The New Hampshire Supreme Court has made it abundantly clear that the State of New Hampshire is responsible for meeting, in full, the costs associated with providing an adequate education for every Granite State child. As the Court ruled in the Londonderry case in 2006, “Whatever the State identifies as comprising constitutional adequacy it must pay for. None of that financial obligation can be shifted to local school districts, regardless of their relative wealth or need.” This mandate, in turn, is often referred to as the “first and last dollar” rule.
Despite the Court’s ruling, members of the Commission to Study School Funding have, for months now, debated the degree to which the State of New Hampshire is responsible for the cost of adequate education, with some suggesting that complying with the “first and last dollar” rule would impinge upon local control. John Tobin, Chair of the NHSFFP Board of Directors, offered his thoughts on these topics in a memo to the Commission earlier today, the full text of which is below. As John observes, as long as New Hampshire continues to rely upon disparate property tax rates as the chief means of funding public education, “meaningful local control will remain out of reach” for many school districts.
Memorandum
To: Commission to Study School Funding
From: John Tobin, for the NH School Funding Fairness Project
Re: Local Control and the First-and-Last Dollar Rule
Date: November 19, 2020
I. Local control – theoretical model and reality on the ground
In numerous Commission discussions and in his “Motion Against the So-Called ‘First-and-Last Dollar’ Rule,” Bill Ardinger has relied on a theoretical and idealized model of “local control,” in which local citizens and their school district leaders across the state possess sufficient local resources to make balanced and reasonable trade-offs between school spending and local tax rates. In fact, as this Commission knows so well, many school districts in our state are forced to impose disproportionately high school tax rates, but are still unable to provide educational resources and opportunities comparable to those provided to students in wealthier districts, who can pay for them at much lower tax rates. A quick look at a few local school districts shows how far the current local control system actually is from the idealized model.
In the 2018-2019 school year, Portsmouth had an equalized value of $2,710,480 per student, while, for Derry and Hopkinton, it was $708,399 and $739,981 respectively. Derry must raise funds for its schools from property worth only about 26% of the property value per student available to support Portsmouth’s school budget. For Hopkinton, the ratio is about 27%. During the same school year, the equalized value per pupil was $378,712 in Berlin, while in Moultonborough it was $7,019,499 per student. This means Berlin had property wealth per student equivalent to 5.3% (approximately1/18th) of the property wealth per student in Moultonborough.
With these huge disparities in their tax bases, the taxpayers and school boards in Derry, Hopkinton, and Berlin cannot possibly have the same kind of discussion and debate about balancing tax rates and school spending that the residents of Portsmouth and Moultonborough are able to engage in. New Hampshire’s municipal boundaries, which are several centuries old in many cases, lock in these disparities in local school districts’ capacity to raise money for schools through property taxes. From the beginning of its deliberations, the Commission has acknowledged this deep inequity, and the AIR report has now documented it.
Any “new” school funding system that continues to rely on local property taxation in school districts with such an enormous range of property wealth and tax capacity will immediately and inevitably re-create the profound inequities in the current system. Under such a system, the idealized version of local control and decision-making that Bill Ardinger describes will only be possible, as it is now, in the wealthiest districts. Likewise, the imposition of “mandatory minimum local contributions” with lower rates in wealthier districts will perpetuate rather than eliminate disparities in tax rates. This would continue to prevent meaningful and balanced local control in property-poor districts.
II. “Skin in the game”
In his motion and at a number of the Commission’s recent meetings, Bill has said that the local (and inevitably unequal) property tax should remain part of the State’s school funding system because this will promote better local decision-making. He argues that these local taxes give local taxpayers “skin in the game” that will help promote civic engagement and more thoughtful spending and policy decisions.
At present, however, it is safe to say that taxpayers in property-poor districts have too much skin in the game. They must endure disproportionate and burdensome tax rates, year after year, that still leave them unable to meet their students’ educational needs. Under the two funding models proposed by AIR, a statewide property tax of about $12.00 per thousand, or a statewide property tax of approximately $7.00 combined with a “mandatory minimum local contribution” of $5.00 per thousand, will be included in the property tax bill that all homeowners will receive from their city or town. To these homeowners and the businesses that own real estate, paying education taxes at a $12.00 rate will certainly feel like they are putting “real skin into the game” of school funding. They will be making a very sizeable investment in public education and they will have every incentive to participate in the local discussions about how that money will be spent.
III. Yes, support for schools and educational achievement are high in New England – but taxpayers’ sacrifice in NH is not equal
Bill has been quite correct that in repeatedly pointing out that in New England and other states in the Northeast there has been an enduring pattern of high spending and high educational achievement compared to other regions of the country. He hypothesizes that the system of local property taxation may have helped create this success, but to his credit, he acknowledged in his motion that “correlation is not causation.” An alternative explanation for these praiseworthy regional characteristics is that education at all levels is now and has always been highly valued in these states, which have long understood the obvious long-term economic and social benefits of investing in public schools. In New Hampshire, this commitment to education is manifested in the willingness of taxpayers in property-poor districts to impose burdensome and disproportionate tax rates to educate their children. In many such districts, taxpayers dig deep to support their schools. But the grossly inequitable tax bases make it impossible for them to keep up with the wealthier districts in student achievement or spending per pupil, even if they are willing to make great financial sacrifices when they pay their property taxes each year.
One of the Commission’s central missions is to propose a path for eliminating these systemic inequities and creating a level playing field for property taxpayers. Going back to local property taxes at unequal rates would be a profound failure and a betrayal of the students and taxpayers who are looking to the Commission to provide a plan for ending this injustice.
IV. State funding and state requirements on local districts
In his motion, Bill raised the specter of “increasingly onerous requirements as preconditions to state aid” as another reason to continue to rely on local property taxes and “local control” instead of the increased state aid proposed in the AIR model. This argument ignores the existence of the State’s longstanding and comprehensive “Minimum Standards for School Approval.” Through these minimum standards, the State already imposes a broad range of requirements and obligations on local school districts. Unfortunately, under the current funding scheme, which is heavily reliant on unequal property taxes, school districts have widely varying capacities to raise the funds needed to comply with these standards. Commission members have repeatedly expressed strong general support for a system of “accountability” as a pillar of any proposed changes to the current school funding system and have indicated overall satisfaction with the minimum standards. If this accountability system is to be fair, however, there must be a level playing field for taxpayers and school districts. Widely varying local property tax rates, justified by a misplaced allegiance to an unrealistic model of local control, will not create the conditions needed for meaningful accountability across the state and will perpetuate the struggle of many school districts to meet the State’s existing standards. Again, meaningful local control will remain out of reach for these districts.
V. Making room for “local innovation”
In its idealized form, local control gives local districts the ability to be creative and innovative in allocating resources to their schools. As the Commission has learned, however, many poor districts must instead struggle to provide the basics of a decent education to their students because they face high teacher turnover, aging facilities, and the inability to expand or maintain programs or replace outdated materials and equipment. Building a “new” funding system that is again anchored to disparate property wealth and once again imposes unequal tax rates will continue to prevent many districts from being able to make the thoughtful judgments about educational programs and resources that the theoretical model of local control assumes are possible everywhere. Thus, one of the central justifications for this model would remain an illusion for many school districts, students, and taxpayers.
VI. California v. New Hampshire
In Bill’s memo, he cites an article by Dartmouth professor William Fischel about the problems in California’s schools allegedly caused by the decisions of that state’s Supreme Court in the Serrano case which increased the state government’s funding responsibility. Not only are New Hampshire and California dissimilar in many significant ways, but the model proposed for New Hampshire by AIR is very different than what the Serrano decision required in California more than four decades ago. The AIR model is much more flexible and responsive to local needs than Professor Fischel’s interpretation of what the Serrano rulings required in the early 1970s.[1]
VII. The meaning of “first and last dollar” – flexibility in funding distribution and uniformity in tax rates
We strongly agree with Bill Ardinger that state aid can and should be directed to meet the differing needs of each school district, and we applaud the AIR model for taking these differences into account and directing the funding accordingly. As we have pointed out in prior submissions to the Commission, the NH Supreme Court endorsed such an approach in Claremont II. “We emphasize that the fundamental right at issue is the right to a State funded constitutionally adequate public education. It is not the right to horizontal resource replication from school to school and district to district. Claremont School District v. Governor, 142 NH 462, at 473-474 (1997). Thus, it is clear that the State can and should target extra aid to needy districts as part of fulfilling its core duty to all students in New Hampshire. The current and prior funding formulas have tried to do this, but in woefully low amounts.
While the State’s adequacy aid can and should be matched to the needs of local districts, the responsibility for paying for it belongs to the State. The Attorney General’s office and the lawyers for the ConVal and amici school districts all told the Commission that the State is responsible for the “first and last dollar” of the cost of constitutional adequacy. The Supreme Court stated in Claremont II that the Legislature has wide discretion in choosing which tax or combination of taxes it will employ to meet that duty, but that if it chooses a property tax, the rate must be uniform rate across the State.
The Commission has apparently ruled out recommending any form of taxation except a new version of the statewide property tax. But preserving a significant role for local property taxes in funding the State’s constitutional obligation, as proposed in Bill Ardinger’s model, would perpetuate the fundamental flaw in the current system, because such taxes would continue to be imposed at unequal rates due to the great differences in property wealth from district to district. Such a system would be both unfair and clearly unconstitutional. Unless the proposed “mandatory minimum local contribution” is imposed at the same rate in all districts, it too would violate the Constitution. And the taxpayers, school boards, and students in property-poor districts would continue to be deprived of the opportunity to exercise local control in any meaningful way. The Commission should not adopt such an approach.
Respectfully submitted,
John E. Tobin, Jr,
for the NH School Funding Fairness Project
November 19, 2020
[1] I would also note that Professor Fischel is not a dispassionate scholar of school funding. He was a witness for the State of New Hampshire in the trial of the Claremont case, defending the state funding system that then provided only 8% of the total of school funding in New Hampshire. He has repeatedly been a professional witness for other state defendants in school funding cases.