Taxpayers seek to stop the statewide education property tax

Taxpayers seek to stop the statewide education property tax

After being a resident of Hopkinton for 23 years and an educator in various New Hampshire school districts for even longer, Jim Lewis has seen the school funding issue from many perspectives.

Commuting daily from his home in Hopkinton, where he paid about $8,000 last year in taxes, to work in Lempster where he is the superintendent of schools, Lewis can see firsthand how every dollar of funding matters to a district and also how high property taxes are impacting residents.

He loves Hopkinton for its bucolic setting, “excellent” school system and supportive townspeople and can’t imagine moving away. But for many of his neighbors, staying in town has become unaffordable, Lewis said.

The school tax at $21.80 per thousand of property value is more than three times the municipal tax rate of $6.50 per thousand.

“Hopkinton’s a great place; I love it. And a lot of people feel the same way I do,” Lewis said. “But a lot of people have left because they, quote, ‘can’t afford it anymore,’ and that’s concerning. There’s got to be a better way.”

Lewis is one of the newest plaintiffs in a lawsuit claiming that the state of New Hampshire’s education tax rates are unconstitutional because they are not proportional across towns. The suit, which was launched in June, argues that the state relies too much on local taxpayers to provide the funding necessary to give students an adequate education. As a result of the state’s over-reliance on property taxes, students across the state receive different educational opportunities depending on whether they live in a property-rich town or a property-poor town, which is unconstitutional.

“I’d like to see that distributed a little more evenly,” Lewis said. “A town like Lempster is a very small town; a thousand dollars to us is a lot of money compared to other districts. I would like to see the state take a little more ownership to it, rather than the small town.”

Lewis’ modest home is valued at $256,800, according to the town assessor. He knows fellow residents whose home values are much higher and they pay up to $15,000 a year in taxes.

“In my position right now, I’m fortunate. I can stick around,” Lewis said. “But I don’t know how much longer that’s going to last. We know to put money aside every month, just because we know it’s going to hit and it’s always going to be a little bit more than expected.”

Last week, the property-owning plaintiffs took a new step by asking the court for preliminary injunction to prevent state Department of Revenue Administration Commissioner Lindsey Stepp from setting the Statewide Education Property Tax (SWEPT) rates for the coming year, while the lawsuit is pending. In their motion, the plaintiffs argue that they’re likely to succeed in proving in court that the SWEPT violates the Constitution by not being uniform across all towns.

In New Hampshire, about 62% of funds for public education come from local revenue, while the state funds about 31% and the federal government funds the remaining 7%. New Hampshire property owners are charged for both local education property taxes and state taxes. Each town is required to collect the SWEPT in addition to their local property taxes to raise funds in order to meet the state’s cost of funding an adequate education. Since 2005, the legislature has set the total annual amount to be raised by the state education tax at $363 million, but lowered it to $263 million for the 2022-2023 fiscal year.

Lewis, alongside co-plaintiffs Jessica Wheeler Russell and Adam Russell of Penacook; John Lunn of Newport; Robert Gabrielli, who owns commercial property in Penacook; and Steve Rand, who owns commercial property in Plymouth, say that the state of New Hampshire relies too much on local taxpayers to provide the funding necessary to give students an adequate education.

The suit, led by attorneys Andru Volinsky, John Tobin and Natalie LaFlamme, is the latest legal move toward changing the state’s school funding model. Their argument hinges on 1997 rulings issued for the Claremont school funding lawsuit, where the New Hampshire Supreme Court held that state property taxes for education must be “administered in a manner that is equal in valuation and uniform in rate throughout the state.”

“We’re just going to go ahead and try to show the court that not only are the rates different mathematically and numerically, but that they violate the Constitution,” Tobin said.

The debate around New Hampshire’s education funding system identifies two types of towns: “property-rich” towns, with wealthy tax bases and high property values that can generously fund their public schools, and the “property-poor” towns that struggle to provide funding without disproportionately high taxes. The divide, which has perpetuated despite multiple state Supreme Court rulings, means property-rich towns tend to experience better facilities, higher teacher pay and often better educational outcomes, while the property-poor towns experience delayed facility upgrades and face high staff turnover.

New Hampshire’s school funding system was declared “inequitable from both student and taxpayer perspectives,” by the Commission to Study School Funding in a 2020 report. At the time, the commission – made up of state legislators, school administrators and education specialists – proposed redistributing the state education taxes so that excess taxes from wealthier towns are passed along to those with fewer resources, restoring a “donor town” system that had been eliminated in 2011.

Another school funding lawsuit referred to as ConVal, filed by the Contoocook Valley, Mascenic, Monadnock and Winchester school districts in 2019, is still pending. That suit argues that the funding the state provides per pupil – which was around $3,636 in 2019 – isn’t enough and doesn’t take into account the costs of transportation, teachers and facilities.

“Between the two of us, hopefully we’ll get a new system where the state does its fair share and taxpayers pay comparable rates instead of really disproportionate rates,” Tobin said.

The trial date for the lawsuit over tax rates has been set for August 2023.

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