Why New Castle Residents Should Be Concerned about Education Funding.
As of next July 1, the residents of New Castle will be forced to “donate” approximately $1,178,265 of their tax dollars to other communities, including some with higher median household incomes, unless the Legislature stops the return of “Donor Communities.”
When Donor Towns take effect, the law, as currently structured, will add approximately $2.00 or about 40% to the tax rate. For perspective, this would be an additional $1,500 per year on property assessed for $$750,000.
The reappearance of full-fledged Donor towns harkens back to the dark days between 1999 and 2005 when New Castle taxpayers were forced to raise and “donate” $7,943,261 to Concord for redistribution to other towns, some of which used the money for non-educational purposes. Neither the taxpayers nor schoolchildren of New Castle received any direct benefits from this nearly $8 million in tax dollars. This unfair system is now scheduled to return on July 1, 2011.
By way of background, NH law requires that $363.5 million be raised annually from the Statewide Education Property Tax (SWEPT) to go toward the State’s share of funding education. The remainder comes from the general fund (lottery profits, real estate transfer tax, etc.) The State sets the SWEPT rate to raise the $363.5 million ($2.19 in FY11). If a community with high property values like New Castle raises more under the SWEPT than what the State determines is its cost of adequacy, a community is said to raise “excess” SWEPT.
According to the State’s formula, the cost of providing what the State has defined as an “adequate” education for New Castle students is $364,514 for this fiscal year. However, New Castle can raise $1,545,648 under the SWEPT. The current formula said if New Castle raised more than its FY09 cost of “adequacy” plus what it raised under the SWEPT that year – a total of $1,244,927 – it could keep any “excess” if it was spent on local education.
But beginning July 1, 2011, any local option disappears and New Castle will be forced to “donate” the “excess” to Concord. This means local education costs currently financed with the “excess” SWEPT will have to be funded with local education tax dollars.
It also is important to note that New Castle spent $19,247.07 per schoolchild in 2008-2009, largely due to the cost of maintaining a school for a relatively small number of students, paying tuition to Rye and Portsmouth for junior and senior high school, and SAU administrative overhead. The state average per-student spending at the elementary level was $12,095.86 for the same period, which is the most recent available. Meanwhile, the State’s “adequacy formula” allocates only a base per-pupil amount of $3,450 per pupil, although certain school and individual factors may increase the amount. Nonetheless, it is clear that the State’s cost of ‘adequacy” has little relation to the reality of education costs in New Hampshire.
New Castle is not alone in facing major budgeting challenges due to the coming changes in the State’s education funding formula. About half of NH’s cities and towns (120) will see a decrease in State aid under the education funding formula that will cost an additional $70 million (and possibly as much as $150 million or more if the federal stimulus money used this year to plug the education funding budget hole is not renewed). Almost one-third of these communities face cuts of $100,000 or more, while $42 million of the extra $70 million will go to just two cities with large legislative delegations: Manchester will get $29 million and Nashua will receive $13 million more.
Unfortunately, the NH Supreme Court has interpreted the NH Constitution to say that the State must send the same base amount of education funding to every schoolchild – even in wealthy communities that can well afford to school their children without State money.
The Coalition Communities, comprised of New Castle and 34 other municipalities with high property values, have long supported a constitutional amendment that would allow the State to target aid only to the neediest communities. Past independent surveys have shown NH taxpayers agree by a 2-1 margin. In today’s economic climate, it makes more sense to send money to towns that truly need help rather than sending the same per-pupil base amount to every community – which dramatically increases the total cost. Nearly every other state in the nation uses such a “foundation aid” method of supplementing what the local community cannot raise, instead of paying both the first and last dollar of education adequacy as the NH Supreme Court now requires.
Governor Lynch also has been a proponent of a constitutional amendment since before he took office in 2005, but the Legislature’s previous attempts to pass one have broken down over the wording and lawmakers’ fears that their communities might lose State education money.
The Coalition will continue to fight the return of “Donor” towns but it is essential that the residents of New Castle and other communities also tell all their State political candidates that going back to this unfair system can only cause irreparable harm to the taxpayers and schoolchildren in our State.