To help pay their tax bill, the second floor of John and Meredith Lunn’s Newport home is now a 600-square-foot apartment. Any source of income helps when they’re trying to pay an annual tax bill that only seems to grow year to year.

In 2023, that bill was just over $9,000. The Lunns live in a three-bedroom, two-bathroom house, valued at just under $400,000. Meredith Lunn, 72, is retired and dependent on Social Security. John Lunn, 64, works part-time.

Adam Russell and Jessica Wheeler Russell own a home in Penacook worth a fraction of the cost – just $287,000. But their tax bill isn’t too far off. Last year, they paid just over $8,300 in taxes at a local rate of $29.15. More than half, $17.47, went to local schools and state education.

In New Hampshire, the property tax burden hits homeowners across the state, with the majority of public school spending funded through local tax bills.

To the Russells and Lunns, though, the dependency on local property taxes for school funding creates discrepancies among different towns.

This argument is now going to trial on Monday in Superior Court – one of two lawsuits challenging education spending in the state – in a lawsuit, Steven Rand et al. v. State of New Hampshire.

Their argument is succinct – an inadequate amount of state funding for education means local taxpayers foot the bill. The solution to school funding playing out in the legislature, and counterarguments from a coalition of wealthy towns in the state, complicate the case which has unfolded over the last two years.

Steven Rand, the current owner of his longstanding family business, Rand’s Hardware in Plymouth, lives half a mile up the road from his store.

Last year, he paid nearly $10,000 in property taxes for his home, which is valued just above $400,000.

Rand’s name is now the moniker for the school funding lawsuit, which challenges the state’s education funding scheme. The crux of the argument is that a reliance on property taxes means that school funding is not uniform across communities – violating the state constitution.

In addition to Rand, Lunn, and the Russells, Jim Lewis, a Hopkinton resident, and Robert Gabrielli, of Penacook, are also petitioners in the case.

The lawsuit, which was first filed in 2022, will be heard in Rockingham Superior Court by Judge David Ruoff, who has also presided over the ConVal vs. State of New Hampshire school funding lawsuit – where school districts are challenging the state’s calculation for spending on an adequate education.

The scope for the Rand trial, though, has narrowed over the years, as the case was split into two portions last fall.

One piece, the crux of the upcoming trial, considers the property tax burden on local communities to fund public education.

The second, which was heard by Ruoff last fall, focuses specifically on the administration of the Statewide Education Property Tax.

The tax, which the legislature introduced in 1999, requires that towns raise and retain money to fund local education. In 2005, the legislature put a specific amount on this – $363 million per year, with a rate set in each town to raise their required contribution.

In towns with higher property values, the tax rate set ends up rising more than their required amount.

In these communities, the excess money is kept within the town and used to offset costs.

The plaintiffs, however, argue that this is unconstitutional and this excess funding should be returned to the state and redistributed to help communities with lower property values.

Last year, Ruoff sided with this argument – ruling that the administration of this tax was unconstitutional and that excess funding should be distributed throughout the state. That ruling, however, has been appealed to the Supreme Court.

Behind the appeal is a push from a group of over two dozen property-wealthy towns, known as the Coalition Communities.

To Mark Decoteau, the town manager for Waterville Valley and chair of the coalition, there is a misconception across the state that these municipalities retain the money to pay off other expenses.

“It’s not correct to think that Waterville Valley is buying a fire truck with SWEPT money,” he said. “We are using every one of those dollars for our schools.”

While school funding decisions have played out in court, the Coalition Communities have also turned to the State House to lobby for keeping the state tax funding scheme as is.

Through July 2024, the Coalition Communities had paid nearly $50,000 to Sheehan Phinney Capitol, a lobbying group.

The school funding decisions also raise questions of local control and fairness to Decoteau, who said communities should have oversight with spending.

“Taxpayers in the donor communities do not have a say in those funding decisions that are being made in the receiver,” he said. “We are now taking tax dollars from Waterville Valley and we’re sending it to some other towns in the state, but our taxpayers in Waterville Valley have no way to vote to say how that money is being used.”

On the other side of the coin is the New Hampshire School Funding Fairness Project, a nonprofit advocacy group.

Zack Sheehan, the executive director, is quick to point out that many of the communities that make up the coalition are municipalities with high rates of second home ownership.

To him, changes to the statewide tax administration could also be accompanied by programs to support homeowners who are struggling to pay their taxes, like bolstering the low and moderate-income property tax relief program and introducing a homestead exemption.

Instead, the case remains at a standstill with an impending Supreme Court hearing.

“Holding up SWEPT reform is just being a blockade is holding up serious discussions about how do we change the funding formula in the state because we don’t have a sales or income tax, so a state property tax is the clearest path towards shifting some of that funding from the state,” he said.

The remaining portion of the Rand case will begin in Rockingham County Superior Court on Sept. 30.