New Hampshire Supreme Court shakes up state's school funding system

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The New Hampshire Supreme Court issued a ruling that will upend the state's education funding system. 

Tuesday's opinion set a new floor for school funding. In a ruling last month, the court upheld the state's education property tax as constitutional. 

New Hampshire's Republican leadership denounced the ruling. 

"The Court reached the wrong decision today," Gov. Kelly Ayotte said. "The fact is, New Hampshire is top 10 in the country when it comes to funding our children's education. We are evaluating the ruling to determine the appropriate next steps. In the meantime, I will continue working with the Legislature to support our teachers and keep delivering a best-in-class education for every child in New Hampshire."

The decision upheld a 2023 ruling from a New Hampshire Superior Court that found the state must spend $7,356 per pupil for a "base adequacy payment." The current base payment is $4,182.

The state also pays "differential aid" for students with disabilities, from low income households, or who need English learning services. A lawsuit challenging those payments as unconstitutionally low is awaiting a ruling in a Superior Court. 

The court's ruling — and the decision to name a dollar amount — was a "big deal," said Zack Sheehan, executive director of the NH School Funding Fairness Project.

"They haven't ruled on school funding in many, many, many years," Sheehan said. "But also, they've never set a number like this."

Tuesday's decision is based on the 1990s Claremont decisions, where the state Supreme Court ruled the constitution guarantees the right to an education, which must be funded through taxes that are uniform across the state.

But Sheehan argued the current status of education funding shows the legislature isn't interested in following the Supreme Court's direction on education. 

In New Hampshire's 2026-2027 budget, which passed in late June, lawmakers included a "Legislative Declaration of Authority Regarding Public Education." The declaration voiced "grave reservations as to the court's authority" to weigh in on education funding, and said the legislature had only been complying with the Claremont decisions "in the spirit of comity."

"The legislature shall make the final determination of what the state's educational policies shall be and of the funding needed to carry out such policies," the declaration concluded.

Since the new ruling has been issued, the Republicans who control the legislature have struck a similarly defiant tone. The leadership of both chambers released a joint statement decrying the "rampant judicial overreach."

"We are disappointed that the court continues to insert itself into the Legislature's role in determining state aid to local school districts," House Speaker Sherman Packard and Senate President Sharon Carson said. "New Hampshire voters have always rejected efforts to centralize public education in Concord."

The Supreme Court did not put a timeline on the new figure for education funding, Sheehan said, in contrast to the Superior Court decision which directed the state to implement the new funding immediately.

"It is now incumbent upon the legislative and executive branches to remedy the constitutional deficiency that we have identified," the ruling states.

Last month, the Supreme Court ruled on part of another education funding case, upholding the current statewide education property tax, known as SWEPT. 

Because SWEPT is a flat tax, some municipalities collect far more revenue than others. New Hampshire law originally had towns send their "excess SWEPT" to the state, then redistributed the funds to poorer schools. But in 2011, the state changed the law, so each town keeps its SWEPT revenue, no matter how high. 

The plaintiffs argued their poorer towns had to raise taxes beyond SWEPT levels to get enough revenue for an adequate education — which violates a 1990 ruling that education must be funded through taxes that are equal across the state. 

The judge in the New Hampshire Superior Court sided with the plaintiffs. But the Supreme Court voted 3-1 to uphold the SWEPT system. 

"We hold that the SWEPT scheme is constitutional under Part II, Article 5 because it is 'administered in a manner that is equal in valuation and uniform in rate throughout the State,'" wrote Chief Justice Gordon MacDonald in the majority opinion. 

The Supreme Court did overturn one part of the SWEPT system. Some towns are required to raise SWEPT but have no school districts. These municipalities and the state found a loophole: they would collect SWEPT taxes, then implement a negative property tax, so residents had an effective tax rate of zero. 

The Supreme Court declared that practice unconstitutional. But did not issue a direct order to stop, nor did it suggest a use for the new SWEPT revenue those municipalities would generate.

This ruling was just the first part of the case. The second part, still awaiting a ruling from the Superior Court, challenged New Hampshire's base adequacy formula and differentiated aid formula. 

The state sends schools around $2400 for each student who qualifies for differentiated aid, Sheehan said; he estimates the actual cost is closer to $30,000. Sheehan said the Supreme Court's ruling on Tuesday bodes well for this case. 

"It's a similar argument, right?" Sheehan said. "There's this massive discrepancy between what the state is saying is enough and what the actual costs are."