Gannon v. State, 372 P.3d 1181

Background

Plaintiffs challenged Kansas K‑12 funding under Article 6 §6(b) (adequacy and equity). A three‑judge panel found the system (SDFQPA then CLASS) inequitable; the Kansas Supreme Court affirmed equity violations in Gannon I (298 Kan. 1107) and Gannon II (303 Kan. 682) and stayed remedial mandate to allow legislative cure.
In April 2016 the Legislature enacted H.B. 2655: it restored the pre‑CLASS capital outlay formula, applied that capital outlay formula to LOB (local option budget) supplemental general state aid, added a 1‑year “hold harmless” equalization payment for districts that would lose funding, and moved/allowed transfers from an “extraordinary need” fund to help shortfalls.
The State bore the burden to prove H.B. 2655 remedied the equity defects identified in Gannon II; the court reviewed legislative materials submitted as the remedial record.
The court found H.B. 2655: (1) cured capital outlay equalization when fully funded; (2) failed to cure and in some respects worsened LOB inequities because applying the capital outlay formula to LOB greatly reduced aid to poorer districts and fewer districts qualified; (3) the hold harmless and extraordinary need provisions were insufficient to cure those LOB inequities.
Because the unconstitutional LOB/supplemental aid provisions are integral to CLASS and severance would produce massive funding losses (≈$1 billion annually) inconsistent with legislative intent and operation, the court held the unconstitutional provisions are not severable; the court retained the stay of remedial orders through June 30, 2016 to give the Legislature another opportunity to act.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether H.B. 2655 cured capital outlay equity violations	Capital outlay inequities remained unless pre‑CLASS formula was fully restored and funded	H.B. 2655 restored and funded the pre‑CLASS capital outlay formula	Held: cured — restored SDFQPA capital outlay formula and funding satisfied equity for capital outlay
Whether H.B. 2655 cured LOB (supplemental general state aid) equity violations	Applying capital outlay formula to LOB worsens inequities; hold harmless and extraordinary need won’t fix structural disparity	State argued applying capital outlay formula is permissible, and hold harmless + extraordinary need fund mitigate harms	Held: failed — application of capital outlay formula to LOB reduces aid, decreases number of qualifying districts, and exacerbates inequity; hold harmless and extraordinary need are insufficient
Whether plaintiffs are entitled to attorney fees for this remedial phase	Plaintiffs sought fees	State opposed; procedural rules not satisfied	Held: denied — fee motions not properly before the court on this appeal stage
Whether unconstitutional LOB/supplemental provisions are severable from CLASS	Plaintiffs: provisions not severable; whole act must fall	State: sever offending provisions and leave remainder in force (pointing to severability clause)	Held: not severable — severance would defeat legislative intent and produce immediate massive funding losses inconsistent with the Act; whole statutory scheme cannot stand as severed

Key Cases Cited

Gannon v. State, 298 Kan. 1107 (Kan. 2014) (establishing adequacy/equity standards and holding funding system inequitable)
Gannon v. State, 303 Kan. 682 (Kan. 2016) (affirming equity violations under CLASS and retaining jurisdiction to review legislative cure)
Montoy v. State, 282 Kan. 9 (Kan. 2006) (legislative cure material can be considered; party asserting compliance bears burden)
Montoy v. State, 279 Kan. 817 (Kan. 2005) (remedial burden and review principles)
Brennan v. Kansas Ins. Guar. Ass'n, 293 Kan. 446 (Kan. 2011) (two‑part severability test focusing on legislative intent and functional operability)
Felten Truck Line v. State Bd. of Tax Appeals, 183 Kan. 287 (Kan. 1958) (severability standard and intent analysis)
National Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (U.S. 2012) (discussion of severance risks and judicial limits)
Hines v. State ex rel., 163 Kan. 300 (Kan. 1947) (refusing severance where unconstitutional provisions are integral to statutory scheme)