By GARRY RAYNO, InDepthNH.org
CONCORD — A proposal to “re-characterize” local property taxes into a state tax was generally supported at a public hearing Tuesday, but a statewide school budget cap in the same proposal was not.
The House Finance Committee heard a proposed amendment to House Bill 1583, which increases state aid to public education by raising the per-pupil state adequacy grant to the level recommended by a superior court judge in the ConVal School District vs the State decision issued last year.
Superior Court Judge David Ruoff suggested the minimum per-pupil grant to cover the cost of an adequate education should be $7,356.
The proposed amendment would achieve that by using about $450 million of what are now local education property tax dollars and using the money as state aid instead.
The change would increase the amount of money so-called donor communities would have to send to the state instead of retaining for education expenses at the school district level from about $29 million to about $90 million raising the property taxes for those 50 plus communities around the state.
The $90 million would be the only “new money” for state education aid under the amendment which would come from property taxpayers in the donor communities.
In property wealthy communities, the Statewide Property Tax raises more money that is needed to cover the cost of an adequate education for their students. They have been able to retain the money and spend it on education or lower the amount needed for the local school property tax portion of property tax bills.
While there was general support for the change from local to state property tax, there was almost universal opposition to the section imposing a three-year budget cap on school district spending to the three-year average increase in the Consumer Price Index.
The cap could be overridden by a two-thirds majority of the legislative body of the school district.
Not only were people opposed to the cap for taking away local control, they also said the proposal would lock in the significant disparities that currently exist in the quality of education in a property wealthy community versus a property poor community.
“I hope you guys are going to understand the moment that is in front of you,” Portsmouth Mayor Deaglan McEachern told the committee. “A moment to actually solve education funding and to do so in an equitable way.”
McEachern opposed both the budget cap and expanding the Statewide Education Property Tax which will impact Portsmouth taxpayers as it raises excess money under the current rate for the SWEPT.
But Doug Hall, a former House Finance Committee member now affiliated with the NH School Funding Fairness Project, said he could support the expansion of the statewide property tax and ending allowing the property wealthy communities to retain the excess money, but not the budget cap.
“The goal we all share is that all students should have the opportunity for an education that does not vary by zip codes,” Hall said. “This would lock in the large disparities that exist.”
He noted every expensive special education student that moves into a district reduces funds for other students, saying in his community, Chichester, special education costs exceed all state aid.
He also noted the cap would not allow for any new building to replace or renovate many of the old school buildings.
Waterville Valley town manager Mark Decoteau, who is also the chair of the Education Coalition Communities 2.0, which is comprised of property wealthy towns and unincorporated places with negative local school property taxes, opposed the amendment saying his organization opposes raising property taxes on one community and sending some of that money to another community without any oversight.
He said the amendment would exacerbate an unfair funding scheme that was repealed in 2011 and the House voted down earlier this session.
“This concept is fundamentally wrong and at odds with how local government has worked for centuries,” Decoteau said.
He said under the plan his community would have to send $1.2 million of the $1.5 million it raises in SWEPT to the state and then raise another $1.2 million to replace the money it was spending on education that would go to the state and would have to do that every year.
That will impact other town projects such as highways and bridges, water and sewer and public safety, he said.
This creates winners and losers all across the Granite State, Decoteau said.
“The Education Coalition Communities 2.0 appreciates the challenges in addressing school funding in our state,” Decoteau said. “We deeply care about ensuring a quality education for our children and will continue our support for a fair and comprehensive approach for education funding in New Hampshire, but will continue to oppose any plan which requires property taxes raised in one community, sent to another community and used without any accountability for this use.”
Sean Parr, Manchester Board of School Committee member, said he supports fully funding education in New Hampshire, and as a co-plaintiff on the ConVal suit, supports the judge’s findings in the case.
He noted Manchester already has a tax cap, and the amendment would further limit local authority.
“Manchester is one of the districts with the greatest needs,” Parr said, “and has the largest and most diverse student population in the state.”
The amendment was supported by Charles Smith Jr. of Orford who spoke of the problems facing rural communities with low student enrollment and little new construction.
The situation is not sustainable, he said, with a greater and greater burden on property taxpayers.
He also raised the issue, as did McEachern, of the impact the state’s current use system places on some communities.
While he supported the bill, he noted they ought to be looking for other means to support education.
Longtime Hollis-Brookline Coop Budget Committee member Tom Enright objected to the statewide budget cap which he said “substitutes your judgment for the judgment of my budget committee, my school board, and most importantly, my district’s judgment. I want local control.”
He told the committee during the pandemic teachers barely received a raise in its three-year contract and the district has had problems finding and retaining teachers.
But at the district meeting this year, voters approved one of the largest increases for teachers he has seen in his 30 years on the budget committee, and now the district can find and retain teachers. With the state budget cap, the teachers’ pay increase could not have happened.
“A spending cap gets in the way of controlling our own situation,” Enright said. “My community’s judgment is better than the judgment you want to thrust over me.”
Jason Sorens of Amherst and the founder of the Free State Project, objected to the amendment saying it would create unintended consequences and have the opposite effect to what lawmakers are trying to achieve.
He called the proposal a kind of redistribution based on property taxes that encourages schools to be unproductive while discouraging schools who are more efficient.
People will want to be in communities receiving aid instead of having to provide additional funding to other communities, Sorens maintained.
“It gives towns an incentive to be inefficient, to become property poor and not want to be donor towns,” he said, and will penalize families with a greater taste for education who will want to live in a town with good schools, but are often more expensive to live in.
Exclusionary zoning also impacts communities, Sorens said, by stopping development and commercial building which towns need to grow, but communities put in place due to the cost of educating more students.
“You do not want to do things to make the problem worse,” Sorens said. “Low income families should have access to good schools, rather than from rich people in Hanover giving to the rest of the state.”
Rep. Glenn Cordelli, R-Tuftonboro, opposed the amendment saying where he lives the cooperative school district has six towns, two of which are donor communities. The amount of excess revenue they have from the SWEPT is $2.8 million, but that will grow to $9 million with the amendment.
The proposal calls for donor towns to send 30 percent of the excess revenue to the state in February, he said, which will be very difficult for donor communities because their budgets are already set.
“I’m not sure of the process,” he said, “but it is of great concern to many of our towns.”
The Finance Committee’s Division II holds a work session on the amendment at 10 a.m. Wednesday.
Garry Rayno may be reached at garry.rayno@yahoo.com. Garry Rayno is InDepthNH.org’s State House bureau chief with 40 years of reporting experience.