Durant v. State

• Decision Date: 23 August 2002
• Docket Number: Docket No. 230859.
• Citation: 251 Mich. App. 297,650 N.W.2d 380
• Parties: Donald S. DURANT, et al, Plaintiffs, v. STATE of Michigan, Department of Education, State of Michigan, Department of Management and Budget, and Treasurer of the State of Michigan, Defendants.
• Court: Court of Appeal of Michigan — District of US

650 N.W.2d 380

251 Mich. App. 297

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

Docket No. 230859.

Court of Appeals of Michigan.

Submitted September 6, 2001, at Lansing.

Decided May 10, 2002, at 9:25 a.m.

Released for Publication August 23, 2002.

Pollard & Albertson, P.C. (by Dennis R. Pollard and Richard E. Kroopnick), Bloomfield Hills, for the plaintiffs.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, Jane O. Wilensky, Edith C. Harsh, Deborah Anne Devine, Gary L. Hicks, Matthew H. Rick, and Darrin F. Fowler, Assistant Attorneys General, for the defendants.

White, Schneider, Baird, Young & Chiodini, P.C. (by James A. White and Kathleen Corkin Boyle), Okemos, for Michigan Education Association.

Before: NEFF, P.J., and SAWYER and FITZGERALD, JJ.

SAWYER, J.

This original action,¹ commonly referred to as "Durant III," requires this Court to revisit and reexamine the interplay between Const 1963, art 9, § 29 (the Headlee Amendment), Const 1963, art 9, § 11 (Proposal A), and the State School Aid Act, M.C.L. § 388.1601 et seq., as amended by 2000 PA 297, as well as to expand on this Court's Durant II decision, Durant v. Michigan (On Remand), 238 Mich.App. 185, 605 N.W.2d 66 (1999), vacated in part on other grounds and remanded, reconsideration den 462 Mich. 882, 613 N.W.2d 722 (2000).

In response to this Court's decision in Durant II, the Legislature enacted 2000 PA 297. Plaintiffs now challenge the constitutionality of that act. For the reasons expressed below, we conclude that 2000 PA 297 is constitutional.

2000 PA 297 creates a tripartite funding scheme the parties refer to as either the "three bucket" or the "three pot" approach. The state provides an overview of this approach in its brief in opposition to plaintiffs' motion for summary disposition as follows:

1. Allocate the appropriation for the state share of the Proposal A obligation at the 1994-95 level. (§ 22a).

2. Allocate the appropriation for the Headlee Amendment obligations at the state financed proportions for special education and special education transportation. (§ 51c).

3. Calculate the amount under the former appropriation sections (§§ 20, 20j, 51a(2), 51a(3) and 51a(12)).

4. The appropriations made under Step 1 (§ 22a) and Step 2 (§ 51c) are subtracted from the total in step 3.

5. The remainder equals the § 22b appropriation, an additional discretionary payment.

Sum of former appropriation sections — 22a appropriation (Proposal A obligation) — 51c appropriation (Headlee Amendment obligation) _________________________ = 22b appropriation.

A more detailed explanation of this three-bucket funding method is set forth in a February 6, 2001, Department of Education Bulletin as follows:

PAYMENT MECHANISM UNDER THE DURANT SOLUTION (NEW Sections 22a, 22b, and 51c)

Beginning in FY2001, foundation allowance payments and supplemental payments to local school districts and PSAs will no longer be paid out of Section 20 and 20j and special education payments to those entities will no longer be paid out of Section 51a. Rather, the amounts calculated pursuant to those sections will be used to determine the amount of state payments under NEW Section 22b. This payment mechanism, described below, has been designed to demonstrate the State's compliance with the foundation allowance guarantee under Proposal A and the minimum special education reimbursement obligation pursuant to the Headlee amendment:

Section 22a allocates a per pupil amount to meet the Proposal A guarantee of a FY95 foundation allowance per pupil.

Section 51c allocates an amount to meet the Headlee obligation equal to 28.6138% of a district's special education costs plus 70.4165% of the district's special education transportation costs.

Section 22b allocates a discretionary payment equal to the sum of the calculated amounts under Sections 20, 20j, 51a(2), 51a(3), and 51a(12) minus the amounts paid in Sections 22a and 51c.

NEW Section 22a allocates to each local school district, university school, and public academy that operated during FY95 and is in operation in the current year an amount per pupil sufficient to guarantee revenue in the amount of its FY95 total state and local per pupil revenue for school operating purposes, as guaranteed under Section 11 of Article IX of the State Constitution of 1963 ("Proposal A"). The payments under this section for a local school district will be calculated by subtracting from the FY95 foundation allowance or $6,500.00, whichever is less, the current year per pupil local operating revenue from the nonhomestead millage levy. The figure used for the current year per pupil local operating revenue is equal to the current year nonhomestead taxable value (less any captured assessed valuation under TIFA, LDFA, DDA, or Brownfield), multiplied by the lesser of 18 mills or the number of mills levied by the district for FY94, divided by the district's current year membership. If a hold harmless district's Y95 hold harmless millage rate, as certified by the Department of Treasury for the 1994 tax year, multiplied by the district's current year taxable value per pupil no longer generates the full hold harmless amount per pupil (that is, the difference between the district's FY95 foundation allowance and $6,500.00), the amount paid under Section 22a will be increased to include that shortfall. The per pupil payments under this section for a university school or PSA that was in operation in FY95 and is operating in the current year will be equal to the university school's or PSA's FY95 per pupil payment under Section 20.

NEW Section 51c allocates to districts (including a university school and PSAs) an amount equal to 28.6138% of total approved costs of special education (excluding costs reimbursed under section 53a), and 70.4165% of total approved costs of special education transportation.

NEW Section 22b allocates to districts (including a university school and PSAs) an amount equal to the difference between the sum of the calculations under Section 20 (foundation allowance), 20j, (hold harmless supplemental), 51a(2) (special education foundation allowances and "categorical" payments), 51a(3) (special education" hold harmless"), and 51a(12) (other special education foundation allowances); minus the payments made under new Sections 22a and 51c. These Section 22b payments are not to be considered per pupil revenue for school operating purposes under Section 11 of Article IX of the State Constitution. Finally, in order to receive these funds, districts are required to administer a standardized department-approved assessment of basic educational skills for pupils in grades first through fifth.

The practical effect of this three-bucket approach is that, although subsection 20(1) of 2000 PA 297 sets the basic foundation allowance at $5,700 per membership pupil for 1999-2000, at $6,000 per membership pupil for 2000-01, at $6,300 per membership pupil for 2001-02, and at $6,700 per membership pupil for 2002-03, the state is calculating and funding its obligation under art 9, § 11 at a level not less than "the 1994-95 total state and local per pupil revenue for school operating purposes" for each particular school district. The per membership pupil amount for the 1994-95 fiscal year was $5,000. Although the parties are less than clear on this point, it appears that the funds that compose the difference between the 1994-95 foundation allowance and the basic foundation allowances specified in subsection 20(1) of 2000 PA 297, other than the Headlee obligation allocation, are poured into the discretionary funds bucket.

This leads us to the current litigation. Plaintiffs are 458 taxpayers, 423 school districts, and 33 intermediate school districts, who have commenced this original action pursuant to Const 1963, art 9, § 32, MCR 2.605, and MCR 7.216(A)(7), seeking both a judgment declaring that the state has underfunded its constitutional obligation under art 9, § 29 and a money judgment in the amount of this underfunding. The gravamen of plaintiffs' claim is set forth in paragraphs 23 and 24 of count I of their second amended complaint:

23. However, in enacting 2000 PA 297, the defendant state has again utilized revenue guaranteed to school districts in Michigan for general or unrestricted school operating purposes, i.e., "foundation allowance revenue," pursuant to Proposal A in order to satisfy the state's independent and additional funding obligation to those school districts under § 29 of the Headlee Amendment in order to defray the costs incurred by those school districts to provide special education programs and services, inclusive of special education transportation services, in the proportion which applied in 1978 when the Amendment was adopted.

24. By operation of 2000 PA 297, school districts in Michigan were unconstitutionally underfunded Three Hundred Ninety-Six Million Five Hundred Thirty Thousand Two Hundred Four Dollars ($396,530,204.00) for the 1999-2000 school year and are presently being underfunded Four Hundred Seventeen Million Four Hundred Three Thousand One Hundred Fifty-Eight Dollars ($417,403,158) for the 2000-2001 school year and will be underfunded Four Hundred Fifty-Two Million One Hundred Thirty-Three Thousand Two Hundred Fifty Dollars ($452,133,250.00) for the 2001-2002 school year and will be underfunded Four Hundred Sixty-Six Million Ninety-Five Thousand One Hundred Twenty-Three Dollars ($466,095,123.00) for the 2002-2003 school year because per pupil revenue guaranteed to school districts in Michigan for general or unrestricted school operating purposes pursuant to Proposal A, Const 1963, art 9, § 11, as amended, has been allocated or transferred in order to satisfy the state's independent and additional funding obligation to those school districts pursuant to

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