CONCORD, N.H. — In 2022, the town of Newington needed to raise $309,366 in statewide property taxes in order to pay for an “adequate education” in its schools as defined by a state formula.
Instead, after applying the standard statewide property tax rate, the town raised well over that: $1.1 million.
In the past, Newington, one of the wealthiest towns in the state, would have been required to give the extra $794,000 to the state to distribute it to towns that did not raise enough money to pay the bare minimum for their schools.
But since a 2011 law, it and other wealthier towns have been allowed to keep the additional property tax revenue, and the reallocation to other towns has stopped.
On Wednesday, that long-standing debate over “donor towns” — and whether the statewide education property tax should be redistributed from rich to poor — returned to the New Hampshire Supreme Court.
A group of plaintiffs argued the current arrangement allowing towns to keep excess state property tax revenue, rather than pass it to less wealthy towns, is unfair to taxpayers and unconstitutional. And they said the court should force the Legislature to fix it.
“The Legislature doesn’t need any time to go back and figure it out,” said Natalie LaFlamme, an attorney for the plaintiffs. “The fix is clear. They can have the excess communities remit the excess, like they did in the past.”
The state and a group of property-wealthy towns known as the Coalition Communities argued the tax is fairly and evenly collected, and that the Legislature, not the court, has the full power to direct how it is distributed.
“All taxpayers pay the full, uniform SWEPT in every town, in excess towns and in non-excess towns,” said attorney John-Mark Turner, representing the Coalition.
And the three justices hearing the arguments asked sparse questions, revealing little of their thoughts and intentions.
The arguments, made in the case of Rand et al. v. State of New Hampshire, make up half of that lawsuit. The other half, which argues the state’s school funding “adequacy formula” is unfair to taxpayers, has been sent to superior court for a full trial, and could come to the high court later on appeal.
The Supreme Court is also taking up a separate school funding lawsuit, Contoocook Valley School District v. State of New Hampshire, in which a number of school districts are suing to argue New Hampshire’s school funding formula does not provide enough money for school districts to pay for an adequate education. The court has not set a date for oral arguments in that case.
The state appealed both cases to the Supreme Court after Rockingham Superior Court Judge David Ruoff issued two transformative orders in November 2023 siding with the plaintiffs and finding the school funding laws unconstitutional.
Wednesday’s oral arguments focused just on the constitutionality of the statewide education property tax, not the entire formula. But plaintiffs say adjusting the distribution of the tax is crucial to their overall goal of forcing lawmakers to fix funding inequities between school districts.
The state counters that the court should not intervene because doing so would intrude on the Legislature’s authority and violate the separation of powers.
Created in 1999, the statewide education property tax, known as SWEPT, imposes a set percentage tax on every property owner in the state. Cities and towns must collect that statewide tax in addition to any local property tax. But the revenues are not passed on to the state; instead the town keeps the funds and must apply them to educational expenses.
The tax was created in response to a series of state Supreme Court rulings in the 1990s known as the Claremont decisions, which found that the state had an obligation to provide “adequate” education funding to all students.
And as originally passed, the SWEPT had a redistribution mechanism: Towns could keep only the portion of the money they raised that was necessary to meet the state’s definition of “adequate” funding per student.
The town would need to transfer any extra amount collected, or excess, to the state’s Education Trust Fund, which would allow it to be distributed to less wealthy towns in the form of adequacy aid.
That arrangement changed in 2011 when Democratic Gov. John Lynch and a Republican legislature passed a bill repealing the part of the SWEPT law requiring redistribution, and allowing wealthier towns to keep any extra they collected. Lynch and others said the previous system had made those wealthier towns into “donor towns.”
Today, that 2011 change – to end donor towns – is the subject of the Rand lawsuit.
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