Adair v. Michigan

• Decision Date: 22 December 2014
• Docket Number: Docket No. 147794.,Calendar No. 1.
• Parties: ADAIR v. MICHIGAN.
• Court: Michigan Supreme Court

497 Mich. 89

860 N.W.2d 93

ADAIR

v.MICHIGAN.

Docket No. 147794.

Calendar No. 1.

Supreme Court of Michigan.

Argued Oct. 9, 2014.

Decided Dec. 22, 2014.

Secrest Wardle, Troy (by Dennis R. Pollard, William P. Hampton, and Mark S. Roberts), for plaintiffs.

Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, and Timothy J. Haynes, Jonathan S. Ludwig, and Travis M. Comstock, Assistant Attorneys General, for defendants.

Opinion of the Court

YOUNG, C.J.

I. INTRODUCTION

This Court is yet again faced with a challenge to the Legislature's education-related funding appropriation for state-imposed mandates under the Headlee Amendment.¹ Plaintiffs are taxpayers and school districts seeking a declaratory judgment that the amount of funding appropriated by the Legislature to fund new and increased recordkeeping requirements is materially deficient. Consistent with our construction of the Headlee Amendment and our court rules, we have required that plaintiffs bringing an action charging inadequate funding of a legislative mandate under the Headlee Amendment must allege and prove not only that the funding was insufficient, but the type and extent of the harm. Today we make clear that this burden includes the requirement that the plaintiff show the specific amount of underfunding where the Legislature has made at least some appropriation of funds.

The special master applied this burden of proof and dismissed plaintiffs' claims when plaintiffs stated at trial that they would not provide proofs establishing the specific amount of underfunding. The Court of Appeals reversed, requiring plaintiffs only to provide evidence that the methodology used by the Legislature to determine the amount of the appropriation was materially flawed, and remanded the case to the special master for further proceedings. The Court of Appeals' standard is inconsistent with this Court's longstanding requirement that a plaintiff alleging inadequate funding must show the type and extent of the funding shortfall.

Plaintiffs were properly instructed regarding the burden of proof by the special master before trial and failed to offer proofs concerning the specific amount of the alleged shortfall. Thus, we reverse the judgment of the Court of Appeals and enter a judgment in favor of defendants.

II. FACTS AND PROCEDURAL HISTORY

A. HISTORY OF ADAIR LITIGATION AND LEGISLATIVE ACTION

The legislatively imposed mandates at issue require that school districts collect and report certain information regarding school district performance to the Center for Educational Performance and Information (CEPI).² The CEPI was created through Executive Order 2000–9 and 2000PA 297 and is entrusted to “[c]oordinate the collection of all data required by state and federal law from districts, intermediate districts, and postsecondary institutions”³ and “provide information to school leaders, teachers, researchers, and the public,” including “[r]esearch-ready data sets for researchers to perform research that advances this state's educational performance.”⁴

Initially, the state did not make an appropriation to fund the CEPI mandate. As a result, in 2000 plaintiffs commenced a Headlee Amendment action in the Court of Appeals. In the first Adair case decided by this Court, we held that the lack of funding for CEPI reporting requirements presented a “colorable claim under Headlee” because the mandates “require[d] the districts to actively participate in maintaining data that the state requires for its own purposes,” a requirement that had not existed before that time.⁵

After a few additional trips between this Court and the Court of Appeals, the case culminated in Adair v.

Michigan

(Adair I ).⁶ In Adair I, this Court affirmed the Court of Appeals' declaratory judgment that the Legislature had violated the prohibition of unfunded mandates (POUM) provision of the Headlee Amendment. We held that, in a case in which the state provides no funding at all to fund a mandate, a POUM Headlee claim does not require proof by a plaintiff of specific increased costs necessitated by the state mandate. In that situation, “a plaintiff need only establish that the state imposed on it a new or increased level of activity without providing any funding to pay for it.”⁷

In response to Adair I, the Legislature enacted MCL 388.1752a,⁸ which appropriated about $25 million for the 2010–2011 school year to reimburse local school districts for the cost of the CEPI recordkeeping mandate.⁹ The Legislature also added an additional CEPI mandate, the teacher-student data link (TSDL), which requires reporting of data to allow districts “to assess individual teacher impact on student performance.”¹⁰ So, for the 2010– 2011 school year, the Legislature made a separate appropriation in the amount of $8.4 million for the newly created TSDL mandate.¹¹ For the following school year, 2011–2012, the Legislature appropriated approximately $34 million to cover all of the CEPI record keeping requirements, which included money for the TSDL requirements (the “ § 152a appropriation”).¹² Additionally, for both of these school years, the Legislature made a “discretionary nonmandated payment” (the “ § 22b appropriation”).¹³ However, these funds were conditioned on furnishing the data as required by the CEPI mandates. The condition currently reads as follows:

In order to receive an allocation under subsection (1), each district shall do all of the following:

* * *

(c) Furnish data and other information required by state and federal law to the center and the department in the form and manner specified by the center or the department, as applicable.^{[ 14 ]}

B. THE CURRENT LITIGATION

Plaintiffs, more than 450 Michigan school districts together with one individual taxpayer from each district filed an original action in the Court of Appeals¹⁵ challenging the amount of the § 152a appropriation for school year 2010–2011 as inadequate to compensate the school districts for the CEPI requirements. Plaintiffs amended their pleadings to include a similar challenge to the following school year's appropriation.¹⁶

The Court of Appeals assigned the case to a special master. After discovery, defendants moved for summary disposition under MCR 2.116(C)(10),¹⁷ claiming that plaintiffs could not produce any evidence of the amount of necessary increased costs and that in any case, the § 22b appropriation fully funded the mandates. The master denied defendants' motion, finding that plaintiffs had presented “more than sufficient evidence to show that the state has underfunded the CEPI mandates ... [and] the [TSDL] mandate.” He also ruled that

[p]laintiffs have a ‘higher burden’ which requires them to produce evidence of specific dollar-amount increases in the costs incurred in order to comply with the CEPI requirements. [Adair I, 486 Mich. at 480] n. 29 .... The Plaintiffs' poignant argument that the general direction of Adair I mitigates requiring them to establish the insufficiency of the amount of appropriation overlooks the factual distinctionbetween Adair I (no appropriation made) and this case (appropriations made).

At that point, the master believed that “[o]nce the state establishes an appropriation, the Plaintiffs are equipped to attack whether the amount is sufficient. Indeed, the Plaintiffs' expert has done just that.”

The case proceeded to trial, but during opening statements, plaintiffs' counsel stated that they would not attempt to prove a specific dollar amount of underfunding, but rather intended to show through expert testimony that the Legislature's methodology to determine the requisite amount of funding was materially flawed and thus that the appropriation could not be constitutionally adequate under Headlee. At the close of plaintiffs' opening statement, on the basis of plaintiffs' refusal to present proofs on the specific amount of alleged funding shortfall, defendants filed a motion for an involuntary dismissal,¹⁸ claiming that plaintiffs were unable or unwilling to meet their burden. Plaintiffs responded that, because this was merely a declaratory action, they need not quantify the extent of the underfunding, but only show that an underfunding occurred. The special master granted defendants' motion. In a written opinion, the master reiterated that plaintiffs had the burden to establish the specific amount of underfunding. Because plaintiffs declined to offer those proofs, their case was dismissed.

Both parties filed objections, and the Court of Appeals reversed the special master's ruling on the appropriate burden of proof, but affirmed in all other respects.¹⁹ The panel concluded that the special master had relied too heavily on the fact that Adair I involved no legislative funding while this case involves a claim for underfunding. In the Court of Appeals' view, Adair I stood for the proposition that neither Const 1963, art 9, § 29 nor MCL 21.233 required plaintiffs to prove how much their districts' costs had increased as a result of a new or increased mandate.

Instead, stated the panel, plaintiffs had the “burden to present sufficient evidence to allow the trier of fact to conclude that the method employed by the Legislature to determine the amount of the appropriation was so flawed that it failed to reflect the actual cost to the state if the state were to provide the activity or service mandated as a state requirement....”²⁰ The Court of Appeals concluded that plaintiffs stood ready to meet this burden through expert testimony, which a trier of fact could find “undermined the validity of the method used by the Legislature to determine the amount of the appropriations at issue....”²¹ The panel remanded to the special master to reopen the proofs.

Both parties sought leave to appeal in this Court; we granted defendants' application for leave to appeal.²²

III. STANDARD OF REVIEW

Questions of constitutional and statutory interpretation are reviewed de novo.²³ An appellate court reviews de novo a trial court's ruling on a motion for an...