By KATHARINE WEBSTER, InDepthNH.org
Under sharp questioning by three state Supreme Court justices, the state and property taxpayers from several towns argued on Wednesday about whether the state’s method of paying for public education is constitutional.
Natalie Laflamme, an attorney for Plymouth property taxpayer Steven Rand and others, asked the high court to uphold a lower court ruling in Rand v. New Hampshire that the current Statewide Education Property Tax (SWEPT) scheme is unconstitutional because property-wealthy towns get to keep any “excess” money they collect from the state tax beyond what’s needed to pay for an “adequate education” for their own, resident school-age children.
Those communities are using the extra money to offset the local share of school funding or to pay for other educational items. Meanwhile, Plymouth and other communities that don’t collect “excess” funds must hike their local property taxes to pay for everything above the base, state-determined adequacy amount they need to run their schools, leading to “effectively unequal” education tax rates for taxpayers in those cities and towns
An adequate education is a state obligation that must be funded by a state tax that is “uniform in rate” and distributed by the state equally on a per-pupil basis, regardless of where those pupils live, Laflamme said. The court should follow its own precedents in upholding the lower court ruling, she said.
“This court’s been very clear that it (an adequate education) is a statewide benefit and a statewide obligation, and you can’t base it on how many students live in a certain town,” Laflamme said.
However, state Solicitor General Anthony Galdieri and John Mark Turner, a lawyer for 27 property-wealthy towns known as the Coalition Communities 2, argued that the high court should overturn the ruling by Rockingham Superior Court Judge David Ruoff, who found the current tax scheme to be unconstitutional.
Galdieri argued that the SWEPT is constitutional because it is levied at exactly the same rate in every city and town. He also said the Legislature has the sole power to decide on spending for education, including that the “excess” funds raised on property in wealthier communities can remain in those communities.
He also argued that property owners in the state’s unincorporated areas should not have to pay the SWEPT because they are not municipalities as defined by state law. Currently, the state sets negative property tax rates for unincorporated areas with no school-age children to offset the SWEPT.
Ruoff’s ruling “is far too overbroad and it violates the separation of powers” by dictating what the state must do and bypassing the other branches of government, Galdieri said.
If the high court finds that unincorporated areas are not exempt from the SWEPT or upholds other parts of the lower court ruling, “This court should give the legislative and executive branches a reasonable amount of time to fix these issues,” he said.
“How can we be confident the Legislature’s going to fix it?” Associate Justice Patrick Donovan asked. “It’s had 30-plus years now, and it hasn’t fixed it.”
Rand vs. New Hampshire is just the latest round in a decades-long fight over state education funding. In its landmark Claremont rulings in 1994 and 1997, the state Supreme Court determined that the state has a constitutional duty to provide all students with an “adequate education” – the teaching of core subjects including math, English, science and history and other state requirements – and to pay for it with a statewide tax or taxes. The high court has rejected previous challenges to those decisions.
Rand and property owners in Penacook, Concord, Hopkinton and Newport sued the state in 2022, arguing that the state sets the base per-pupil cost of an adequate education – $4,100, plus more money for students who live in poverty, need special education services or are learning English – at less than one-third of its true cost.
They argue that lowballing the adequacy amount forces cities and towns to pay for what should be the state’s responsibility with widely varying municipal education property tax rates.
Rand and the others also argue that the structure of the statewide education tax has been unconstitutional since 2011, when a new state law allowed property-wealthy communities to keep SWEPT revenues in excess of the per-pupil adequacy amount for their own school-age children and use that money to lower their property tax rates or add extra programs and facilities to their own schools, thereby using state tax revenues to fund what should be a local responsibility.
Turner argued that Rand and the other taxpayers didn’t have standing to sue over the state tax because what they are actually objecting to is a spending decision by the Legislature.
“The Claremont cases do not require the state to spend an equal amount on all students,” he said. “The Legislature is permitted to choose what purposes” it spends money on.
The Rand case was divided into two parts. Ruoff issued a summary judgment ruling a year ago on the second part because the two sides agreed on the facts.
Ruoff ruled in favor of the taxpayers, finding that property-wealthy towns cannot keep any SWEPT money they collect beyond the educational adequacy amount for their own K-12 schoolchildren, because those are state tax revenues that must be used to fund an adequate education for all children.
Ruoff also ruled that property owners in unincorporated areas are not exempt from paying the statewide education property tax – an argument that seemed to get support from Donovan on Wednesday after Laflamme said that state law is very clear that you can’t exempt certain taxpayers, only certain types of property, from statewide taxes.
“We have hundreds of thousands of residents who have no children, and they pay the state school tax,” the associate justice remarked.
A trial over the other part of the Rand lawsuit, whether the state adequacy amount is set too low, was held before Ruoff last month.
He has not issued a ruling yet. However, he is expected to decide for the taxpayers after ruling last year, in another education funding lawsuit brought by the ConVal School District, that the state’s base adequacy cost should be no less than $7,356 per pupil and that the true cost is probably much higher.
The state has also appealed that ruling, and the justices asked both sides in the Rand case on Wednesday whether they should hold off on ruling in the Rand case until they have decided the ConVal case.
If the high court agrees with Ruoff that the base adequacy amount is set way too low, then the “excess could not be excess anymore,” Donovan said.
Galdieri and Laflamme both argued the court should not wait, since the constitutionality of how the state collects and distributes SWEPT revenues – or doesn’t collect them – from cities, towns and unincorporated places still needs to be decided before the state can figure out how to set tax rates.
Senior Associate Justice James Bassett was absent, but will watch video of the proceedings and participate in the ruling, Chief Justice Gordon MacDonald said. Associate Justice Anna Barbara Hantz Marconi is on paid leave from the court and has agreed to have her law license temporarily suspended while she faces charges of improperly interfering in a criminal case involving her husband.
Video from Wednesday’s hearing
