The opening of the Rand trial before Judge David Ruoff in Rockingham County Superior Court last week marked the beginning of an effort to persuade the court to reaffirm and enforce the rulings of the New Hampshire Supreme Court in the Claremont cases by ordering the state to rescind and replace its unconstitutional system of financing public schools.
Steven Rand, a business owner from Plymouth, together with four property owners from Concord, Penacook, Hopkinton and Newport, charge that for the past 27 years the Legislature has failed to comply with either of the Supreme Court’s two orders in the Claremont litigation.
The plaintiffs are represented by attorneys Andru Volinsky and John Tobin, who argued the Claremont cases, and Natalie Laflamme, who was then a second grade pupil in Berlin. They are accompanied by Michael-Anthony Jaoude of Harter, Secrest & Emery of Buffalo, New York, and lawyers from the Education Law Center in Newark, New Jersey.
The Rand case is the second to be tried by Ruoff. The first, filed by the ConVal School District, claimed that the $4,100 per pupil allotted by the state to meet its duty to fund an adequate education is insufficient and asked the court to more than double the amount to nearly $10,000. Ruoff agreed and pegged the cost at a minimum of $7,356 while acknowledging that likely it should be more.
However, the ConVal pleadings altogether disregarded the tax issues at the center of the Supreme Court’s rulings in the Claremont litigation, which have underlaid the refusal of the legislative and executive branches to address, much less comply with them, for nearly three decades.
A ConVal school bus. The state’s education funding formula is the subject of an ongoing legal battle. (File/Ben Conant/Concord Monitor)
In 1993, the court held in Claremont I that the state constitution places an “unequivocal legal duty” on the state “to provide a constitutionally adequate education to every educable child in the public schools in New Hampshire” and “to guarantee adequate funding.”
Four years later in Claremont II the court ruled that local school taxes are “in fact state taxes that have been authorized by the Legislature to fulfill the requirement of the Constitution” and further held that “to the extent the State relies upon property taxes to fund a constitutionally adequate public education, the tax must be administered in a manner that is equal in valuation and uniform in rate throughout the State.”
“There is nothing fair or just about taxing a home or other real estate in one town at four times the rate that a similar property is taxed in another town to fulfill the same purpose of meeting the State’s educational duty,” the justices declared, referring to the tax scheme as “fiscal mischief.”
At the same time, the court drew a parallel between disproportionate property taxation and disproportionate educational opportunities, finding that “Imposing dissimilar and unreasonable tax burdens on the school districts creates serious impediments to the State’s constitutional charge to provide an adequate education for its public school students.”
School funding litigation turns not on the sum total of expenditures, but instead on the inequitable sources of revenue raised to fund the lion’s share of them. The U.S. Census Bureau reported that in 2022 New Hampshire spent $22,738 per pupil, a figure topped by only nine states.
But nowhere is the state share of school funding less and the burden borne by local property taxpayers more than in New Hampshire. Property taxes, local school taxes and the statewide education property tax (SWEPT), both levied at rates that vary from one municipality to another, fund, 70 percent of public school expenditures.
The Rand plaintiffs charge that because both local school taxes and the SWEPT are levied at disparate rates across the state both are unconstitutional and therefore illegitimate means of funding the state’s obligation to provide constitutionally adequate public education.
Like the ConVal plaintiffs, the Rand plaintiffs argue that the state contribution to school funding is insufficient, but then conclude that the paucity of state funding shifts the burden of funding public schools from the state to municipalities where local property taxes raise 60 percent of the revenues funding public schools.
Since property wealth varies widely among towns and cities, local school tax rates vary with them. The Department of Education reported that in 2022-2023.the median equalized property value per pupil was $1,896,826 and ranged from a low of $778,484 in Charlestown to a high of $25,055,786 in New Castle. As a result, local school tax rates ranged between $23.21 in Hopkinton and $1.33 in Newington, contrary to the court’s order in Claremont II.
In 2020, the American Institutes for Research (AIR) found that more than three-quarters of all students live in cities and towns where equalized property values per pupil are below the state average, with Manchester home to the largest share of them.
These relatively property poor districts are also home to a disproportionate share of students economically disadvantaged, learning English language and receiving special education services who are more costly to educate. Despite imposing the highest school tax rates, AIR reported that these districts spend less than those with fewer students in need and that academic performance in these districts trails that of districts with greater property wealth and fewer needy students.
The Rand plaintiffs further charge that the inequitable effects of local school property taxes are compounded by those of the SWEPT, which ironically was intended to overcome them. In other words, the plaintiffs claim that 70 percent of the taxes levied to pay for public schools are unconstitutional.
The SWEPT is levied on taxable property throughout the state at uniform rate set to raise $363 million a year, or 10 percent of the total funding package. The tax is collected by municipalities, and the proceeds are appropriated to school districts to defray the cost of an adequate education as calculated by the State.
In some two to three dozen municipalities with the greatest property wealth, the tax raises more than required to fund an adequate education. When the SWEPT was first introduced in 1999, those excess receipts were remitted to the state and distributed as state aid among municipalities where, for want of sufficient property valuation, SWEPT revenues fell shy of the cost of an adequate education.
Cities and towns with excess SWEPT balked and formed the Coalition Communities to urge the Legislature to scrap what they described as the “donor-receiver” model of school funding. The Legislature made three efforts to spare taxpayers in these municipalities the full rate of the SWEPT by either abating or phasing-in the tax, all of which failed. The courts ruled, as the Rand plaintiffs claim, that such measures would reduce the effective rate of the tax below its uniform rate in violation of the Constitution.
Nevertheless, in 2011 the Legislature repealed the requirement to remit excess SWEPT, entitling municipalities to retain any excess while requiring it be allocated, “for the use of the school district.”
In fiscal year 2021, 34 municipalities retained $24.4 million in excess SWEPT. Meanwhile in 21 other communities, mostly incorporated places with few if any pupils, the NH Department of Revenue Administration (DRA) has set negative local school tax rates, which offset the SWEPT altogether.
The plaintiffs argue that because the excess SWEPT revenue and negative tax rates offset the full rate of the SWEPT, the effective rate of the SWEPT is not uniform throughout the state as the court required. While the SWEPT is a fraction of property tax bills, its effect is significant. In Newington, a median priced home of $450,000 is taxed at 40 cents per $1,000, or $180, in SWEPT to fund an adequate education while a comparable home in Hopkinton is taxed $1.48 per $1,000 or, $666, more than three times more.
In 2023 the Rand plaintiffs presented their case in Rockingham County Superior Court in 2023 where last November Ruoff ruled in their favor. Citing several past court decisions, he ruled that by retaining the excess these municipalities were spared the full rate of the tax, in violation of the constitutional requirement that state taxes be equal in valuation and uniform in rate throughout the state. The state has appealed Ruoff’s order to the Supreme Court, which has yet to schedule proceedings.
Meanwhile, the Rand trial has entered its second week when Kevin Clougherty, former Commissioner of the Department of Revenue Administration, is scheduled to testify.
