Here’s what’s next for a pair of New Hampshire school funding lawsuits

By ETHAN DEWITT

New Hampshire Bulletin

Published: 08-17-2023 5:04 PM

For over a year, a group of taxpayers have waged a lawsuit against the state of New Hampshire, seeking to prove that the state’s school funding model is unfair. This month, lawyers behind that effort made an ambitious ask.

In a proposed settlement offer sent in early August, the plaintiffs asked the state to require that cities and towns send any excess taxes collected by the statewide education property tax back to the state for redistribution – ending a decade-long practice. Since 2011, municipalities wealthy enough to collect more than they need in that tax have been able keep the extra revenue. If the state agreed to the settlement, the result would be a return to the model referred to by opponents as a “donor town” system.

The settlement offer has dim prospects: The state has not responded to it in the two weeks since it was sent. And even if it were accepted, it would resolve only a portion of the lawsuit, which also seeks to demonstrate that the state does not send enough money for an adequate education to its public schools, distorting property tax rates. 

But the attempt highlights the bigger aims of plaintiffs in the case, known as Rand v. State of New Hampshire, and demonstrates what could be at stake if the state Supreme Court takes up that case and Contoocook Valley School District v. State of New Hampshire in the future. 

Here’s a refresher of where both lawsuits are and what to expect in the coming months. 

Two cases, two focuses

In recent years, two lawsuits have emerged challenging the way New Hampshire funds its schools. 

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The first, filed on behalf of the ConVal School District and others in 2019, asserts that New Hampshire’s low level of state support for public schools has hurt districts financially and that the state is not fulfilling its duty to provide an education. The second, filed by taxpayers, argues that the state’s school funding formula creates broad disparities between towns with more property wealth and towns with less, hurting taxpayers in the poorer towns.

Since the 1993 state Supreme Court decision known as Claremont I – and the follow-up 1997 decision in Claremont II – New Hampshire has been obligated to provide the funding for an “adequate” education. But despite that mandate, critics argue the state does not do so, and that the current $4,100 minimum of funding guaranteed to every child does not meet that standard of adequacy on its own. 

While similar, the two lawsuits were not filed in conjunction, and they address different themes. The ConVal lawsuit is requesting that the court define the realistic cost of an adequate education in order to determine whether the state is providing that to schools. The Rand lawsuit is arguing that the current system creates uneven outcomes for towns and violates the constitutional requirement that state taxes be uniform. 

Each of the cases is following its own timeline. The ConVal case has already appeared before the state Supreme Court; in 2021, the court remanded the case back to a superior court so that that court could hold a trial to determine what parts of public school services constitute the minimum requirements for an “adequate” education. That trial took place in May; the parties are awaiting a decision by Judge David Ruoff of Rockingham County Superior Court.

The Rand case has not yet received a full trial. Arguments in that case were expected to be heard in September – also by Ruoff. But this month, Ruoff announced he was delaying that trial so he can either issue a ruling in the ConVal case or resolve one of the motions in the Rand case. The timing of that case is now in limbo until Ruoff completes those actions.

The spring ConVal trial

While the Rand case is stalled for now, the ConVal case was put into the spotlight this May, when Ruoff presided over a trial.

There, lawyers for the state and the plaintiffs tussled over which parts of a school district’s budget – from busing to nursing – are necessary in order to provide an adequate education, and thus necessary to be funded by the state. They disputed whether the adequacy standard requires the state to give schools enough money to keep the number of students per teacher below a certain level. 

And they debated the bigger question of whether the state’s adequacy formula payments come close to covering the actual cost of educating each student, which averages about $24,000 in Contoocook Valley School District. 

The same case had been decided for the plaintiffs by Ruoff in 2019, but in that decision, Ruoff declined to issue a recommended per-pupil dollar figure for what the state owes schools to ensure an adequate education. Because the case was then remanded by the Supreme Court back to superior court for a full trial, Ruoff will need to revisit that decision. 

The push for SWEPT changes

In contrast to the ConVal lawsuit, one major aim of the Rand lawsuit is to change New Hampshire’s statewide education property tax, known as SWEPT. 

The tax, created in response to the Claremont school funding decisions, was created to help standardize how towns and cities collect property taxes for their public schools. Money raised by the tax helps to offset how much the state needs to pay in “adequacy aid” payments. 

But because towns have different property values, each town collects a different amount in SWEPT. Originally, towns that collected more SWEPT than they needed to offset the state adequacy aid would need to return the rest to the state to be redistributed to other cities and towns. But in 2011, the Republican-led Legislature and Democratic Gov. John Lynch removed that requirement after some railed against wealthier municipalities becoming “donor towns.” Now, wealthier towns that collect more than they need are allowed to keep the excess and use it to lower their other town taxes. Poorer towns that take in less through SWEPT, must rely on adequacy payments from the state and their own local property taxes to bridge the gap. 

This month, lawyers for Rand asked in their settlement proposal for the state to reverse the changes made in 2011. The proposal would require the state to stop allowing cities and towns to keep excess SWEPT revenue starting on April 1, 2025. To properly carry that settlement out, the Legislature would need to act in the 2024 session to undo the 2011 changes; if the Legislature refused, the state could be held liable, according to Natalie LaFlamme, an attorney for the plaintiffs.  

The state does not look likely to accept that settlement. If it doesn’t, plaintiffs in the Rand case will attempt to ask the New Hampshire courts to require the changes to SWEPT instead. 

Uncertain steps ahead

At this point, lawyers in both cases are waiting for more developments from the court. And because both cases are in the same court before the same judge, the timing of each development is intertwined.

Ruoff’s order earlier this month staying the Rand trial until he issues the ConVal decision means his decision in the ConVal case will likely arrive in the next few months. At that point, the losing side will likely appeal the case again up to the state Supreme Court. 

Ruoff’s decision in the ConVal case could affect the trial in the Rand case, especially if he rules on some of the questions that overlap between the two cases. That, in turn, could affect the legal strategies of both the plaintiffs and the state. 

But lawyers in both cases are expecting a final destination at the Supreme Court, meaning a resolution in court on New Hampshire’s school funding formula is still likely years away.

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