NH argues education funding is constitutional after judge rules it's too low

After months of preparation, lawyers have submitted their first filings in the lawsuits concerning New Hampshire’s school funding system.

The New Hampshire Attorney General’s Office is taking to the Supreme Court to argue that two groundbreaking decisions by a lower court finding the state’s school funding laws are unconstitutional were wrongly decided.

In a court filing Monday, the state officially appealed a November Rockingham County Superior Court decision that found that the state’s base $4,100 per pupil yearly payments to schools are unconstitutionally low. That decision found that the payments – known as adequacy grants – should be at least $7,356.01 per student per year in order to meet the state’s obligation to provide an adequate education.

In its appeal, the state argued the court had no authority to tell the Legislature exactly how much the state should spend per child due to separation of powers. And it contended the Rockingham County judge, David Ruoff, wrongly relied on superintendents’ estimates of how much it costs to provide an adequate education, when he should have stuck to state statutes and guidelines.

“The trial court’s approach completely untethers the right to an adequate education from any objective, definitional standard,” the state’s appeal reads. “This threatens to embroil the judicial branch in a perpetual cycle of school-funding litigation.”

The filing is the second appeal in two weeks made by the state against Ruoff’s decisions in two school funding lawsuits. Last week, the state and a collection of property-wealthy towns known as the “Coalition 2.0” sought to overturn Ruoff’s other decision finding that New Hampshire’s statewide education property tax (SWEPT) is also unconstitutional.

Those lawsuits – Contoocook Valley School District et al v. State of New Hampshire and Steven Rand et al v. State of New Hampshire – are likely to receive oral arguments in the coming months. The plaintiffs now have until the end of September to respond to the state in their own briefings to the Supreme Court, according to John Tobin, an attorney helping represent plaintiffs in the Rand case.

The lawsuits are rooted in allegations that New Hampshire’s school funding system is not equitable, more than two decades after the state Supreme Court held that the state is required to provide an adequate education.

A battle over adequacy payments

In the first lawsuit, Contoocook Valley School District, known as ConVal, and other school districts have argued the state is not providing sufficient funding to allow the districts to adequately run their schools, requiring those districts to rely on local property taxes to make up the difference.

Currently all property-tax payers must pay a statewide tax on their property that is meant to help cover their school budgets. But if that tax doesn’t raise enough money, the state must provide adequacy funding for the district. Those school districts receive $4,100 per year for every pupil, plus an additional $2,300 for lower-income students eligible for free and reduced-price lunch; $800 for each English language learner; and $2,100 for each student receiving special education services.

ConVal and others say $4,100 is insufficient and that it and other school districts must resort to raising property taxes, a situation they say goes against the two Supreme Court rulings from the 1990s known as the Claremont decisions.

The lawsuit reached the Supreme Court in 2021, but the court declined to move quickly on it, instead remanding it back down to superior court for a trial to determine the actual cost of an adequate education. That trial is at the heart of the state’s current appeal to the high court.

Plaintiffs in the trial, held last summer, used the testimony of superintendents to paint a portrait of the spending requirements they say are necessary for an adequate education. ConVal Superintendent Kimberly Rizzo testified that she believed the adequacy funds should be at least $9,929 per pupil to cover actual costs. Ruoff used her and others’ testimony to arrive at the $7,356.01 figure in his November decision.

But the state argues those calculations are wrong. When determining what counts as an “adequate education,” lawmakers should not rely on school district reports, but should instead stick to the written minimum requirements for schools outlined in RSA 193-E:2-a – as well as the minimum standards laid out in the Department of Education’s rules, known as Ed 306, the state contends.

That state statute requires that schools provide instruction in English language arts and reading; mathematics; science; social studies; arts education; world languages; health and wellness; physical education; engineering and technology; personal finance literacy; computer science; and logic and rhetoric. The state rules go into further detail of expectations for school districts.

The state argues that lawmakers should be beholden only to their own statutes when determining how much state money to send to schools – not the courts. Plaintiffs say the statute itself is unconstitutional and must be overridden by a court.

The return of donor towns?

In the Rand lawsuit, filed in 2021, a group of residents are suing the state arguing that the school funding system is unfair to property-tax payers.

In their legal filings to the Supreme Court last week, the Attorney General’s Office and the Coalition 2.0 argued that Ruoff was wrong to rule that the SWEPT tax is unconstitutional.

The tax – and the ability for wealthy towns to keep any SWEPT revenue they don’t spend on schools, rather than redistributing it to poorer towns – is constitutional, the Attorney General’s Office argued.

“The SWEPT rate is proportional and reasonable, equal in valuation and uniform in rate across the State, and just,” the state said.

Currently, under New Hampshire’s statewide education property tax system, the Department of Revenue Administration applies a set percentage property tax rate to each town and city in the state – an amount they determine is necessary to raise $263 million per year. That flat rate must be applied to all property owners equally.

But the amount that rate actually raises varies in each city and town, depending on the value of properties. In towns with high-value properties, the percentage will net high amounts of revenue; towns with low-value properties will raise less. Some wealthy towns raise more than enough to cover the cost of their local schools, while some poorer towns don’t raise enough.

While the SWEPT initially required wealthier towns to give up any revenue not needed for their schools, and allowed the state to redistribute that revenue, that changed in 2011 when Gov. John Lynch and Republican lawmakers allowed wealthier towns to keep their excess and use it for other town expenses.

The result: Poorer towns no longer receive extra infusions of revenue, and must instead rely on the state’s adequacy fund and additional local property taxes to pay for their schools.

Ruoff ruled that even though the SWEPT technically applies the same percentage tax rate to every property-tax payer, the lack of redistribution meant that in effect, towns are required to set different property tax rates for their schools, a violation of the constitutional requirement for taxes to be “proportional and reasonable” upon all inhabitants and residents.

“Accordingly, the Court concludes that allowing some communities to retain excess SWEPT funds impermissibly results in a disproportionate tax rate, in violation of Part II, Article 5,” Ruoff wrote . He ordered that the state return to the “donor town” system and redistribute the revenue immediately; that ruling was later stayed by the Supreme Court.

But the state – and the wealthy towns themselves – disagree with Ruoff’s decision. SWEPT is a fair and equal tax for all property-tax payers, and whether the Legislature requires that it be redistributed is merely a spending decision by the Legislature, they argued in their appeal to the Supreme Court last week.

“What the plaintiffs and the trial court call ‘excess SWEPT’ is nothing more than lawfully raised tax revenue,” the Attorney General’s Office wrote in its pleadings. “… Part II, Article 5 does not apply to how the legislature chooses to appropriate lawfully raised SWEPT revenue.”

The state also argues Ruoff was citing the state constitution too expansively, and was improperly applying the earlier Supreme Court Claremont decisions in the 1990s that first established that the state should provide for an adequate education.

If the Supreme Court cannot reconcile the state’s position with the earlier Claremont decisions, it should overturn or correct those decisions so that they align with the current statutes, the state continued.

The Coalition 2.0 filed its own briefing arguing the Legislature was acting constitutionally when it ended the “donor town” model of SWEPT taxes in 2011. Towns in that group include Bridgewater, Carroll, Center Harbor, Franconia, Gilford, Hampton, Hebron, Holderness, Hollis, Jackson, Lincoln, Lebanon, Meredith, Moultonborough, Newbury, New Castle, Newington, New London, Portsmouth, Rye, Sandwich, Sugar Hill, Sunapee, Tuftonboro, Waterville Valley, and Wolfeboro.

In an interview, Tobin, the plaintiffs’ attorney in the Rand case, countered that the SWEPT is not free revenue for the Legislature to distribute. And whether extra SWEPT can be kept by the towns is not a spending decision by lawmakers, but rather a question of how the tax itself functions, Tobin argued.

“Most of the SWEPT gets allocated the right way, but in these wealthy towns, it doesn’t,” he said."

This story was originally published by the New Hampshire Bulletin .

This article originally appeared on Portsmouth Herald: NH argues education funding is constitutional after judge rules it's too low