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Thursday, November 29, 2012

Ark. Supreme Court strikes blow to equitable school funding

Posted By on Thu, Nov 29, 2012 at 2:07 PM

Arkansas CHIEF JUSTICE JIM HANNAH: Dissented.
  • CHIEF JUSTICE JIM HANNAH: Dissented.
Whoa. In a 4-3 split decision, the Arkansas Supreme Court today ruled that school districts can keep property tax revenue even when it exceeds funding levels required by law. The decision potentially ends equity funding of state school districts, something that the courts and state legislature fought for (and over) for 15 years with the Lake View case.

The immediate effect of the ruling is that two school districts — Eureka Springs and Fountain Lake — don't have to turn monies collected through property taxes above the state minimum over to the state to be redistributed. The broader consequence is likely that no districts will be required to turn over their excess funds to the state, which means that richer districts will have more money per student than poorer districts, unless the legislature steps in next year to make up the gap. UPDATE: I clarified this below.

You can get a feel for what a big deal this is by Chief Justice Jim Hannah's dissent.

“The majority nullifies ten years of difficult and painstaking work diligently undertaken by the General Assembly, the Department of Education, the Attorney General, and the Governor, to provide this state with a constitutional school-funding system. The state’s carefully crafted constitutional system of state-funded public education is obliterated by the majority’s decision.”

UPDATE: The Beebe administration and the attorney general plan to petition the Arkansas Supreme Court to rehear the case, which is the only judicial recourse they have, according to Matt DeCample, spokesman for Gov. Beebe.

The decision is all about precedent, lawmakers and policy experts who I've talked to this afternoon said. At issue is the intersection of Arkansas Amendment 74, passed by voters in 1996, which requires school districts to levy a uniform rate of tax of 25 mills to be used towards the maintenance and operation of schools, and the General Assembly's statutory creation of the idea of foundation funding that's required to fund a "general, suitable, and efficient system of free public schools." Foundation funding is a reaction to the second Lake View court case and came into being in 2009.

Every year, the legislature determines a new foundation-funding amount per student. The latest figure is $6,267 (it was $6,023 when this lawsuit was filed in the 2010-2011 school year). If a school district's 25 mills don't add up to $6,023 — if say, in a poorer district with mostly low property values, 25 mills only adds up to $3,000 per student — the state will make up the difference. What today's Supreme Court decision undoes is the converse of the previous example: When a district's 25 mills add up to more than foundation-funding — say 25 mills from a district with high property values means $9,000 per pupil — the state has been redistributing the money to other districts. It and General Revenue have made up foundation-funding shortfalls in districts with lower property values.

I haven't gotten a clear estimate of what the immediate financial impact of decision is, but it certainly won't mean the governor needs to resubmit his education budget, according to DeCample. What the dissenting justices, Beebe and others are worried about is that the decision has the potential to undue 15 years of grueling work on equity during Lake View I and Lakeview II. If schools with higher property tax can keep their 25 mills revenue above foundation-funding levels, that would create inequity, they argue.

A complicating factor, at least in my mind, is that Amendment 74 sets 25 mills as a baseline. Districts can levy more millage. Some wealthy districts tax as many as 37 mills. The disparity between those districts and poorer ones grows smaller once poorer districts receive National School Lunch Act funds, but it's still an issue. In fact, many have predicted that a lawsuit over inequity could be on the horizon even before this ruling.

The other issue that particularly troubles the Beebe administration, according to DeCample, is this passage from the majority opinion:

"Should the General Assembly wish to provide a mechanism or procedure by which excess funds may be distributed to other districts, it is certainly within its purview to do so—no time machine required."

The governor's worried about that the prospect of statutorily remedying a constitutional amendment puts in place a precedent that some future administration or legislature might seize upon to undo Amendment 74's key role in equity funding.

Shew. Got all that?

UPDATE II: I forget to include links to the separate dissents by Justice Robert Brown and Special Justice George Ellis.

Here's a link to Andrew DeMillo's reporting with the AP, which quotes Education Commissioner Tom Kimbrell saying:

"It's the foundation on which we've based so many decisions over the last 10 to 12 years on how we fund education, what we expect our schools to do, what we expect of our General Assembly. There have been so many things done based upon this premise. It surprises me and I think it just changes the game."

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