Rand Decision Finds State Funding Deficient.
The consequence of our failures is that Claremont may be insolvent.
The “third shoe” dropped in the trilogy of pending school funding cases. Our Rand case was decided in two parts. Yet another court decision found that the state shirks its duty to constitutionally fund schools. This time the finding included payments NH schools receive for children who qualify for special education.
At the same time, the Claremont, NH school district publicly declared it may be insolvent and unable to meet its cash flow needs for more than a month or two of the upcoming school year. The two topics, a further finding of inadequate state funding and the insolvency of a property poor district, are obviously related.
The Rand Case
Four property taxpayers sued the state arguing that insufficient state aid for schools meant that local education property taxes are required to supplement insufficient state funding for that portion of public education that is the state’s responsibility. Let’s call this state portion, a “basic quality education.” NH courts in the 1990s found this basic quality education was a state responsibility under Part II, Article 83 of the NH Constitution. The taxes to pay for a basic quality education are therefore state taxes. NH’s constitutional provision on taxes, Part II, Article 5, unremarkably requires that state taxes be imposed at a uniform rate across the state.
NH has a statewide property tax (SWEPT) which is currently set at about $1.00 per thousand dollars of assessed real estate value. In the eyes of Chief Justice MacDonald, this tax is constitutionally uniform across the state. NH also has local education taxes that varied in FY 2024 from a low of a minus $2.23 to a plus $14.98 per thousand dollars of value. Brookline in southern NH has the dubious honor of imposing the highest local education tax. Hart’s Location, an unincorporated area in northern NH with about $20 million in real estate used the negative rate to completely offset its statewide education tax, a practice that is now outlawed as a result of Part A of the Rand case that was decided this spring.
The state of NH violates the uniform rate requirement to the extent the state relies on highly varying local education taxes to pay for a basic quality education, which is solely the state’s responsibility. This is what the plaintiffs alleged was happening and this is what Judge Ruoff of the Rockingham County Superior Court found in his decision released on Monday, August 18th. The judge found that the state’s basic adequacy payment is insufficient to actually pay for a basic quality education. This part of the ruling is similar to what was found in the ConVal decision. Second, Judge Ruoff found that the state’s payment for special education services is also deficient. Special education costs make up about 25 percent of the cost of public education in NH so this part of the ruling was a whopper and was completely distinct from the ConVal case. In fact, no case in NH’s fifty year ed funding litigation history beginning with the Laconia v. Laconia School District (1971) case has ever found a deficiency in the state’s funding of special education.
Special Ed-The Math Does Not Lie
Special Ed in NH, and in most states, is administered consistent with a 1975 federal law called the Individuals with Disabilities Education Act (IDEA). States must comply with IDEA or they lose federal grants that defray about 20 percent of the costs of special education. NH spends about $900 million each year on special education. Twenty percent or about $180 million comes from the feds.
The plaintiffs called a highly experience special ed administrator and former special ed teacher, Jen Dolloff, to explain how special ed works in NH and what some of its costs are. While some children with very complex intellectual and physical disabilities may require specialized placements in distant facilities costing up to $300,000 per year, the average cost for each student who qualifies for special ed is $30,000. This is in addition to this child’s regular education cost, which is about $24,000. Dr. Dolloff testified that special ed is designed to allow students to access and gain from the regular ed curriculum. Thus, the costs of the two are additive. Children in special ed programs are evaluated every three years to determine if the child is making progress or if his or her program must change.
Judge Ruoff wrote in his August 18th order, "Further, given Dr. Dolloff’s credible testimony concerning the relevant costs, the Court finds that New Hampshire school districts spend an average of $1,666.67 per year just on evaluating (or reevaluating) each student eligible for special education services. As the current special education differentiated aid figure is $2,100 . . . this leaves schools with an average of only $433.33 per eligible student, per year, to fund all the rest of special education services. The math does not lie. Throughout her testimony, Dr. Dolloff repeatedly and credibly opined that this figure is woefully inadequate."
Later in his order, Judge Ruoff described a second funding stream for special education services that the state insisted was relevant. The second program is now called Special Education Aid. It’s former name, Catastrophic Aid, more aptly describes its limited purpose. Judge Ruoff found the second source of funding not particularly relevant because school districts don’t receive a single penny in Special Education Aid until the special education costs (on top of the regular education costs) exceed about $70,000. The state then kicks in 80 percent of the costs through $250,000 and picks up all costs in excess of $250,000.
Supposedly.
Even though the law is written as Judge Ruoff described, Dr. Dolloff testified that the payments come a year after the fact and the legislature often reduces its payments by up to 30 percent.
The State’s Adequacy Payments Must More Than Double
The plaintiffs’ primary expert on the insufficiency of state adequacy funding was John Freeman. Dr. Freeman focused his testimony on the Pittsfield School District where he was the superintendent for more than ten years.
Dr. Freeman’s budget for this struggling district was about $10 million. The budget increased a total of 3.4 percent over ten years, meaning Freeman had to continually cut staff and services to stay afloat. Pittsfield also has about the lowest rate of teacher pay in the state meaning it’s as cost efficient as possible. Of course, this cost efficiency has its costs. Dr. Freeman testified to constant teacher turnover resulting from such low pay. One year, the district lost all of its elementary teachers to other nearby districts where pay was higher.
Dr. Freeman testified that he tried to craft a school budget in Pittsfield with just the dollars the state contributed for adequacy, which totaled $2.7 million. Judge Ruoff found Dr. Freeman “credibly testified that he quickly abandoned” this original goal having concluded that the Pittsfield School District could not fund a basic quality education for this amount. Dr. Freeman then testified that he doubled the adequacy funding by considering federal monies and state funding outside of adequacy and tried to craft a budget that would support a basic quality education for approximately $5.3 million (of the $10 million actually spent). Again, Judge Ruoff found Dr. Freeman credible in testifying that he could not craft a budget that would support a basic quality education for this poor rural district at twice the level of the state’s adequacy payments.
Corinne Cascadden, the longtime superintendent of the small urban Berlin School District, also testified for the plaintiffs. Judge Ruoff ruled, “Dr. Cascadden’s testimony regarding the multiple rounds of cuts required to meet her target budget figure demonstrates that Berlin’s school budget is not bloated by local preferences that result in overspending. Far from it. It reflects an efficient and budget-conscience effort to meet the requirements of Constitutional Adequacy. Despite those realities, Berlin relies exclusively on local property tax revenues to bridge the gap between existing Adequacy Funding levels and the costs associated with Constitutional Adequacy."
Annette Blake of the Belmont School District testified to the critical importance of funding student support services as a part of adequacy. Students facing desperate home and family circumstances cannot learn, she testified.
Kevin Clougherty, a retired Department of Revenue Administration Commissioner testified that any reliance on local property tax revenues to fund constitutional adequacy violates Part II, Article 5 of the New Hampshire Constitution. Commissioner Clougherty also explained the department’s equalization process allowing for comparison of local tax rates among school districts.
Finally, Mark Manganello, a NH Department of Education administrator responsible for analyzing the annual financial reports filed by school districts, testified as an expert for the plaintiffs and defense. Manganello testified that, although he may have found mistakes in financial filings, he never found that any school district intentionally filed false financial data. He also testified that the mistakes were generally caught and corrected before the annual filings were accepted by the NH Department of Education. Manganello’s testimony was important because both Freeman and Cascadden relied on financial data published by the state that was derived from the school district’s annual financial report filings.
The State’s Case
The defense mounted by the state is hard to describe because it was almost non-existent. The judge put it succinctly when he wrote: “the State failed to admit a scintilla of evidence at trial to justify existing Adequacy Funding levels.” The state called two experts, Jay Greene, who is currently with the Heritage Foundation (as in Project 2025), and James Shuls, who was trained by Jay Greene. Judge Ruoff found their criticisms of the plaintiffs’ experts “unpersuasive.” Equally unpersuasive was Greene’s testimony that NH should look to “developing countries” for less expensive models for providing public education.
What’s Next
Across the state, local property tax bills will be issued in November for payment in December. The governor should call the legislature back into session to craft legislation that will increase state funding to a level that reflects the actual costs of providing a basic quality of education. She won’t. The Republicans will say Judge Ruoff is wrong and call for his impeachment. Democrats will say that property taxes are too high but support bills that don’t address the problem and that unconstitutionally paper over the state’s responsibility to pay for constitutional adequacy.
Claremont
Meanwhile, Claremont.
The inevitable is happening. The Claremont School District appears to be insolvent even though it has taxed its working class residents higher than almost any other school district in the state. Claremont and the state are now in the handwringing, finger-pointing stage of denial. It will take weeks to move beyond the blaming stage to craft actual solutions, yet school is set to open in about a week. I’ll write more on this topic as developments occur. For now, the Valley News’ Patrick O’Grady has written about the travesty of Claremont.
Many Thanks
The state of NH spent millions of dollars to defend the ConVal and Rand lawsuits. They paid private lawyers from St. Louis. They assigned at least three lawyers from the NH Department of Justice. The state sent money to the Heritage Foundation’s Dr. Greene and his disciple Dr. Shuls. Paid staff from the DRA and DOE worked with the state’s legal team.
All of the plaintiffs’ experts worked for free. That’s John Freeman, Corinne Cascadden, Jen Dolloff, Annette Blake, and Kevin Clougherty.
The White and Case law firm assigned a pro bono team of a dozen lawyers led by Alice Tsier to staff the case. Harter, Secrest and Emery gave us the time of our lead counsel, Michael Jaoude. The Education Law Center lent us the services of their policy expert, Wendy Lecker. NH lawyers John Tobin, Natalie Laflamme and I contributed our time, as did special assistant and honorary lawyer Doug Hall of Chichester.
Most importantly, we must thank our plaintiffs. They are the taxpayers who brought the suit and it is they, in addition to all the prior plaintiffs in the many previous lawsuits, who may someday bring equity and a sense of justice to how we in NH fund our public schools. These plaintiffs are Steven Rand of Plymouth, Jessica Russell of Penacook, Robert Gabrielli of Concord, John Lewis of Hopkinton, and John Lunn of Newport.
Thank you for the thorough explanation of how this case has progressed. As a special education teacher in NH for 17 years, I find it frustrating to work in schools that don't adequately fund special education. We have a responsibility to relentlessly and continuously push the Governor and the legislature to increase the funding for schools. The quality of life in New Hampshire depends on it. Many young adults who excel in our schools often move out of state and do not return to raise their families here.