Durant v. STATE, DEPT. OF EDUC.

• Decision Date: 25 January 2000
• Docket Number: Docket No. 211740.
• Parties: Donald S. DURANT, et al., Plaintiffs, v. STATE of Michigan, DEPARTMENT OF EDUCATION, Department of Management & Budget, and Treasurer of the State of Michigan, Defendants.
• Court: Court of Appeal of Michigan — District of US

605 N.W.2d 66

238 Mich. App. 185

Donald S. DURANT, et al., Plaintiffs, v. STATE of Michigan, DEPARTMENT OF EDUCATION, Department of Management & Budget, and Treasurer of the State of Michigan, Defendants.

Docket No. 211740.

Court of Appeals of Michigan.

Submitted June 16, 1999, at Lansing.

Decided October 19, 1999, at 9:15 a.m.

Released for Publication January 25, 2000.

Polland & Albertson, P.C. (by Dennis R. Pollard), Bloomfield Hills, for the plaintiffs.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Jeffrey J. Butler and Edith C. Harsh, Assistant Attorneys General, for the defendants.

White, Przybylowicz, Schneider & Baird, P.C. (by James A. White), amicus curiae, Okemos, for Michigan Education Association.

Before GRIFFIN, P.J., and DOCTOROFF and JANSEN, JJ.

ON REMAND

PER CURIAM.

This case, commonly referred to as "Durant II," returns to our Court¹ pursuant to a Supreme Court order of remand. Durant v. Michigan, 459 Mich. 874, 585 N.W.2d 302 (1998). Previously, this Court dismissed plaintiffs' complaint, without prejudice, "for failure of plaintiffs to pursue the case in conformity with the [court] rules." In particular, our Court ruled that plaintiffs' complaint was too conclusory and nonspecific for our Court to grant plaintiffs relief.² A unanimous Supreme Court peremptorily reversed and remanded to this Court

to resolve expeditiously the issue on which plaintiffs seek declaratory judgment. MCR 7.302(F)(1). See particularly ¶A of the request for relief section of the complaint.[³] Durant v. Michigan, 456 Mich. 175, 205, 566 N.W.2d 272 (1997), MCR 2.11(B)(2). The Court of Appeals has jurisdiction to determine the issue under Const. 1963, art. 9, § 32 because the gravamen of the action is a failure to comply with art 9, § 29. [459 Mich. 874, 585 N.W.2d 302.]

We grant, in part, plaintiffs' request for a declaratory judgment. We hold that the State School Aid Act, M.C.L. § 338.1601 et seq.; MSA 15.1919(901) et seq., as amended by 1997 PA 142 and 1998 PA 339 (State School Aid Acts), is unconstitutional in part. We declare that the state violated the Michigan Constitution when it enacted 1997 PA 142 and 1998 PA 339 to the extent that these acts allocate the revenues provided to school districts pursuant to Proposal A (art. 9, § 11), in order to satisfy its independent funding obligation under the Headlee Amendment (art. 9, §§ 25-34). In all other respects, we grant summary disposition in favor of the state.

I

This case requires us to define the interplay between the Headlee Amendment, Proposal A, and the State School Aid Acts. Pursuant to the Supreme Court's remand order, we address the merits of plaintiffs' complaint.

Plaintiffs, 244 taxpayers representing 225 school districts and 11 intermediate school districts, have commenced this original action in this Court under Const. 1963, art. 9, § 32, MCR 2.605, 7.203(C)(2), 7.216(A)(7), and M.C.L. § 600.4401; MSA 27A.4401, alleging that defendants (herein referred to collectively as the state) have underfunded special education programs and services by approximately $272,307, 416 during the 1997-98 school year and an as yet to be determined amount for the 1998-99 and 1999-2000 school years, and special education transportation services by approximately $68,237,573 for the 1997-98 school year and as of yet undetermined amounts for the 1998-99, 1999-2000, and 2000-01 school years. The crux of plaintiffs' challenge is that the Legislature enacted 1997 PA 142 and 1998 PA 339 to divert foundation allowance funding, which is constitutionally guaranteed to local and intermediate school districts and prescribed for the general operating costs of those districts by art. 9, § 11, to make up for the revenue shortfall in categorical funding for state-mandated special education programs, services, and transportation. Plaintiffs allege that by diverting the foundation allowance funding the state has avoided paying for state-mandated services from its own revenues and, instead, is relying on local school districts' revenues guaranteed to them by art. 9, § 11 to satisfy constitutionally mandated state funding obligations in violation of art. 9, §§ 11 and 29, Durant v. State Bd. of Ed., 424 Mich. 364, 391-392, 381 N.W.2d 662 (1985), and Durant v. State Bd of Ed. (On Remand), 129 Mich.App. 517, 532-533, 342 N.W.2d 591 (1983).

The parties have filed cross motions for summary disposition. We conclude that the funding scheme employed in 1997 PA 142 and 1998 PA 339 complies with the Headlee Amendment. However, we hold that the per pupil funding guaranteed local and intermediate school districts to reimburse the costs of school operations by Proposal A (art. 9, § 11) is constitutionally dedicated solely for reimbursement of general school operating expenses. Moreover, to the extent that the funding scheme employed in 1997 PA 142 and 1998 PA 339 restricts the use of that portion of art. 9, § 11 per pupil funding attributed to special education pupils solely to the satisfaction of the state's funding obligations for mandated programs, services, and transportation under Headlee, we hold that the State School Aid Acts violate the constitutional guarantee of a specific base level of unrestricted aid per pupil mandated by art. 9, § 11. Accordingly, we grant summary disposition in favor of plaintiffs with regard to their claim of a violation of Proposal A (art. 9, § 11) and grant declaratory relief. With regard to plaintiffs' claim of a Headlee violation as set forth in count I of their amended complaint, we grant summary disposition in favor of the state.

Plaintiffs' complaint (count III) also alleges that the state has violated art. 9, § 29 by underfunding school lunch programs for the 1997-98, 1998-99, 1999-2000, and 2000-01 school years. The state conceded at oral argument before this Court that it had underfunded the lunch programs. The Legislature passed a supplemental appropriations bill to remedy the underfunding. The Governor signed the bill on July 19, 1999. 1999 PA 119. Despite this supplemental appropriation, plaintiffs have filed a second amended complaint and have moved for summary disposition in regard to count III of that complaint. Plaintiffs seek a declaratory judgment holding that the school lunch program funding provided in subsection 31a(5) of the State School Aid Act, M.C.L. § 388.1631a(5); MSA 15.1919(931a)(5), does not constitute state funding for purposes of satisfying the state's proportional share of the necessary costs of the state-mandated school lunch program and, consequently, that the state has violated art. 9, § 29 by underfunding its share of the costs of the school lunch program in the amount authorized to be spent under subsection 31a(5). We hold that funding supplied through subsection 31a(5) can be used to satisfy the state's proportional share of the necessary costs of the school lunch program under art. 9, § 29. We further hold that the school districts have violated the mandate of subsection 31a(5) by failing to use from the funds supplied under subsection 31a(1) of the State School Aid Act, M.C.L. § 388.1631a(1); MSA 15.1919(931a)(1), an amount necessary to operate the school lunch programs. Accordingly, we grant summary disposition in favor of the state pursuant to MCR 2.116(I)(2).

II

The voters of Michigan amended our constitution by adopting article 9, §§ 25-34 of the Constitution of 1963 pursuant to an initiative petition, Proposal E, at the general election of November 7, 1978. Durant v. Michigan (Durant I), 456 Mich. 175, 182, 566 N.W.2d 272 (1997); Schmidt v. Dep't of Ed., 441 Mich. 236, 244, 490 N.W.2d 584 (1992). These sections are popularly called the "Headlee Amendment," named after its author and taxpayers' rights crusader Richard Headlee. Durant I, 456 Mich. at 182,566 N.W.2d 272. The Headlee Amendment is the voters' attempt to link funding, taxes, and control by limiting legislative expansion of requirements placed on local government, by freezing what they perceived was excessive government spending, and by lowering their taxes at both the state and the local levels. Durant, 424 Mich. at 378, 383,381 N.W.2d 662.

The scheme of the Headlee Amendment is cogently summarized as follows in Durant I, 456 Mich. at 182-183, 566 N.W.2d 272:

The Headlee Amendment imposes on state and local government a fairly complex system of revenue and tax limits. These are summarized in art. 9, § 25 and implemented in the following sections. There are three main elements. Section 26 limits any changes in total state revenues to an amount based on changes in personal income in the state. Section 31 prohibits units of local government from levying any new tax or increasing any existing tax above authorized rates without the approval of the unit's electorate.

The third element of the Headlee system is summarized in art. 9, § 25, which states in part, "The state is prohibited from requiring any new or expanded activities by local governments without full state financing, from reducing the proportion of state spending in the form of aid to local governments, or from shifting the tax burden to local government." These requirements are implemented in §§ 29 and 30.

That part of the Headlee Amendment set forth in art. 9, § 29, which is at issue in this case, provides in pertinent part as follows:

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.

Pursuant to art. 9, § 29, the state is obligated to finance 28.6138 percent of the necessary costs of special education programs and activities offered by plaintiff school districts, 70.4165 percent of the necessary costs of the special education transportation provided by the districts and 6.0127 percent of the necessary costs of the school lunch program offered by the districts. Durant v. Dep't of Ed. (After Remand, On Third Remand)...