School-funding suit focuses on tax inequities
Andru Volinsky (center) returned to court in June with Natalie Laflamme (left) and John Tobin (right) by his side. (Photo by Kate Brindley Photography)
“Why do we have to do this all over again?” asked Andru Volinsky, the lead counsel when the New Hampshire Supreme Court struck down the system of funding public schools in the landmark Claremont cases nearly three decades go.
In June, Volinsky returned to court, accompanied by John Tobin, former longtime executive director of NH Legal Assistance and fellow veteran of the Claremont litigation. They were joined by a third member of the legal team, Natalie Laflamme, who was an elementary school pupil in Berlin when the Claremont cases were decided.
“My daughter is the same age now I was then,” she said. A graduate of Georgetown University and Duke Law School, who clerked for Bob Lynn, former chief justice of the NH Supreme Court, Laflamme now practices in Concord.
Laflamme joined the two Claremont litigation veterans after when Tobin first broached the prospect of another round of litigation in 2018. “We’re hoping for some renewed energy and maybe some younger blood to carry the torch,” he said.
“She’s the best lawyer of the three of us,” Volinsky added, a point quickly echoed by Tobin, who said “she’s a dogged researcher and sound strategist.”
While a legion of 18 attorneys worked the original Claremont litigation, these three aim to persuade the justices to reaffirm and enforce their rulings. “The state has never complied with the court’s decisions,” Volinsky said, “and both Democrats and Republicans are responsible. It’s a bipartisan failure.”
The Claremont decisions
The court’s rulings were concise and straightforward.
In 1993, the justices held that the New Hampshire Constitution grants a right to an adequate education to every child in the public schools and imposes a duty on the state to pay for their education.
The plaintiffs then returned to court to argue six counts, five claiming the state failed to honor the right of schoolchildren to an adequate education and the sixth claiming local school property taxes were neither proportional nor reasonable as the Constitution requires.
In 1997, the justices addressed only the sixth count, finding that taxes levied by school districts are local only in the sense they are levied on local property and holding these taxes “are in fact State taxes that have been authorized by the Legislature to fulfill the requirements of the New Hampshire Constitution.”
And the court ruled 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.”
For good measure, the justices added, “To hold otherwise would be to effectively conclude that it is reasonable, in discharging a State obligation, to tax property owners in one town or city as much as four times the amount taxed to others similarly situated in other towns or cities. This is precisely the kind of taxation and fiscal mischief from which the framers of our State Constitution took strong steps to protect our citizens.”
Laflamme noted that the court subsequently reaffirmed its decisions, in advisory opinions requested by the Legislature and in litigation brought by Portsmouth and Londonderry.
In its second Claremont decision, the court stipulated that the duty of the state consists of four mandates: to define an adequate education, determine its cost, fund it with constitutional taxes and ensure its implementation. Volinsky, Tobin and Laflamme contend that after all these years successive governors — Democrat and Republican alike — and Legislatures have yet to fulfill them.
The lawsuit hinges on the inequities among property taxpayers arising from the disparities in property wealth among cities and towns. All three plaintiffs are property owners. However, as Tobin explained, the system of funding education, with its inordinate reliance on property taxation, fosters inequities in educational opportunity and achievement among students as well.
More than three-quarters of all students live in cities and towns where equalized property values per student are below the state average. School districts with relatively less property wealth are home to a disproportionate share of students who are economically disadvantaged, learning the English language and receiving special education services.
Despite imposing the highest school tax rates, these districts spend less than those with fewer such students. The American Institutes for Research found that academic achievement in these districts lagged behind that of districts with fewer such students.
The SWEPT
Over the years, the Legislature has tinkered with the definition of an adequate education, but its wordsmithing has not matched its calculation of the cost of an adequate education.
For instance, from 2012 to 2022 the base cost of adequacy rose from $3,450 to $3,786, an increase of 9.7 percent, while the average cost per pupil increased 37 percent, from $13,459 to $18,434. Moreover, the average cost per pupil does not include some $2,200 in capital expenses, debt service and transportation costs.
The base cost is supplemented by “differential aid” for students qualified for free and reduced price lunch, learning the English language, receiving special education services and third graders reading below proficiency level, which together raise the average per-pupil cost of an adequate education to $4,578.
Volinsky described the amounts allocated to both an adequate education and differentiated aid as “arbitrarily low” and doubted they were sufficient to enable schools to meet the minimum standards the state prescribes for public schools, let alone support an adequate education.
Tobin explained that by setting the perpupil cost of an adequate education at a fraction of the actual costs, the state has shifted the lion’s share of its obligation to fund schools to local property taxpayers, who bore 61 percent of the cost of public education in 2020-2021.
At the same time, far from correcting the “fiscal mischief” cited by the court, the state has perpetuated and even exacerbated it, he said.
Equalized property value per pupil measures the fiscal capacity of municipalities to fund its schools and determine the local education tax rate. The Department of Revenue Administration reported that in the 2020-21 school year values ranged from a low of $523,285 in Claremont to a high of $120,861,443 in Millsfield and averaged $1,346,793 throughout the state. As a result, disparities in local school property tax have persisted, matching or exceeding those when the Claremont cases were decided.
One of the petitioners in the suit, Steven Rand, lives in Plymouth, where he owns five properties — his residence and four commercial and residential rental properties.
Plymouth is the largest of the nine towns in the Pemi-Baker Regional School District. Equalized property values per pupil range from $942,652 in Plymouth to $5,469,546 in Waterville Valley. The local education rates range from $1.44 in Waterville Valley to $13.43 in Campton.
The disparities in local property taxes are compounded by the statewide education property tax, or SWEPT. The SWEPT has been a staple in the school-funding system since it was first introduced in 1999, and remains the largest single source of revenue in the state’s contribution to the cost of education.
In the 2019-20 school year, the total revenue raised to fund public education totaled $3.3 billion. The state’s share amounted to $997 million, or 28 percent of the total, consisting of $634 million raised from nine different state taxes and $363 million from the SWEPT.
As a surcharge on the local property tax, the SWEPT increased property taxpayers’ share of education to about 70 percent. But, levied at a uniform rate across the state, it met the “proportional and reasonable” test to qualify as state tax.
When the SWEPT was introduced, municipalities were required to assess the tax, pay their share to fund an adequate education to the school district and remit any excess to the state. The excess funds were deposited in an “education trust fund” for distribution to the majority of municipalities where proceeds from the SWEPT failed to meet the cost of an adequate education.
Right away, 22 property-rich municipalities balked at remitting their excess tax receipts to the state for redistribution to others. Calling themselves “donor towns,” they formed the Coalition Communities and mounted an effort to repeal the SWEPT, which they dubbed a “donor-receiver system.”
As property values appreciated, the initial tax rate of $6.60 per $1,000 fell, bottoming out at $3.24 in 2005 and leaving only three “donor towns.” That same year, legislation entitled municipalities to keep the excess as long as it was spent on their schools. And in 2011 this restriction was lifted, allowing municipalities to use their excess as they chose to lower their property taxes or fund other public purposes.
Consequently, the SWEPT, which was intended to cure the tax issue, has simply aggravated it.
‘Unconstitutional’ scheme
In their lawsuit, Volinsky and Tobin list 11 towns, with little or no school enrollment, that virtually evade the SWEPT altogether by setting a negative rate for the local school tax against the rate of the SWEPT. For instance, in 2021 the SWEPT rate in Cambridge was $1.85 while the local school tax rate was negative $1.84, producing a combined rate of a penny.
The equalized school tax rates, combining the SWEPT and local rate, required to raise $1,000 for each student enrolled in the district highlights that school taxes are neither equal in valuation nor uniform in rate either, the suit argues. In 2020-21, rates ranged between 1 cent in Millsfield and $1.88 in Claremont and averaged $0.72 throughout the state.
“School funding cases are all about the math,” said Volinsky, “and this is down to simple math.”
“The issue,” Tobin added, “is not that as a state we pay too little for our schools, but how we raise and distribute the money we spend.”
The petitioners have asked the justices to order the state to “discontinue its unconstitutional public education funding scheme” and replace it with one that incorporates the full cost of a constitutionally adequate education to every school district amounting to not less than the average expenditure per pupil and including allowances for transportation, capital investment and debt service.
The court stipulated that the state’s duty consists of four mandates: define an adequate education, determine its cost, fund it and ensure its implementation.
