Durant v. State

• Court: Michigan Supreme Court
• Writing for the Court: PER CURIAM; Cooley; Brickley; MALLETT; BRICKLEY; RILEY and WEAVER, JJ., concurred BRICKLEY; WEAVER
• Citation: Durant v. State, 456 Mich. 175, 566 N.W.2d 272 (Mich. 1997)
• Decision Date: 31 July 1997
• Docket Number: Docket Nos. 104458,No. 13,104460-104492,104459,13
• Parties: , 119 Ed. Law Rep. 1146 Donald DURANT, et al, Plaintiffs-Appellees, v. STATE of Michigan, et al, Defendants-Appellants. Gerald SCHMIDT, et al, Plaintiffs-Appellees, v. STATE of Michigan, et al., Defendants-Appellants. Calendar

Page 272

566 N.W.2d 272

456 Mich. 175, 119 Ed. Law Rep. 1146

Donald DURANT, et al, Plaintiffs-Appellees, v. STATE of Michigan, et al, Defendants-Appellants.

Gerald SCHMIDT, et al, Plaintiffs-Appellees, v. STATE of Michigan, et al., Defendants-Appellants.

Docket Nos. 104458, 104459, 104460-104492.

Calendar No. 13.

Supreme Court of Michigan.

Argued April 10, 1997.

Decided July 31, 1997.

Pollard & Albertson, P.C. by Dennis R. Pollard and Richard E. Kroopnick, Bloomfield Hills, for Plaintiffs-Appellees.. Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, Paul J. Zimmer, Edith C. Harsh, Jane A. Wilensky, and Jeffrey J. Butler, Assistant Attorneys General, Lansing, for Defendants-Appellants.

Alfred H. Hall, Senate Majority Counsel, Philip K. Douma, House Minority Counsel, and Lisa K. Gigliotti, Michael G. O'Brien, Michael R. Severino, and Mark J. Newman, Assistants Senate Majority Counsel Lansing, amici curiae, for Dick Posthumus, Ken Sikkema, Harry Gast, Donald Gilmer, Dan DeGrow, and Glenn Oxender.

White, Przybylowicz, Schneider & Baird, P.C. by Karen Bush Schneider and Thomas A. Baird, Okemos, and Hoekenga & Farrell, P.C. by Daniel J. Hoekenga, Southfield, amici curiae for Michigan Education Association.

Thrun, Maatsch & Nordberg, P.C. by Gordon W. Van Wieren, Jr., Lisa L. Swem, and Cheryl Takacs Bell, Lansing, amici curiae for Michigan School Districts.

Opinion

PER CURIAM.

Today, we consider and resolve five questions relating to the Maintenance-of-Support Clause of Const. 1963, art. 9, § 29, ¹ part of the "Headlee Amendment":

(1) Are special education and special education transportation state-mandated activities or services within the meaning of art. 9, § 29? Yes.

(2) Is the "state match" payment for school lunches part of the "state financed proportion" for the purpose of computing compliance with art. 9, § 29? Yes.

(3) Are payments that are required of the state by art. 9, § 29 "funds constitutionally dedicated for specific purposes" and exempt from executive order reduction under Const. 1963, art. 5, § 20? Yes.

(4) Are plaintiffs' attorney fees in this case part of the costs that may be recovered under Const. 1963, art. 9, § 32? Yes.

(5) What is the appropriate remedy for the violation of art. 9, § 29 in this case? A money judgment for plaintiff school districts for the full amount of underfunding for 1991-92, 1992-93, and 1993-94, to use for refunds for taxpayers, tax relief, or other public purposes.

THE HEADLEE AMENDMENT

Sections 25 through 34 of article 9 of the Constitution of 1963 were adopted pursuant to initiative petition, Proposal E, at the general election of November 7, 1978. ² They are popularly called the "Headlee Amendment." 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. ³

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." ⁴ These requirements are implemented in §§ 29 ⁵ and 30. ⁶ The application of the general, even vague, concepts of these sections to the complexities of state-local relations has proven a difficult task, as illustrated by the history of this case.

HISTORY OF PROCEEDINGS

This case is a consolidation of three groups of original actions filed in the Court of Appeals under art. 9, § 32. ⁷ The first of these, the Durant case, was filed on May 7, 1980, on behalf of seven taxpayers who were residents of the Fitzgerald School District and that district. Defendants are the Department of Education, the Department of Management and Budget, and the State Treasurer. Plaintiffs alleged that the state was violating its duty under art. 9, § 29 to maintain the state-financed proportion of the necessary costs of activities that state law orders plaintiff school district to perform.

The Court of Appeals is an appellate court that has not been set up to conduct trials, much less trials involving complex factual questions. It initially ruled that the plaintiffs must first exhaust administrative remedies under the act passed by the Legislature to implement the Headlee Amendment, 1979 P.A. 101, M.C.L. § 21.231 et seq.; M.S.A. § 5.3194(601) et seq. ⁸ , 110 Mich.App. 351, 313 N.W.2d 571 (1981). This Court reversed, ruling that plaintiffs were not required to exhaust administrative remedies before the local government claims review board. 413 Mich. 862, 317 N.W.2d 854 (1982).

On remand from this Court, the Court of Appeals ruled on a number of significant points in the continuing progress of the case. The most basic substantive question at that time was whether elementary and secondary education as a whole was a state-mandated activity ⁹ within the requirements of § 29. The Court of Appeals determined that it was not and that the proper focus was on more specific programs, listing special education as an example of such an activity. 129 Mich.App. 517, 526, 342 N.W.2d 591 (1983). ¹⁰ The Court also ruled that it was unable to grant relief, particularly mandamus because there were disputed facts and again dismissed the case. Id. at 534, 342 N.W.2d 591. This Court affirmed the substantive holding of the Court of Appeals concerning education as a whole. 424 Mich. 364, 381 N.W.2d 662 (1985). However, we reversed the Court of Appeals procedural dismissal, noting that § 32 gave the taxpayers the right to proceed in the Court of Appeals. We remanded the case to the Court of Appeals, suggesting the appointment of a Special Master to act as factfinder. 424 Mich. at 394, 381 N.W.2d 662.

The Court of Appeals accepted the suggestion and appointed Macomb Circuit Judge George R. Deneweth as Special Master. The case was submitted on live testimony, depositions, extensive stipulations of facts, and lengthy briefs. Among the many issues raised by the parties and addressed in the Special Master's report are the four issues raised by defendant in this appeal. On each of these issues, the Special Master and Court of Appeals have consistently ruled in favor of plaintiffs. The Court of Appeals accepted the Master's holdings that special education, special education transportation, driver's education, and school lunch and supplemental milk programs were state-mandated activities within § 29. All these were the beneficiaries of specific categorical state aid. The Court rejected a claim by plaintiffs on the basis of activities mandated by statute that had not been supported by specific "categorical" aid. It disagreed with some of the Master's recommendations on how to compute "necessary costs." It remanded for recalculation of the amounts involved. 186 Mich.App. 83, 463 N.W.2d 461 (1990). Defendants filed an application for leave to appeal with this Court.

In the meantime, a second group of plaintiffs, consisting of fifty-one taxpayers and fifty-one school districts, filed their own original action in the Court of Appeals, Schmidt v. State of Michigan (Docket No. 132677). Their complaint for relief was modeled on the first amended complaint in Durant. In the context of the multiple school districts, a question appeared that had been hidden in Durant, which had only one school district plaintiff. In Schmidt, the proportional support that the state had provided in base year 1978-79 varied from district to district, even for the same activity. The assumption of the complaint was that these built-in variances would be maintained. The complaint asked for a money judgment for each school district on the basis of the state's failure to maintain funding at each district's base-year level.

The Court of Appeals dismissed the Schmidt claim in an unpublished order, entered November 9, 1990 (Docket No. 132677). ¹¹ The order stated that a claim for underfunding under the first sentence of art. 9, § 29 must be based on a decrease in the funding for an activity "across all school districts in the state." That is, as long as the state aid for a program given to all school districts across the state did not fall below the proportion of necessary costs supported in the base year (statewide), it did not matter if some school districts saw their individual levels of support fall. ¹²

On appeal, this Court reversed. Unlike art. 9, §§ 26 and 31, which specify corrections for anticipated problems, § 29 does not address remedy, or even the problem noted by the Court of Appeals, whether an individual unit of government has a enforceable right to have its own level of support maintained. ¹³ In an effort to devise a solution most likely to effectuate the will of the electorate that adopted § 29, we decided that each unit of local government should have a right to continued state support for state-mandated activities, but that use of different base-year proportions for each unit of government would build in undesirable anomalies. Thus, we held that the base-year proportion would be computed on a statewide level and each local unit could count on that base level of support in each ensuing year. 441 Mich. 236, 490 N.W.2d 584 (1992). We remanded Schmidt to the Court of Appeals.

The result of Schmidt was that all the computations in Durant were inaccurate. We remanded Durant to the Court of Appeals in light of Schmidt. 441 Mich. 930, 498 N.W.2d 736 (1993).

On remand, the Court of Appeals consolidated Durant and Schmidt and added a third ...