
House Bill 504, sponsored by Rep. Dick Ames, a Democrat from Jaffrey who served on the commission, would significantly increase the property tax relief offered to low- and moderate-income homeowners. At the same time, the bill adds to the controversy around so-called “donor towns,” those municipalities where the statewide education property tax, or SWEPT, raises more revenue than needed to fund their schools. Since 2011 they have been allowed to retain the excess.
Property taxes in New Hampshire represent some 37% of all state and local revenues, more than in any other state and twice the average of all 50 states. And property taxes claim 5.5% of personal income, also more than any other state.
In particular, property taxes represent nearly three-quarters of the $3.3 billion spent for public education, in New Hampshire, with local school taxes, which generally represent the largest share of local tax bills, accounting for about 62% and the SWEPT for another 11%.
In 2003, New Hampshire became one of 33 states to offer property tax relief to low- and moderate-income homeowners, 27,208 of whom received $7.5 million in rebates when the program was introduced. By 2018, the number of claimants had shrunk to 6,685 and the value of rebates fallen to $1.1 million.
The program is open to single homeowners earning $20,000 or less and heads of household earning $40,000 or less. Rebates apply only against the first $100,000 of the assessed value of the property and only against the SWEPT, the rate of which has fallen from $3.33 per $1,000 to $1.875 as property values have risen.
Rebates range from 100% of the tax bill for those individuals earning less than $12,500 and households with incomes of less than $25,000 to 20% for individuals earning between $17,500 and $20,000 and households with incomes between $35,000 and $40,000.
In other words, only individuals and households with incomes of $12,500 and $25,000 receive the maximum SWEPT rebate of $187.50. For a household with income of $40,000 and a $200,000 home, the rebate would be $37.40.The New Hampshire Fiscal Policy Institute reported that in 2018 property tax levies amounted to about $2,800 per capita while the average rebate was $160.
“HB 504 provides much more generous program,” said Ames.
Under the bill, individuals with incomes below $20,000 and couples with incomes below $30,000 are eligible for the maximum rebate of $1,000. The program would be open to individuals and couples with incomes up to $55,000 and $70,000, respectively.
Their rebates would be calculated by multiplying $150,000 of the local assessed or equalized assessed value of the homestead, whichever is least, by the sum of both the SWEPT and local school tax rate, with a maximum rebate of $1,000. Rebates decline incrementally from the maximum by five percent for each step increase in income of $1,750 for individuals and $2,000.
The program would be capped at $25 million and funded by excess receipts from the SWEPT.
There are 33 municipalities and 17 townships where the SWEPT raises revenue in excess of their costs of providing an adequate education as calculated by the Department of Education. This excess SWEPT amounts to $25.8 million, which is currently retained by municipalities and townships. HB 504 would require municipalities and townships — the so-called “donor towns” — to remit these funds to the state, deposited in the Education Trust Fund and used for property tax relief.
Ames noted that allowing some municipalities to retain their excess SWEPT revenues while requiring others to spend their entire amount poses a constitutional question. In 2006, the Superior Court held that “no constitutional justification can be articulated to permit the retention of those excess funds by the ‘property-rich’ municipalities.”
Although the Supreme Court vacated the decision on procedural grounds, it has yet to rule on the merits of the issue.
Finally, HB 504 would establish a study committee to consider extending the property tax relief program to renters as well as a tax deferral program to serve homeowners whose property values have outpaced their income growth, leaving them without the means to make timely property tax payments.
The school funding commission’s report, issued in December, included a recommendation that the state fund public schools with a statewide property tax through a weighted formula, targeting dollars to those districts with the greatest needs and fewest resources. The report quickly aroused opposition among those donor towns, which talked of reviving the “Coalition Communities” campaign that emerged 20 years ago to resist remitting excess SWEPT to the state.
Portsmouth City Councilor Deaglan McEachern spoke against the bill before the House Ways and Means Committee and was echoed by a resident of Newington. Both are from donor towns and both argued that remitting excess SWEPT to the state would lead to increases in local property taxes that would pose economic hardship for their taxpayers.
Ames provided the committee with data showing that the in the 33 “excess SWEPT” municipalities, the median home value is $380,103, property value per pupil is $4,123,379 – almost four times the state median. Spending per pupil is $28,104,more than 1½ times the state average. The school tax rate (state and local) is $7.46, half the state median.
In addition, the median property tax paid on typical home in “excess SWEPT” municipalities is $2,818, 60% percent of the state average of $4,691.
An increase in local tax rates of 86 cents per $1,000 would be required to offset the loss of the excess SWEPT revenue. That would add $218 to the tax bill for typical home and raise the median school tax rate among “donor towns” from $7.46 to $8.32, a little more than half the median rate throughout the state.