Fair School Finance Council of Oklahoma, Inc. v. State

• Decision Date: 24 November 1987
• Docket Number: No. 56577,No. 1,1,56577
• Citation: 1987 OK 114,746 P.2d 1135
• Parties: 43 Ed. Law Rep. 805, 1987 OK 114 FAIR SCHOOL FINANCE COUNCIL OF OKLAHOMA, INC., an Oklahoma corporation, et al., Plaintiffs-Appellants, v. STATE of Oklahoma; George Nigh, Governor of the State of Oklahoma; Leslie R. Fisher, State Superintendent of Public Instruction; State Board of Education; Harry Shackelford, Jack Mace, Seay Sanders, Dr. C.B. Wright, R.E. Carleton, and E.L. Collins, members of the State Board of Education; and Leo Winters, Treasurer of the State of Oklahoma, Defendants-Appellees, and Independent School Districtof Alfalfa County, Oklahoma, et al., Intervenors-Appellees.
• Court: Oklahoma Supreme Court

Page 1135

746 P.2d 1135

43 Ed. Law Rep. 805, 1987 OK 114

FAIR SCHOOL FINANCE COUNCIL OF OKLAHOMA, INC., an Oklahoma corporation, et al., Plaintiffs-Appellants, v. STATE of Oklahoma; George Nigh, Governor of the State of Oklahoma; Leslie R. Fisher, State Superintendent of Public Instruction; State Board of Education; Harry Shackelford Jack Mace, Seay Sanders, Dr. C.B. Wright, R.E. Carleton, and E.L. Collins, members of the State Board of Education; and Leo Winters, Treasurer of the State of Oklahoma, Defendants-Appellees and Independent School District No. 1 of Alfalfa County Oklahoma, et al., Intervenors-Appellees.

No. 56577.

Supreme Court of Oklahoma.

Nov. 24, 1987.

As Corrected Nov. 25, 1987.

M. David Riggs, Dianne L. Smith, Messrs. Chapel, Wilkinson, Riggs, Abney & Henson, Tulsa, for plaintiffs-appellants.

Jan Eric Cartwright, Atty. Gen., Kay Harley Jacobs, Judith Coleman Nichols, Asst. Attys. Gen., Oklahoma City, for defendants-appellees.

Joe L. Heaton, Messrs. Fuller, Tubb & Pomeroy, Oklahoma City, for intervenors-appellees.

Harry A. Woods, Jr., Mark S. Grossman, Messrs. Crowe & Dunlevy, Oklahoma City, successor counsel for plaintiffs-appellants.

Duke Halley, Woodward, successor counsel for intervenors-appellees.

OPALA, Justice.

This case challenges the constitutionality of Oklahoma's system of financing public elementary and secondary schools. The litigation focuses upon disparities in taxable wealth among the various school districts as well as the effect of those differences upon the fiscal ability of the poorer districts to provide their students with educational resources and opportunities comparable to those of the more affluent school districts. We hold that neither the United States nor the Oklahoma Constitution requires a funding regime that provides equal expenditures per child.

The plaintiffs brought this suit as a class action on July 16, 1980. The plaintiffs are Fair School Finance Council, Inc., an Oklahoma non-profit corporation whose members include the boards of education of thirty-eight school districts, which at the time this action was commenced had a total of 179,669 children in average daily attendance; ¹ fifty-four minor school children, who reside and attend public schools in these districts; and forty-eight residents who pay ad valorem taxes on properties within the districts.

The defendants named in the action are the State of Oklahoma; George Nigh, in his official capacity as Governor of the State of Oklahoma; Leslie R. Fisher, State Superintendent of Public Instruction; the State Board of Education, whose duties include apportioning and disbursing funds to school districts under the State Aid program; Harry Shackelford, Jack Mace, Seay Sanders, Dr. C.B. Wright, R.E. Carleton and E.L. Collings, members of the State Board of Education; and Leo Winters, Treasurer of the State of Oklahoma.

The plaintiffs sought a judgment declaring that the method of financing public education in Oklahoma violates the United States and the Oklahoma Constitutions. After the action was commenced, ninety school districts were allowed to intervene as additional defendants. ² These defendants filed a motion for judgment on the pleadings, in which the named defendants concurred. Finding that the petition's allegations, even if true, failed to establish any basis upon which the Oklahoma school finance system might be declared unconstitutional under either the United States or Oklahoma Constitution, the trial court rendered judgment for all defendants.

I THE OKLAHOMA PUBLIC SCHOOL FINANCING SYSTEM

Article 1 § 5 of the Oklahoma Constitution provides for the establishment and maintenance of a system of public schools within the State. ³ Article 13 § 1 of the Constitution places the obligation of doing so upon the Legislature. ⁴ In its efforts to carry out this duty, the Legislature has designed a system of financing public elementary and secondary education which relies primarily on two sources of revenue--local and state sources. A third, minor source of funding is the federal government.

A. Locally-Generated Revenue

The greatest local sources of revenue for financing public education are various ad valorem taxes levied on the real and personal property within the school districts. Each county must levy a tax of four mills on the dollar valuation of all taxable property in the county for school purposes. Unless a different method is provided by law, the proceeds of this levy must be apportioned among the county school districts based upon the legal average daily attendance [ADA] for the preceding school year. ⁵

The school districts themselves also can levy taxes. Upon certification of need by the board of education any school district may levy an additional tax of fifteen mills on the dollar valuation of all taxable property in the district. ⁶ Upon the voters' approval, a district also may make an emergency levy of up to five mills and a local support levy of up to ten mills. The emergency and local levies may only provide sufficient additional revenue to meet the district's needs for the fiscal year as determined by the local board. ⁷ Thus, the maximum ad valorem tax levy allowed by law for a school district's general operating fund is thirty-five mills on the value of the taxable property within the district.

Additional ad valorem taxes also may be approved by the district's voters for education-related purposes. Article 10 § 10 of the Oklahoma Constitution allows a levy of up to five mills for a building fund, which may be used for erecting or repairing school buildings and for purchasing furniture. Article 10 § 26 permits a school district to incur in any one year an indebtedness in an amount, including existing indebtedness, of up to five percent of the valuation of the taxable property of the district for all purposes. If there is an absolute need, a district may increase such indebtedness to ten percent for the purpose of acquiring or improving school sites, constructing, repairing, remodeling or equipping buildings, or acquiring school furniture or equipment.

Small local sources of revenue for financing public schools include certain dedicated taxes and fees, tuition and transfer fees, and proceeds from the sale or rental of property.

Because local sources of revenue are derived primarily from ad valorem taxes, the amount of that revenue varies greatly among the school districts. This variation may be caused by several factors, including differences in assessment ratios and in the methods employed to establish property values. The greatest factor is the difference in property wealth, upon which the tax is based, among the districts. These differences greatly affect the amount of revenue per pupil which each district can raise for the support of its schools.

This variation in property wealth can be seen by comparing the assessed valuation of property per ADA among the districts. ⁸ For 1978-79, the assessed valuation per ADA for all school districts in the state was $11,264.42. In contrast, all but five of the plaintiff school districts had assessed valuations per ADA below the state average; and the average among the plaintiff districts was only $7,780.40. The effect of these differences in property wealth among the districts becomes more apparent by comparing the amount of local revenue per pupil in ADA which is available to the districts. All of the plaintiff school districts levy the full thirty-five mills allowed by law; yet they still cannot raise as much revenue per pupil as can the wealthier districts, some of which levy at a lower rate. In addition, when this action was commenced, all of the plaintiff districts were levying the full five mills allowed by law for a building fund, and all but two levied a tax for a sinking fund. In contrast, thirty-eight of the remaining districts either had no tax, or were levying less than five mills, for a building fund, and one hundred seventy-four districts levied no tax for a sinking fund. Twenty school districts had no tax for either a building fund or a sinking fund.

The level of property wealth within a district also affects the amount of indebtedness which the district may incur for acquiring and improving school sites, constructing and equipping school buildings, and acquiring school furniture and equipment. As stated above, the state constitution prevents a district from becoming indebted beyond a certain level, even though the district's voters may be willing to tax themselves at greater rates to satisfy such indebtedness. This limitation obviously affects all school districts of the State; but it has a greater impact upon the less wealthy ones, whose maximum levels of indebtedness naturally are much smaller.

B. State-Generated Revenue

The other primary source of revenue for public schools is the State itself. State sources of revenue include various taxes designated for school purposes, proceeds from the permanent school fund and monies allocated for specific programs or expenditures. The most important source, State Aid, ⁹ was designed to allow the State and the local school districts to work together to provide full educational opportunities for every child in Oklahoma.

The State Aid program consists of two parts, Foundation Program Aid and Incentive Aid. ¹⁰ The Foundation Program consists of a certain amount of money per pupil which the Legislature has determined to be necessary to operate a minimum program within a school district. From this amount are subtracted various sums, known as Foundation Program Income, which are received by a district from certain sources. One of these items is the net assessed valuation of the property within the district during the preceding year multiplied by fifteen mills. In theory, Foundation Program Income reflects a district's wealth and ability to support itself. A transportation supplement is added to the difference between the Foundation Program and Foundation Program...