To fully understand school funding in New Hampshire, it helps to travel back in time to a pair of lawsuits bearing the name of a little city that became the face of funding inequities and set in motion the ongoing battle over how the state pays for schools. “Claremont, Part One” set the stage for the lawsuits and described how Claremont and four other districts took on the state of New Hampshire in a high-stakes legal battle in the mid-1990s. With “Claremont, Part Two,” we look at how lawmakers responded to the decision and learn why the school funding dilemma still plagues the state to this day.
In the early 1960s, thirty years before the Claremont suits began, New Hampshire faced a familiar school funding crisis.
Kevin Flynn: At the time you had a lot of the same issues. You had Baby Boomers that were starting to come and fill up the schools, building aid was important as they were trying to build new schools… It was hard for local communities to fund that and there were disparities from town to town.
This is Kevin Flynn.
Kevin Flynn: I’m a former journalist in New Hampshire, and now I’m just a scallywag with a microphone.
He also happens to be my step dad. A few years ago Kevin wrote a book about the New Hampshire school funding crisis of the early 60s, and the novel solution the state came up with to solve it.
Kevin Flynn: Well New Hampshire was the first state to have a state-run and sanctioned lottery, and a lot of people have forgotten what exactly that lottery looked like, and when I heard the story I said “this has gotta be a book.”
Much like the early 1990s, many New Hampshire towns struggled to pay for their schools in the 60s, with a heavy reliance on local property taxes. So, in order to raise extra dollars for education, then governor John King naturally decided to create the first state-run lottery in the country.
Kevin Flynn: Well the New Hampshire Sweepstakes was actually not a lottery like we think of a numbers pull or a scratch ticket. It was a horse race… People would buy tickets and then their name would be pulled from a drum, and then they would be matched at random with a race horse. Then there would be a horse race and if your horse won and you were matched then you would win the prize and that’s how the sweepstakes came to be.
In its first years, the New Hampshire Sweepstakes was wildly successful. People from around New England were buying up tickets to be a part of America’s first state-run lottery. And as many participants saw it, their hard-earned money was going to a good cause.
Kevin Flynn: The Sweepstakes was billed as a way to raise money for education and that proportional grants were going to be sent to all the municipalities after all the money was totaled up.
Some participants really bought into this pitch. Here’s a clip of a woman buying a Sweepstakes ticket in 1964.
Ticket Seller: How come you’re buying one of these tickets?
Woman: This is the first one in our country and I would like to participate in it. And I also feel it’s for a very good cause: education.
Ticket Seller: I don’t think there’s a better reason for buying one of these.
In the end, however, the Sweepstakes wasn’t the silver bullet that solved the school funding crisis. While towns did receive a portion of the profits from the event, many districts decided to use the money to decrease taxes, rather than invest in schools.
For me, the story of America’s first official lottery begs a strange question about New Hampshire: why would local politicians create a state-run horse race to fund something as important as public schools, instead of just using regular-old taxes?
I’m Henry Lavoie, and from Reaching Higher New Hampshire, this is Claremont.
In this two-part series, we’re exploring how exactly education became the third rail of New Hampshire politics. In this episode, we’ll look back at how state politicians respond to the Claremont decisions and the future of state school funding. Stay with us.
On December 17, 1997, the Claremont II decision was released. For decades, school funding had been kicked down the road with half-baked policy solutions, from the New Hampshire Sweepstakes in 1964 to the underfunded Augenblick formula in 1985. However this time would be different, with a Court decision that imposed serious constitutional guidelines for school funding.
Scott Spradling: The judges in that decision, in telling the state “you’re not exactly doing enough,” they didn’t give them a benchmark for how much more they needed to provide. They wanted the lawmakers to go back to the drawing board and figure it out for themselves.
That is Scott Spradling, a former reporter and political analyst for WMUR-TV. He explained that the earlier failings of New Hampshire’s government to fix the education problem, had only deepened the extent of the crisis. We spoke outdoors at a public park, so the audio might be hard to hear at points.
Scott Spradling: I keep going back to, in my mind, that if the conservative, rock-rib, Republican state of New Hampshire in the late 80s and early 90s had just fully funded the formula they came up with to pay for education statewide, we wouldn’t be having this conversation today…
There was no doubt at the time that dealing with the Claremont decisions and finding a constitutional way to fund education would be an immense policy challenge for state politicians. The figure who would be at the helm of this effort is a familiar face in New Hampshire politics:
Narrator: We now come to New Hampshire Governor Jeanne Shaheen… She was elected governor in November of 1996 and easily won reelection to her second term which expires in January, 2001.
Jeanne Shaheen was New Hampshire’s first female governor and the first Democrat to hold the corner office after 14 years of Republican control. In many ways, Shaheen embodies what’s now considered classic, old-school Granite State politics. She’s a moderate, big into bipartisan compromise, and self-described policy wonk. Here she is in a special edition of New Hampshire Round Table in 1999.
Jeanne Shaheen: I think I’ve worked very hard to try and understand issues that I deal with and I think that’s important. I really am very interested in the policy side of governing, that’s the thing I like best. But I do think you do need to know that it’s important to delegate, you can’t do everything yourself.
So when Claremont II was released in 1997, the Governor delegated much of the legislative heavy lifting to her head legal counsel.
Judy Reardon: Hi I’m Judy Reardon. I was legal counsel in the governor’s office for Governor Shaheen, for the six years she was governor.
Judy Reardon would play point for the Governor throughout the legislative effort following the Claremont ruling. Her first challenge was to understand what the Claremont decisions said, in order to write legislation which was constitutional. In the previous episode, we looked in depth at what the decisions say, but here’s a quick refresher.
Between Claremont I and Claremont II, the legislature and governor had two new responsibilities under the state constitution. One, they had to provide and guarantee funding for every child to receive an adequate education.
Judy Reardon: What it said was that every child was entitled to an adequate education and the state had to pay for that adequate education for every child.
And two, any taxes the state used to pay for education had to be proportional and reasonable throughout the state. In other words, the tax rate had to be the same everywhere.
Judy Reardon: The other thing is our state constitution requires that all taxes be proportional.
Any school funding solution that the legislature and governor came up with had to follow these two rules, otherwise it would not be legal under the state constitution.
However there was also a third, non-Claremont guideline which would dictate what kinds of school funding solutions were possible.
Judy Reardon: The Pledge is saying that you will veto a broad-based income or broad-based sales tax and no one had been elected governor in New Hampshire who wasn’t willing to say they’d veto an income or sales tax.
The Live Free or Die state is famous for its lack of broad-based income or sales tax. Advocates say this policy has a slew of benefits which are often referred to as the “New Hampshire Advantage,” or the idea that families, businesses, and tourists are attracted to the state because of its tax-free market. So to ensure that this anti-broad-based tax tradition endured, a group of conservatives developed what’s now known as the Pledge — a promise made by politicians running for governor that they won’t pass any broad-based tax. In the over 50 years since this began, only once has a candidate won the New Hampshire Governorship without taking the Pledge.
Judy Reardon: The people of New Hampshire have shown in election after election they feel strongly about it. So Jeanne Shaheen right off the block said she would veto a sales or income tax.
So, any school funding legislation could not involve a broad-based tax to receive a signature from the governor.
On top of these constitutional and political restrictions was a strict legal deadline. In Claremont II, the justices wrote that the current school funding system could remain in place only through the 1998 tax year, giving the legislature until April 1, 1999 to find a solution. It was somewhat unclear what exactly would happen if no reform was made before April 1. Predictions ranged from the court simply extending the deadline to a Y2K-like collapse of the state public school system.
So, all together, the governor and legislature had to craft a piece of legislation which, (a) funded an adequate education for every child, (b) was paid for using proportional and reasonable taxes (c) did not include a broad-based tax, and (d) did all of that in 470 days.
One of the other key players who the Governor would have to work with to achieve all this was Donna Sytek, the Republican Speaker of the House. Sytek was a longtime Republican state representative and was elected Speaker in 1996. Like Governor Shaheen, Sytek’s brand of politics were quintessentially New Hampshire. Here she is on New Hampshire Roundtable.
Interviewer: In 1997 you were named the most powerful woman in the state by network publications. How powerful are you?
Donna Sytek: I think power is more a perception than a reality. As the Speaker of the House I have a chance to be influential, but power is largely a myth. I’m elected by the 400 members of the House — that’s the source of my power — I have 399 other people I’ve gotta try to keep happy.
The New Hampshire House is famously large, with a total 400 representatives. This can make it a difficult body to manage, with stark ideological divides both between each party, but also within the parties. Sytek’s leadership style as Speaker was fiercely civil and bipartisan — she even wrote a book about political etiquette. Sytek’s Deputy Speaker, Donnalee Lozeau, shared a similar attitude about politics.
Donnalee Lozeau: Donna Sytek had just gotten elected Speaker and I had just gotten appointed as her deputy. And we both saw our role as a non-partisan role, because she was the Speaker of the House not the speaker of the party, that’s what the majority leader and minority leaders are for.
Even though the Governor’s office was controlled by Democrats while the House and Senate were controlled by Republicans, party leadership on both sides was committed to cooperation and bipartisanship. While nobody thought that solving the school funding crisis would be easy, this particular class of legislators should’ve been well-suited to hammer out a compromise.
The first attempt to do so began on January 15, 1998, just a month after the Claremont II decision was released. That day, Governor Shaheen announced her vision to fix school funding. She called it the Advancing Better Classrooms Plan, or more commonly known as
Donnalee Lozeau: the ABC Plan.
The ABC Plan offered a relatively simple approach to fund schools. Here’s how the Governor said it would work: using revenue drawn from several different state taxes, the state would raise an additional $100 million to spend on schools. This money would then be targeted at the most property-poor school districts.
According to Governor Shaheen, the ABC Plan met all the legal and political requirements legislators faced: it used state dollars to ensure every student could receive an adequate education, it was paid for using taxes with proportional and reasonable rates, it would not include any broad-based taxes, and most importantly, it garnered support in the Republican House and Senate.
Donnalee Lozeau: We thought ABC had a chance… you know it felt like something that could move the ball forward, and let’s keep working on it.
In May of 1998, the House voted to pass the Governor’s plan with bipartisan support. At that point, the state government was on track to legislatively address the Claremont decisions a full year before their deadline of April 1, 1999. However when the ABC bill reached the Senate, a few members had some doubts that it would actually pass constitutional muster.
So, a group of senators basically asked the state Supreme Court to give the bill a read, and let them know whether it was legal under Claremont. The Court responded a few weeks later with bad news for the legislature. Again, political analyst Scott Spradling:
Scott Spradling: Honestly, I think Jeanne Shaheen’s ABC plan was by far the simplest and most pragmatic fix, but it didn’t fit the tenets of the ruling, because the basic ruling is “listen guys, I don’t care what town you’re in, everybody has to have the same level of help.” The ABC plan gave a baseline, but then it targeted aid to those towns that needed extra help. So pragmatically speaking, that formula makes a lot of sense, with a little bit of a sliding scale. The Supreme Court said “un-uh” you can’t do that.
The details of this ruling are a little complicated, but they basically boiled down to this: Under the ABC Plan, property-rich towns that could pay for their schools entirely with local property taxes could essentially opt out of receiving state funds, and in exchange didn’t need to raise any additional taxes to support other property-poor towns. The court wrote that this abatement system violated the section of the Claremont decisions that said the state needed to guarantee funding to every child using proportional state taxes.
So in one fell swoop, the ABC Plan was killed by the Supreme Court, and the legislature had nothing to show for their six months of work. Now back at the drawing boards, the school funding debate began to get messy.
Donnalee Lozeau: When ABC went down, people immediately thought “ok, I got the solution” … it just exploded.
After the Supreme Court shot down the ABC Plan, it became clear that the legislature couldn’t just target funding at the districts that needed it. For a school funding plan to be constitutional, they would truly need to fund an adequate education for every student using state dollars. With a definition of adequacy developed by John Augenblick — the same expert who designed the Augenblick formula — the state came up with a new price tag for spending on schools: roughly $900 million, over eight times higher than what was proposed under ABC.
The legislature now had just under twelve months before the April 1 deadline, to find a way to raise that $900 million using proportional and reasonable state taxes. Between New Hampshire’s 424 lawmakers, dozens of ideas were floated.
Speaker Donna Sytek proposed her so-called SMART plan, which mainly relied on a statewide property tax to raise the money. It never managed to get off the ground though.
Donnalee Lozeau: Speaker Sytek came out with the SMART plan and that didn’t get enough legs.
Several plans reminiscent of the 1960s New Hampshire Sweepstakes proposed that the state legalize and tax video gambling to fund schools. This idea saw support from the Governor, the gambling lobby, and some legislators like Representative David Lawton, son of Bob Lawton who owns Funspot, the state’s largest video gaming arcade. However, video gambling also didn’t gain much traction.
Judy Reardon: Video gaming legislation has been tried a number of times and has always failed.
Other funding plans included different mixes of taxes like business, capital gains, second homes, cigarettes, and rental cars. But no one combination of these various taxes managed to find the bipartisan Goldilocks zone.
The list of school funding proposals which never gained broad support is too long to examine entirely. In the end, there were only a handful of viable solutions to the Claremont decisions which had any chance of making it passed the legislature, Governor, and Supreme Court. In this episode, I’d like to look at three, in particular.
The first came from the Republicans. They proposed that instead of finding a constitutional way to fund schools, they just change the state constitution. Speaker Donna Sytek:
Donna Sytek: I believe that the original Claremont decision was wrongly decided. The only way you remedy that is to change the constitution. It isn’t so much to kick the court out as to allow us the greatest parameters to solve the problem.
The idea of amendmending the state Constitution to partially or fully nullify the Claremont decisions quickly gained support among House and Senate Republicans. In New Hampshire amending the constitution requires a 60% vote from both houses of the legislature, which then sends the amendment to the voters in the next regular election, where it requires a two-thirds majority to pass. Needless to say, amending the state constitution is very hard, so writing an amendment that was broadly supported would be crucial. Even at this beginning stage, however, Republicans ran into trouble.
Donnalee Lozeau: I was a believer in amending the constitution, with a scalpel, not with a hatchet… So I wasn’t interested in turning their decision around. I was interested in learning from that decision on how we could manage in the constitution an amendment that would have the state have some responsibility, but be able to manage just how much that was.
The push for an amendment soon revealed a rift in the party: some Republicans advocated for an amendment which would broadly limit the court’s ability to make decisions on school funding. Others, however, believed that the state should still have some responsibility to support schools, even if it was limited.
Donnalle Lozeau: That was probably the biggest break in the party was the ones that didn’t believe that the constitution was read correctly by the justices and then the other group that thought “alright if we have to fund it we should do it minimally because we can’t control how the locals spend their money.”
The effort to amend the constitution ultimately failed in the legislature, even with Republican control of the House and Senate. Any chance at a second shot became even more far-fetched after the 1998 election, when Democrats gained control of the Senate.
A blue Senate, however, opened up new opportunities for school funding solutions. This brings us to the second major plan: the income tax.
Clifton Below: Ok I’m Clifton Below… back in 1992 I was first elected to the New Hampshire house of representatives, served there for six years, until 1998 when I was elected to the state senate and served six years there as well.
When House Democrat Clifton Below first read the Claremont II decision in 1997, he was one of the many state lawmakers to craft his own school funding proposal. It contained several mechanisms to raise revenue, but its primary feature was a statewide 4% tax on income.
Cliff Below: So the basic idea was what do we get individually out of education as well as a society which is the ability to be productive and increase income. So why not give back proportionate income? Because what we had at the time — pretty well documented — was a system in which the highest income paid the least portion of their income in state and local taxes compared to lower income groups.
When Below decided to run for a state Senate seat in 1998, many of his Democratic colleagues advised him not to run on the income tax plan, especially in his historically Republican district. However, to the surprise of many, Below won his race by promoting the income tax. Soon after the election, he worked with House Republican Liz Hager to craft a bipartisan school funding plan which included an income tax.
Cliff Below: And Liz and I got together and said we should combine our efforts and make it a bipartisan proposal… so it quickly became known as the Hager-Below plan, or the Below-Hager plan.
To fund the state’s share of education, the Hager-Below Plan combined a 4% state income tax and a $6 per $1000 statewide property tax which applied only to businesses and second homes. Below and other advocates believed that this plan would create a much more progressive tax system to pay for schools.
Cliff Below: What we found is that we could by replacing the property tax as the primary source of funding for education with an income tax with large personal exemptions… that we could actually invert the situation so that the bottom 80%… would actually have a lower overall tax burden… and the top 20%, who had and probably still have over half of all income, as well as half of all assets, the top 20% as a group would pay more, although most of that was concentrated in the top 5% or the top 1%, because that’s where most of the income was.
By the time the bill was ready for a vote in the early spring of 1999, there were just a handful of weeks left before the April 1 deadline. With time and options quickly running out, the Hager-Below bill passed the Republican-controlled House by just a few votes. However when the income tax plan arrived in the Senate, it became clear that it had several key issues.
On the policy side, some criticized the fact the income tax rate was a flat 4%, rather than a tiered, progressive system like the federal income tax. However, the rate had to be flat, in order for it to be a proportional and reasonable tax.
Cliff Below: We had written into our constitution very basic concepts of fairness in taxation, saying that taxation should be in all cases proportional and reasonable. So it meant that you couldn’t actually have a progressive, graduate income tax in which you ask higher income households to pay a higher percentage of their income in taxes.
But the more important problem with the Hager-Below Plan was political. Not only did the income tax have serious grassroots opposition in New Hampshire, but Governor Shaheen had made it clear that she would veto any bill containing a broad-based tax. Here’s the Governor on New Hampshire Roundtable.
Interviewer: Your pledge to veto any broad-based taxes in New Hampshire many think has gotten in the way of a solution. Is there any situation in which you would be willing to back down?
Shaheen: One of the things I said from the very first day I announced for governor was that I would veto an income tax. I appreciate that there may have been some people who really didn’t believe that that was my position, but I’ve tried to be very clear about that.
However, the supporters of Hager-Below believed that if they could just get the bill on the Governor’s desk, she wouldn’t veto it over the majority of her party. Even still getting the income tax plan past the legislature proved more challenging than Below initially thought. Several key Democrats in the Senate had their own issues with the bill, which required some slight changes to gain their support. After some late-night compromising, the Senate passed an amended version of the bill, which was then sent back to the House for another vote.
However, the income tax had lost some support when it returned to the House, and it was ultimately killed on March 31, 1999, the day before the looming April 1 deadline.
The next day came and went without a Y2K meltdown of New Hampshire’s school system. However, in a few weeks tax bills would be due and without a new funding plan, local education property taxes would officially become unconstitutional, meaning taxpayers wouldn’t have to pay them. So lawmakers were still on the clock. It soon became clear that there was only one viable plan left: a statewide property tax.
Judy Reardon: So we went back to the drawing board and we had another session. In that session she proposed a plan that had a statewide property tax and Speaker Sytek actually was an ally in that effort.
After the ABC Plan went down in 1998, the governor formulated a new proposal: a combination of increases to the business tax, cigarette tax, and most importantly a new statewide property tax. Here’s how it would work:
Every property in the state would be taxed at a flat rate of roughly $6 per $1000. That money would be pooled into a state fund, then be evenly distributed back to school districts on a per-student basis. For towns with high numbers of low-income students or students with disabilities, they would receive some extra state funding.
The goal of this system was to even out the burden of funding education throughout the state, by taxing everyone at the same rate, and distributing roughly the same amount of money to every student. However, the individual town-by-town mindset still motivated many lawmakers looking out for their constituents.
Donnalee Lozeau: I can remember being in the hallways laying out spreadsheets, back in the day when printer paper was still connected. You’d lay it down the hallway and different people would stand there and say “ok this is what it means to this community,” because that’s what everyone wanted to know: what does it mean to my community? How much money do I get? That, again, gets you into trouble.
A large number of legislators weren’t totally satisfied with the statewide property tax plan — both Republicans who’d hoped they could partially nullify Claremont with a constitutional amendment and Democrats who’d pushed for a more ambitious income tax. However by late April, time was really running out and for New Hampshire’s legislators, property taxes were a familiar solution to an age-old problem. So on April 30, 1999, Governor Shaheen’s statewide property tax bill was passed into law, bringing the school funding crisis to an end… for now at least.
Jeanne Shaheen: It’s hard to find something that everybody’s happy with. We’re fundamentally changing the way we pay for public education in the state. We’ve gone from a system where the state has paid less than 10% of the cost of education, to one where the state is paying over 60%. We’ve passed a plan that lowers property taxes in about 80% of the communities in the state, but in the other 20% it’s raised them and so the people in those communities are understandably not happy about that.
After the break, how those 20% of towns responded to the new funding formula.
The 1999 reform bill truly transformed school funding in New Hampshire. While the state had previously financed roughly 8% of the cost of public schools, they were now committed to just over 60%. Plus, the statewide property tax used to pay for this was proportional and reasonable throughout the state. Still though, most politicians agreed there was still work to be done on school funding. Here’s then Governor, Jeanne Shaheen.
Jeanne Shaheen: Well clearly we’re not finished with Claremont and I think if we look at other states around the country that have dealt with education funding issues, it’s taken years to evolve a new system that people are willing to accept.
At the time there were several competing views as to what the future of New Hampshire school funding would look like. These visions would soon go head-to-head on the gubernatorial campaign trail in the year 2000.
Debate Moderator: Good evening and welcome to the New Hampshire governor’s debate. The general election is just over a month away, the Corner Office, the corner office seat still up for grabs, and don’t think the Republican and Democratic nominees are the only ones affecting this race. Even if Libertarian John Babiarz or independent Mary Brown don’t squeak out a win, their votes could certainly affect what is a tight race between the frontrunners.
In 2000, New Hampshire’s four candidates for governor each had a distinct proposal for the future of school funding. Governor Shaheen’s plan was to largely maintain the status-quo.
Jeanne Shaheen: My plan keeps the $879 million commitment required by the school funding law, lowers the statewide property tax 10%, and keeps New Hampshire’s taxes lower than any other state in New England.
Notably, however, Shaheen did not take the no-broad-based tax pledge in the 2000 election. She argued that she wanted to keep her options open for a more long-term school funding solution. The Republican candidate, Gordon Humphrey, seized on this, promising to reduce state spending on education and not implement any broad-based tax.
Gordon Humphrey: The first problem to solve is education funding. I have a concrete, sensible plan to fund education generously with increases in the future, and it requires no income tax. There will be no income tax if you choose me governor.
On the other side, former Republican state senator Mary Brown ran as an independent advocating for an income tax. She argued it was the only way to break the cycle of patchwork school funding solutions using different versions of the property tax.
Mary Brown: Good evening everyone. I am the only candidate with a long-term plan to fund public schools and end our reliance on unfair property taxes. We will lose this window of opportunity for true tax reform, if we continue patchworking our budgets.
Finally was Libertarian John Babiarz. His funding plan was for the legislature to redefine the cost of adequacy to zero dollars and re-establish a targeted-aid program similar to the Augenblick formula. In later elections, he would also advocate for school choice programs.
John Babiarz: Today, I know the state faces great crisis. But I understand that government is not the solution, it’s the problem. I’m here to finally settle the choice once and for all: do we go to socialism or do we go for freedom? I’m for freedom and no income tax.
So in 2000, New Hampshire voters had no shortage of options when it came to the way forward with school funding. They could choose a governor that would push for an income tax, revert back to targeted-aid, or something in between. In the end, voters went for option number three, with Shaheen being elected for a third term in office with 48% of the vote. To this day, Shaheen is the only New Hampshire governor to have been elected without taking the Pledge.
When the statewide property tax reform came into effect in the early 2000s, dozens of towns saw immediate benefits to their schools. Take a district like Rochester, for example. Rochester is a medium-sized city in south-east New Hampshire, which like Claremont, saw a large decline in local industry during a 1990s recession. As a result, their taxbase to fund schools massively decreased.
Caroline McCarley: It was tough to fund schools here and we had some periods of time where it was extremely difficult. We had a period of time in the early-90s during the recession when there was a huge rift in the community between the taxpayer’s association and the ability to fund schools. It was just a really really difficult time.
That’s Caroline McCarley. She was a Democratic state senator who represented Rochester during the 90s school funding crisis. For her district, she explained that the effects of the new funding model were clearly visible.
Caroline McCarley: The first year that the money all came in, we dropped our property tax rates, which a lot of communities did. That’s the only year we took that advantage, but we did do that. And since then, I think the money has been phenomenally helpful… In terms of the years between 2002 and 2008, our school district got a chance to catch up. We got smaller class sizes, more reading teachers, more support for special education. There is no question that we got a chance to catch up.
This story was similar for many property-poor districts in this period. While the system certainly wasn’t perfect, it was working basically as intended by those who created it. With the state paying for over 60% of the cost of education, many towns were finally able to cut local property taxes and invest in their schools for the first time in years.
However, a small, but influential group of communities saw it differently. At that time, the government collected statewide property tax revenue like it does with other taxes. If a district raised more than it was owed in adequate education funds, those excess dollars were sent back to the state. This was the situation for about a fifth of New Hampshire’s towns, which were the richest in property value. Because they raised more revenue than they were owed by the state, a portion of that money was collected and put into a general education fund.
However, many residents of these property-rich towns believed this system was fundamentally unfair. From their view, the state was forcing them to raise their local taxes to subsidize schools in the rest of the state. In reality, the new state tax was used to subsidize every school district’s cost of education. Not to mention that the tax rates in many property-rich communities were often similar to or lower than those in other communities under the new funding formula. However the messaging that some towns were – quote – “donors” and others were “receivers,” was powerful in these rich communities.
Caroline McCarley: Trying to have that argument about “all our kids deserve the same chance” seems really simple. But as many times as you would say it, it was a nice generic phrase, but when it got down to individual communities and individual folks in individual communities, it just doesn’t sell. It’s like people sorta forget their goodness, I don’t know another way to describe it… I can remember Shaheen having to come out and speak in Portsmouth and people were just brutal.
In May of 1999, a group of 22 property-rich school districts — who referred to themselves as “donor towns” — formed what they called the Coalition Communities in order to fight statewide property tax legislation. While the Coalition was unsuccessful in defeating the 1999 reform bill, they continued to lobby the legislature and drum up grassroots support to end the so-called donor town system.
The woman leading the Coalition Communities was Portsmouth Mayor Evelyn Sirrell. Throughout the early 2000s, Sirrell lobbied, filed lawsuits, and gave speeches to oppose the statewide education property tax. In the fall of 2001, she spoke at a series of select board meetings in several property-rich towns, where residents invoked Article 10 of the State Constitution, or the right of revolution against the state government.
Over the course of a few years the Coalition Communities gained more influence in state politics and pushed for policies which gradually reduced the statewide property tax rate. However it wasn’t until 2005 that they saw a major victory.
With the help of the Coalition, the Republican legislature passed House Bill 616 which further lowered the statewide property tax to $3.33 per 1000, nearly half the original $6.60, and virtually eliminated the donor town system. Under this new formula, property-rich districts would keep any excess money raised with the statewide property tax, rather than add it to the state education fund. In July of 2005, this bill became law under Democratic Governor John Lynch.
A group of 21 school districts soon filed a lawsuit against the state, claiming this new funding formula was unconstitutional. What eventually became known as the Londonderry case ran its way up to the state Supreme Court. Here’s attorney Natalie Laflamme, who you heard from in episode one.
Natalie Laflamme: So Londonderry is basically the same underlying principle of the state was sued for not fulfilling its duty to define an education, and determine its cost, and then actually fund it. I guess I always look at Londonderry as not breaking any new ground from Claremont.
When the Court released their decision in the Londonderry case in September of 2006, they agreed that the 2005 funding reform was in fact unconstitutional. However, the court’s reasoning as to why exactly it was unconstitutional was somewhat roundabout.
Instead of focusing on the donor town issue, the Court decided to zero in on the way the state defined an adequate education. At the time, the set of seven standards the state used to measure adequacy were relatively ambiguous, with statements like: students shall be provided with the opportunity to acquire – quote – “skills in reading, writing, and speaking English to enable them to communicate effectively and think creatively and critically” – end quote.
In the majority opinion, the justices wrote that there is no way to determine whether or not the state is guaranteeing enough funding for an adequate education, because their current definition of adequacy couldn’t be measured or priced in any objective way.
Natalie Laflamme: Like their point about “hey we can’t determine what something costs until we know what it is.” I think it’s just a matter of the definition comes first and if you think of the way… we can’t get to issue two, three, four until we resolve issue one because they build on each other.
So, the court gave the state until the end of the 2007 fiscal year to come up with a measurable definition of an adequate education, figure out how much it costs, and find a way to pay for it.
The legislature set up a commission to study the issue and in February 2008, they released their final report. In it, they determined the cost of an adequate education by adding up the price of various inputs — like teacher salaries, technology, and transportation — then they cost it out on a per-student basis. The final number they came up with was $3466 per student for the state to meet their requirement to fund an adequate education. The legislature and governor then passed a bill which made this recommendation into law.
This solution did pass muster on the Londonderry decision. The state had defined an adequate education, figured out its cost, and was now paying for it in full. However this system had a problem: the actual cost to educate a student is much higher than $3500. During the 2008-2009 school year, when this new formula was passed, the average per-student spending for a New Hampshire school was just under $12,000, over three times what the state deemed an adequate education to cost.
Natalie Laflamme: That’s such a key of like “well what is adequate?” Because if it turns out — and I think this is not true — but if it turned out that in fact an adequate education could be provided on $3600 a year, then yeah the state is meeting its obligation. I think the problem is that we know that that’s probably not true.
On top of the base $3500 per student the state paid to meet its adequacy requirement, schools could also receive additional funds called differentiated aid, for students who are English language learners, economically disadvantaged, or have special education needs. However even with these extra dollars, no school in the state of New Hampshire could fully fund even a basic education program using only the funding provided by the state.
Since 2008, there have been a number of significant changes to New Hampshire’s school funding formula. New funding mechanisms like stabilization grants have been introduced, some major costs like teacher retirement have been downshifted to towns, and school voucher programs have become an increasingly large priority of the state. However the big picture of school funding really hasn’t changed much in the last 13 years: the so-called donor town system hasn’t been reinstated, the statewide property tax rate has been reduced to under $2 per $1000, and the state funds about 30% of the statewide cost of education.
Compare this to the initial years of the 1999 school funding reform package, when state education funds were raised and distributed throughout New Hampshire, the statewide property tax rate was over triple its current amount, and the state government picked up over 60% of the cost of public education. However, even these major reforms developed under Governor Shaheen were considered a temporary solution at the time, requiring further work for the state to fully meet its constitutional requirement to provide universal, adequate education. Here again is the then Republican Speaker, Donna Sytek:
Donna Sytek: We recognize that what we passed a few weeks ago will only see us through for the next few years. We’re constantly in the process of figuring out what’s next.
Today, the school funding system created in the late 1990s is a shell of its former self, suggesting that the current funding model might stand on a shaky legal foundation.
Natalie Laflamme: You know there’s the whole separation of powers and the court has again and again differed to the legislature to say “hey it’s the legislature’s role to define an education and determine its cost, that’s not the court’s role,” which is all well and good if the legislature does what they’re supposed to… What’s the point of having constitutional rights if the court says “yes it’s being violated, legislature stop it,” and the legislature just says “nah, we’re good, we’re just gonna keep doing it.” So then it’s like your rights are pretty hollow. Do they even exist if you can’t genuinely enforce them because the court keeps deferring?
In 2019, yet another group of school districts filed a lawsuit challenging the state school funding system, this time led by ConVal school district. Their central argument is that the roughly $3500 of per-student funding currently provided by the state cannot actually pay for an adequate education. For reference, in the 2019-2020 school year, New Hampshire school districts spent an average of $16,800 per student. The ConVal case is still pending.
Meanwhile on the ground, the disparity in local school property tax rates are reaching pre-Claremont levels. Here’s Democratic state representative Dave Luneau:
Dave Luneau: Education taxes in a lot of towns across the state are $25, $30 per $1000 in property value, while the local education tax in some other towns in the state are literally less than a dollar per $1000 or two or three dollars per $1000. You know if you’re lucky enough to have an ocean or a lake, you’re getting one dollar, two dollars, three dollars per $1000 property taxes, if you’re not it’s ten times higher than that.
In 2019, Luneau chaired a bipartisan commission set up by the legislature to study school funding, bringing in national education experts to assess the current situation. They found that in addition to large tax disparities from town to town, the state’s current funding system has had a significant effect on student outcomes.
Dave Luneau: We knew that taxes were high in a lot of places and taxes were low in a lot of places. But what we found that I think was really eye opening to me is that although on a statewide basis, the average student in New Hampshire performs really well nationally… we’re just not seeing it everywhere. Where I’m sitting right now here in Hopkinton, the average student in Hopkinton performs at around the 80th or 82nd percentile… But you don’t have to go very far — you just go 20 minutes up the road to Newport or half hour down 89 and 93 to Manchester — average kid in Manchester is performing at the 5th percentile.
To address this disparity, the Commission developed a new model which would fundamentally shift the way schools are funded in New Hampshire. Right now, the state thinks about funding an adequate education in terms of covering the cost of basic educational inputs for schools — things like teacher salaries, computers, and transportation. That’s what the $3500 per student of state funding is supposed to pay for.
The Commission on the other hand offered a new way of thinking. They proposed a new funding model where adequacy is defined by student outcomes: things like test scores, graduation rates, and attendance rates. Under this definition, guaranteeing funding for an adequate education would become a completely new game, where the primary goal is making sure every district receives the funding it needs to actually perform competitively. This would allow for a return to an Augenblick-like targeted aid program, where the state directs more funds to under-performing school districts.
In 2020, Luneau and others drafted several bills which would implement a funding mechanism like the one developed by the Commission. Some of these proposals include a statewide education property tax more similar to its original form in the early-2000s, where revenue is collected and distributed throughout the state, and not retained locally. This has led the Coalition Communities to reform, in order to oppose these measures. So far, however, none of these proposals have been made into law, leaving New Hampshire with the same school funding system we’ve had for the last fifteen years.
What happens next for state school funding remains an open question. The ConVal case could turn out to be the next Claremont II, forcing the legislature to enact serious reforms; it could also be more like Londonderry, with a less sweeping decision; it’s also possible that the issue is resolved politically, without any court intervention. However, regardless of which course of action does or doesn’t end up playing out, it’s vital that the lessons of the 20 years since the Claremont decisions are truly reckoned with in order to break the cycle of lawsuits, short-term reform, and backlash. Otherwise, twenty years from now, we’ll be having the same conversation.
A huge thanks to everyone who spoke with me for the making of this episode. Claremont is written, produced, and scored by me, Henry Lavoie with editing help from Sarah Earle. For more podcasts about New Hampshire school funding, subscribe to School Talk, wherever you listen to your podcasts.