Will school funding reform succeed this time?

By Sarah Earle

Members of the School Funding Commission are confident that their work will go further than past attempts to address school funding inequities. Nevertheless, the challenges are clear. 

Part Four of a Five-Part Series

The young people attending school in Claremont in 1991, the year it sued the state over the way it pays for education, are well into adulthood now. The youngest of them are old enough to pay property tax bills and have school-age children. And those who are still in New Hampshire know that many of the inequities their families experienced in those days persist nearly 30 years later. 

There is little dispute over that reality. The very existence of the Commission to Study School Funding is evidence, said Rep. Mel Myler (D-Contoocook), who sponsored the bill that created the Commission.

“I think there was a recognition on the part of all legislators, this issue needed to be addressed,” he told Reaching Higher last month. 

As they present their final report representing a year of research and deliberation and prepare to incorporate its recommendations into legislative proposals, Myler and other Commission members are optimistic about the prospects for their work. Student and taxpayer equity are bi-partisan issues, leaders of the Commission work groups explained in a recent interview. Though consensus on fiscal policy is never easy, there are numerous options lawmakers can explore, they said. 

No matter how clear the need for school funding reform, however, challenges undoubtedly lie ahead.

A time-honored principle

Working with an independent research group, the Commission found that New Hampshire’s method of paying for schools primarily through local property taxes is the most regressive funding system in the country, leading to extreme disparities between communities. 

That finding comes as no surprise. The Claremont lawsuits hinged on the same argument. Nevertheless, every attempt to change the way the state pays for its schools bumps up against one reality: Broad-based taxes are anathema in New Hampshire. Every governor for the past 50 years — with the exception of Jeanne Shaheen in her third term — has taken “the pledge,” promising to veto any sales or incomes tax that makes it to their desk. 

“The pledge” reflects the public’s distaste for a sales or income tax. The Commission’s public engagement work underscored that sentiment. A survey conducted by the University of New Hampshire Survey Center found minimal support for a sales or income tax. 

Accordingly, the Commission has not proposed a broad-based tax.

“The conundrum that we found was this,” Myler said. “Although there’s a concern about the overreliance on property taxes … there’s not a hue and cry for another tax.”

Elusive Solutions

In fact, the Commission’s report stops short of recommending any particular fiscal policy, but one approach that may gain traction is the uniform statewide property tax proposed by American Institutes for Research (AIR) in the analysis it conducted for the Commission. That proposal increases the statewide property tax, decreasing local property taxes for the majority of towns and boosting the amount of aid that comes from the state. For such a proposal to work, towns who raise more through the statewide property tax than the “adequacy” rate set for their schools would not get to keep the excess. 

And that change may not go over well in the Legislature, where Republicans recently won back control of both chambers.

“If money goes from one town to another, that’s not the way it should work,” said Jim Grenier, a former school teacher from Lempster who served in the Legislature from 2012-2018. “I don’t think it’s going to resolve the problem either.” 

An independent who ran as a Republican and crossed party lines on several education bills, Grenier is also concerned about any proposal that uses current per pupil spending as a baseline. “That’s a really slippery slope. A district can make bad decisions that become very costly. Should the state be responsible for fixing bad decisions?”

Grenier does, however, believe the state should shoulder a greater share of the cost of education. That’s a sentiment held by many. More than half of respondents to the UNH Survey conducted for the Commission said the state should increase its funding for local education, and while Democrats were considerably more likely to support increased state funding, nearly 30% of Republicans also agreed. 

The state currently funds schools at a level of about $3,700 per student, plus additional aid for students in certain categories such as special education, far less than the average per pupil spending of about $17,000. 

To boost state aid without increasing the statewide property tax, legislators have often relied on business taxes. That strategy may be a hard sell as well. 

“The tax rate for businesses here is pretty high,” said Val Zanchuk, who owns Graphicast, a manufacturing company in Jaffrey, and serves on the Commission to Study School Funding. “Businesses are always aware of the opportunity the legislature takes to tax the entire business community. … I think you’ll probably hear a lot of screaming and hollering about business taxes being increased.” 

On the other hand, business owners understand firsthand the value of a well-educated and stable workforce, said Vanchuk, former chair of the Business and Industry Association of New Hampshire. Manufacturing companies in particular are desperate to attract and retain workers at a time when several thousand young people are moving out of the state every year, he said. 

Like other members of the Commission, Vanchuk believes a shift in thinking is the key to change. 

“I don’t have any children. Every dollar that I’ve paid in taxes is supporting someone else’s kid,” he said. “But I don’t think in terms of my town, I think in terms of my state. Equity of opportunity is incredibly important from an economic standpoint.”

Too far, not far enough

While the philosophy of equity was broadly embraced by the Commission, not all members agreed on all of its recommendations. Rep. Rick Ladd (R-Haverhill), the one Commission member who voted against approving the report, filed a minority report emphasizing several key issues. The estimated cost model created by the Commission shouldn’t include expenses such as sports and other extracurricular activities, he said. Additionally, performance indicators adopted by the Commission as part of its outcomes-based model are insufficient in measuring student achievement, he said. 

In member statements included in the report, other members expressed disappointment that the Commission hadn’t adopted a clear fiscal remedy for tax inequities and voiced concerns about a possible increase to the statewide property tax. 

“A significantly increased SWPT has negative impacts, which the commission has tried to address through recommended tax relief and tax deferral programs,” former State Senator Iris Estabrook wrote in her member statement. “These would need to be extremely robust to create a funding stream I would endorse.”

Hardships and Hope

All of this comes at a time of severe hardship for schools and communities. The coronavirus pandemic has created ongoing budgetary pressures, teacher shortages, and drops in enrollment that may affect funding in the coming biennium. Many taxpayers are under duress due to job loss and other economic strain, and state funds have taken a hit from the economic downturn as well. 

At the same time, the pandemic has highlighted both how profoundly communities rely on public schools and how deep the disparities are within and among them. 

In spite of the obstacles, Commission members hope their work will lay the foundation for alleviating those disparities and better supporting schools and students. 

“These kids are our kids. You have to talk about our kids collectively,” Zanchuk said. “To get people out of that my-interest-first mentality — that’s hard. … But we’re going to have to get people to start thinking about what’s best for New Hampshire.” 

Read all of our coverage of the School Funding Commission’s Final Report:

Read more about school funding in New Hampshire:

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