The Superior Court held that the school property tax was a municipal tax not a state tax, and therefore did not have to be uniformly applied throughout the state. The Superior Court ruled that it is the identity of the entity that controls the mechanics of assessment and collection, and the disposition of the tax revenues after their collection that must be given primary consideration when identifying a tax.

The school districts disagreed, arguing that it is the purpose of the tax, that characterizes it as a state or local tax. In not giving the proper weight to the purpose of the school tax in its analysis of Count VI, the Superior Court ignored New Hampshire Supreme Court case law which states the purpose of a tax is not only relevant but determinative of its character as a state or local tax.

Pursuant to the New Hampshire Supreme Court's 12/93 Claremont I decision, the state has two obligations to all of the state's educable children: The provision of an adequate education and a guarantee of adequate funding.

The state legislature has determined that the state will meet its duty through the current property tax system and has prescribed in detail the operation of that system. The school districts contended that this delegation by the state does not diminish the state's duty, nor does it alter the purpose of the school tax.

The Superior Court stated that the process of assessment and collection of property taxes begins with the budgeting function for which local communities are responsible. It held that, "The state exercises no authority over the amount a town budgets. Rather, the school board of each school district prepares its own annual budget."

The Superior Court dismissed the petitioner school districts' argument that they have little control over their budgets. As stated earlier, evidence was present that in some districts over 90% of their budgets were made up of non-discretionary spending and went the fulfillment of state mandates, such as the state's Minimum Standards and Special Education.

The Superior Court stated that the Minimum Standards allow school districts flexibility in seeking alternative measures to comply with a standard. However, evidence was introduced that the availability to the school districts of alternative compliance has not provided them with the ability to increase their discretionary spending beyond the 5 or 10 percent level.

The Superior Court noted that , "the first step in the district's school budgeting process is the ascertainment of expense estimates from the principals of all schools in the district." The reality is that these estimates will be driven by the school principals' duty to present budgets that meet the Minimum Standards.

The school districts presented evidence on the control of the process of taxation. Stan Arnold, Commissioner of the Department of Revenue Administration, (DRA), testified that the legislature has defined the method of property taxation in New Hampshire and that the D.R.A. is responsible for directly supervising every aspect of property taxation, from setting the tax rate, to assessment of property and collection of taxes.