Durant v. State Bd. of Educ.

• Decision Date: 11 February 1986
• Docket Number: Docket Nos. 72895,73245
• Parties: Donald DURANT, Leander Picard, Jack Kennedy, Hilary Kutella, Douglas Holbrook, Verna Rasmussen, Edward Rishavy, and Fitzgerald Public Schools, a Michigan municipal corporation, Plaintiffs-Appellants, Cross-Appellees, v. STATE BOARD OF EDUCATION; Department of Management and Budget; and State Treasurer, Defendants-Appellees, Cross-Appellants. WATERFORD SCHOOL DISTRICT, a fourth class school district of the State of Michigan and Stanley W. Kurzman, Doris C. Warner, A.J. Stepanski, L. Donna R. Thomas, Patsy L. Johnson, Eldon C. Rosegart, Charlotte J. Clark, each in his or her official capacity as a member of the Waterford School Board, and also in his or her individual capacity as taxpayer within the geographical boundaries which encompass the Waterford School District, Plaintiffs-Appellants, v. STATE BOARD OF EDUCATION and State Treasurer, Jointly and Severally, Defendants-Appellees. 424 Mich. 364, 381 N.W.2d 662, 30 Ed. Law Rep. 870
• Court: Michigan Supreme Court

Page 662

381 N.W.2d 662

Donald DURANT, Leander Picard, Jack Kennedy, Hilary Kutella, Douglas Holbrook, Verna Rasmussen, Edward Rishavy, and Fitzgerald Public Schools, a Michigan municipal corporation, Plaintiffs-Appellants, Cross-Appellees, v. STATE BOARD OF EDUCATION; Department of Management and Budget; and State Treasurer,

Defendants-Appellees, Cross-Appellants.

WATERFORD SCHOOL DISTRICT, a fourth class school district of

the State of Michigan and Stanley W. Kurzman, Doris C.

Warner, A.J. Stepanski, L. Donna R. Thomas, Patsy L.

Johnson, Eldon C. Rosegart, Charlotte J. Clark, each in his

or her official capacity as a member of the Waterford School

Board, and also in his or her individual capacity as

taxpayer within the geographical boundaries which encompass

the Waterford School District, Plaintiffs-Appellants, v. STATE BOARD OF EDUCATION and State Treasurer, Jointly and Severally, Defendants-Appellees.

Docket Nos. 72895, 73245.

424 Mich. 364, 381 N.W.2d 662, 30 Ed. Law Rep. 870

Supreme Court of Michigan.

Argued June 25, 1985.

Decided Dec. 30, 1985.

Released for Publication Feb. 11, 1986.

Clark, Hardy, Lewis, Pollard & Page, P.C. by Dennis R. Pollard, Timothy K. McConaghy, Birmingham, Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., Gerald F. Young, James E. Riley, Asst. Attys. Gen., for defendants-appellees, cross-appellants.

William G. Wolfram, Farmington Hills, Bruce T. Leitman, Bloomfield Hills, for plaintiffs-appellants.

Frank J. Kelley, Atty. Gen., Louis J. Caruso, Sol. Gen., Gerald F. young, James E. Riley, Asst. Atty. Gen., Lansing, for defendants-appellees.

Hiller, Larky & Hoekenga by Daniel J. Hoekenga, Gregory J. Bator, Southfield, for amicus curiae.

BOYLE, Justice.

We granted leave in these two cases to consider the proper interpretation of specific provisions of the "Headlee Amendment," Const. 1963, art. 9, Secs. 29, 30, and 32.

In Durant, the Court of Appeals had originally refused to hear a request for mandamus on the ground that plaintiffs (several taxpayers from the Fitzgerald School District and the Fitzgerald Public Schools), by failing to first obtain a decision before the local government claims review board, had not exhausted their administrative remedies. This Court reversed and remanded, ordering the Court of Appeals to hear the case and ruling that plaintiffs did not need to exhaust their administrative remedies. On remand, the Court of Appeals made several findings, but again dismissed plaintiffs' complaint for mandamus on the basis that the remedy generally will not lie in cases involving disputed facts. 129 Mich.App. 517, 342 N.W.2d 591. The dismissal was without prejudice to plaintiffs' right to go before the local government claims review board for development of a suitable evidentiary record and a decision in that forum, followed by a judicial review, if the parties were still aggrieved.

In Waterford, plaintiffs are the Waterford School District and several taxpayers from the school district as well as members of the Waterford School Board. The suit was originally filed in Oakland Circuit Court, where the trial judge granted summary judgment for the defendants. The Court of Appeals affirmed in light of their holding in Durant.

Specifically, our order granting leave to appeal in both cases directed the parties to consider: (1) whether the term "state law" in Const. 1963, art. 9, Sec. 29 was intended to encompass the provisions of Const. 1963, art. 8, Sec. 2; (2) whether there is a minimum level of educational services required by state law within the meaning of Const. 1963, art. 9, Secs. 26-34; (3) the proper interpretation of the term "necessary costs" as used in Const. 1963, art. 9, Sec. 29; (4) whether the state should be allowed to offset any deficiency in funds provided for necessary costs of required activities or services by the amount of any restricted aid being provided to the school district; and (5) what judicial procedures should be followed by the Court of Appeals in taking evidence and reaching a decision in Durant.

Defendants in both of these cases are the State Board of Education and the State Treasurer. The Michigan Education Association has filed a brief as amicus curiae.

We conclude that the Court of Appeals reached the correct result in these cases in its substantive findings but erred in some of its reasoning and in its procedural disposition of Durant. We affirm in part, reverse in part, and remand Durant for further proceedings in light of this opinion.

I FACTS

The issues in this case arise from: A) the fact that the amount of state funding for K-12 education, taken as a whole, has declined since 1978-79, and B) from the further fact that the result of application of two distinct formulae ¹ for financing has, as applied, resulted in a reduction of the state-financed proportion of individual school districts' budgets. These two formulae are used to determine the amount of state aid which will be available to school districts during each school year.

Fluctuation in the level of aid given across the board to school districts is evidenced by the trial court's finding in Waterford that the overall expenditures for education have not been consistent from year to year. For example, in fiscal year 1979, total state spending was $6,645,331,794. Of that total, 41.61 percent, or $2,764,784,748, went to local governments, and of that local allocation, 52 percent, or $1,454,200,440, went to school aid. In 1980, total state spending was $6,948,356,051, of which 41.62 percent, or $2,891,988,782, went to local units of government, and fifty percent of that amount, or $1,455,097,842, went to school aid.

The reduction of aid to the Waterford School District is the result of the formula adopted by the Legislature in M.C.L. Sec. 388.1621; M.S.A. Sec. 15.1919(921) (hereafter Sec. 21). This statute currently provides in pertinent part:

"Except as otherwise provided in this act, from the amount appropriated in section 11, there is allocated to each district an amount per membership pupil sufficient to guarantee the district for 1984-85 a combined state-local yield or gross allowance of $300.00 plus $64.00 for each mill of operating tax levied. For purposes of this section, only taxes levied for purposes included in the operation cost of the district as prescribed in section 7 shall be considered operating tax. The net allocation for each district shall be an amount per membership pupil computed by subtracting, from the gross allowance guaranteed the district, the product of the district's state equalized valuation behind each membership pupil and the millage utilized for computing the gross allowance."

Aid under Sec. 21 is referred to as unrestricted aid. It was designed to remedy possible inequities in the state educational system by providing a sliding scale of funds to "poorer" school districts, i.e., those with a less valuable tax base, to assure a guaranteed minimum amount per student. This formula makes the amount of state aid dependent on the district's state equalized valuation (SEV), i.e., property value and the amount of local mills actually levied, i.e., tax effort, most frequently resulting in less aid to districts with a smaller millage rate and additional aid to those with a higher rate of millage.

Smaller millage rates are now mandated in certain circumstances by Const. 1963, art. 9, Sec. 31 (the Headlee Amendment), which provides:

"Units of Local Government are hereby prohibited from levying any tax not authorized by law or charter when this section is ratified or from increasing the rate of an existing tax above that rate authorized by law or charter when this section is ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon. If the definition of the base of an existing tax is broadened, the maximum authorized rate of taxation on the new base in each unit of Local Government shall be reduced to yield the same estimated gross revenue as on the prior base. If the assessed valuation of property as finally equalized, excluding the value of new construction and improvements, increases by a larger percentage than the increase in the General Price Level from the previous year, the maximum authorized rate applied thereto in each unit of Local Government shall be reduced to yield the same gross revenue from existing property, adjusted for changes in the General Price Level, as could have been collected at the existing authorized rate on the prior assessed value.

"The limitations of this section shall not apply to taxes imposed for the payment of principal and interest on bonds or other evidence of indebtedness or for the payment of assessments on contract obligations in anticipation of which bonds are issued which were authorized prior to the effective date of this amendment."

Application of Sec. 31 has resulted in reduced or "rolled back" millage rates when property values (SEV) rose beyond the inflation rate, as measured by the Consumer Price Index. This "rollback" has, in turn, resulted in less state aid under the Sec. 21 formula.

The trial court judge found that in the Waterford School District, the property values (SEV) rose at a greater rate than the rate of inflation (from $448,083,300 in 1978-79 to $531,541,786 in 1979-80 and to $612,968,575 in 1980-81). He further found that this resulted in a "rollback" of the millage rate in Waterford from 30.38 in 1978-79 to 29.6791 in 1979-80 and to 29.7745 in 1980-81 and in a reduction in unrestricted state aid under Sec. 21 from 44.79 percent of the total guarantee per student in 1978-79 to 38.36 in 1979-80. Plaintiffs in Durant claim ² that the Fitzgerald Public Schools is an "out of formula" school district covered by M.C.L. Sec. 388.1743; M.S.A. Sec. 15.1919(1043) (hereafter Sec. 143). An "out of formula" school district is one in which the level of local funding and SEV is so high that the district does not...