Split Arkansas Supreme Court alters school funding 

But the jury is still out on whether it undermines the landmark Lake View case.

It took nearly 25 years of legal battles and legislative wrangling for Arkansas to settle on a formula for level public school funding. A split decision by the Arkansas Supreme Court last week, however, may undo all that.

The court ruled, 4-3, in a case involving Fountain Lake and Eureka Springs school districts, that those districts can keep property tax dollars that exceed the state's per-student funding minimum.

Chief Justice Jim Hannah wrote in his dissent, "The state's carefully crafted constitutional system of state-funded public education is obliterated by the majority's decision."

Gov. Mike Beebe, who as a legislator and as attorney general was involved in school funding legislation and litigation, told reporters that decorum prevented him from saying what he thought about the decision. He did say he agreed with the dissenters.

What has Hannah and Beebe so riled? Not the direct and immediate consequence of the ruling over an arcane tax question affecting only Fountain Lake and Eureka Springs. The amount of money, while significant for the two districts, didn't account for much in the state's school funding plan.

Instead, it's the precedent the majority set for all school districts that has officials concerned.

At issue are notions of adequacy and equity, two words that came to define the epic Lake View School District court battle waged for more than 15 years.

The difference between the two concepts is perspective, according to David Matthews, an attorney in Rogers who represented the Rogers School District during a long stretch of the Lake View case.

"Equity says we've got one great big pie. Are you dividing the pie evenly? Adequacy asks, is the pie big enough?"

Lake View, a Phillips County district that no longer exists, initially sparked the court battle by alleging that the state's system of public education violated the Arkansas Constitution's equal protection clause and promise of a "general, suitable, and efficient system of free public schools." The question of equity — whether Lake View and the other districts were receiving an equal slice of Arkansas's educational pie — initially dominated the proceedings. When the case entered his court, Pulaski Circuit Judge Collins Kilgore changed the course of the legal argument by determining that adequacy, rather than equity, should be the key criterion.

In response, the state General Assembly came up with a definition for adequacy, partly by creating a "foundation funding" amount guaranteed to all school districts. Every year, the legislature determines a new foundation funding amount per student. The latest figure is $6,267.

The recent Supreme Court ruling dealt with the intersection of adequacy funding and Arkansas Amendment 74. Passed by voters in 1996, Amendment 74 requires school districts to levy a uniform rate of property tax of 25 mills to be used towards the maintenance and operation of schools. The revenue districts generate from the 25 mills goes to the state before returning to the district as foundation funding.

When a school district's 25 mills of property tax revenue don't produce the foundation funding amount, a common occurrence since many school districts are located in areas with low property values, the state makes up the difference, primarily through its Educational Adequacy Fund. The court ruling undoes the converse of previous example: When a district's 25 mills add up to more than foundation-funding, the state had been redistributing the excess revenue to other districts.

Now, the court says that the 25 mills of property tax cannot be considered state revenue and districts can rightfully keep dollars in excess of what is necessary to meet the per-pupil foundation funding. All district shortfalls on foundation funding going forward will be made up solely by the state's Educational Adequacy Fund.

Chief Justice Hannah — along with Justice Robert Brown and Special Justice George Ellis, who each wrote their own dissents — argues that the majority decision will lead to inequity: Some districts' foundation funding will be more than others. Brown, in his dissent, acknowledges that the Lake View cases dealt with adequacy, but says the majority ignores the constitutional mandate that funding be equal, as affirmed in the 1983 school-funding case Dupree v. Alma School District No. 30.

It's important to remember that, in defining adequacy, the state legislature set a funding floor, not a ceiling. The state required that only the minimum foundation funding be equal. Amendment 74 allows districts to levy as much millage above the required 25 mills as voters will approve. Many school districts raise more money to spend on students by levying more than 25 mills. The Little Rock School District, for instance, taxes property at a 46.4 mill rate. Districts may keep the revenues raised by the additional mills.

The disparity between districts like the LRSD and those that only levy the state-required 25 mills shrinks thanks to National School Lunch Act Funds that poorer districts receive. But education advocates say the system is still inequitable; in fact, many predicted even before last week's ruling that a lawsuit over inequity could be on the horizon.

In his majority opinion, Justice Paul Danielson (joined in the majority by Justices Karen Baker, Courtney Hudson Goodson and Donald Corbin) suggested that, if the state wanted to return to redistributing the excess revenues produced by the 25 mandated mills, it could provide a legislative solution. But Gov. Beebe and other officials fear that by proposing a statutory update to constitutional Amendment 74, the court is inviting litigation, or the dismantling of the current school funding system by future legislatures.

On Friday, Arkansas Education Association president Donna Morey said her group would ask the legislature "to modify the statutes to clearly define the funding structures for schools." Asked in a news conference if such a remedy might invite litigation, Bill Kopsky, executive director of the Arkansas Public Policy Panel, which partners with the AEA to advocate on education issues, said, "There are different ways to achieve a fix. I don't think we know enough yet, but we're going to hold [legislators'] feet to the fire."

In a Republican-controlled legislature, it would likely be difficult to convince a sufficient number of Republicans, who have been generally sympathetic to ideas of local control of school districts, to institute a fix. House Majority Leader Rep. Bruce Westerman (R-Hot Springs), who previously served on the school board of the Fountain Lake School District, a defendant in the Supreme Court case, has said he agreed with the court ruling.

Meanwhile, the governor has indicated that the state plans to ask the Supreme Court to rehear the case.

From his perspective, attorney David Matthews said he doesn't see the decision as cause for alarm.

"Everyone that's been involved in Arkansas educational progress over the last 10 years feels proud of what's happened, but also lives in abject fear that the least little decision could overturn that work. Any change causes folks to become very concerned. I don't think this decision does that."

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