## Facts

- Several school districts, students, and taxpayers challenged New Hampshire’s method of financing public elementary and secondary education.
- Public education funding came largely from local property taxes, supplemented by relatively small amounts of direct legislative appropriations and federal aid.
- The funding structure relied predominantly on local real estate taxes, producing substantial differences in tax rates among municipalities.
- For the 1994–1995 school year, equalized tax rates varied dramatically, including an example where one town’s rate exceeded another’s by more than 400%.
- Plaintiffs asserted that, because the State has the constitutional duty to provide an adequate education, the education property tax functioned as a state tax and therefore had to satisfy constitutional requirements that state taxes be proportional and reasonable.
- After earlier litigation recognized a state constitutional duty to provide and guarantee a constitutionally adequate education, the case returned on appeal following further proceedings addressing the validity of the existing finance system.

## Issues

1. Whether the State’s school-finance system, which depends heavily on local property taxes and yields large tax-rate disparities, violates the New Hampshire Constitution.
2. Whether the education property tax is a state tax by virtue of the State’s duty to provide an adequate education and, if so, whether it is disproportionate and unreasonable under N.H. Const. pt. II, art. 5.
3. Whether the State satisfied its constitutional obligations to define a constitutionally adequate education and to ensure its funding provides equal educational opportunity statewide.

## Decision

- The court held the existing system of financing elementary and secondary public education unconstitutional.
- It ruled that the property tax used to fund public education is a state tax because it is imposed to discharge the State’s constitutional obligation to provide an adequate education.
- As a state tax, the education property tax was unconstitutional because it was disproportionate and unreasonable, given the large disparities in tax burdens among similarly situated property owners across municipalities.
- The court stayed further proceedings until the end of the upcoming legislative session (and further order) to permit the legislature to craft a constitutionally compliant funding mechanism.

## Legal Principles

- The State has a non-delegable constitutional duty to provide a constitutionally adequate public education and to guarantee equal access to that education.
- When a tax is imposed to fulfill a state constitutional obligation, it is subject to constitutional limits governing state taxation.
- Under N.H. Const. pt. II, art. 5, state taxes must be “proportional and reasonable,” requiring substantially equal tax burdens for similarly situated taxpayers statewide.
- A school-finance system that funds a state obligation through locally variable property-tax rates that create dramatic disparities in taxpayer burdens violates the proportional-and-reasonable taxation requirement.
- Courts may declare a school-finance system unconstitutional, while leaving the specific design of a compliant remedy to the legislature, subject to continued judicial authority to enforce constitutional requirements.

## Conclusion

The court invalidated New Hampshire’s property-tax-based school-finance structure because it funded a state constitutional duty through a state tax that imposed sharply unequal burdens across towns, and it required legislative action to define and fund an adequate education on equal terms consistent with constitutional taxation limits.


Claremont Sch. Dist. v. Governor, 142 N.H. 462, 703 A.2d 1353 (N.H. 1997)