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School-funding suit plaintiffs again call for statewide property tax to be jettisoned


In countering state’s argument, they say SWEPT is unconstitutional.
school property tax graphic NHBR

Story Produced by NH Business Review, a Member of

    The tussle over the constitutionality of the Statewide Education Property Tax continued this week in Rockingham County Superior Court as plaintiffs challenging the tax countered in their latest fling that the argument it offered by the state and nearly three dozen municipalities with the highest assessed property values per student.

    The issue of the Statewide Education Property Tax, or SWEPT, is one element of a comprehensive challenge to the system of funding public schools brought by five property owners represented by attorneys Andru Volinsky, John Tobin and Natalie Laflamme,

    The SWEPT is levied at a fixed rate to raise $363 million a year – the largest single share of state support for public schools. Although a state tax, the SWEPT is collected by municipalities and appropriated to school districts to defray all or part of the cost of the state’s duty to fund an adequate education.

    Originally, proceeds from the tax were remitted to the state, deposited in the Education Trust Fund and redistributed throughout the state by a formula weighted in favor of municipalities with relatively low property values and students with relatively greater needs.

    However, municipalities where receipts from SWEPT exceeded the cost of an adequate education cried foul, calling themselves “donor towns.” And since 2011, the Legislature has entitled municipalities where receipts from the SWEPT exceed the cost of an adequate education to retain the excess funds.

    In fiscal year 2020-21, 34 municipalities retained $24,419,040 in excess SWEPT receipts. In another 21 municipalities — all unincorporated places — with sparse school enrollment the Department of Revenue Administration set the local school tax at a negative rate, offsetting the SWEPT altogether.

    Last October, the plaintiffs asked the court to enjoin the SWEPT for the 2023 tax year. When Justice David Ruoff denied the motion, which he found untimely, the plaintiffs filed a motion for summary judgement asking he find the SWEPT unconstitutional. This tactic would enable the court to resolve the issues raised by the SWEPT before the beginning of the 2024 tax year.

    State’s argument

    The state and Coalition Communities have asked the court to deny the plaintiffs’ request to find the SWEPT unconstitutional and enjoin its collection on the grounds that the tax itself complies with the Constitution and the distribution of the revenue it generates lies solely with the Legislature.

    The plaintiffs argue that since taxpayers in those municipalities retaining excess SWEPT are spared the liability of paying the SWEPT at the full rate paid by taxpayers elsewhere in the state, the effective rate of the tax varies from one municipality to another, contrary to the ruling of the NH Supreme Court in the Claremont lawsuit of the 1990s. At the time, the court held that, “To the extent the State relies upon property taxes to fund a constitutionally adequate public education, the tax must be administered in a manner that is equal in valuation and uniform in rate throughout the State.”

    According to the argument of the state and the so-called Coalition Communities, the rate of the SWEPT is set and assessed as the Constitution prescribes and the court has ordered. The issue, they contend, is not the structure of the tax, but how the revenue it generates is distributed, which is the sole prerogative of the Legislature.

    Representing the Coalition Communities, attorney John-Mark Turner stressed, “The power of the Legislature over appropriations is paramount” and noted in its Claremont decision the Supreme Court granted the Legislature “wide latitude in choosing the means by which public education is supported.”

    In 2011, he said, while the Legislature made several major changes to the system of funding public education, it made no changes to the SWEPT itself. Instead, lawmakers simply eliminated the requirement to remit excess SWEPT to the state. He described the legislation as a spending decision, not a tax, and it falls exclusively within the authority of the Legislature.

    ‘Novel re-characterization’

    The plaintiffs counter that “this novel re-characterization” ignores the principle that any school-funding plan based on property taxation, which generates different effective tax rates among municipalities, is unconstitutional, irrespective of its mechanics. The test of funding education with a property taxes, as the Supreme Court has held, is whether it has a “differing impact” among taxpayers as measured not by the nominal but by the effective tax rate.

    Moreover, the plaintiffs said, three times similar measures to spare property-rich municipalities the full weight of the SWEPT have been scotched by the courts, twice by the Supreme Court and once by the Superior Court.

    As for those municipalities for which the DRA set negative tax rates, the state claims that the SWEPT does not apply to localities without significant educational needs and that unincorporated places are not liable for SWEPT because they are not “municipalities.”

    In reply, the plaintiffs note that the Supreme Court has held the SWEPT is levied “throughout the state,” regardless of their educational needs.

    If unincorporated places were exempt from the SWEPT, it would not be a valid state tax, the plaintiffs maintain. Moreover, the state itself has treated unincorporated places as municipalities for the purposes of SWEPT. The DRA includes them in its calculation of the tax and issues them all a warrant to collect the tax at the same rate levied throughout the state.

    Again, the plaintiffs asked the court to declare the SWEPT unconstitutional, leaving the state to correct its flaws by adding excess receipts to the Education Trust Fund, failing to set negative local school tax rates, or simply scrapping the SWEPT altogether.

    These articles are being shared by partners in The Granite State News Collaborative. For more information visit collaborativenh.org.


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