Douglas Independent School District No. 3 v. Jorgenson, Civ. 68-19C.

Citation293 F. Supp. 849
Decision Date26 November 1968
Docket NumberCiv. 68-19C.
PartiesDOUGLAS INDEPENDENT SCHOOL DISTRICT NO. 3 who sues on its own behalf and on behalf of all other school districts similarly situated, and Frederick L. Gray and Antonia B. Kopp who sue on behalf of themselves and all other citizens similarly situated, Plaintiffs, v. Lloyd JORGENSON, State Auditor, State of South Dakota, Pierre, South Dakota; Al Hamre, State Treasurer, State of South Dakota, Pierre, South Dakota; Alvin F. Bies, Assistant Director, Statistical Services, Department of Public Instruction, Pierre, South Dakota; Gale D. Schlueter, Director, Statistical Services, Department of Public Instruction, Pierre, South Dakota; James C. Schooler, Assistant Superintendent, Administration, Department of Public Instruction, Pierre, South Dakota; Dr. Gordon A. Diedtrich, Superintendent of Public Instruction, Department of Public Instruction, State of South Dakota; Defendants.
CourtU.S. District Court — District of South Dakota

Melvin D. Wedmore, Rapid City, S. D., for plaintiffs.

Frank L. Farrar, Atty. Gen., and C. J. Kelly, Asst. Atty. Gen., State of South Dakota, for defendants.

Before VAN OOSTERHOUT, Chief Circuit Judge, NICHOL, Chief District Judge, and BECK, District Judge.

MEMORANDUM DECISION

NICHOL, Chief District Judge.

This constitutes at least the third in a series of challenges to state laws seeking to deduct certain percentages of Federal impact funds from the amount of state aid to impacted school districts. Three-judge Federal district courts in both Virginia and Kansas have sustained such challenges. We do the same in South Dakota.

The Douglas Independent School District No. 3, (hereinafter referred to as Douglas Independent), Frederick L. Gray, and Antonia B. Kopp, on behalf of themselves and all others similarly situated, attack the constitutionality of Chapter 53 (H.B. 877) of the South Dakota Session Laws of 1967 and Chapter 44 (S.B. 104) of the South Dakota Session Laws of 1968, both of which permit the State of South Dakota to deduct certain percentages of the Federal impact funds received by an eligible district from the amount of state aid to such impacted area. The plaintiffs claim that the two South Dakota laws violate the Supremacy Clause, Article VI, Clause 2, of the United States Constitution, and also that because of said two South Dakota laws the plaintiffs are being denied their right to equal protection of the law as guaranteed by the Fourteenth Amendment to the United States Constitution.

The plaintiffs herein wish to permanently enjoin all defendant State officials from using the two aforementioned South Dakota laws in the computation of the South Dakota Foundation Program Formula and request that the sums already so withheld for the 1967-68 school year be disbursed to the plaintiff and all other impact area districts as they would have been had it not been for the two South Dakota laws herein contested.

An "impacted area" is an area whose school population has been burdened because of attendance by a large number of Federal employees' children and which may at the same time be losing school tax revenues because of the United States Government's immunity from land taxes. Both of these factors generally result from increased Federal activity within the area. In 1950 Congress attempted to somewhat alleviate hardships caused to these "impacted areas" by enacting Public Law 874, codified as Title 20 U.S.C. Sec. 236 et seq. which, while not entirely replacing revenues lost due to the Federal government's immunity from land taxes, does provide for the allocation of Federal funds to local school districts in varying amounts, depending upon whether or not children of Federal employees or members of the armed forces reside on Federal property or whether such children reside off of Federal property but have parents employed on Federal property.

The plaintiff, Douglas Independent, is an impacted area district and the South Dakota laws in question have resulted in a loss of revenue to the district. The plaintiff, Frederick L. Gray, a United States citizen, is employed by and resides on the Ellsworth Air Force Base, South Dakota. Because of his employment and residence at Ellsworth Air Force Base, Gray's four children attend the public schools within Douglas Independent. The plaintiff, Antonia B. Kopp, also a United States citizen, is a resident and taxpayer of Douglas Independent, and has three children that attend the public schools in Douglas Independent.

The defendants are the State officials charged with the responsibility and duty of distributing the public moneys appropriated for schools by the South Dakota Legislature. The plaintiffs do not claim that the officials have failed to follow the mandate of the laws in question but rather question the validity of those laws. During the 1966-67 school year, the average daily attendance of federally connected school children in the public schools of Douglas Independent was as follows: 2570 children whose parents lived on and worked on Federal property, and 273 children whose parents lived off but worked on Federal property. Under Public Law 874, codified as Title 20 U.S.C. Sec. 236 et seq., the sum allocated per child for the 1966-67 school year was: $359.47 for children of the live on/work on Federal property parent; and $179.74 for children of the live off/work on Federal property parent. The plaintiffs cite Chapter 78, 1961 Session Laws of South Dakota, now SDCL 1967, Sec. 13-28-13, which provides:

"Children who live on any federal lands, irrespective of the nature or content of the federal ownership, interest, or jurisdiction with respect thereto shall have the same school privileges as any other children who live within the state."

as further illustration of their allegation that the children of Douglas Independent and all other children attending schools on Federal land are entitled to equal treatment in the State of South Dakota.

The plaintiffs do not assert violation of this equal treatment until the passage of Chapter 53 (H.B. 877) of the 1967 South Dakota Session Laws which dictated that the computation of the Foundation Formula Funds under SDC 1960 Supp. 15.2246 must consider fifty percent (50%) of the funds received by a school district under the provisions of Public Law 874, subsection 3(c) (1) as part of the income of the foundation program of the school district. The plaintiffs assert that the 1968 South Dakota legislature further penalized federally impacted school districts and the residents thereof when it passed Senate Bill 104 (Ch. 44, South Dakota Session Laws of 1968), which reads in part as follows: (Sec. 3(6) (b) (2) (e)

"Seventy-five percent (75%) of the funds received by a school district under the provisions of Public Law 874 subsection (3) (c) (1)."

It is conceded by the defendants in their trial brief that the merits of this lawsuit "must either stand or fall on the basis of whether or not the decision of the three-judge Federal District Court of Virginia in Shepheard v. Godwin1 is applicable in this litigation, and if applicable, whether such opinion was correctly decided within the law."

The court in Shepheard was faced with a similar State legislation, the major difference being that moneys saved by the application of the Virginia statutes were returned to the State's general fund while the funds thus saved in South Dakota are disbursed to all school districts within the State. It is the contention of the present defendants that since the State of South Dakota does not retain such funds as did Virginia, that the Shepheard decision is not applicable in the present case. If the court in Shepheard was correct in its finding that 874 funds are a supplement for local revenues rather than a substitute for lost revenues because of increased Federal activity, as the defendants contended in Shepheard and as the present defendants contend, then the difference between what is done with the money withheld from the impacted area districts because of their receipt of 874 funds is immaterial. This Court feels that the finding of the Shepheard court that 874 funds are a supplement for local revenues and not a substitute is correct, and also that the Shepheard case is directly in point with the present case.

At this point it would seem to be appropriate to compare the Virginia Flat Grant statute, under which legislation similar to Ch. 53 of the 1967 South Dakota Session Laws and Ch. 44 of the 1968 Session Laws was found to be unconstitutional and invalid, with the South Dakota Flat Grant statute.

It is the defendants' contention that there is an appreciable difference between the two laws since in Virginia the State retains funds not distributed to the local impacted districts as a result of the Virginia statute retaining 50% of all Federal aid received by the school from the amount of state aid to be distributed, while in South Dakota these funds thus retained are distributed to all other school districts through a pro rata formula. It is the finding of this Court that what the State of South Dakota does with funds unconstitutionally withheld from impacted area districts is immaterial and the fact that the money is withheld is sufficient to substantiate the plaintiffs' claim that their rights have been violated.

The defendants' contention that if the funds withheld under the 1967 and 1968 statutes were not withheld from the impacted area districts that then the State aid would in fact amount to a double payment of sorts to these districts is sufficiently answered by the recent case of Hergenreter v. Hayden,2 which concludes that a similar law in Kansas which was founded upon similar reasoning was in effect an attempt by the State to substitute its judgment of what amount of money was appropriate to compensate an impacted area district and was invalidated upon that conclusion.

"The grievance of the plaintiffs is obvious; any deduction whatsoever of the
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