School Funding - Issue Summary

Do we need a new way to fund K-12 education?

Issue Facts

Do we need a new way to fund K-12 education?By: Charlie Arlinghaus, President of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord
This issue has been updated by LFDA editors.

The recent history of education funding in New Hampshire is a history of court cases. For more than thirty years, states across the country have faced lawsuits intended to force additional state spending in particular school districts. The 1971 Serrano case in California led to waves of lawsuits across the country after the California Supreme Court ruled that the level of financial disparity between districts was unacceptable.

New Hampshire saw its own series of lawsuits but the current debate began after the 1993 Claremont lawsuit decided that the New Hampshire Constitution established a State duty to provide an adequate education and to guarantee funding. It was followed by the landmark December 1997 Claremont II ruling.

The precise meaning of the second Claremont ruling and what it allows the legislature to do or prohibits it from doing has been at the heart of the recent debate over education funding.

In essence, the ruling seems to require that the state define some level of education called adequate and pay for that level with state raised tax dollars. To the extent that it delegates responsibility, those responsibilities must still be paid for with state tax dollars not local tax dollars.

For many years, state aid to education has not been one program but a series of programs including special education aid, aid for building construction,  partial aid for the town’s share of the retirement contribution for teachers, and a general category of aid based to some extent on the financial need of each town. 

The legislature’s initial response to the 1997 lawsuit was legislation that changed the financial need category also known as “foundation aid” to a new formula commonly known as “adequacy aid.” It increased the total state aid for schools from about $150 million to $875 million.

Half of this state aid came from the controversial new statewide property tax. Under this mechanism, a portion of local property taxes are renamed state taxes but spent locally and counted as state aid.

The new law also increased taxes on businesses, tobacco, rental cars, and real estate sales by a total of $195 million, the largest tax increase in NH history up until that time.

It was hoped the new spending would allow poorer communities to spend more on their education needs and also to reduce the property tax burden on poorer communities. The study “Dollars Diverted: Taking a Hard Look at Education Finance Reform in New Hampshire,” found that the increased aid was being spent on non-educational functions or being spent by the richest towns that least needed help.

In terms of property relief, the NH Center for Public Policy Studies found ( that total property taxes decreased statewide by about $150 million the first year of the new funding, the only decrease in the recent history of the state. However, after the initial decrease, taxes continued to rise by more than $600 million over the next four years – a greater increase in four years than in the nine years prior to the reform.

The initial plan and all subsequent revisions created a formula which identified an amount of state obligation for each town. Most of the formulas have included cost factors and also the relative fiscal capacity of a town. The more recent Londonderry case clarified the series of “Claremont” rulings to forbid the legislature from considering a town’s relative wealth in the initial part of state aid.

The current financing mechanism for state aid includes the statewide property tax mentioned above. It is implemented as follows: the state calculates the amount that would be raised in a town if a tax were assessed at a rate that would raise $363 million statewide and then deducts that amount from the amount of aid a town would otherwise receive. In the first years of the new system, a small number of towns had a high enough property value that it exceeded their aid level. Known as “donor towns,” they received no state aid and were required to send a check to the state. Rising property values allowed the law to be adjusted so a lower property tax rate left no donor towns for the time being.

These mechanisms have moved the state’s funding from under $100 million to around $1 billion per year. In 2007-2008, school districts raised about $2.5 billion with about 40% coming from the state and 54% from local taxation.

Another proposed solution is a Constitutional Amendment that will take the school funding matter out of the hands of the courts and into the legislature. Every governor holding office after the Claremont II decisions recommended such an amendment, yet no amendment has made it out of the legislature and onto the ballot for citizens to decide.


In 2008, the legislature passed an education funding bill designed to comply with the recent Supreme Court decisions. The bill provided $3450 for every student in the state and provided additional aid for students that receive free lunch and those in special education programs. The bill was criticized on the grounds that it reduced state aid to the poorest communities and increased it to the richer ones. Supporters argued that the change was required to comply with the court. That reality led the legislature to consider, but ultimately reject, a more limited amendment to the constitution.


On July 13, 2011, Gov. John Lynch signed legislation that resets the formula for school aid funding. HB 337 is described as "an act amending the calculation and distribution of adequate education grants, repealing fiscal capacity disparity aid, and providing stabilization grants to certain municipalities."

Starting in 2014 no community will get a school aid increase of more than 5.5 percent a year. The bill also eliminates a requirement for property-rich communities to help poorer communities with their education costs. 


On Feb. 15, 2012, the Senate Internal Affairs Committee passed CACR 12 with an amendment. CACR 12 was designed to give the Legislature "the full power and authority and the responsibility to define standards for public education, establish standards of accountability, mitigate local disparities in educational opportunity and fiscal capacity, (and the) full power and authority to determine the amount of state funding for public education." The proposal had passed in the House Special Committee on Education Funding Reform in March 2011.  CACR 12 ultimately did not get the 3/5ths majority needed to get the amendment on the ballot.


Many legislators sponsored 2014 bills related to school funding. 

Rep. Gary Richardson (D-Hopkinton) sponsored HB 1534, a 2014 bill which establishes a committee to study fiscal disparities between school districts, and recommend any legislative changes. Slightly different versions were considered and passed by the House and Senate. A joint conference report was adopted by the two bodies on June 5. Gov. Hassan signed the bill in November 2014.

Rep. James Grenier (R-Goshen) sponsored HB 1472, a 2014 bill that "requires use of the most recent equalized property valuation when property value is used to apportion expenses in cooperative and multi-town school districts." It was ruled inexpedient to legislate in the House.

Rep. Rick Ladd (R-Haverhill) was the primary sponsor of HB 1114, a bill requiring the state to increase aid for school construction and renovations to at least $50,000,000 per year, and moving the authority to grant that aid from the Department of Education to the Board of Education (an unpaid board of appointees). It was ruled inexpedient to legislate in the House.

Rep. Kenneth Weyler (R-Kingston) sponsored HB 1393 and HB 1394, both 2014 bills directed towards charter school funding.  HB 1393 applies to communities that do not have their own public schools and have tuition agreements with outside schools.  If a community lacks a public school but has a charter school, the community must pay the charter school tuition for every student that attends the charter school instead of the outside school with a tuition agreement. It was ruled inexpedient to legislate in the House. HB 1394 dedicates $600,000 to charter schools for maintenance and repair. It was also ruled inexpedient to legislate in the House.

Rep. Mel Myler (D-Contoocook) and Rep. Gary Richardson (D-Hopkinton) sponsored HB 1147, a 2014 bill that would allow schools to advertise. It was ruled inexpedient to legislate in the House.

2015 Legislation

Many legislators are sponsoring 2015 bills to adjust state funding for schools.

Sen. Jeb Bradley is sponsoring CACR 3, a 2015 constitutional amendment to give the legislature more power over school funding.

Rep. Rick Ladd is the primary sponsor of HB 218, a 2015 bill that provides an additional $675 in state education funding per pupil who does not test at the proficient level or above in the math portion of the state assessment. Right now the additional $675 goes to students who are not proficient in reading. The Department of Education says this bill would increase state costs next year by roughly $250,000.

Rep. Peter Hansen was the primary sponsor of HB 444, a 2015 bill that exempts from the assessment of school district taxes any person who has paid school taxes and resided in New Hampshire for at least 36 consecutive years.  The House killed the bill in March.

Rep. David Bates is the primary sponsor of HB 562, a 2015 that makes several changes to the law governing the distribution of state funds to schools.  For example, this bill eliminates stabilization grants for municipalities whose Statewide Education Property Tax (SWEPT) exceeds the total calculated cost of an adequate education.

Rep. Kenneth Weyler is the primary sponsor of HB 563, a 2015 bill that provides that funding for chartered public school pupils shall be based on 50% of the most recently available statewide average cost per pupil for public school pupils.  Based on the current average cost per pupil, this would roughly double funding for charter school students.

Rep. Michael Brewster is the primary sponsor of HB 623, which uses tobacco tax and tobacco settlement funds to reduce the education property tax.

Rep. Dan McGuire is the primary sponsor of HB 630, which allows video lottery machines in establishments with a liquor license, and uses funds from the video lottery machines to offset the education property tax.

Rep. Gilman Shattuck was the primary sponsor of HB 680, which makes various changes to the laws governing the statewide education property tax.  In particular, this bill establishes the rate of the statewide education tax at $8 per 1,000 of the value of taxable property and transfers the authority to collect the education property tax from the municipalities to the Department of Revenue Administration. This bill establishes a homestead exemption from the education property tax for the first $250,000 of assessed value of homestead property. The bill also requires an annual transfer of $150,000,000 from the education trust fund to the general fund.  The House killed that bill in March.

Sen. Nancy Stiles is the primary sponsor of SB 227, a 2015 bill that makes various changes to the method of calculating, distributing, and reporting education grants to municipalities, and repeals the provisions relating to differentiated aid.

Sen. David Watters was the primary sponsor of SB 228, a 2015 bill that increases education grants for municipalities, increases funding for pupils attending full-day kindergarten programs, and decreases stabilization grants to municipalities which have less than the state average number of pupils receiving a free or reduced price lunch. The Department of Education estimates this bill will increase state education trust fund expenditures and local revenues by $2,105,715 in 2016.  The Senate tabled the bill in March.

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Pro Issue Opinion by LFDA Editor, for a constitutional amendment that will take the school funding matter out of the hands of the court and into the legislature:


The legislature is better suited to deal with education funding than the courts:

  • New Hampshire citizens are better off with legislative involvement in education funding, since judges and courts are not elected, and hence are nonresponsive to the citizens of the state.

State funding of education will result in less funding for education:

  • A study by Brian Gottlob, prepared for The Committee for Sensible School Funding, compared the state and local fiscal trends across the United States relating to education funding. The result was that increasing a state’s share of education funding results in larger per-capita tax increases on the state and local level. In addition, over the long term, per-pupil expenditures grow more slowly in states that provide a larger share of education funding. The result can be fewer dollars available for popular expenditures that increase classroom resources, reduce class sizes or increase teacher salaries, and this result occurs in states of all sizes, regardless of the source of state revenue.

Funding education at the state level results in poor performance:

  • The court is insisting on centralizing school funding at the state level. There is very little debate about the effect on school performance in states that have gone this route—it is almost all negative. Prof. William Fischel of Dartmouth

Education funding is best left at the local level:

  • The strength of local property taxes is that they are a local investment and relate directly to the increase or decrease in the value of homes in the community. Not only do citizens see clearly where the money ends up, but improvements to the schools or the town are reflected in the value of the asset being taxed. Increasing or decreasing taxes. Good schools, roads, and economic development all have an impact on the value of the taxpayer’s home. This argument is based on research by Prof. William Fischel of Dartmouth:

Targeted aid to needy communities is what is necessary:

  • The court’s actions effectively prohibit targeting state education aid to the neediest communities. The legislature will always have limited resources and they should be sent first where they are needed most. Not considering a town’s relative wealth is as irrational as requiring the government to send welfare payment to millionaires.

The court’s action is not legal:

  • The court overstepped its authority and is legislating. Because the constitution merely says that the legislature has a duty to cherish “all seminaries and public schools,” their interpretation is way over the top.
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Con Issue Opinion by LFDA Editor, against a constitutional amendment that will take the school funding matter out of the hands of the court and into the legislature:

The legislature cannot be relied upon:

  • The New Hampshire Supreme Court has ordered the legislature to define the cost of an adequate education and reduce town-by-town funding differences in schools. Prior to the Court’s involvement this never happened.

Targeted aid is not reliable and creates problems:

  • Targeted aid depends upon state revenues that will change with economic times. Without judicial oversight the state government will reduce targeted aid during difficult financial times.

The towns receiving targeted aid will become differentiated from other NH towns, making residents feel stigmatized. 

Something must change:

  • The current method of funding education is not fair. It places a much greater burden on poorer communities and on poorer families than it should, and only the state can rectify this problem. Without the court involvement, the legislature will revert to “targeted aid”, which has failed to correct the in balance in the past.
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School Funding Member Posts
Take Action

If you are interested in the school funding issue and want to take action here are some choices:

  • Contact one of the organizations listed in Learn More. These groups represent the pro or con positions of issues.
  • Contact a government official as follows:

1. Contact members of the New Hampshire House of Representatives or the New Hampshire Senate.

2. Contact the Committee chairperson or members of the House Education Committee or the Senate Education Committee – these are the committees that oversee this issue.

3. Contact the head of the New Hampshire Department of Education.

4. Give your opinion to Governor Maggie Hassan

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Learn More/Take Action

Do we need a new way to fund K-12 education? Whatever your thoughts are, we urge you to make your voice heard. See the "Learn More/Take Action" section on this page for more information.

Issue Status

Sen. Jeb Bradley (R-Wolfeboro) is sponsoring CACR 3, a 2015 constitutional amendment to give the legislature more power over school funding.

Many other legislators are sponsoring bills to adjust the state funding formula for schools.

Both the House and Senate in the 2015 legislative session agreed separately on some school funding changes. The changes in both chambers sought to increase or lift altogether the state's cap on growth in per-pupil spending. And both would pay for such it by reducing so-called "stabilization grants," created in 2011 to keep certain school districts from losing huge amounts of funding after the last round of changes to the base aid formula.

The House's plan reduces stabilization grants by 10 percent starting in the 2016 school year, and lifts the cap on growth entirely. The Senate's proposal reduces the grants by 4 percent a year, and doesn't eliminate the cap until the following year.


June 26, 2015
Foster's Daily Democrat: School funding unlikely to be revisited in state budget
June 18, 2015
Foster's Daily Democrat: Budget writers OK business tax cuts, school funding changes
June 15, 2015
NHPR: Interactive: How would school funding changes affect my district?
April 16, 2015
Eagle-Tribune: Proposal would end NH ed funding cap
March 13, 2013
Nashua Telegraph: Charter school funding bill passes the House 
Feb. 24, 2015
Keene Sentinel: Troy officials not happy with court's decisions on school funding formula appeals
Feb. 19, 2015
Seacoast Online: NH House sends school funding bills to finance committee
Foster's Daily Democrat: House to vote on school funding bills
Feb. 2, 2015
Union Leader:Garry Rayno's State House Dome: Money for schools back before Legislature
Feb. 6, 2013
Concord Monitor: Rep. Burridge proposes1 percent state income tax levy to support schools
Union Leader: County income tax scheme for local schools get chilly reception from House Committee
Feb. 1, 2013
Union Leader: School funding fix is offered
Concord Monitor: NH Senate passes school-funding fix
Jan. 22, 2013
Seacoast Online: Bill would prevent drop in school funding aid
Jan. 19, 2013
Union Leader: School funding threatened in NH cities
Jan. 12, 2013
Union Leader: School funding change on hold
Jan. 11, 2013
Seacoast Online: Sen. Stiles withdraws bid to allow targeted aid
NHPR: Education funding debate to be delayed after senator pulls legislation
Concord Monitor: Lawmakers agree to hold off on education funding constitutional amendment until 2014
Dec. 12, 2012
Concord Monitor: Bipartisan effort under way for education funding constitutional amendment
Nov. 24, 2012
Concord Monitor: Lawmakers likely to make another run at constitutional school funding amendment
June 11, 2012
Nashua Telegraph: Legislature's power figures took it on the chin with education funding vote
June 10, 2012
Seacoast Online: Capitol Corner: Better off without ed funding amendment
June 7, 2012
Concord Monitor: Constitutional ed funding question fails
Nashua Telegraph: Ed funding comes up short in House, off the ballot in 2012
NHPR: Education funding amendment fails
June 6, 2012
WMUR: NH school funding amendment faces key vote
June 5, 2012
Union Leader: Education funding fight defies party lines
June 3, 2012
Seacoast Online: Passing education funding amendment no easy feat
June 2, 2012

Union Leader: Granite Status: Democratic candidates for governor at odds with Lynch over proposed education funding amendment
June 1, 2012
Union Leader: Agreement reached on education-funding amendment
May 31, 2012
Union Leader: Education funding amendment could be near
May 21, 2012
Seacoast Online: Panel to meet over school funding amendment
March 26, 2012
Union Leader:  Mayor's budget unveiled, debate hinges on school funds
March 12, 2012
Concord Monitor: Amendment gives NH option of funding schools