The True Story of the School Finance Lawsuit

Feb 11, 2013 by

When I was a Regent, we were faced with enormous cutbacks to the budget of higher education. We understood the pressure on revenues during the Great Recession and just hoped we could endure necessary cuts until revenues were restored as the economy recovered. No one on the Board of Regents imagined that a new administration would cut funding to education even as the economy began to recover.

There has always been the assumption that education is a critical investment in the future of the people of Kansas, and that to cut investment in our workforce makes no economic sense at all. I’m surprised that the current administration doesn’t see it that way.

Our next article gives a detailed history of recent court cases involving K-12 funding. It is by John Robb, one of the lead attorneys on many of the school finance cases of the past 25 years. He represents the school districts and, by extension, our teachers and children. It’s a long piece, but it contains a lot of vital information, particularly the extended quotes from the court’s decision toward the end of the article.

Of course, it is this case which inspires the proposed changes to our judicial selection system. – JD

By John Robb

I am General Counsel for Schools For Fair Funding. SFFF is a coalition of 53 school districts, including 146,843 kids in Kansas. This is 33% of the kids in the state.

I became involved with school finance issues about 25 years ago. Alan Rupe and I have partnered to file and try the Kansas school finance cases of the modern era. This includes the Mock case, the USD 229 case, the Robinson case, the Montoy case, the Petrella case and the Gannon case. Let me give a (short, I hope) history lesson on modern school finance:

The Kansas Constitution requires that schools be “suitably” funded. The courts have interpreted this to mean “adequately” funded. The SFFF districts did not think this constitutional mandate was being followed in the late 1990s and they authorized the Montoy suit. It was filed in 1999 in the District Court of Shawnee County in Topeka. It was assigned to Judge Terry Bullock, the senior judge of the district. After lengthy pretrial procedures, the case went to trial in 2003. The schools (and thus the kids) won at trial. The school finance system was declared “blatantly unconstitutional.”

The Montoy case was then appealed to Kansas Supreme Court… five times. In 2005, the Supreme Court unanimously agreed that the Kansas school finance system was unconstitutionally underfunded.

We then had contentious legislative sessions in the Regular Session of 2005, the Special Session of 2005 and the Regular Session of 2006. The legality of the school finance system was resolved when the legislature adopted a “three-year funding plan” in 2006. This phased-in plan promised to inject $755M annually into Kansas schools, when fully implemented.

We thought we were done. The Supreme Court took the legislature at its word and dismissed Montoy.

The follow through…

The three-year plan called for funding increases in 2007, 2008 and 2009. School years 2007 and 2008 saw the agreed increases. School year 2009 started with increases, and then the cuts began. Through a series of seven cuts from 2009 through 2011 the state has cut $511M back out. To put this in perspective, the Montoy increases were calculated to increase funding by $755M per year. The funding went up $755M and then back down $511M. One might get the idea that the legislature “backed up” on their promise.

The issue was that the increases were not “gratuitous,” the increases were not “gifts” bestowed by the legislature. The increases were found by the Supreme Court to be required to meet the mandates set by the Kansas Constitution. Our position was that there was no authority for cuts, absent a showing that school district costs went down. As all school boards, administrators and teachers know, the sour economy did not lower costs to educate kids, it increased them.

In response to this state of affairs, SFFF authorized the Gannon suit to be filed. It was filed in 2010 in the District Court of Shawnee County in Topeka.

The case was assigned to a special three-judge panel for trial. The panel consisted of Judge Theis from Topeka, Judge Burr from Goodland and Judge Fleming from Parsons – a geographically diverse panel of judges, from a mix of urban and rural areas. This three-judge panel system was designed by the legislature to avoid “activist” judges like Judge Bullock in Montoy – the legislative thought being, apparently, that a three-judge panel would avoid another “activist” judicial decision. (I guess it did not work out that way for them.)

Trial was held in the summer of 2012. The case was tried by Alan Rupe, Jessica Skladzien, and John Robb. Trial lasted five weeks with 42 live witnesses and 662 exhibits, totaling 18,727 pages. The trial transcript contains 3,672 pages of trial testimony.

The case was vigorously defended by the Attorney General’s office and outside counsel. The state had every opportunity to show that the finance system complied with the constitutional mandate.

The three-judge panel issued the Gannon decision on January 11, 2013. The school finance system was again found unconstitutional “beyond any question.”

The decision:

  1. Finds the Kansas school finance scheme unconstitutional as a violation of Article 6 of the Kansas Constitution due to underfunding. “The unconstitutionality attendant here is due to underfunding, not the Act itself….” (Page 243)
  2. Finds the Capital Outlay statute unconstitutional in whole due to the decision not to fund the equalization portions of it. Capital Outlay is “otherwise sound and necessary” but the “dilemma faced springs from the underfunding” of the equalization portion of it. (Page 243)
  3. Finds the proration of LOB equalization aid to be unconstitutional, as it creates a wealth-based disparity between poor districts and wealthy districts. (Page 233)
  4. Orders that the base be increased to $4492 from $3838 for the 2013-14 school year. This is the statutorily set amount that has been underfunded by under-appropriation. (Page 245)
  5. Orders “To prevent further unconstitutional erosion of funding to the school system occasioned by inflation, to resurrect an inflation adjustment mechanism for school finances such as [previously existed but] has now expired, so as to allow a then current value to future funding decisions….” (Page 244)
  6. Orders the state “to evaluate and compensate for any new costs that may accrue to the Kansas K-12 school system either from the Waiver or the ‘Common Core Standards,’ or both.” (Page 244)

The court said:

We think it clear, as the high court stated, actual costs are critical both to any formula, weighting, or funding in determining the constitutionality of legislation tied to a “suitable provision for finance” under Article 6, § 6(b). Costs, along with the equity of distributing funds to the need evidenced, are a “critical” factor to be considered. (Page 51)

If goals are to be reached their costs need to be known. The consequence of mere denial or guess is far too severe…. [T]he inquiry to be made is empirical, that is, fact based. (Page 54)

While some outside advocacy groups have tried to falsely state that achievement levels are not impacted by the amount of money spent on schools, the defense tried this approach with its witnesses and the court did not buy it. The court said:

Studies in Kansas have shown that money does make a difference. In the LPA study, a 1% increase in district performance outcomes was associated with a .83% increase in spending – almost a one-to-one relationship. (Page 61)

The court went on to say:

Nevertheless, what seems clear is that the benefit of the increased weightings made by the Legislature after FY2005 has largely been neutralized…. we must conclude that the Legislature could not have possibly considered the actual costs of providing an Article 6, §6(b) suitable education in making its appropriations in its annual sessions after its 2008 session through its 2012 session. (Page 117)

In truth, and in fact, it appears that the Kansas Legislature… wholly disregarded the considerations required to demonstrate a compliance with Article 6, §6(b). Further, not only were the above factors disregarded, but also they did not provoke the clearly obvious need for an updated cost study that might properly reflect the cost of the growing demands placed on our school children and their school districts if our children are to succeed in our more complex world of work. (Page 118)

Throughout the litigation history concerning school finance in Kansas, wealth based disparities have been seen as an anathema, one to be condemned and disapproved…. Here, there has been no showing of a cost based justification for prorating the payment of supplemental State aid money [LOB equalization]… (Page 141)

An educational system that permits these results is neither fair, nor balanced, nor in the public interest. More importantly, in Kansas, such an educational system is not constitutional. (Page 190)

[We have found] that the non-payment of capital outlay state aid exacerbated, and most probably diminished, the value of the reduced [base] existing from FY2010 forward. We also found that the nonpayment of capital outlay equalization payments created an unconstitutional, wealth based, inequity, which would, if left uncorrected, make the whole of K.S.A. 72-8801, et seq., unconstitutional. (Page 201)

While we have not been called upon to rule upon the legal efficacy of 2012 Senate Substitute for H.B. 2117, which enacted an income tax reduction effective January 1, 2013, in the face of the State’s active disregard of its constitutional duties under Article 6, § 6(b), we, probably, need not do so in the absence of a non-compliance with our overall opinion in the present case. (Page 225)

It seems completely illogical that the State can argue that a reduction in education funding was necessitated by the downturn in the economy and the state’s diminishing resources and at the same time cut taxes further, thereby further reducing the sources of revenue on the basis of a hope that doing so will create a boost to the state’s economy at some point in the future. (Page 226)

[W]e still believe… that Plaintiffs have established beyond any question that the State’s K-12 educational system now stands as unconstitutionally underfunded. (Page 229)

What would it cost to fix the system? It depends on the level you aim at. For a beginning point, the Gannon court looked at the level that is currently set in statute but has been under-appropriated. To fund a base at $4492 instead of the current $3838 costs an additional $437M. If you follow the cost studies done by the state, the base should be set at around $6000. That would cost an additional $1.4B. Fully funding LOB equalization aid costs $57M and fully funding capital outlay equalization aid costs $21M. The total to fix the system is either $515M or $1.5B. If the state is compelled to fund the “actual costs” as prior case law mandates, it will be closer to the $1.5B number.

The case is currently on appeal to the Kansas Supreme Court. We expect the matter to be briefed this summer, orally argued in the fall with a decision late this year or early next year.

 

 

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  1. Docking Blog features Gannon attorney - [...] A great explanation of how we got here and how the Montoy/Gannon cases are not overreach. http://www.dockingblog.com/the-true-story-of-the-school-finance-lawsuit/ [...]

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