Amend or Spend - Claremont revisited

By Charles M. Arlinghaus

Josiah Bartlett Center for Public Policy

Almost 20 years ago, Judd Gregg asked the famous political question: Which will it be, Joe, an income tax or a sales tax? Today, the state Supreme Court has presented New Hampshire lawmakers with a similar question: Which will it be, spend or amend?

New Hampshire schools spend about $2.3 billion on education. Since the landmark Claremont decision in 1997 threw out the system of education finance, lawmakers have argued about what the decision means and how to respond to it.

Broadly, there are three categories of response. One group has pushed for the state to take over most of education spending. Many in this group, but not all, support an income tax to pay for the huge increase. Many conservatives agreed that the court decision seemed to mandate a massive spending increase and new tax source, so they wanted to use a constitutional amendment to reverse the court decision or "take the courts out of" education finance.

But in recent years, a third option achieved wide support. This option suggests targeting state aid so towns with greater need get more money but some towns get none.

In the last session of the Legislature, the leadership of both parties, the leadership of both houses and the governor all supported targeted aid plans that had similar amounts of state grants to towns, approximately $500 million, or a little less than 25 percent of total education spending. Some plans added to that an amount that was state property tax kept by the towns, a sort of shell game that increases the nominal amount to $800 million.

Some lawmakers felt a basic targeted aid plan like the ones proposed by Democratic Gov. John Lynch and Republican Senate President Ted Gatsas were a good idea but assumed they would be struck down by the court.

The latest court case resolved that issue. The court said unambiguously what it had said before, that the state must determine a base level of acceptable funding called adequacy and pay for the

level of funding in each and every town without regard to a town's relative wealth or ability to pay.

Put another way, what the state does for a poor town like Berlin, it must do for a rich town like Bedford. This would require a significant increase in spending merely to maintain the current level of support for poorer towns.

The court pointed out that whatever the Legislature and governor come up with, the current $837 million, including the statewide property tax, seems unlikely to be an adequate amount. In fact, most observers assume that state aid will have to increase by $800 million or even a billion dollars to meet the court mandate.

That's option No. 1 - spend another billion dollars. As one of the Claremont lawyers suggested last week, it will require "a new revenue source." The Concord Monitor has suggested the Hager-Below income tax.

A significant spending increase is the only option that will satisfy the court's ruling. So to pass a more targeted plan like Lynch's or Gatsas's, the only other choice is some form of an amendment.

Some conservatives would "take the issue from the court," but other amendments are possible. The most likely amendment will clarify the commonsense position that education funding, like most government functions, may be shared between state and local governments. The state may delegate to towns, as it does with so many functions, and target the state aid to areas where it is needed most.

In fact, this was the constitutional position of Justice Sherman Horton, who dissented from the Claremont II case that started this all.

The Legislature can and will debate many different funding proposals from the governor's $450 million targeted aid plan to income tax-based funding plans like the Monitor suggests. Some of those plans will require amending the constitution to one degree or another, some won't. But the governor and Legislature need to go into the debate with open eyes.

The court has made clear there are only two choices.

Which will it be, John, spend or amend?

(Charles M. Arlinghaus of Canterbury is president of the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord.)