The fair division of the cost of education in New Hampshire is an issue that cannot reasonably be addressed without repealing Claremont II. There, the court said that for education to be constitutionally adequate it must be entirely funded with a state tax imposed at a statewide uniform rate.
Using local tax revenues to pay for an “adequate” education makes that education constitutionally inadequate. As the court said, if the “property tax is used in the future to fund the provision of an adequate education, the tax must be administered in a manner that is equal in valuation and uniform throughout the State.” No state in the country has a similar standard, which explains why every state uses local property taxes to pay at least in part for education. It is not possible to raise local property tax revenues without producing differences in tax rates among districts.
To preserve local budgeting and control over education, and achieve superficial compliance with the court’s standard, the state enacted the SWEPT tax, a state property tax, and carved out adequacy expenses from other educational expenses. Adequacy is funded with SWEPT tax revenues, which local districts collect and administer. Since 2011, districts that raise revenues exceeding the “adequacy” amount retain that money. The state receives no tax revenues from the SWEPT tax, which essentially operates as a phantom state tax to set the amount of aid that the state educational trust fund pays to districts with lower fiscal capability. This system has allowed New Hampshire to continue to budget and tax locally for education for nearly 30 years since Claremont.
The time has come to recognize that the Claremont standard for educational adequacy that requires paying for education exclusively with a state tax imposed at a uniform rate is not constitutionally based, not achievable without a broad-based income or sales tax capable of raising revenues exceeding $4 billion annually (something that New Hampshire residents don’t want), not workable, and not related in any way to educational quality. Since the court decided Claremont nearly 30 years ago, the critical question of how New Hampshire would budget for education were it entirely funded with state taxes remains unanswered.
The adequacy amount for the SWEPT tax is now set at $4,200 when the average per pupil expenditure across the state is well over $25,000. The sufficiency of this amount is on appeal to the court, and the central question is not how much an adequate education should cost, but the authority of an unelected court under our Constitution to tell our legislature what kind of tax must be used to pay for governmental services, and then what the tax rate should be. In every other state in the country, those decisions are made by an elected legislature. The court’s intervention in our tax system in Claremont II came at a time when the state had a financial aid system in place that allowed every school in the plaintiffs’ districts to meet all the state minimum standards. The problem then, and now, is not education but the alleged “unfairness” of the tax system.
The plaintiffs say that the courts don’t want to tell the legislature what kind of tax to pass or the rate of that tax, but that courts have been required to do precisely this because our legislature is not doing what the court thinks it should do. They say that if our legislature just “stopped all the silly defensive talk about protecting their role — and actually fulfilled it,” the courts would not need to tell them what tax to enact and the rate of that tax.
Our schools are not in crisis. The crisis is the expectation created by Claremont II that there is a constitutional right to a uniform state tax. The conversion of the right to an adequate education to an alleged constitutionally based right to a uniform state tax does not make the right constitutionally based. No such right exists in our constitution.
Whether to enact a broad based sales or income tax at a flat rate is solely the prerogative of our legislature. It hasn’t happened because a flat rate income tax or sales tax would be regressive, would eliminate significant tax revenues now paid by out of state property owners and businesses, would eliminate local budgeting for schools and would tax the wages of working residents of New Hampshire, instead of the wealth of non-residents. Once paid, the new state taxes would go into the state coffers to compete with other state priorities and expenses.
The time has arrived to repeal Claremont and allow our legislature to figure out fair taxation.
Leslie Ludke lives in Concord and was associate attorney general who represented the state at the Superior Court trial of the Claremont case in 1996.