Durant v. Department of Educ.

• Decision Date: 17 December 1990
• Docket Number: Docket No. 91271
• Citation: 64 Ed. Law Rep. 539,463 N.W.2d 461,186 Mich.App. 83
• Parties: Donald DURANT; Jack Kennedy; Hillary Kutella; Edward Rishavy; Taxpayers of the Fitzgerald School District; and Fitzgerald Public Schools, a Michigan Municipal corporation, Plaintiffs, v. DEPARTMENT OF EDUCATION; Department of Management and Budget; and Treasurer of the State of Michigan, Defendants. (On Second Remand) 186 Mich.App. 83, 463 N.W.2d 461, 64 Ed. Law Rep. 539
• Court: Court of Appeal of Michigan — District of US

Page 461

463 N.W.2d 461

Donald DURANT; Jack Kennedy; Hillary Kutella; Edward Rishavy; Taxpayers of the Fitzgerald School District; and Fitzgerald Public Schools, a Michigan Municipal corporation Plaintiffs, v. DEPARTMENT OF EDUCATION; Department of Management and Budget; and Treasurer of the State of Michigan Defendants. (On Second Remand)

Docket No. 91271.

186 Mich.App. 83, 463 N.W.2d 461, 64 Ed. Law Rep. 539

Court of Appeals of Michigan.

Submitted Sept. 27, 1989.

Decided Nov. 5, 1990.

Released for Publication Dec. 17, 1990.

[186 MICHAPP 86] Clark, Hardy, Lewis, Pollard & Page, P.C. by Dennis R. Pollard, Michael R. Mueller, and Richard E. Kroopnick, Birmingham, for plaintiffs.

Frank J. Kelley, Atty. Gen., Gay Secor Hardy, Sol. Gen., and Gerald F. Young, Paul J. Zimmer and Jane D. Woodfin, Asst. Attys. Gen., Lansing, for defendants.

Hoekenga, Amberg, McNenly, Zuschlag, Firestone & Lee, P.C. by Daniel J. Hoekenga and Kathlyn M. Thomas, Southfield, amicus curiae for Michigan Educ. Ass'n[186 MICHAPP 87] and Warren Fitzgerald Educ. Ass'n.

Before DANHOF, C.J., and GILLIS and MacKENZIE, JJ.

DANHOF, Chief Judge.

Plaintiffs brought the instant action for mandamus in this Court, seeking to compel defendants to fund the Fitzgerald Public Schools in the same portion as those schools were funded in the fiscal year 1978-79, pursuant to Const. 1963, art. 9, Secs. 25-34, more commonly referred to as the Headlee Amendment. We refused to issue the requested writ on the ground that plaintiffs had not exhausted their administrative remedies because they had failed to first obtain a decision before the local government claims review board pursuant to M.C.L. Sec. 21.240; M.S.A. Sec. 5.3194(610). Durant v. Dep't of Ed., 110 Mich.App. 351, 313 N.W.2d 571 (1981). Our Supreme Court, in lieu of granting leave to appeal, reversed, finding that plaintiffs were not required to exhaust their administrative remedies before our resolution of the legal issues raised, and remanded, ordering us to consider the merits of plaintiffs' claim. Durant v. Dep't of Ed., 413 Mich. 862, 317 N.W.2d 854 (1982). On remand, we were charged with the interpretation of the following language set forth in that portion of the Headlee Amendment found at Const.1963, art. 9, Sec. 29:

The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law.

Our substantive conclusions of law were as follows:

[186 MICHAPP 88] (1) the broad concept of "education" is too indefinite to be considered an existing activity or service required of school districts by state law within the meaning of Sec. 29 of the Headlee Amendment; (2) only those specific and identifiable programs which the state requires school districts to provide by state statute or state agency regulation fall within the state financing requirements of Sec. 29; (3) the "necessary costs" of a required service or activity are those costs which are essential to the completion of the intended purpose of the state-mandated activity, and they must be determined on a statewide basis, computed according to the actual cost to the state, were it to provide the required activity or service; (4) the state is not required to maintain the level of unrestricted state school aid which was present at the time Sec. 29 became effective; and (5) the state is required to maintain the level of funding of categorical aid for the necessary costs of programs required of school districts by state statute or state agency regulation that existed at the time Sec. 29 became effective. [Durant v. Dep't of Ed. (On Remand), 129 Mich.App. 517, 533-534, 342 N.W.2d 591 (1983).]

After arriving at these conclusions, we again dismissed plaintiffs' complaint for mandamus on the ground that the remedy generally does not lie in cases involving unresolved factual disputes. Id., p. 534, 342 N.W.2d 591. This dismissal was without prejudice to plaintiffs' right to go before the local government claims review board for the development of an evidentiary record and a resolution of the factual disputes, followed by a judicial review, if the parties were still aggrieved. Id. Thereafter, plaintiffs sought and obtained review by our Supreme Court. The Court affirmed our substantive findings but concluded that we had erred in some of our reasoning and in our procedural disposition of the instant case. Durant v. State Bd. of Ed., 424 Mich. 364, 371, 381 N.W.2d 662 (1985). The Court remanded[186 MICHAPP 89] the case to this Court and instructed us to appoint a factfinder pursuant to M.C.L. Sec. 600.308a; M.S.A. Sec. 27A.308(1) and MCR 7.206(D)(3) to resolve the factual disputes and report findings to this Court. Durant, 424 Mich. p. 394, 381 N.W.2d 662. By order issued April 10, 1986, we referred the instant case to Chief Judge George R. Deneweth of the 16th Judicial Circuit for the taking of proofs and the reporting of factual findings. The proofs have been taken; the factual findings have been reported. We now examine those findings with a view towards resolving plaintiffs' claims.

I

As a prelude to our discussion of plaintiffs' right to funding pursuant to Sec. 29, we find it necessary to examine the propriety of Judge Deneweth's denial of defendants' motions for partial summary disposition as to counts III through V of plaintiffs' amended complaint. How we resolve defendants' claim that Judge Deneweth erroneously denied their motions will help establish the parameters of plaintiffs' possible right to funding.

The School Aid Act of 1979, M.C.L. Sec. 388.1601 et seq.; M.S.A. Sec. 15.1919(901) et seq., provides for two basic forms of state aid to local school districts, unrestricted aid and categorical aid.

Unrestricted aid, provided pursuant to MCL 388.1743; MSA 15.1919(1043), is a general grant of money based on pupil membership in the school district, wealth of the district as measured by the state equalized valuation of property per pupil, and on local taxing efforts. This type of aid is not correlated with any specific service or activity required by the state and, therefore, may be used by the school district for such purposes as teacher salaries, transportation, heating and textbooks. On [186 MICHAPP 90] the other hand, categorical aid is designed to support a specific service or activity provided by a local school district, such as special education, MCL 388.1651-388.1656; MSA 15.1919(951)-15.1919(956), and driver's education, MCL 257.811; MSA 9.2511. [Durant, 129 Mich.App. pp. 531-532, 342 N.W.2d 591.]

Plaintiffs' original complaint filed with this Court contained three counts. In count I, plaintiffs alleged that Sec. 29 required the state to maintain the level of unrestricted aid that it had been providing plaintiff district at the time the Headlee Amendment became effective. In counts II and III, plaintiffs alleged that Sec. 29 imposed the same constitutional obligation on the state as pertains to the level of categorical aid disbursed to the district for its special education and driver education programs, respectively. All three counts referenced only the fiscal year 1979-80.

Subsequent to the entry of our April, 1986, order referring the instant case to the factfinder, plaintiffs filed a motion to amend their complaint. Judge Deneweth granted plaintiffs' motion over defendants' objection.

Counts I and II of plaintiffs' amended complaint repeated the claims asserted in counts II and III of plaintiffs' original complaint. In counts III and IV of plaintiffs' amended complaint, plaintiffs sought to remedy alleged underfunding in categorical aid received by plaintiff district for the district's bilingual education and lunch and supplemental milk programs. In count V, plaintiffs modified their claim for unrestricted aid, seeking unrestricted aid in an amount totalling 11.58 percent of the operating expenses for each of the activities and services set forth in twelve paragraphs which plaintiffs alleged they were required by state law to provide. All five counts referenced funding allegedly wrongfully[186 MICHAPP 91] withheld "for each school year from 1979-80 through the date such judgment is entered...."

Defendants filed a motion for partial summary disposition pursuant to MCR 2.116(C)(7) and (8) in response to the filing of plaintiffs' amended complaint. Defendants sought the dismissal of count V of plaintiffs' amended complaint on the ground that plaintiffs had failed to state a cause of action because our Supreme Court, in Durant, 424 Mich. p. 378, 381 N.W.2d 662, had held that unrestricted aid did not constitute funding for an existing activity or service required by state law within the meaning of Sec. 29. Defendants also sought dismissal of counts III through V of plaintiffs' amended complaint on the ground that the claims asserted therein were barred by the one-year period of limitation set forth in M.C.L. Sec. 600.308a(3); M.S.A. Sec. 27A.308(1)(3). Judge Deneweth rejected defendants' arguments and denied their motion by written opinion and order dated November 19, 1986. The judge reasoned in pertinent part:

This Court is not convinced that the claims set forth in plaintiffs' Count V are so clearly unenforceable as a matter of law that no factual development can possibly justify a right to recovery. It is true that the citation by defendants of the Michigan Supreme Court's advance declaration of their holding supports defendants' argument. The Supreme Court stated at 424 Mich., page 378 :

"[W]e hold that ... unrestricted state aid is not funding for an 'existing activity or service required of units of Local Government by state law.' "

Although this preamble appears to be on point and an easy answer, the following discussion and holding by the Michigan Supreme Court does not support the conclusion asserted by defendants. Indeed, at 424 Mich., page 392 , the Court declined to resolve a very similar...