The New Hampshire state budget for 2022-2023 replaces a targeted property tax relief fund with a $100 million cut to the statewide education property tax (SWEPT). SWEPT, a state tax that is retained locally by towns and cities, offsets the amount of funding that they receive from the New Hampshire Department of Education for their public schools.
Research from Reaching Higher NH shows that this proposal to replace the targeted relief fund with a tax cut disproportionately benefits owners of higher valued properties, while ultimately resulting in a cut in funding for residents in towns with lower property tax bases (“property-poor” towns).
The targeted relief fund, known as “fiscal capacity disparity aid,” was reinstituted in 2021 and directed $47.5 million to towns with lower property tax bases. The funding was supposed to be a temporary solution, with the original drafters hoping that this year’s lawmakers would adopt a more permanent and equitable funding solution. None of the seven proposals to change the school funding formula passed this year, and the House and Senate killed attempts to extend the targeted aid program. Instead, they chose to cut the statewide property tax, which applies to all property owners, regardless of wealth.
The average homeowner in Northumberland, for example, would pay $540 more in property taxes because the loss of targeted aid would be greater than the SWEPT tax rate decrease. In Derry, the average homeowner’s property tax bill would increase by $165.
The average homeowner in Moultonborough, which has a higher tax base, would save $267 in property taxes, and the state would backfill that $1.8 million loss in tax revenue with state funds.
Northumberland, which has the lowest property valuation per pupil in the state, would lose nearly $450,000 in the next school year, since their grant of $493,022 would expire, and they would receive approximately $46,122 in tax relief under the budget proposal. Similarly, Berlin would lose approximately $1.5 million, and Claremont would lose $2.5 million.
For Northumberland, that loss translates to a $4.84 increase in the local education property tax rate; for Berlin, the tax rate increase is approximately $4.14, as shown in the table below.
Alternatively, Moultonborough, which has among the highest equalized valuation per student, did not receive targeted aid in 2021; however, with the budget proposal’s tax cut, the town would save approximately $1.8 million in 2023, which equates to a tax decrease of $0.50 per thousand. The state budget includes a “supplemental payment” for those towns that collect excess SWEPT, to backfill the revenue that they would lose as a result of the tax cut.
While there is a one-year gap between the expiration of the targeted aid and the SWEPT reduction (the 2021-2022 school year), the following analysis explores the effect of the lapse in state aid as compared to the tax reduction. A reduction in state aid could mean either a tax increase, cuts to the school budget, exploration of funding from other sources, a mix of these, or some other means; however, these analyses explore the tax rate impact as if there were no budgetary or non-state revenue changes.
Therefore, this analysis assumes that the loss in state funding is made up for in the local education tax rate, that the loss in state funding is held constant into the 2022-2023 school year, and that all other education-related taxes are held constant (as in, towns do not proportionally increase their local education tax rates).
The analysis uses the 2020-2021 Fiscal Capacity Disparity Aid, as well as 2023 adequate education aid data from the Legislative Budget Assistant (LBA). These are estimates and are for discussion purposes only, since official numbers for property valuations, average daily membership (ADM), and official tax rates have not yet been published.
Average Home Values: Zillow, Accessed June 10, 2021
Adequate Education Grants, SWEPT Tax Rates: Legislative Budget Assistant calculations as of June 3, 2021
Property Valuations: NH Department of Revenue Administration Municipal – Property Tax Rates & Related Data, 2021 State Education Property Tax Warrant
The House and Senate have passed separate versions of the budget, and are meeting for a “committee of conference” to work out a compromise of their changes. The first meeting of the committee of conference is scheduled for Friday, June 11 at 1 p.m.
The compromise budget will go to both chambers for their vote, and then will go to the Governor’s desk.
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