GARRY RAYNO, InDepthNH.org
The problem with taxes is that most people don’t know how taxes work.
Taxes by their very nature create winners and losers, and usually more losers than winners.
But because the majority of people don’t understand the finer points of taxation, states have an upside-down system for one of their biggest expenditures: public education.
The system benefits those living in wealthy communities, while punishing those living in wealth-poor communities and their children.
Two years ago, the Board of Education Funds hired a prominent national consulting firm to examine state education data and student performance. As a result, it turns out that most people already know. Student performance is better in school districts with wealth than in districts with less wealth.
The group proposed a funding scheme based on a statewide property tax. It provides all school districts and their students with the resources they need to perform at the state average level.
The consultants did not suggest increasing spending on education, but they did suggest changing the way funding is raised.
However, a statewide property tax was a poor sell given Donner’s history of outrage from the town, so board members were reluctant to approve it.
The commission approved changes proposed by consultants to how states determine appropriate education, moving from the current input-based formula to an education outcomes-based formula, which was approved by the current Congress last year. Rejected.
But the 2021-2022 legislators decided to play around with a statewide education property tax that funds a significant portion of state educational aid to school districts.
A statewide property tax, while theoretically a state tax, is raised at the local level. Viewing it as a state tax would make the consultant’s proposal fairer to both students and taxpayers, but people in wealthy communities with property wouldn’t view it as such.
As most people know, New Hampshire is at or near the bottom of the 50 states for public education support and the bottom for higher education support.
More than 60% of the money spent on public education comes from local property taxes, and tax rates vary widely. As the state Supreme Court told legislators more than 20 years before him, this is inherently unconstitutional under the state constitution.
Now let’s look at two approaches to tax.
When Democrats had a majority in Congress in 2019-20, they approved $47.5 million in the last biennial budget to provide property tax relief to more property-poor communities in the state, It provided so-called disparity assistance.
The current budget, approved last year by the Republican-controlled Congress, eliminates targeted aid to poor neighborhoods and reduces the state’s current statewide education property tax valuation to $263 million. Replaced by $100 million used.
Statewide property taxes are based on equalized valuations of communities, essentially adjusting each town’s property value to 100% of market value.
This is one way to accurately compare one town’s property tax rate to another town’s tax rate, as many communities are valued above or below current market values.
Congress also said that for property wealthy communities who keep the surplus income they raise under statewide property taxes, rather than receive in the state’s adequate education subsidy, which is $3,787 per student. That’s a lot, including an additional $15 million.
There are no “donor towns” because some communities raise more than the state-determined per-student cost of an adequate education and hold additional funds.
Using the Reaching Higher New Hampshire figures, the impact of this change on statewide property taxes would increase state aid to the wealthy while punishing property poor communities.
For example, Moultonborough, which has one of the lowest property tax rates in the state, received no state money from $47.5 million, but received $1.8 million in savings due to statewide property tax cuts, and $1.80 million. $10,000 profit.
Meanwhile, Claremont, which has one of the highest property tax rates in the state, received $2.5 million in state-targeted disparity assistance, but received a $372,497 reduction under the statewide property tax cut. can only be seen. State subsidies bring the property tax rate to $2.86 per her $1,000 valuation increase.
Even communities in the middle, like Delhi, where property values are spread out, lose money saved in the statewide distribution of property taxes.
Delhi received $3.37 million in targeted aid, but only $1.8 million in savings from statewide property tax assistance. That means state contributions will be cut by her $1.56 million and property tax rates will be raised by 43 cents per $1,000 he.
Berlin is an example of a community where this change would result in a significant increase in property tax rates.
Under last year’s disparity aid, Berlin received an additional $1.64 million in state aid, but saves only $176,808 from statewide property taxes paid by the state.
The difference is a negative $1.47 million, which increases the property tax rate by $4.14 million per $1,000.
Portsmouth, on the other hand, receives no disparity aid, but a $3.3 million statewide property tax, along with $2.3 million in supplemental assistance, to make up for the excess of lost statewide property tax revenues. will receive a discount.
One of the biggest winners is Nashua, which received no additional state disparity aid last year, but will get a $5.75 million reduction in its statewide property tax liability.
Another community that lost more than $1 million in state aid under the switch is Rochester at $2.1 million.
Republicans touted $100 million in property tax savings, but many communities in New Hampshire would receive less state aid than they did from the $47.5 million disparity aid targeted at property-poor communities. will be
Anyone who says their state’s education funding system is working needs to do some more research.
Without change, inequality will only get worse. In particular, more and more money will be poured into educational freedom accounts, creating millions of dollars in new state mandates.
Funding for this program comes from state education trust funds. This fund also funds state appropriate aid and per-student aid to charter schools.
The law has an unusual provision that if the Education Trust Fund does not have sufficient funds to pay an Educational Freedom Grant, it will be drawn into the state General Fund without the approval of the Joint Legislative and Finance Committee or the Governor.
State budgeters estimate that state revenues will generate $2.69 billion this fiscal year, possibly more if current revenue trends are maintained, but the state’s economy Not as much as last year, which was aided by federal aid that revitalized and generated record profits. many large companies.
Over $1 billion of total state revenue is allocated to education trust funds.
During the first year of the Education Free Account program, the state will incur costs of $8 million to $9 million, with about 90% of those costs going to students who did not attend public school the previous year. We pay a portion of our tuition fees to private and religious schools.
The Legislative Budget Assistant estimates that the state’s exposure to private and religious school students will be about $70 million annually under a broad program.
As more and more money goes into the Education Freedom Account, the pressure on the Education Trust Fund will increase.
When the program was launched in 2021, proponents did not approve any additional collections or fee increases.
Instead, the Republican-controlled Congress and governors began lowering business, lodging, and meal taxes and phasing out interest and dividend taxes.
You might think that’s irresponsible budgeting. Especially when the education funding system is in need of a radical overhaul.
Garry Rayno can be reached at [email protected].
Distant Dome by veteran journalist Garry Rayno explores a wider perspective on InDepthNH.org’s Capitol and state affairs. In his 30-year career, Leino covered the NH State House for New Hampshire Union Leaders and Fosters his Daily Democrats. During his career, his coverage has ranged from local planning, schools, and select boards to national issues such as deregulation of the electrical industry and presidential primaries. Leino lives with his wife Carolyn in New London.