In sweeping order, court holds NH school funding model is unconstitutionally low

Judge: State should fund at least $7,356 per pupil – not the current $4,100.

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BRENTWOOD, NH — New Hampshire is sending too little state money to its public schools and is violating its constitution, a superior court judge ruled Monday, in a groundbreaking decision that could significantly change education funding and require the state to spend an additional $3,256 per student each year.

In a pair of rulings on two separate lawsuits, Judge David Ruoff of Rockingham County Superior Court found the state is not meeting its obligations to provide students an “adequate” education. In one ruling, Ruoff found the current $4,100 base adequacy rate — the minimum amount of money the state sends to public schools for each student — is not enough to meet the state’s constitutional requirement to provide an adequate education.

The state instead should send no less than $7,356.01 for each student in order to meet its adequacy requirements, Ruoff ruled. That would constitute a $537.6 million increase in state spending per year — a more than 50 percent increase to the $1 billion per year the state currently spends on its K-12 public schools.

“In light of the compelling evidence presented at trial, the Court trusts that the legislature will set a base adequacy aid figure meaningfully higher than the $7,356.01 threshold: a figure that will fulfill the State’s obligation to fund the opportunity for a constitutionally adequate public education,” Ruoff wrote.

In a second ruling, Ruoff found that the statewide education property tax (SWEPT) is unconstitutional. That tax is collected by towns — not the state — at a set rate in order to provide funding for each town’s school district. But Ruoff ruled that the state’s 2011 decision to allow wealthier towns to retain any excess SWEPT they collect is unconstitutional and that the money should be distributed to poorer towns. Ruoff’s Monday order prohibits the state from allowing towns to retain that excess SWEPT in the upcoming tax season this winter and spring.

“We are happy that the court properly held the state is failing to meet its constitutional obligations and set a conservative minimum threshold for base adequacy,” said Michael Tierney, an attorney with Wadleigh Starr & Peters who was representing school districts in the ConVal lawsuit.

A spokesman for the Department of Justice declined to say whether the state would appeal. “We have received the court’s order,” Michael Garrity said Monday. “We will review it and consider potential next steps.”

The decisions, which would upend the way New Hampshire funds its schools, will likely be appealed by the state to the Supreme Court. In the two Claremont decisions of 1993 and 1997, the Supreme Court held that the state had a constitutional requirement to provide an adequate education, and held that the state was not meeting that requirement.

The plaintiffs in both lawsuits this year had argued that the state was still not meeting that requirement 30 years later. In one lawsuit, Contoocook Valley School District et al v. State of New Hampshire, school districts said the state’s funding formula does not allocate them enough money to provide an adequate education without resorting to local property taxes. In another, Steven Rand et al v. State of New Hampshire, property taxpayers argued that the deficiency of state funding has created disparities in how much residents in some towns are taxed versus others, in violation of the Claremont rulings.

The state — which was joined in the Rand lawsuit by “the Coalition Communities 2.0,” a group of cities and towns that oppose the efforts to redistribute SWEPT revenues — argued that the plaintiffs had not proven that the state’s funding model does not provide adequate funding, and stated the SWEPT does not create an uneven taxation structure.

In a statement, Mark Decoteau, the Waterville Valley town administrator and the chairman of the Coalition Communities 2.0, called the ruling “not a fair decision.”

“The state has been down this road before and this court’s methodology of pitting town against town with a proposal that is unequal in its application will only serve to bring about more acrimony and certainly more court challenges,” Decoteau said. “This method is not fair, it is not right and must not be allowed to be implemented again despite this decision.”

Per-pupil costs

In determining the actual per-pupil cost to school districts to provide an adequate education, Ruoff wrote that he used “conservative figures that likely undervalue the requisite level of funding.”

He assumed an average teacher salary of $57,000 a year, slightly less than the actual state average of $60,000 to account for wealthier districts choosing to pay their teachers more. Using that salary and average benefits and matching it to average teacher-to-student ratios, Ruoff determined that schools would need an average $3,157.34 per student just to pay teachers alone.

Once school districts add in the cost of administrative assistance, guidance counselors, custodians, nurses, and other specialists, that cost rises to $4,752.34 per student, Ruoff wrote. That calculation proves that the state’s $4,100 per student is insufficient to pay for staff, let alone other building and material expenses in the school, Ruoff added.

“Consistent with the foregoing, the court concludes that the plaintiffs have defeated any applicable presumption that the current level of base adequacy aid funding is constitutionally sufficient,” Ruoff wrote.

In defending against the ConVal lawsuit, attorneys for the state had argued that Ruoff should not dictate a specific amount for the state to spend because doing so would violate the constitutional separation of powers and encroach on the role of the Legislature.

But Ruoff countered that the complicated and politically charged history of school funding “suggests some level of judicial intervention is now necessary.”

The minimum per-pupil spending number specified by Ruoff is less than what the plaintiffs in the ConVal lawsuit had asked for: $9,929 per pupil.

Ruoff clarified that the $7,356 base adequacy number is not meant to be the mandatory level, but instead is meant to be a bare minimum for the state to clear when setting adequacy. By setting a conservative figure that he said likely doesn’t cover the full amount that schools need, Ruoff wrote he was giving “appropriate deference to the Legislature” to set an amount.

Gov. Chris Sununu
NH Gov. Chris Sununu called the decision “deeply concerning” and disappointing. File Photo/Andrew Sylvia

SWEPT constitutionality

When issuing his order on the constitutionality of SWEPT in the Rand lawsuit, Ruoff drew on the precedents set in the Claremont decisions in the 1990s. He ruled that the current design of the SWEPT law does not meet what the courts had required of the state: specifically that the state create a school funding mechanism that results in a uniform tax for residents.

SWEPT requires that all cities and towns collect the same percentage of property tax per year for education, an amount set by the Department of Revenue Administration. But towns with high property values often collect vastly more from that percentage than others — and often more than they need for their schools. Currently, those towns are allowed to keep the excess school property tax and use it for non-school expenses, meaning they effectively pay a smaller percentage of tax toward schools than less wealthy towns, the plaintiffs argued.

Meanwhile, residents in “property-poor” towns often find the same percentage rate set by the state in SWEPT does not bring in enough to even cover their schools — let alone excess. Those towns must then raise local property taxes higher to compensate. Plaintiffs in the Rand case argued that those two realities mean that even if the statewide tax percentage rate is technically the same, the reality is that residents must pay vastly different rates of local taxes depending on the wealth of their town.

Ruoff agreed with the plaintiffs, and held that the state should not allow wealthy cities and towns to keep their excess collections but instead should require them to be returned to the state to be redistributed to poorer towns through the adequacy formula. Only then can the SWEPT rate be considered uniform and constitutional, Ruoff held.

Ruoff also held that the Department of Revenue Administration should stop setting negative SWEPT tax rates for unincorporated towns, which don’t have school districts. That occurs when the department sets the SWEPT rate at the uniform level, but then deducts an equal amount from the local property tax rate, effectively canceling out the SWEPT tax. The effect: Unincorporated towns do not functionally collect the statewide education property tax. Ruoff’s order prohibits that practice.

“This is a really strong order,” said Natalie LaFlamme, an attorney with Laflamme Law, PLLC who helped represent the plaintiffs. “It does what we asked the court to do.”

What comes next?

The timing of Ruoff’s SWEPT tax ruling could be tricky: The Department of Revenue Administration is already in the middle of approving local property tax rates for New Hampshire municipalities for the 2024 tax deadline, and a change to SWEPT distribution could affect that.

But the state has time to either file a motion to reconsider or appeal the order to the Supreme Court, and either of those actions could result in the order being stayed and the SWEPT tax continuing as normal for now.

Meanwhile, bigger questions loomed Monday over where the two school funding lawsuits may go next. Depending on whether and how the state appeals, the two rulings could be heard by the Supreme Court together or separately.

While Ruoff’s ConVal ruling is a full decision on the entire ConVal lawsuit, the SWEPT ruling is only a partial summary judgment ruling on a portion of the Rand lawsuit. The rest of the Rand lawsuit may still go to trial in the same Superior Court, which would not likely happen until next year.

The next steps are up to the state and how it chooses to respond. Because the decisions were issued simultaneously, Ruoff gave the state an additional 30 days to file a motion to reconsider.

Gov. Chris Sununu expressed disappointment Monday.

‘Today’s decision is deeply concerning and an overreach into a decades-long precedent appropriately placed in the hands of our elected representatives in Concord,” he said.

This story republished with permission under New Hampshire Bulletin‘s Creative Commons license.


About this Author

Ethan DeWitt

ReporterNH Bulletin

Ethan DeWitt is the New Hampshire Bulletin’s education reporter. Previously, he worked as the New Hampshire State House reporter for the Concord Monitor, covering the state, the Legislature, and the New Hampshire presidential primary. A Westmoreland native, Ethan started his career as the politics and health care reporter at the Keene Sentinel. Ethan DeWitt is a reporter for New Hampshire Bulletin.