NH high court upholds education property tax scheme as constitutional

Yahoo

11-06-2025

The New Hampshire Supreme Court rejected a challenge to the state's education aid law, upholding a plan that lets property-rich towns keep excess money raised under a statewide property tax that supports public schools.
The high court's 3-1 decision overturned the 2023 ruling of Rockingham County Superior Court Judge David Ruoff, who had said that letting richer towns keep some of that tax violated Part II, Article 5 that holds all taxes must be 'proportional and reasonable.'
In the majority opinion, Supreme Court Chief Justice Gordon MacDonald wrote that the statewide property tax passes legal muster because it's imposed at the same rate on all cities and towns.
'We hold that the SWEPT (Statewide Education Property Tax) scheme is constitutional under Part II, Article 5 because it is 'administered in a manner that is equal in valuation and uniform in rate throughout the state,'" MacDonald said.
Joining MacDonald in the majority decision were Associate Justices Patrick Donovan and Melissa Countway.
Associate Justice James Bassett was the lone dissenter. He maintained that the SWEPT clearly gave a financial benefit to property-rich towns not available to other communities.
'The impact of the SWEPT scheme on taxpayers in excess SWEPT communities is anything but 'theoretical' or 'indirect': the effective SWEPT rate reduction those taxpayers enjoy is real and direct. The impact of the SWEPT scheme on taxpayers in other communities that do not generate excess SWEPT is also real and direct: those taxpayers enjoy no comparable reduction in their effective SWEPT rate,' Bassett said.
In its lawsuit, the plaintiffs noted that the property-rich Lakes Region town of Moultonborough has an effective SWEPT tax rate of $0.44 per $1,000 of property value while the poorer town of Plymouth has an effective rate of $1.56.
'This disparity in effective tax rates violates Part II, Article 5 and 'is precisely the kind of taxation and fiscal mischief from which the framers of our state Constitution took strong steps to protect our citizens,'' Bassett wrote.
An ongoing fight
When lawmakers first created SWEPT in the 1990s, it compelled rich towns to send to the state all it had collected under the tax. This plan sparked a movement by these 'donor' towns that banded together as the Coalition Communities.
For many years they lobbied the Legislature to change the statute so that they didn't have to send more than $20 million to the state for distribution to other communities as part of state aid to education.
In the Tea Party-dominated election of 2010, voters gave Republicans a 3-1, veto-proof majority in both chambers of the State House. The Legislature in 2011, over the objection of then-Democratic Gov. John Lynch, got rid of donor towns, passing a law that let them keep their excess amounts.
Zach Sheehan, executive director of the NH School Funding Fairness Project, said the decision allows a 'two-tiered' system of public schools to exist.
'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 in a statement.
He urged lawmakers to remedy the matter by changing the SWEPT law.
'This is a major step backwards for our state, but it doesn't have to be forever,' Sheehan said. 'Just because this SWEPT loophole is allowed does not mean that the Legislature cannot act to close it. '
The Supreme Court still has another education funding case, and another appealed ruling by Ruoff, on its plate. The Ruoff ruling under appeal is the case in which the ConVal regional school district and nearly 20 others sued the state, alleging that the level of state aid to public schools wasn't enough to meet the requirement that the state support the cost of an adequate education for all students.
In that matter, Ruoff concluded that the state's definition of an adequate education cost was 'woefully' short and ordered the Legislature to increase state spending to public schools by more than $500 million a year.
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