The Pew Charitable Trusts

CONCORD, New Hampshire - Finding a fairer way to pay for schools in New Hampshire as the state Supreme Court insists has evolved into a high stakes poker game, with no one yet holding a winning hand. Income tax backers hold the most aces, but Gov. Jeanne Shaheen believes she has the only card needed to trump them - a promise to veto the tax.

Despite her threat, a bill providing for a state income tax squeaked out of the House on March 4, 194-190, with the support of 53 Republicans who rebuffed a GOP leaders' call to keep New Hampshire as one of nine states without a personal income tax.

However, in a setback to supporters a week later, the state Supreme Court ruled voters couldn't approve an education funding plan in a binding referendum.

Shaheen had said she'd allow a referendum bill containing an income tax to become law. After the ruling, she reiterated her promise to veto the tax if voters did not have the final say.

Defiant supporters are pressing for its adoption regardless. But Shaheen's threatened veto has dampened the enthusiasm of a few backers, particularly in the 24-member state aSenate, who are reluctant to work on a solution destined to die. It rejected the income tax bill 13-11 on Tuesday, but followed that action by voting overwhelmingly to table the plan rather than to kill it outright.

On Thursday, the state Senate will take up Shaheen's solution, which calls for a statewide property tax, increased taxes on business, and the legalization of video slotmachines.

Days before the state Supreme Court rejected linking an income tax to a referendum, Shaheen unveiled her latest school financing plan. But her proposed business tax overhaul is unpopular with lawmakers.

The state senate is struggling to find consensus to comply with the court's order to implement a new school financing system by April 1, the start of the new property tax year. The court ruled unconstitutional the state's reliance on the existing system of widely varying rates statewide to fund 90 percent of public education's costs because of the imbalance in spending between rich and poor communities.

In five rulings in six years, the court has, if anything, become more adamant about the state's duty to provide an adequate education for every New Hampshire pupil, adequately funded with a uniform state tax.

The court said the property tax could be used if its rate was uniform statewide, prompting all the major funding plans to include a statewide property tax to raise some of the money.

The difficulty has been keeping the rate low enough to minimize economic disruption to "donor" communities required to send money to the state. To equalize spending on education in all New Hampshire communities, rich and poor, the property tax plans rely on a combination of other funding sources with varying degrees of political support.

Like a grocery list, each item removed from it means lawmakers must hunt elsewhere for money or change the rates of the taxes in their plans.

The House has historically opposed expanding gambling and killed a video lottery bill earlier this year. The Senate, meanwhile, is working on a similar bill that would raise $200 million of the estimated $900 million cost to be borne by the state.

Some plans rely on the property tax to provide close to half the funding. But as the rate changes, so does its support among lawmakers representing donor towns. Each player in the game is holding onto funding cards that may wind up being the final hand dealt New Hampshire taxpayers. But no one knows yet which cards will be discarded in negotiations.

The only tax certain to be part of the final mix is the property tax. But will it be at $6 per thousand or higher? Will homeowners get a homestead tax break? Those and other questions haven't been decided.

Though the court called for the final hands to be thrown down by April 1, the players have begun hedging and considering emergency measures to push the deadline off until May or even July 1 when most towns collect their first property tax bills.

And there is one wild card. No one knows what the court will do if the five districts that sued the state ask it to intervene if nothing is done by its deadline.