Nashua School Board Joins New Hampshire School Funding Lawsuit

NASHUA, NH — The city's board of education voted on Monday to join more than a dozen other districts in a lawsuit over adequate education funding of schools in the state of New Hampshire.

The vote, which was unanimous, made Nashua one of 15 other school districts joining the Contoocook Valley (ConVal) Regional School District in a case filed in March 2019, against the state of New Hampshire and Frank Edelblut, the commissioner of the New Hampshire Department of Education.

The lawsuit, the third of its kind, claimed base adequacy aid provided by the state, around $3,700 per student, was not enough to provide an adequate education — a constitutional requirement, according to the plaintiffs. The average cost per pupil for the state is around $17,000, according to state data.

Heather Raymond, the president of the Nashua Board of Education, said she was "proud" of the board's unanimous vote.

"We are not hesitating in joining so many other school districts, large and small, in moving this case forward," she said.

Mayor Jim Donchess added the state was not living up to its responsibility.

"We all value public education because it uniquely serves our community honorably to make sure each and every student has an equal opportunity, no matter what circumstances, to lead educated, productive and engaged lives," he said.

The state requested a dismissal of the lawsuit but that was rejected by the New Hampshire Supreme Court in March. The case has been returned to the Cheshire County Superior Court. Judge David Ruoff, who was appointed by then-Gov. Maggie Hassan (D-NH) in 2015, has given other districts in the state until Friday to join the lawsuit.

Along with ConVal and Nashua, Manchester, Claremont, Derry Cooperative, Fall Mountain, Grantham, Hillsboro-Deering, Hopkinton, Lebanon, Manchester, Mascenic, Mascoma Valley, Monadnock, Newport, Oyster River, and Winchester are all involved. The New Hampshire School Board Association and the American Civil Liberties Union have also signed onto an amicus brief in support of the lawsuit.

Constitutional Interpretation

At issue is a legal interpretation by the New Hampshire Supreme Court, known as the Claremont I decision, that stated Part II, Article 83, the Encouragement of Literature, etc.; Control of Corporations, Monopolies, etc. clause, required the state government to provide an adequate education for every educatable child in public schools in New Hampshire and guarantee adequate funding.

The clause, written in 1784, does not actually state anything about school funding. But it does say the need for "the preservation of a free government" and "the opportunities and advantages of education," it "shall be the duty of legislators" to "cherish the interest of literature and the sciences, and all seminaries and public schools…"

Since 1993, there have been a countless number of bills proposed before the Legislature trying to rectify funding issues — and especially address property taxes as well as sales and income taxes to fund education, a second lawsuit known as Claremont II, and now, the one by ConVal.

The state of New Hampshire spent $3.35 billion on education for the 2019-2020 school year. Most of that money — $2.1 billion, about 63 percent, was raised through "local taxation" or property taxes. Another $961 million was raised in other forms by the state.

Funding Arguments

Earlier this year, the Carsey School of Public Policy released a lengthy school funding report, after the Legislature created a commission to discuss the issue in 2019.

Instead of just talking about money, the report looked at outcomes and proposed shifting statewide education property tax money (SWEPT) to districts that needed more funding but could not provide it due to already high per-thousand property tax rates, to improve outcomes. While many commission members did not like the comparison, it was very similar to the "donor town-receiver town" concept forwarded by funding change advocates in the late 1990s. With that proposal, about four dozen towns, with high-valuation properties, would have money shifted from their communities to low-valuation property communities.

This would require the donor communities to then raise their property taxes even more to make up for the lost education revenue that was shifted to receiver communities.

Instead, the state-approved SWEPT, a $2 per $1,000 tax on property to pad the adequacy aid provided by the state. That tax raises around $363 million.

In some cases, the high-valuation communities, including North Country towns as well as towns around Sunapee and Winnipesaukee, and the Seacoast, like Hampton, New Castle, North Hampton, Portsmouth, and Rye, do not receive adequacy aid from the state. Instead, they fully fund their schools with the SWEPT.

In 2008, the state created fiscal capacity disparity aid funding which supplemented communities with below-average median incomes. Three years later, it revised the formula again and removed capacity disparity aid for a differentiated aid formula.

On top of the $3,700, schools with students in certain categories receive additional money: With special education students adding $1,995 more; free and reduced lunch qualified students at $1,845 each; schools with English Language Learners get $726 more per pupil; and Grade 3 reading students — students with low reading scores, get an additional $725, to offset the cost of additional reading preparation.

But as enrollments began to drop around New Hampshire, due to lower birth rates, so did funding.

In 2012, the Legislature added more funding via a stabilization grant — giving districts 25 years to "right-size" their costs based on expected and continued declines in enrollments. That grant, however, would be lowered annually by 4 percent.

Most districts have not adjusted costs — they just used the additional money and then, requested the funding be restored.

Also during the 2019-2020 school year, districts across the state received an additional $218.7 million in federal money via three different acts and funds to offset the cost of the coronavirus pandemic.

Broad-Based Taxes

Across many decades, Granite Staters have argued about whether the state should approve broad-based taxes to pay for education and other state services.

All during that time, any number of plans and bills have been rejected.

New Hampshire is one of only nine states without a broad-based income tax and one of five without a broad-based sales tax. The state does tax interest and dividend income and there are sales taxes on rooms and meals, cigarettes, electricity, real estate, and other transactions — with gas and liquor taxes hidden in the prices.

According to state data, in order to raise the $363 million from the SWEPT tax, a 4.5 percent sales tax would need to be implemented on all retail sales (based on $7.5 billion in annual retail trade activity). This tax would also raise rooms and meals from 9 percent to 14 percent as well as other transactions, too.

On a $250,000 assessed home in Nashua, as an example, the homeowner's property taxes would drop by about $520.

This tax would be revenue-neutral — meaning it would raise exactly what was spent in the 2019-2020, with no increase in education spending.

About 29 percent of state residents who are renters would probably not see any financial benefit since most landlords would not lower rents in the wake of a very small property tax refund.

Back in 2017, the late state Rep. Paul Henle (D-Concord) proposed a plan to create both a sales and income tax as well as lowered business and property taxes. In his plan, he proposed a 3.95 percent income tax that, according to the Department of Revenue Administration, would raise $1.315 billion dollars. This is a good measure by which to find out how much someone would pay in income taxes to replace the state education taxes.

In order to replace all state and property tax funding — about $3.2 billion, a 9.9 percent income tax would need to be implemented, on all income, without exemptions.

In Nashua, the property tax rate is $22.61 or about $5,600 for both city and school services. With a 9.9 percent income tax, the property tax rate would drop by about $520 with the elimination of SWEPT and $2,275 for the local education tax — while the median household income of $73,000 would be taxed at around $7,227.

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