By GARRY RAYNO, InDepthNH.org

CONCORD — State attorneys reiterate arguments rejected by a Superior Court Judge in declaring the Statewide Education Property Tax unconstitutional in their legal brief to the state Supreme Court filed Wednesday evening appealing  the lower court’s decision.

The state is joined in a brief by the Coalition Communities, a group of 26 property wealthy communities that intervened in the Rand vs. the State of New Hampshire case, claiming they would be unduly harmed if the tax were declared unconstitutional.

They both argue the state should be allowed to continue administering the tax as it did before the ruling.

The change in taxation ordered by the superior court would negatively impact about 50 communities that retain about $30 million that would otherwise go to property poor communities in the state.

The plaintiffs claimed the state’s administration of the SWEPT results in lower tax rates for the wealthy communities and small unincorporated places with no or few school-aged children.

Rockingham Superior Court Judge David Ruoff agreed with the plaintiffs late last year declaring the SWEPT unconstitutional as administered by the state and ordered the state to stop its practices, although the injunction was stayed by the Supreme Court until it issues its decision.

At the heart of the plaintiff’s argument is that property wealthy communities like those in the Coalition, raise more revenue than they need to pay for an adequate education for their students and retain the excess money, rather than send it to the state as was the law until 2011 when the legislature acted to allow the communities to retain the excess revenue.

Most Coalition Communities use the excess money to reduce their communities’ local school rate of their property tax bills.

The plaintiffs successfully argued retaining the money resulted in a lower effective tax rate for the wealthy communities, despite the state constitutional requirement that a state tax has to be “proportional and reasonable.”

The plaintiffs also argued the Department of Revenue Administration sets the local property tax rate for unincorporated places at a negative number allowing those areas to avoid paying the SWEPT and also lowering their effective rates of the SWEPT.

“Fair taxation to fund schools is one of the pillars of the Claremont decisions, and these arguments from the State and the Coalition seek to defy that basic principle,” said Zack Sheehan, NH School Funding Fairness Project Executive Director. “The arguments presented in these briefs rehash what failed at the Superior Court and contribute to blocking progress towards a fairly and adequately funded education for all New Hampshire students.”

In their briefs the state and Coalition Communities argue allowing the communities to retain money was a spending decision by the legislature and does not impact the tax rate which is the same for all communities.

State Solicitor General Anthony Galdieri argues “What the plaintiffs and the trial court call ‘excess SWEPT’ is nothing more than lawfully raised tax revenue. RSA 76:8, II appropriates SWEPT funds to the municipalities that raise them and requires those funds to be spent for a public purpose—the use of the municipality’s school districts—consistent with Part I, Article 12 and Part II, Article 6 of the State Constitution. RSA 76:8 does not use SWEPT revenue to reduce or abate any individual municipal taxpayer’s SWEPT rate, nor does RSA 76:8 provide a rebate to an individual municipal taxpayer that functionally reduces the taxpayer’s SWEPT rate.”

He maintains that section of the constitution does not apply to how the legislature chooses to appropriate lawfully raised SWEPT revenue, and there is no such thing as “excess SWEPT.”

Galdieri also asks the court to stay the superior court injunction if it upholds the decision, to allow the legislature and executive branch sufficient time to “resolve the deficiency.”
In the Coalition’s brief, lead attorney John Mark Turner argues that because the excess funds are spent by the municipality at the school and not returned to taxpayers, it cannot be claimed that those municipal taxpayers are paying a lower effective rate.

The state argues that the law establishing the SWEPT applies only to municipalities and not unincorporated places, so the court erred including them in its decision finding the SWEPT unconstitutional.

Ruoff’s decision states “As the Supreme Court has repeatedly emphasized, the public education system benefits the entire State, not merely those communities in which publicly-educated children reside.” 

Likewise Galdieri argues if the prohibition of the setting of negative tax rates is upheld, the Supreme Court should enjoin the practice and the SWEPT money would go to the county to determine how to use the money.

“Under no circumstances should this Court affirm the injunctive remedy the trial court imposed,” Galdieri writes. “That remedy is inconsistent with this Court’s precedents and substantially violates the separation of powers.”

Shaheen said that would impact the communities that are currently being harmed by the state’s practices.

“By trying to block the reforms that will bring SWEPT in line with the New Hampshire Constitution, the State and the Coalition Communities are actively working against fair taxes and an adequate education for every child going to schools in other communities,” Sheehan said.

The Rand lawsuit was filed in June 2022 by property taxpayers in property poor communities negatively impacted by the funding system.

They claim state funding is both unconstitutionally low and uses wildly varying local property tax rates to generate over 70 percent of all school funding, which violates the court’s Claremont decisions.

Those claims of low school funding will be argued before Ruoff beginning Sept. 30. That issue was separated from the court’s decision on the SWEPT.

The NH School Funding Fairness Project used the Department of Revenue Administration’s CAMA file, which has a record of every property in the state, and determined that 20 percent of all residential property value lies in the 26 municipalities that make up the Coalition Communities, which is disproportionate to their population.

According to the organization, these municipalities have much higher rates of out-of-town and out-of-state home ownership than the rest of New Hampshire at 42 percent compared to the state average of 24 percent.

The Coalition Communities successfully lobbied lawmakers during the 2024 session not to make changes in the SWEPT provisions as proposed by several bills and not to change the current funding system.

The plaintiffs have until Sept. 30 to file their response. The State and Coalition Communities will then have 20 days to file briefs in reply to the plaintiffs ahead of oral arguments taking place later in the fall before the Supreme Court.

Garry Rayno may be reached at garryr.rayno@yahoo.com.