State denies ‘any unconstitutional lack of uniformity in tax rates’ in school-funding suit reply

In responding to the latest lawsuit claiming that the funding of public schools in New Hampshire fails to comply with the rulings of the NH Supreme Court, Attorney General John Formella accepts most of the facts and figures presented by the petitioners, but denies that they describe an unconstitutional funding system and contends that the court lacks the authority to enforce its original orders.

In 1993, the justices held that the state Constitution grants every child a right to a “constitutionally adequate education” and binds the state to pay for that education. Four years later, the court held that taxes levied by school districts “are in fact State taxes” and ruled that, “to the extent the State relies upon property taxes to fund a constitutionally adequate public education, the tax must be administered in a manner that is equal in valuation and uniform in rate throughout the State.”

The latest suit, brought by attorneys Andru Volinsky, John Tobin and Natalie Laflamme on behalf of five property taxpayers, argues that the Legislature has priced a constitutionally adequate education at a base cost of $3,708, which is supplemented by “differentiated aid” for students living in poverty, learning English language and qualifying for special education services.

Altogether in the 2020-21 school year the state provided districts with an average of $4,578 per pupil in the form of adequacy aid, an amount the petitioners call “arbitrarily low and insufficient.”

Adequacy aid, funded by a basket of state taxes and fees, represents a fraction of the average expenditure per pupil of $18,434, which excludes another $3,300 of capital investment, debt service, transportation expenses and construction costs, and represents little more than a fifth of the total cost of education.

The statewide education property tax (SWEPT), initially levied at a rate to raise $363 million was reduced to $263 million this year, but is expected to return $363 million again next year, when it will amount to about 10 percent of education costs.

In some 20 municipalities with high assessed property valuations, receipts from the SWEPT exceed the amount of the adequacy grant. Since 2011, these municipalities have been entitled to retain the excess and add to their budgets. In fact, 11 towns offset the SWEPT against the local tax to yield a negative tax school tax rate. In other words, administration of the SWEPT provides some municipalities with a tax abatement, a ploy the Supreme Court flatly rejected in 1999.

Local property taxes represent 61 percent of the revenue funding public schools.

In their suit, the plaintiffs argue, “The State does not currently guarantee funding sufficient to cover the cost of an adequate education. As a result, New Hampshire must rely on local school taxes to bridge the gap. These local school taxes violate Part II, Article 5 of the New Hampshire Constitution because they are not uniform in rate.”

Their solution is for the court to order the state to abandon its school-funding scheme and replace it with a system that accounts for the full cost of providing a constitutionally adequate education counting to not less than the average expenditure per pupil and including capital costs, debt service and transportation expenses

‘Constitutionally unnecessary programs’

In its response, the state distinguishes between the cost of providing the constitutionally adequate education mandated by the court and the actual educational expenditures incurred by school districts, insisting that the second do not “in any way” bear on the first.

While acknowledging that “local education tax rates vary from community to community,” the state denies there is “any unconstitutional lack of uniformity in tax rates.”

Likewise, the state admits that some municipalities are entitled to retain excess SWEPT receipts and others offset the statutory SWEPT rate by setting a negative local school tax rate. But the state denies these maneuvers reduce the effective rate of this state tax levied in these towns and violate the constitutional principle that state taxes must be imposed at uniform rates throughout the state.

In its defense, the state claims school districts, as a matter of choice, spend to provide “constitutionally unnecessary programs and services” as well as “infrastructure and other resources,” which are unnecessary, inefficient or obsolete.

This statement suggests that the state contends that the adequacy grants and the SWEPT receipts, which together represent less than a third of the cost of public education, are sufficient to fund a constitutionally adequate education. Consequently, any additional expenses are incurred at the discretion of local school districts and governments and funded by local property taxes.

Since these expenses exceed the cost of providing a constitutionally adequate education, the taxes to fund them are local, not state, taxes and need not be levied at a uniform rate.

Finally, the state argues that the court lacks the authority to provide the remedies sought by the petitioners “other than a simple declaration that the State is, or is not, complying with its constitutional duties.” Instead, the authority rests with the Legislature, which “possesses the exclusive discretion to determine what programs and what levels of funding are necessary and appropriate.”