The NH Homestead Plan

By State Representative Andy Peterson

Hillsborough, District #3

This year the voters delivered a re-election victory of historic proportions to Governor Lynch and unceremoniously replaced Republican majorities in the New Hampshire House, Senate and Governor’s Council. The after-effect of this “blue tsunami” leaves the Democratic Party with a greater ability to formulate and implement state policy than at any time in living memory.

But sooner than we can imagine, Republican sorrows and Democratic joys alike will be eclipsed by the massive responsibility which confronts the Governor and State Legislature this session: The need to resolve the education funding issue by the July 1, 2007 deadline imposed by the NH Supreme Court.

State Education Funding has for years now loomed like a foreboding shadow over our state’s efforts to support beneficial programs and protect the many advantages that provide New Hampshire citizens with a vibrant economy and singular quality of life. In what I hope will be a constructive contribution to the upcoming debate, I have proposed a comprehensive legislative solution to State Education Funding requirements entitled “The NH Homestead Plan”.

The bill includes a formulation of $4,500 +/- state adequacy grants which will be inflation indexed and paid directly to school districts annually on a per pupil basis. In addition, the legislation calls for over $200 million dollars to be paid to communities annually in the form of targeted aid and approximately $36 million to be distributed in stabilization grants. The total state funding provided for in the plan would be nearly $1,150,000,000, in the 1st year, or over $300 million more annually than provided for in the existing law, which has now been ruled unconstitutional.

The funding for the plan is based on one simple premise: The education of the next generation of New Hampshire citizen’s is everyone’s business … we’re in this together!

I propose that we raise the needed additional revenue by forming a single taxing district for the purpose of raising basic state education expenses and tax property at an even rate of $7.50 per thousand, via the statewide property tax.

The plan is called the “NH Homestead Plan” because resident’s primary homes across the state will receive an exemption from this base tax rate for the first $200,000 of equalized accessed valuation, or a $1,500 tax reduction, estimated to provide over $430 million dollars of direct property tax relief to homeowners statewide.

In addition, the moderation of local property tax rates, which now vary statewide from between only about $3 per thousand to more than $25 per thousand (equalized total rates based on full value assessments/market value), will create a more equitable distribution of tax burdens and lower property taxes for communities which have long been overtaxed when compared with the state average.

These changes require no sales or income taxes, nor do they require other changes such as legalizing casino-style or other expanded gambling. They would, however, achieve two valuable goals: Remove the need for further intervention by the state courts and provide long overdue property tax relief to NH homeowners.

According to Legislative Budget Assistant Office estimates, a resident owner of a $300,000 home in Keene would experience the double benefit of a 95 cent reduction in their property tax rate and also gain a $1,500 reduction via the plan's homestead exemption, lowering their 2005 tax bill of $7857 to $6072. In Manchester, where the tax rate would rise by approximately 74 cents (based on the recently established 2006 rate), owners of $300, 000 homestead properties would see their taxes fall from $5,055 to $3,777. No Manchester homeowner would see an increase for property valued under $2,000,000. In Dublin the tax rate is also projected to increase. However, due to the homestead benefit, primary homes in Dublin valued under $750,000 would see a decrease in total property taxes. As a result of these changes, the "donors" would henceforth truly be individuals, rather than communities.

Owners of second homes, businesses and speculative property in low tax towns will no doubt object to these changes, but the maximum increase in property taxes is limited to $3 per thousand on an equalized basis, and those who will experience these increases will still pay less than if they were located in a neighboring community.

When I compare the overall affects of this plan to other alternatives, I believe it has significant advantages and merits serious consideration in this pivotal year. Take a look at www.AndrewPeterson.org , click on ISSUES and see the details for yourself.