Gwinn Area Community Schools v. State of Mich.
| Decision Date | 10 August 1984 |
| Docket Number | No. 83-1720,83-1720 |
| Citation | 741 F.2d 840 |
| Parties | 19 Ed. Law Rep. 857 GWINN AREA COMMUNITY SCHOOLS, et al., Plaintiffs-Appellants, v. STATE OF MICHIGAN, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Thomas L. Butch (Lead Counsel), Peter W. Strom (argued), Butch, Quinn, Rosemurgy, Jardis, Valkanoff, Escanaba, Mich., for plaintiffs-appellants.
John A. Smietanka, U.S. Atty., Grand Rapids, Mich., Edward R. Cohen (argued), Dept. of Justice, Civil Division, Robert S. Greenspan, Washington, D.C., Frank J. Kelley, Atty. Gen. of Mich., Louis J. Caruso, Paul J. Zimmer (argued), Asst. Attys. Gen., Lansing, Mich., for defendants-appellees.
Before LIVELY, Chief Judge, JONES, Circuit Judge, and TIMBERS, Senior Circuit Judge. *
The questions which the plaintiffs raised in this case are whether the Michigan State School Aid Act of 1979, Mich. Comp. Laws Ann. (MCLA) Secs. 388.1601-.1772 (Michigan Act) meets the requirements of 20 U.S.C. Secs. 236-240 (1980) (Impact Aid Act) and whether the Michigan Act is unconstitutional under both federal and Michigan law. The plaintiffs-appellants are a school district, a taxpayer of the school district and a student enrolled in one of the schools of the district. The defendants-appellees are the State of Michigan, the State Board of Education of Michigan and the state superintendent of instruction, and the United States Department of Education and its Secretary. The district court denied the plaintiffs' motion for a preliminary injunction as moot after granting summary judgment in favor of the state defendants and dismissing all claims against the federal defendants.
Gwinn Area Community Schools (the district) is a school district in sparsely inhabited Marquette County, Michigan. A large U.S. Air Force base is located within its boundaries and 63% of the students in the district schools are children of military and civilian personnel assigned to the base. The United States makes payments to the district under the Impact Aid Act to compensate for the fact that the land occupied by the Air Force base has been removed from local tax rolls and the district is required to furnish educational facilities and opportunities to dependents of persons assigned to the base. In addition the State of Michigan makes payments to the district under the Michigan Act. Since 1980 the state has reduced its payments to the district each year by applying a formula which reduces state aid by a percentage of federal impact aid which a district receives. This deduction is authorized by a provision of the Impact Aid Act which was added by a 1974 amendment. Prior to 1974 the states were not permitted to make a deduction for federal impact aid. The 1974 amendment provided in part:
[I]f a State has in effect a program of State aid for free public education for any fiscal year, which is designed to equalize expenditures for free public education among the local educational agencies of that State, payments under this subchapter for any fiscal year may be taken into consideration by such State in determining the relative--
(i) financial resources available to local educational agencies in that State; and
(ii) financial need of such agencies for the provision of free public education for children served by such agency, provided that a State may consider as local resources funds received under this subchapter only in proportion to the share that local revenues covered under a State equalization program are of total local revenues.
Whenever a State educational agency or local educational agency will be adversely affected by the operation of this subsection, such agency shall be afforded notice and an opportunity for a hearing prior to the reduction or termination of payments pursuant to this subsection.
20 U.S.C. Sec. 240(d)(2)(A) (1982).
In their complaint the plaintiffs charged that the Michigan Act does not provide an "equalized formula" as contemplated by Sec. 240(d)(2)(A) 1 and that the Michigan Department of Education had no right to deduct federal impact aid in calculating state aid. The complaint also charged the state defendants with failing to comply with the requirement of the Michigan Constitution that the state provide a meaningful system of free public education, and with violating the equal protection and due process guarantees of the Constitution of the United States and the Michigan Constitution. In addition to an injunction the plaintiffs sought a declaratory judgment that the state defendants were violating the various constitutional provisions by the manner in which they administer state aid laws in conjunction with federal impact aid and that the federal defendants have breached congressionally imposed obligations by allowing the State of Michigan to deduct from the plaintiff district "the very benefaction that the federal impact aid statutes were intended to bestow ...."
This action was filed in a Michigan circuit court and removed to the federal district court on petition of both the federal and state defendants. Thereafter the federal defendants filed a motion to dismiss and the state defendants filed a motion for summary judgment. The motion for summary judgment was supported by the affidavit of a supervisor within the Michigan Department of Education and exhibits including transcripts of proceedings before the Department concerning the deduction of federal impact aid funds from state equalization allocations.
The district court filed an opinion with its judgment. See Gwinn Area Community Schools v. State of Michigan, 574 F.Supp. 736 (W.D.Mich.1983). The district court summarized the plaintiffs' position as being that the formula used by the state "unduly shifts a tax burden to them." Id. at 741. In a footnote the court pointed out that the argument concerning the relationship between the Michigan Act and the Impact Aid Act was somewhat unclear. Nevertheless, the district court concluded that no judicial attack could be mounted on the state aid formula without first submitting the controversy to the Secretary of Education through administrative procedures provided by federal regulations. Id. n. 1. The court found that there had been no exhaustion of administrative remedies with respect to school years 1980-81, 1981-82 and 1982-83, and found that the plaintiffs were involved in administrative procedures for the school year 1983-84 at the time of its decision. Insofar as it challenged the formula for 1983-84 the complaint was dismissed without prejudice. All other claims were dismissed with prejudice.
The district court determined that the school district lacked standing to assert claims against the State of Michigan for violation of the United States Constitution, but that the individual plaintiffs did have standing to make such claims. Considering these claims of the individual plaintiffs, the court found that the Michigan Act does not create a "suspect classification" and that it places no burden on a "fundamental interest." The court then concluded that the state aid formula survived a "rational relationship" analysis and did not violate equal protection. Id. at 748-54. The district court also found that the substantive due process claims of the individual plaintiffs lacked merit. The court found no confiscation in the allowance of a deduction from state aid for federal impact aid and noted that the Fourteenth Amendment does not require absolute equality in state schemes of taxation. The district court did not address the plaintiffs' claims that action of the state defendants violated the Michigan Constitution.
We have carefully considered each argument made by the plaintiffs-appellants, but will not treat with all of them in detail. The plaintiffs' arguments were fully considered and answered in the district court's published opinion and we agree with the conclusions of the district court on most of the issues.
The district court was clearly correct in dismissing the claims against the federal defendants for failure of the plaintiffs to exhaust administrative remedies. The Department of Education is given responsibility for administering federal impact aid. That department's regulations provide specific standards by which the Secretary of Education is to determine each school year whether a state aid program meets the statutory requirement of a program "designed to equalize expenditures for free public education among the local educational agencies of that State ...." 34 C.F.R. Secs. 222.60-222.68. Further, Sec. 222.69 provides for notice and an opportunity for hearing to any local educational agency adversely affected by a determination, and it provides specific procedural rules. While representatives of the plaintiff district took some of the procedural steps, it is clear that they did not exhaust administrative remedies with respect to school years 1980-81 and 1981-82. The district court treated the exhaustion issue fully in its opinion and we agree with its conclusions. See Gwinn Area Community Schools, 574 F.Supp. at 743-48. One finding of fact with respect to exhaustion is clearly erroneous. The district court found that the plaintiffs had failed to exhaust their administrative remedies for the school year 1982-83. The record discloses, and the defendants concede, that administrative remedies related to that year are still in progress. Therefore, on remand the district court will amend its judgment to dismiss claims against the federal defendants based on allocation of state aid for the school year 1982-83 without prejudice.
We agree with the district court's treatment of the standing question. The school district, as a political subdivision of the State of Michigan, was in no position to attack state action as violative of the United States Constitution. In Lansing School District v. State Board of Education, 367 Mich. 591, 116 N.W.2d 866 (1962), a local school...
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