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Signing of N.H. Aid Plan Could End Finance Suit

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Less than one month after vetoing a similar plan, Gov. John H. Sununu of New Hampshire has signed into law a new foundation-aid program that more equitably distributes state funds to school districts that are historically dependent on the property tax.

Combined with an expected increase of $8 million to $10 million in state aid, the new program could bring to an end one of the nation's most closely watched school-finance lawsuits, Jesseman v. State of New Hampshire.

New Formula

House Bill 442, the basis for the new law, revises the foundation-aid formula and adds to the foundation program funds that are now distributed to school districts on an unequalized basis.

"It's the first major reform in school finance in New Hampshire in 40 years," said Richard H. Goodman, executive secretary of New Hampshire's associations of school boards and school administrators.epresents a realization that districts rich in property don't need much help from the state."

"There aren't many states that are going to move money from rich to poor communities," he added.

Under the new formula, developed by John Augenblick, a school-finance consultant, property-poor districts could receive as much as 50 percent of their operating costs from the state. Wealthier districts would receive less, if any, state money.

Theoretically, the average district would receive 8 percent of its funds from the state, but the amount each district receives is ultimately subject to the level at which the legislature appropriates funds for the program, according to Dean Michener, associate director of the Center for Educational Field Services, an outreach service for school districts based at the University of New Hampshire.

The state now provides only about 6 percent of the cost of precollegiate education, by far the lowest state share in the nation, and has long underfunded the existing foundation-aid program.

Seeking Relief

Lawyers for the plaintiffs in Jesseman had indicated last month that their clients might drop the suit, which dates from October of 1981, if the new program were approved and backed with adequate funds. (See Education Week, May 1, 1985.)

The suit, which challenges the constitutionality of the state's reliance on property taxes to fund education, was brought by 7 property-poor districts and financed by another 21.

Last week, with the level of funding still uncertain, one of the lawyers said he did not know "how much enthusiasm" his clients would now have about pursuing the suit.

The lawyer, Arthur Nighswander, said the plaintiffs might claim victory, rather than carry on in the courts, noting that the new law "would not have happened if the suit hadn't been brought."

Mr. Nighswander also said that by changing the foundation-aid formula, the state has effectively undercut the plaintiffs' case. "The whole issue is now completely different," he said.

"We were protesting because the system was unconstitutional ... and now they've changed it. Constitutionally, I don't know if we're on solid ground attacking the funding if the formula is equitable."

Mr. Nighswander said the crucial issue for his clients now is how much money the legislature provides for the program. "I think most everyone is satisfied with the new formula, provided they fund it," he said.

50-Percent Increase

According to Mr. Goodman, the House has appropriated $32 million for the first year of the new program, while the Senate has set aside $20.8 million. A joint committee will try to work out a compromise in the next few weeks.

"That's at least a 50-percent increase, which for New Hampshire is a major step forward," Mr. Goodman said. "I think we finally have a vehicle the legislature likes, and I think that will encourage the legislature to provide additional funding for education. We simply haven't had a good plan until now."

Although he professed to approve of the formula change, Governor Sununu had previously vetoed similar legislation, House Bill 4, charging that it committed the state to support the foundation program at a level that would lead to new state taxes. New Hampshire has no state sales or income tax.

The Governor also objected to the inclusion in the foundation program of funds raised through a business-profits tax.

The House overrode Mr. Sununu's veto but the Senate upheld it, and the new bill was tailored to meet the Governor's objections. Funds from the business-profits tax apparently will continue to be distributed to schools, but not through the foundation formula.

The foundation program will be supported by a consolidation of three existing programs, plus New Hampshire's share of all monies raised by the new "Tri-State Megabucks" lottery, which begins July 1.

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