NORTH HAVERHILL – The Grafton County Superior Court held a hearing Friday on taxpayers’ motion seeking a preliminary injunction against the Statewide Education Property Tax (SWEPT) as part of a school funding lawsuit brought against the state.
“We brought this motion because in the state’s response to our initial filing in this case, they admitted that communities who raise excess SWEPT are allowed to retain those funds, and that a handful of towns have negative local education tax rates, both of which go against New Hampshire Supreme Court rulings,” said Natalie Laflamme, one of the lawyers representing the plaintiffs.
“The State admits that these practices take place, and that it has enabled these unconstitutional SWEPT avoidance tactics, so there is no disagreeing on the facts that this part of the larger suit should succeed on merit.”
For an injunction to be granted, it must pass a three-part test; 1) The plaintiffs are likely to succeed on the merits of the case, 2) not granting the injunction will cause irreparable harm to the plaintiffs, and 3) granting the injunction will not unduly burden the State. The State’s argument focused mostly on the potential impacts of granting an injunction, rather than the constitutionality of communities not paying their full SWEPT rate.
The state argued that an injunction would delay the issuing of tax warrants. It noted that six communities that will collect excess SWEPT have already had their tax rates set by the DRA, and an injunction might force those warrants to be reissued. “While the State has argued that awarding the injunction would be burdensome to them and create administrative issues for a very small number of communities, using an unconstitutional tax scheme is an even greater burden on taxpayers like the plaintiffs,” Laflamme said. The State also argued that this is a policy matter that should be decided by the State Legislature, despite the 25-year history following the ruling in Claremont II in which the legislature has not fully met the demands of the court’s decision, and even allowed for backsliding with the legislative changes made in 2011 toward the system that existed pre-Claremont. This injunction is only part of a larger case that was brought as a challenge to the wildly varying local property tax rates used to fund education, a model that does comply with NH Supreme Court precedent that the State has a constitutional obligation to fund education, and that any taxes used to fulfil that obligation must be uniform in rate.
The State has determined that the cost of an adequate education is $3,786.66. After adjusting for additional funding for students receiving special education services, English Language Learners, students eligible for free and reduced-price lunch, and 3 rd grade students who score below proficient on the State reading assessment, the average adequacy payment from the state is around $4,597. The actual average cost of educating a student in New Hampshire is over $18,000 per pupil.
The funding gap has to be made up by local property taxpayers, and the wide disparities in property values lead to vast differences in local tax rates. In communities with lower property values, they need to levy much higher rates to raise sufficient funding for their local schools. “This injunction and SWEPT is really just a piece of the larger suit trying to get at this inequitable system we have where people in some towns pay much higher tax rates than their neighbors a town over.
Even in instances where those towns send their students to the same schools, there can be significantly different rates,” said John Tobin, also representing the plaintiffs. “We filed this motion because the state acknowledged in its response to our original filing that they are allowing SWEPT to operate differently in different towns, but it’s just a piece of this larger case that we have against the State and its school funding system.”
If the injunction is not granted, the SWEPT question will still be litigated alongside the rest of the suit.
That trial is scheduled for August 2023. Today’s hearing and the rest of the plaintiffs’ case is also happening against the backdrop of the State defending itself against another school funding lawsuit.
That case, brought by the Contoocook Valley School District and fifteen other districts, is challenging the amount of money the State pays to fulfil its obligation of providing for an “adequate” education. “These issues of how much money the State should be paying for education, and how it is raised, go hand in hand,” Laflamme said. “This issue has been fought over in court and in the legislature for decades. And hopefully the combined pressure of both of these cases will make the incoming legislators take a serious look at school funding as they start putting the budget together.”
Judge Lawrence MacLeod took the matter under advisement and will provide his ruling on the motion in the coming days. * * * * * * * * The Plaintiffs in Steve Rand, et al v. State of New Hampshire are represented by the legal team of Natalie Laflamme, Andru Volinsky, and John Tobin, as well as Michael Jaoude and Morgan Brock-Smith of White & Case. All lawyers are working on this case without compensation.
