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Amid School Funding Anxiety, Some N.H. Communities Fear Return of 'Donor Towns'

City hall in Lebanon
Dan Tuohy / NHPR
Lebanon City Hall. The Lebanon City Council voted on Wednesday to assess the cost of hiring a lobbyist to fight a "donor town" model of funding public schools.

A group of New Hampshire communities is organizing against potential efforts by lawmakers to resurrect a model of funding public education that redistributes money from “donor towns” to poorer school districts.

The burgeoning group has roots in The Coalition Communities, an initiative spearheaded by the city of Portsmouth 20 years ago to fight how the state raised and distributed its statewide "education property tax."

That Coalition, along with Republican lawmakers, successfully pushed for a funding formula that allows property-rich towns to keep all the money raised through their statewide property tax and spend it on their local school district, rather than send it to property-poor towns with a lower tax base, as was originally intended.

But that could all change with efforts this year to revamp New Hampshire’s school funding method, which many say is outdated and places too much burden on local taxpayers.

The state’s Commission to Study School Funding recently advised that revenue generated from the statewide property tax be redistributed to improve student and taxpayer equity. And a handful of bills in the State House would increase what the state sends to districts, with an eye to boosting school budgets and providing property tax relief to poorer residents. On top of that, the New Hampshire Supreme Court is expected to issue a decision on Contoocook Valley School District et al v. State of NH et al, a case about whether the state is failing to meet its constitutional obligation to fund public education.

Taken as a whole, these shifts could spell big tax hikes for certain towns.

The city of Portsmouth recently sent letters to around 50 communities in New Hampshire, warning that they could become “donor towns,” should lawmakers modify the state’s funding method, and inviting them to join the Coalition. The Lebanon City Council was one of the first cities to sign on, approving an MOU to assess the cost of paying for a lobbyist to advocate for the coalition at the State House.

Part of the MOU reads: “The concern for the City is relative to the potential of large sums of property tax dollars raised in the City may, depending upon the final form of proposed legislation be transferred out of the City for use by other school districts. Some of the communities that stand to gain from the property tax revenues raised by the City of Lebanon are the Towns of Bedford and Londonderry. There are questions as to whether these two municipalities are “needy” or “property poor” regarding education funding.”

[This story is part of the NHPR series, "Adequate: How A State Decides The Value of Public Education." READ and listen to more stories in this series.]

At the Lebanon City Council meeting on Wednesday, Paul Deschaine, a project manager for the town of Newington and a private consultant, warned that in spite of its property value per pupil being around the state average, a slight increase in property values in Lebanon could put it in the category of a “donor town.”

At the meeting, several people said the state’s funding formula sorely needed an update, but that turning to the statewide property tax wasn’t the solution.

“I’m opposed to broad-based property taxes that would result in huge spikes in Lebanon," said City Councilor Karen Liot Hill. “But I am for a real solution to the structural inequity that’s in our system right now of using property taxes to pay for education. It’s the most regressive tax system; it is fundamentally unjust.”

Proponents of redistributing the statewide property tax say the Coalition is hampering progress on solutions that would benefit the majority of property taxpayers.

State Rep. David Luneau, a Democrat of Hopkinton who chaired the Commission to Study School Funding and is sponsoring one of the bills opposed by the coalition, said the statewide tax should be used to help the thousands of students in school districts that are poorly funded in spite of higher than average property taxes.

“Really this is a debate about student equity, and whether it’s fair that taxpayers in Claremont are taxing themselves at a tax rate ten times as high as some of the members of the coalition communities,” he said.

Sarah Gibson joined NHPR's newsroom in 2018. She reports on education and demographics.
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