Helena Elementary School Dist. No. 1 v. State
| Decision Date | 01 February 1989 |
| Docket Number | No. 88-381,88-381 |
| Citation | 236 Mont. 44,769 P.2d 684 |
| Parties | , 52 Ed. Law Rep. 342 HELENA ELEMENTARY SCHOOL DISTRICT NO. 1 and High School District No 1 of Lewis & Clark County; Billings Elementary School District No 2 and High School District No 2 of Yellowstone County; et al., Plaintiffs and Respondents, and Montana Education Association et al., Intervenors/Plaintiffs and Respondents, v. The STATE of Montana; and The Montana Board of Public Education; and The Montana Superintendent of Public Instruction, Defendants and Appellants, and C.J. Holje, Bernt Ward and Robert Frederich on behalf of the residents and taxpayers of Sheridan County, Montana, and all others similarly situated, Intervenors/Defendants and Appellants. Hays-Lodge Pole Elementary School District No 50 and High School District No 50, and Blaine County; et al. and the Association of Indian Impact Schools of Montana, Intervenors/Defendants and Appellants. |
| Court | Montana Supreme Court |
Terry G. Spear, Crowley Law Firm, Billings, for Hays-Lodge Pole School Dist # 50, et al.
Beda Lovitt, Helena, for Montana Superintendent of Public Instruction.
Benjamin Hilley, Hilley & Loring, Bigfork, for Montana Educ. Ass'n.
Marc Racicot, Atty. Gen., Helena, Clay R. Smith, Asst. Atty. Gen., Helena, for State.
W. William Leaphart, Helena, Loren O'Toole, Plentywood, Donald A. Garrity, Helena, for defendants and appellants.
James H. Goetz, Goetz, Madden & Dunn, Bozeman, for plaintiffs and respondents.
Charles E. Erdmann, Bruce W. Moerer, Dennis Lopach, Helena, for amicus curiae.
In this action for declaratory judgment, plaintiffs challenge the constitutionality of the 1985-86 method of funding public elementary and secondary schools in the State of Montana. The District Court for the First Judicial District, Lewis and Clark County, ruled in its primary holding that the system of funding violated the 1972 Montana Constitution. We affirm the holding of unconstitutionality, although on a narrower ground than that used by the District Court.
The issues upon which we decide this case and our conclusions are:
1. Does Montana's system of funding the public schools violate the education article, Art. X, of the Montana Constitution? We conclude that the system of funding does violate Art. X. We do not find it necessary to consider the equal protection analysis under Art. II, Sec. 4, of the Montana Constitution.
2. Should this Court clarify the District Court's findings regarding the accreditation standards promulgated by the Montana Board of Public Education? We conclude that some clarification is required.
3. Did the District Court err in its findings and conclusions relating to consideration in the equalization process of federal "874" funding? We affirm the holding of the District Court that Montana presently may not factor "874" revenue into the equalization formula because our system does not meet the federal definition of an equalized program. In its review of Montana's system of funding for public schools, the Legislature may desire to review the nature and extent of "874" funding, even though it may not in any manner factor that into an equalization formula without meeting federal requirements.
4. Did the District Court err in denying plaintiffs' attorney fees? We affirm the denial of attorney fees.
In the 1985-86 school year, there were 545 school districts in Montana with a total student enrollment of 153,869. These included 382 elementary and 163 secondary districts. Nearly 45% of Montana schools have enrollments of less than 100 students.
The six-week-long trial included extensive evidence and testimony about the complex combination of federal, state, and local sources through which Montana's public elementary and secondary schools are funded. In addition to the General Fund, each school district uses up to nine other types of budgeted funds. These include transportation funds, teacher retirement funds, debt service funds, and building reserve funds. Some of these depend upon voted levies and all are primarily funded on a district or county level. School districts also have nonbudgeted funds including food service, traffic education, rental funds, sick leave reserves, block grants, building funds, endowment funds, and interlocal agreement funds. Expenditures from these nonbudgeted funds may only be made from cash on hand.
The General Fund, which provides 70% of school funding in Montana, includes several components. In 1949, the Montana Legislature enacted the Montana School Foundation Program. Under that program, every two years the legislature sets "Maximum General Fund Budget Without a Vote" (MGFBWV) schedules for elementary and secondary school districts in the state. Eighty per cent of the MGFBWV is funded by county and state equalization revenues. These equalization revenues are derived from levies of 45 mills on all taxable property in each county and state aid from such sources as earmarked revenues, surplus county Foundation Program revenue, and direct legislative appropriations.
The remaining 20% of the funding of MGFBWV is through permissive mill levies of up to 6 mills for elementary districts and 4 mills for high school districts. These levies are made without a vote. If the school district is unable to obtain the MGFBWV level through permissive levies and other specified nonlevy revenue, state permissive equalization revenues are used to make up the difference.
The evidence shows that, in 1985-86, most school districts adopted budgets in excess of the MGFBWV. They utilized a third stage of funding under which monies were obtained primarily from property tax levies voted by each school district. Other revenues which were used in this third level of funding included vehicle taxes, interest income, tuition income, and federal "874" funds. By 1985-86, 35% of all General Fund budgets were obtained from this level of funding. In contrast, in 1950, the Foundation Program furnished 81.2% of all general fund revenues in Montana, leaving less than 20% of revenues to be obtained by local levies and other sources.
Plaintiffs presented voluminous evidence to support their theory that the system of funding public education in Montana is unconstitutional. The evidence established great differences in the wealth of the various school districts and, more significantly, established disparities of spending per pupil as high as 8 to 1 in comparisons between similarly-sized school districts. We affirm the following unchallenged findings of the District Court:
214. Several Plaintiff witnesses had experience either as teachers or administrators in other Montana districts, including some relatively wealthier districts. Mr. Walt Piipo, for example, currently Superintendent at Drummond, was previously Superintendent for Geraldine schools. The two school districts are very close in size, at both the elementary and high school levels. Geraldine's taxable valuation, however, is more than twice that of Drummond's. The tax efforts for the elementary schools are comparable, while Geraldine levies more General Fund mills than does Drummond at the high school level. Consequently, Geraldine spends approximately $1,000 more per ANB than Drummond at the elementary level, and over $2,000 more per ANB at the high school level. Approximately 40% of Geraldine's General Fund revenues derive from the voted levy, while at Drummond, the voted levy supplies approximately 15% of General Fund revenue. This illustrates the fact that wealthier districts are able to rely to a greater extent on the voted levy to generate revenues for the General Fund.
215. Mr. Piipo testified unequivocally that Geraldine schools have advantages, and offer opportunities, which Drummond schools cannot afford. Geraldine has much greater budget flexibility to address educational needs and goals than does Drummond. Mr. Piipo testified that there is no question that the educational opportunities afforded students in Drummond could be improved if the district had the same amount of money as Geraldine.
216. The fact that spending disparities result in unequal educational opportunities was established more systematically by Plaintiffs' experts Dr. Ron Mattson, Mary Pace, and Dr. John Picton. Each of these individuals has many years' experience in Montana public education. They comprised a "Study Team" which was commissioned by the Plaintiffs to do a comparative study of several pairs of school districts in the State. They compared three pairs of elementary districts, and three pairs of secondary districts. Schools in each pair were of similar size, with one spending considerably more per pupil than the other. In addition to analyzing the budget data for each of these districts, members of the Study Team visited all 12 districts to observe the schools first hand, and to conduct interviews with administrators and teachers.
217. The Study Team identified clear differences between the schools in each of the pairs. They found that the better funded schools tended to offer more enriched and expanded curricula than those offered in the schools with less money. The richer schools were also better equipped in the areas of textbooks, instructional equipment, audio-visual instructional materials, and consumable supplies. With respect to buildings and facilities, the districts with more money were better able to maintain their facilities than were the poorer districts. The Study Team concluded:
* Availability of funds clearly affect the extent and quality of the educational opportunities.
* There is a positive correlation between the level of school funding and the level of educational opportunity.
* The better funded districts have a greater flexibility in the reallocation of resources to programs where there is a need.
* The differences in spending between the better funded and underfunded districts are clearly invested in educationally related programs.
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