Under Threat of Closings, N.H. Revives Property Tax

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With some Granite State districts threatening to shut down schools within weeks, the New Hampshire legislature approved a stopgap measure last week to finance schools for four more years.

New Hampshire's school system was thrown into turmoil last month when the state supreme court declared the state's hard-won school financing plan unconstitutional. The court struck down a statewide property tax enacted in April to pay for the plan because it phased in tax
increases for some towns—usually richer communities—but not for others. ("N.H. Supreme Court Rejects Funding System," Oct. 27, 1999.)

The legislation approved last week reinstated the controversial property tax, with one small change. Rather than phasing in the tax for entire communities hit hard by tax increases, lawmakers targeted relief to only the poorer property owners in those cities and towns. Under the new plan, for example, families with incomes of less than $50,000 and individuals earning less than $25,000 a year will be eligible for rebates of 33 percent to 100 percent on their tax payments.

The measure also allocates $70 million to help plug an estimated $100 million gap the state faces in its $825 million school finance plan this fiscal year.

But educators and policymakers across the state conceded that the legislation, which was quickly signed into law by Gov. Jeanne Shaheen, falls short of a permanent solution to the long and bitter struggle to find a fair and adequate way to pay for schools.

"All of us recognize that this is simply a short-term solution that allows us to continue to function," said Paul W. Krohne, the executive director of the New Hampshire School Boards Association. "No one in this state believes the debate is over."

Food or Taxes

New Hampshire's funding troubles grew out of a 1991 lawsuit brought by five poor communities. The education finance plan enacted in April was intended to address those communities' concerns by increasing the state's share of education funding and evening out tax-rate differences between communities. But the towns—known as the Claremont coalition— successfully argued before the state's highest court this fall that the plan did not go far enough.

A lawyer for the coalition said last week that his clients had not decided whether to challenge the legislature's newest aid plan.

"There probably are some constitutional issues with the tax abatement," said Scott Johnson. He also noted that lawmakers had yet to answer fundamental questions about whether they were providing enough money.

But the property tax, set at $6.60 per $100,000 of assessed valuation, is already engendering opposition from some wealthier communities. "I've just never seen such poor educational or tax policy in my life," said Thaddeus J. Jankowski, the finance director for the city of Portsmouth and the head of a group of 30 well-off towns contemplating a legal challenge to the plan. "People realistically will be choosing between paying property taxes and eating."

Even with the tax abatements, he said, homeowners earning less than $15,000 a year in his community will still see their property-tax bills go up.

Much of the divisiveness over the issue has stemmed from New Hampshire residents' tenacious opposition to using a state income tax to pay for schools. The Democratic-controlled Senate two weeks ago approved a funding bill that included a 4 percent income tax—despite repeated veto threats from Gov. Shaheen, a fellow Democrat. But the bill was roundly defeated in the Republican-controlled House, which was looking instead at a constitutional amendment that would remove the courts from having a say in school spending.

Legislators were more inclined to put aside their differences last week as the deadline for many cities and towns to send out their tax bills loomed. Some towns were even predicting they would run out of local revenue to pay for schools by mid-month.

Vol. 19, Issue 11, Page 28

Published in Print: November 10, 1999, as Under Threat of Closings, N.H. Revives Property Tax
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