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Advocates of a state income tax to fund public schools suffered a setback Tuesday when New Hampshire’s Supreme Court ruled the current Statewide Education Property Tax, or SWEPT, is constitutional.

The case, Rand v State of New Hampshire, was the first of two education funding lawsuits launched in hopes of upending the current property-tax-based system. Still looming is the ConVal ruling and its potential $500 million per year price tag.

In a 3-1 decision, the Supreme Court overruled Superior Court Judge David Ruoff, who had declared that the way money is collected is unequal across the state and unfair. He also ruled against the state’s current education spending formula in the ConVal case.

Though the cases aren’t connected, opponents of the ConVal lawsuit were heartened by Tuesday’s ruling, seeing it as a hopeful sign of how the court may be leaning.

New Hampshire’s constitution requires that taxes be applied at the same rate for every community, and Chief Justice Gordon MacDonald wrote in the majority opinion, the current SWEPT law does just that.

“The State Constitution requires that taxes, as ‘impose[d] and lev[ied],’ must be ‘proportional and reasonable.’ N.H. CONST. pt. II, art. 5. The plaintiffs do not dispute that under the SWEPT, as administered, taxpayers are actually assessed at a uniform rate. That concludes the constitutional inquiry,” MacDonald wrote.

The majority ruling states that since every community that collects SWEPT is also allowed under the law to keep excess revenue, there is nothing unconstitutional in the fact that some wealthy communities use the extra revenue to lower local taxes.

The Rand plaintiffs wanted SWEPT suspended since some wealthy towns with high property values collect more SWEPT than needed for education. Under the law, the SWEPT rate is set by the state, but the municipalities collect the revenue and then send it to their local school districts. The law allows towns that collect more SWEPT than required to use the excess revenue to lower local tax rates. The Rand plaintiffs argued that this allowed wealthy communities to effectively have lower tax rates than poorer communities.

Dissenting Associate Justice James Bassett argued that the fact some wealthy communities use SWEPT to lower the local SWEPT tax burden, means those wealthy communities are effectively getting taxed at a lower rate than poor communities, a violation of the constitution.

“To the contrary, when excess SWEPT funds are not sent to the State, but instead are retained by communities, the taxpayers’ effective SWEPT rate in those communities is reduced and Part II, Article 5 is violated,” Bassett wrote.

All four justices agreed that the state’s practice of setting lower SWEPT rates in a few poorer communities does violate the constitution.

(The fifth Supreme Court Justice, Anna Barbara Hantz Marconi, is on leave after being indicted for two felonies and five misdemeanors relating to her attempts to interfere with a criminal investigation into her husband, Geno Marconi.)

Marc Decoteau with the Education Funding Coalition Communities advocacy group applauded the decision, saying it keeps a fair system in place and allows people to decide how to operate their local schools and governments.

“This decision by the court says each community and each taxpayer is being taxed through the SWEPT in the same way. But there is a fairness component to this decision as well. Education expenses are decided by the voters who will pay the property taxes for use within their community, and this decision ensures that their hard-earned tax dollars will be spent in their community while providing for direct accountability,” Decoteau said.

At the opposite end of the debate, NH School Funding Fairness Project Executive Director Zack Sheehan said Tuesday’s decision leaves a fundamentally unfair system in place.

“Allowing some taxpayers in this state to continue to get special treatment and avoid paying their fair share of taxes to support the education of all students in the state is beyond disappointing. For far too long, the State has allowed this two-tiered system to operate, and this order will allow it to continue at the expense of funding for schools in the districts that need it the most,” Sheehan said.

Now, Gov. Kelly Ayotte and the legislature are waiting to see if the Supreme Court will uphold Ruoff’s ConVal decision. In that case, initiated by the Contoocook Valley School District, Ruoff found that the state’s per-pupil adequacy grant of around $4,000 is too low. As a result, he said, it violates the Supreme Court’s Claremont decision.

Ruoff ruled that the per-pupil grants need to be raised to about $7,200. If that’s upheld, taxpayers would need to find an extra $500 million each year to fund public schools.

Lawmakers are considering a new solution to New Hampshire’s (potential) $500 million education funding dilemma:

Ignore the state Supreme Court.

A proposed House concurrent resolution (HCR) allows lawmakers to say the state Supreme Court’s 1993 Claremont decision, which defines a constitutional right to an adequate education, is a non-binding suggestion and not a court mandate.

“This simply affirms that the power of judicial review is not the power to force the other branches to pass legislation,” said Rep. Greg Hill (R-Northfield), a lead sponsor of HCR 11.

Hill brought his proposed resolution to the House Judiciary Committee on Wednesday, hoping to inspire lawmakers to take control of the education spending issue. He argued the Claremont decisions regarding “adequate funding” were wrongly decided and violated the separation of powers. 

“This (resolution) says that we, the House and Senate, find the lines of responsibility between the legislative and judiciary to have been crossed,” Hill said.

The Claremont Decision is a fiscal time bomb that could finally go off this year. The pending ConVal school funding decision, which could force a $500 million per year state spending increase, is based on the court’s view of how much funding is “adequate.”

The House Judiciary Committee also heard testimony Wednesday on a proposal to possibly impeach the ConVal judge, Rockingham Superior Court Judge David Ruoff. The proposal does not make any specific claims that Ruoff committed an impeachable offense; it only seeks an investigation into his conduct.

In November 2023, Ruoff sided with the Contoocook Valley School District in finding the state is still violating the Claremont decision by underfunding schools. Ruoff ordered the state to up the per pupil adequacy grant from $4,100 to at least $7,400. The state has appealed to the Supreme Court and a decision is pending.

HCRs do not have the force of law in New Hampshire, making the proposal as a defiant gesture rather than a policy change, said Greg Sorg, an attorney who backs the resolution. Defiance against judicial overreach is now needed, he said.

“I always felt it would be a healthy thing in an egregious case like this if the legislature repudiated the court,” Sorg said. 

House Judiciary Committee member Rep. Tim Horrigan (D-Durham) said the legislature is already ignoring the Claremont decision, and has been for the past three decades. In the 16 budgets passed since the 1993 decision, the legislature effectively ignored the ruling and continues to underfund education.

“Haven’t we gotten away with not funding education? Haven’t we triumphed over the courts?” Horrigan said.

New Hampshire lawmakers approved about a $150 million increase in public school funding in the last budget. The state spends more than $1 billion on public education, including adequate education grants and statewide property tax revenue. If the ConVal lawsuit decision is upheld by the Supreme Court, the state will need to come up with another half a billion dollars. 

Zach Sheehan with the New Hampshire School Funding Fairness Project, said the state only pays for less than a third of public education costs. Local taxpayers carry the heaviest burden, paying 70 percent of the education costs through local property taxes. That burden is because the state has failed to live up to Claremont, Sheehan said.

Horrigan suggested increasing statewide taxes to pay for education — the most obvious option being an income tax — would lower the local property tax burden. 

“Isn’t that an option?” Horrigan asked.

Sorg is skeptical that adding an income tax would lead to a smaller overall tax bill for Granite Staters.

“I think the appetite of the schools for money is just limitless,” Sorg said.