San Diego Unified Sch. Dist. v. Yee, D072894

• Decision Date: 30 November 2018
• Docket Number: D072894
• Citation: 241 Cal.Rptr.3d 896,30 Cal.App.5th 723
• Court: California Court of Appeals Court of Appeals
• Parties: SAN DIEGO UNIFIED SCHOOL DISTRICT et al., Plaintiffs and Appellants, v. Betty YEE, as State Controller, Defendant and Respondent.

30 Cal.App.5th 723

241 Cal.Rptr.3d 896

SAN DIEGO UNIFIED SCHOOL DISTRICT et al., Plaintiffs and Appellants,

v.Betty YEE, as State Controller, Defendant and Respondent.

D072894

Court of Appeal, Fourth District, Division 1, California.

Filed November 30, 2018

Dannis Woliver Kelley and Christian Mark Keiner, William Benjamin Tunick, Chelsea Olson Murphy for Plaintiffs and Appellants.

Xavier Becerra, Attorney General, Thomas S. Patterson, Senior Assistant Attorney General, Paul Stein and Aaron David Jones, Deputy Attorneys General for Defendant and Respondent.

O'ROURKE, J.

Plaintiffs and appellants San Diego Unified School District, Clovis Unified School District, Poway Unified School District, San Jose Unified School District, Newport-Mesa Unified School District, and Grossmont Union High School District (the Districts) appeal from an order sustaining without leave to amend the demurrer of defendant and respondent State Controller Betty Yee (the Controller) to the Districts' first amended petition for writ of mandate and complaint. The Districts had challenged the Controller's reduction of subvention—reimbursement of monies from state funds to the Districts¹ —but the trial court ruled the action was barred by the 90-day statute of limitations set forth in Code of Civil Procedure²

section 341.5, implicitly finding the action was one "challenging the constitutionality of any statute relating to state funding for ... school districts" within the meaning of section 341.5.

The Districts contend that under its plain language, section 341.5 does not apply because, among other reasons, their challenge involves subvention, not state funding; the dispute is focused on the Controller's actions, not the constitutionality of the statutes under which the Controller acted; and their challenge is not a facial challenge subject to section 341.5. We reject these contentions, and conclude section 341.5 applies to the Districts' action, the gravamen of which is a challenge to the constitutional validity of statutes— Government Code sections 17581.8, 17581.9 and 17581.95 —providing one-time general state funding for school districts. We accordingly affirm the judgment of dismissal.

FACTUAL AND PROCEDURAL BACKGROUND

We set out the facts from the Districts' first amended petition and complaint; in doing so, we accept as true all the material allegations but not contentions,deductions or conclusions of law. ( Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512, 213 Cal.Rptr.3d 568, 388 P.3d 800.) We may also consider matters that are judicially noticeable. ( Grossmont Union High School Dist. v. State Dept. of Education (2009) 169 Cal.App.4th 869, 897, 86 Cal.Rptr.3d 890 ( Grossmont Union ).)

The Districts are public school districts, which entitles them to be reimbursed by the state for the costs associated with any new program or higher level of service mandated by the Legislature or any state agency. That right to reimbursement or subvention is set forth in article XIII B, section 6 of the California Constitution.³ The Legislature created and delegated to the Commission on State Mandates the authority to hear and decide whether a statute or executive order imposes costs mandated by the State within the meaning of article XIII B, section 6 and created a statutory scheme for local agencies or school districts to claim subvention. Under the scheme, school districts file initial and then annual reimbursement claims. The Controller is charged with receiving, auditing, and accounting for the claims submitted by local agencies for costs of implementing the state-mandated programs.

Since the 2013-2014 school year, funding for kindergarten through grade 12 school districts has been governed by a formula that establishes a minimum amount of revenue per student for each school district. In 2014, 2015 and 2016, the Legislature enacted Government Code sections 17581.8, 17581.9 and 17581.95 (at times the funding statutes) providing one-time general state funding to school districts and other local education agencies. Under those funding statutes, the State Superintendent of Public Instruction allocated funds essentially based on a school district's average daily attendance rate without relation to the amount of subvention owed to it. Each law provides in part: "Allocations made pursuant to this section shall first satisfy any outstanding claims pursuant to Section 6 of Article XIII B of the California Constitution for reimbursement of state-mandated local program costs for any fiscal year." ( Gov. Code, §§ 17581.8, subd. (c), 17581.9, subd. (d), 17581.95, subd. (d).⁴ )

For fiscal years 2014-2015, 2015-2016 and 2016-2017, the Controller's reports showed a reduction of subvention owed to the Districts, reflecting the Controller's interpretation of the language contained in the funding statutes. The Controller acknowledged in statements accompanying her reports that " ‘[t]he State Controller's Office is required to offset amounts received by each school district ... against any balances of unpaid claims for reimbursement of state-mandated local costs and interest in chronological order beginning with the earliest claim.’ "

On December 2, 2016, the Districts filed a petition for writ of mandate and complaint for declaratory and injunctive relief in the San Diego Superior Court against the State of California, the Controller, and the Director of the Department of Finance. The petition and complaint challenged the State's practice, under the funding statutes, of deeming general purpose funding provided to all school districts as subvention for those districts with outstanding claims for state-mandated costs. The Districts alleged the funding statutes sought to "accomplish ... what the voters sought to prevent in article XIII B, section 6," namely, the diversion of hundreds of millions of dollars in general purpose school district funds from local district priorities to cover the costs of state-mandated programs, transferring the fiscal responsibility for the costs from the State to the school districts, which "violat[ed] the constitutional protection" of article XIII B, section 6. They alleged that the three statutes "have been used by the State in an attempt to wipe out nearly $365 [million] in mandated costs otherwise owed to school districts." The Districts alleged: "This accounting maneuver means that funds received by the District must be used to offset costs mandated by the State instead of funding programs to advance the Districts' missions. This is exactly the type of financial burden which the Constitution prohibits the State from shifting to school districts. Under the requirements of the Constitution, the State cannot ‘require[ ] local entities to use their own revenue to pay for [mandated] programs.’ "

In the original petition and complaint, the Districts sought judicial declarations that the use of the funding statutes to reduce subvention due to the Districts "violate[d] the protections of article XIII B, section 6." Alleging the defendants' attempt to reduce subvention through the funding statutes violated the Constitution and the Government Code, the Districts sought a peremptory writ of mandate alleging that the defendants had a "clear, present and ministerial duty to not artificially reduce the amount of subvention owing to Districts" and sought to compel the defendants to not reduce subvention "as a result of the appropriation of funds pursuant to [Government Code] sections 17581.8, 17581.9, and 17581.95 and to correct any reductions made to date based on these statutes." The Districts also sought prohibitory and mandatory injunctions "to restrain [defendants] ... from implementing the portions of [the funding statutes] which require any reduction in the amount of subvention owing to the Districts" and "to require [them] ... to correct any adjustments in the amount of subvention owing to the Districts made to date pursuant to [the funding statutes]."

Defendants demurred to the complaint on grounds it was time-barred by the 90-day statute of limitations set forth in section 341.5. They pointed out the Districts' petition was filed 158 days after the effective date of Government Code section 17581.95, and approximately 1.5 and 2.5 years respectively after sections 17581.9 and 17581.8 became effective, well after the 90-day limitations period.

Rather than oppose the demurrer, the Districts filed their operative pleading, the first amended petition and complaint, in March 2017. They eliminated the state and the Department of Finance director as parties, and again characterized the Controller's action in offsetting the funding as an "accounting maneuver" or "paper reductions" that sought to "accomplish ... what the voters sought to prevent in article XIII B, section 6." The Districts sought declaratory and injunctive relief, as well as a peremptory writ of mandate. Specifically, they asked for a determination of their rights and duties and judicial declarations (1) of the amounts of subvention due them; (2) that the amounts of subvention due the Districts could only be reduced by reimbursement provided by law; and (3) that "any act by [the Controller] to otherwise reduce the amounts of subvention due to the Districts is unlawful." The Districts asked the court to issue a peremptory writ of mandate to compel the Controller "to not unlawfully artificially reduce the amount of subvention owing to the Districts," "to correct any unlawful reductions to the amount of subvention owing to Districts" and "to issue correct reports of the amount still owed to the Districts." They asked for a prohibitory injunction to restrain the Controller from (1) artificially reducing the amount of subvention owed them and (2) refusing to allocate future State reimbursement to the Districts for costs associated with state-mandated programs in amounts less than what was legally due. They sought a mandatory injunction to require the...