School Funding Still Perplexes New Hampshire Lawmakers

CONCORD, N.H. — Two years after the state Supreme Court ordered New Hampshire to find a fairer way to pay for schools, state legislators act like soldiers returning from the front lines, complaining of battle fatigue from spending too many months in the education funding trenches.

Unable to agree on a permanent solution, they declared a truce in November until the next Legislature takes office in 2001 and dumped what could be a $400 million budget mess into their successors’ laps. That’s because the Legislature paid for the first two years’ of school costs with $181 million in revenues from sources not likely to be repeated. It left a $30 million shortfall for the current two-year budget to absorb.

It also froze state aid to schools at $825 million a year, which doesn’t allow for growth in the cost of an adequate education the state must provide nor the growth in student population. Those factors could boost the state’s bill more than $100 million a year in 2001 and 2002.

Two years ago, the court ruled the state has a duty to adequately fund public schools. It also ruled the old system of local property taxes unconstitutional because of widely varying rates. The interim fix relies mostly on a statewide property tax that is automatically repealed in 2003.

Most legislators readily acknowledge that, barring further court order this year, they won’t tinker with their interim solution.

And it’s unlikely the courts will disturb their truce. The five school districts whose lawsuit led to the landmark decision in December 1997 aren’t likely to ask the Supreme Court to order changes to a temporary solution. Instead, they’ll wait to see what a special commission appointed to review the funding issue recommends late this year for the 2001 Legislature to consider.

If they choose to take the state on again, they will be better funded by the state. The Supreme Court last month ordered the state to pay some of the attorneys’ fees for the towns. The court said the state’s immunity to paying such costs doesn’t apply when a law is overturned as unconstitutional that benefits the public interest.

Similarly, a lawsuit filed last month by a group of communities that pay higher property taxes under the new financing law must work its way through a lower court before reaching the Supreme Court. That could take two or more years.

Certainly, this Legislature will fight skirmishes on several other fronts:

• Constitutional amendment. Conservative Republicans are pushing to give voters the chance next November to undo the 1997 court ruling. The amendment given the best, though extremely slim, odds of passing the House is backed by House Speaker Donna Sytek and would shift control over school funding to the Legislature. Even if such an amendment passes the House, which will consider it Thursday (Jan. 13), it has almost no chance of surviving the Senate. A three-fifths vote is needed in each chamber.
• School accountability. Legislators could adopt measures to ensure schools provide an adequate education with their state aid. House and Senate Education Committee chairwomen are sponsors of bills to ensure failing schools get state help meeting local improvement goals. The House passed similar legislation in 1998, but the accountability provisions died in negotiations with the Senate. The Senate brought the bill back last year, but it was pushed aside by the need to replace the old property tax system.
• Budget shortfall. The stopgap measure adopted in November creates a $30 million shortfall in the two-year state budget. Gov. Jeanne Shaheen favors increasing the cigarette tax a dime over spending reductions. That would raise the tax to 62 cents per pack — a level supported by the House, but not the Senate this year.
• Permanent solutions. Though some other tax ideas will be considered, it will be hard to get this Legislature to take up the fight again now that the pressure is off. A consumption tax on goods and services has been reintroduced. An income tax — passed in various forms by both chambers last year — remains alive in the Senate, but probably won’t be pushed unless the court throws out the education property tax adopted in November.
• Aid changes. The formulas used to determine aid levels and distribution will be scrutinized, but legislators most likely will defer to a special Adequate Education and Education Financing Commission assigned the enormous task of recommending a permanent solution by next Dec. 1. A separate Tax Equity and Efficiency Commission is studying taxes used to fund education. Some entered the fray with high hopes of finding a permanent fix after campaigning on their education funding solutions in 1998. Now, they say they need another election to get more clarity from voters.

For many, that means a referendum on an income tax. Its supporters insist it is the only tax that can fairly raise the hundreds of millions of dollars needed. Opponents say it will shift too much control over education tax policy to the state.

Already, Republican leaders are defining the 2000 elections as a choice between an income tax and return to local control. Among Shaheen’s potential opponents is former U.S. Sen. Gordon Humphrey, a conservative Republican.

If it had not been for Shaheen’s vow to veto the income tax, it would have become law last year. The popular Democrat has not said if she’ll run for re-election, but most expect her to seek a third term. Lately, she has hedged whether she would continue to block an income tax if legislators sent her one after this year.