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. http://www.courts.state.nh.us/supreme/opinions/1997/school.htm

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 (http://www.nhpolicy.org/report.php?report=67) 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 http://www.courts.state.nh.us/supreme/opinions/2006/londo103.pdf 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.

2008

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.

2011

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. 

2012

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.

2014

Many legislators have requested 2014 bills related to school funding. 

Rep. Gary Richardson (D-Hopkinton) is sponsoring HB 1534, a 2014 bill which establishes a committee to study fiscal disparities between school districts, and recommend any legislative changes. It passed the House and is being considered by the Senate Health, Education & Human Services Committee.

Rep. James Grenier (R-Goshen) is sponsoring 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) is 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) is sponsoring 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 ruled inexpedient to legislate in the House.

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

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Pros

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: http://www.dartmouth.edu/~wfischel/Papers/00-03.pdf

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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Cons

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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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

Many legislators have requested 2014 bills related to school funding.  For more information, see the bottom of the Issue Summary.

News

There are no 2014 articles on this topic.

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