In December 1997, the New Hampshire Supreme Court decided that the local property tax used to fund the state’s K-12 public education was set at $6.60 per $1,000 of a property’s value. On the surface, this measure would appear to meet the stipulation of “equal and proportionate,” since a uniform tax rate is applied equally to all property owners across the state. However, on January 17, 2001, Rockingham Superior Court Judge Richard E. Galway ruled in Sirrell, et al. v. State of New Hampshire, et al. that the new statewide property tax was also unconstitutional. A divided state Supreme Court reversed this decision in early May. The Galway decision and its reversal by the Supreme Court are crucial to the fiscal options available to New Hampshire policymakers in solving the school funding problem. In this issue of Fiscal Facts, we discuss the Galway decision and the Supreme Court reversal. First, we summarize briefly the Galway decision, which is rooted in a critique of property assessment techniques. Second, we review the mechanics of property valuation and assessment in general. Third, we discuss the specific property was unconstitutional. The court’s reasoning revolved around two provisions in the New Hampshire state constitution. First, the court said that the education clause in the state constitution guarantees all state residents an “adequate” education, implying that the provision of an adequate education is a responsibility of state government. Second, the court said that the constitution requires that tax rates levied to fund any governmental program be “equal and proportionate” across all individual taxpayers within the appropriate taxing jurisdiction. Given the adequate education mandate, the appropriate taxing jurisdiction was deemed to be the entire state of New Hampshire. On this basis, with property tax rates in fact varying dramatically across New Hampshire’s 259 communities, the court declared the local property tax to be unconstitutional (see Fiscal Facts, Fall/Winter 1998).
