By GARRY RAYNO, Distant Dome
The New Hampshire Supreme Court’s decision finding the current administration of the Statewide Education Property Tax constitutional contradicts earlier decisions by the court on similar issues.
What the court said Tuesday in its decision is if the state Department of Revenue Administration sets the same SWEPT rate for every community, that is enough to declare it constitutional.
The court’s majority believes “in theory” if the rate is the same for everyone, it meets the constitutional requirement for proportional and reasonable taxation.
However, even in theory, some places in the state — unincorporated places, did not have the same rate because they had negative education tax rates, which the court said was unconstitutional, but did not apply the same logic to real towns and cities with children to educate and education expenses to pay which many of the unincorporated places do not have.
The rate for the SWEPT is set so that it raises $363 million annually. The current rate is a little less than $1.10 per $1,000 of equalized evaluation.
The money raised for most communities goes to covering the cost of providing an adequate education, or about $4,200 per student as determined by the legislature. The Superior Court Judge who ruled in the ConVal case has another estimate not quite double what the legislature set.
In most communities, the SWEPT revenue is not enough to cover the cost of adequacy for all students, which is the state’s responsibility.
So the state has to provide more money to most towns to cover the cost of “an adequate” education.
But in about four dozen communities, they raise enough and more under the SWEPT to cover the adequacy costs for their students.
These communities have been allowed since 2011 to retain the entire amount of money they raised and use it for “educational expenses” although some communities said without the money they would not be able to upgrade their sewer system and fix roads and bridges, which would be unconstitutional, until last week’s decision.
However, the $363 million is only 8.4 percent of the total cost of education in the state, which a school year ago — the latest figures from the Department of Education — was $4.01 billion.
Local education property taxes according to the department’s figures paid $2.45 billion of the cost or 61 percent of the total cost.
Together local and state property taxes pay for 69.4 or 70 percent of the cost of education in New Hampshire, the highest amount by far in the country.
Property taxes along with sales taxes are some of the most regressive taxes because they do not account for how wealthy a person is. So a poor person who inherits the family’s cottage on a lake cannot afford to pay the property taxes and will have to sell it although it has been in the family for generations.
But if you are among the top 10 percenters, you don’t have to worry about affording property taxes on that lakefront cottages because you have plenty of money to pay for it and in New Hampshire, your wealth is not taxed because there is no state income tax.
There used to be an interest and dividends tax that did tax wealth, but that was eliminated in January and an inheritance tax as well but that was eliminated a decade or more ago.
You can see why New Hampshire has the reputation of taking care of the top of the wealth scale, while the state’s social service programs are mostly on the low end of the scale compared to surrounding states.
And the supreme court’s decision last week in the Rand case exacerbates the problem.
Property owners in property wealthy communities like those on the Seacoast, or around the large lakes in the state will see their tax rates effectively lowered by money intended under SWEPT to help communities that do not have property wealth.
The last education funding commission made it abundantly clear students from property wealthier school districts perform better and are more successful than those from property poor school districts.
Last week’s ruling says this upside down system where the wealthier just get wealthier and the poor get caught in a death spiral blowing away education and economic development is just fine, which shouldn’t surprise us because that is what has been going on for years since the infamous trickle down theory was proclaimed as the preferred path forward for the country instead of the pathway to hell, which it is if you lack education and an economic standard high enough to prevent drowning.
The opinion was written by Chief Justice Gordon MacDonald and lacked a robust legal argument for its declarative statements.
It also ignored the earlier Supreme Court rulings on then-Gov. Jeanne Shaheen’s ABC plan which allowed property wealthy towns to retain their tax advantages, as well as the Claremont II and Claremont III decisions.
Claremont II was the original decision on taxation and the judges directly addressed “effective tax rates” which last week’s decision dismissed as theoretical and not relevant.
“This disparity in effective tax rates violates Part II, Article 5 and ‘is precisely the kind of taxation and fiscal mischief from which the framers of our State Constitution took strong steps to protect our citizens.’ Claremont School Dist. v. Governor, 142 N.H. 462, 465 (1997) (Claremont II); see also id. at 471 (‘There is nothing fair or just about taxing a home or other real estate in one town at four times the rate that similar property is taxed in another town to fulfill the same purpose of meeting the State’s educational duty,)’” wrote Associate Justice James Bassett who dissented in the 3-1 decision.
The Claremont III case involved phasing in a statewide rate so the last to have to pay the real rate were the property wealthier communities.
At one point, the House approved House Bill 739, which would have required the property wealthier communities to send the excess SWEPT revenue to the state, but the Senate killed the bill.
The House had used the extra money — about $42 million — to boost special education spending and increase disparity aid to poorer communities, but the Senate removed much of the additional special education money.
Hedging its bets before the Rand decision was released the Senate added a section into the trailer bill or House Bill 2, that says the legislature alone can determine education policy and funding.
The trailer bill contains the changes in law needed to align with the numbers in House Bill 1, as well as other things.
The section reads “426 Legislative Declaration of Authority Regarding Public Education. In its 1993 and 1997 decisions, in the so-called Claremont series of public school funding cases, the New Hampshire Supreme Court ruled that the New Hampshire Constitution imposes upon the legislature 4 obligations with respect to public K-12 education: (1) define an adequate education; (2) determine its cost; (3) fund it with constitutional taxes; and (4) ensure its delivery through accountability. Although the legislature has from the beginning had grave reservations as to the court’s authority to impose these obligations upon a coordinate branch of government, in the spirit of comity it has over the subsequent quarter-century devoted extensive time, energy and public tax dollars to satisfying them. However, in the most recent of these cases, the judicial branch has asserted authority to review and set aside the legislature’s determinations with respect to its 4 supposed obligations, and to fund education at levels determined by the court through a process which, though adjudicatory in form, is legislative in substance. Accordingly, the legislature now deems it necessary to definitively proclaim that, as the sole branch of government constitutionally competent to establish state policy and to raise and appropriate public funds to carry out such policy, the legislature shall make the final determination of what the state’s educational policies shall be and of the funding needed to carry out such policies.”
The Senate says Judge David Ruoff went too far in telling them they have underfunded public education since time began and need to step it up in his ConVal ruling while ignoring the fact the legislature has done little in the 30 years since the first Claremont decision to make the funding system any more equitable or fairer for students and taxpayers in the property poor communities of the state while defying the courts and failing to live up to the constitutional requirements they swore to uphold.
The Supreme Court ruling last week, says at least for SWEPT, they are off the hook.
Garry Rayno may be reached at garry.rayno@yahoo.com.
Distant Dome by veteran journalist Garry Rayno explores a broader perspective on the State House and state happenings for InDepthNH.org. Over his three-decade career, Rayno covered the NH State House for the New Hampshire Union Leader and Foster’s Daily Democrat. During his career, his coverage spanned the news spectrum, from local planning, school and select boards, to national issues such as electric industry deregulation and Presidential primaries. Rayno lives with his wife Carolyn in New London.