COAST COMMUNITY COLLEGE DISTRICT et al., Plaintiffs and Appellants, v. COMMISSION ON STATE MANDATES, Defendant and Respondent; DEPARTMENT OF FINANCE, Real Party in Interest and Respondent.
S262663
IN THE SUPREME COURT OF CALIFORNIA
August 15, 2022
Third Appellate District C080349; Sacramento County Superior Court 34-2014-80001842CUWMGDS
Justice Groban authored the opinion of the Court, in which Chief Justice Cantil-Sakauye and Justices Corrigan, Kruger, Jenkins, and Guerrero concurred. Justice Liu filed a concurring opinion.
Opinion of the Court by
The districts filed a claim with the Commission on State Mandates, “‘a quasi-judicial body [that] has the sole and exclusive authority to adjudicate whether a state mandate exists‘” (California School Boards Assn. v. State of California (2009) 171 Cal.App.4th 1183, 1200; see
The Commission rejected the claims, concluding that the districts had failed to show they were legally compelled to comply with the regulations because there was no provision creating a mandatory duty that they do so; instead, noncompliance merely raised the possibility that some portion of their state funding would be withheld. The Commission further concluded that the districts had failed to establish they were compelled to comply as a practical matter, explaining that no evidence had been submitted demonstrating the districts were unable to function without state funding or that they otherwise lacked any true choice but to comply with the conditions.
In subsequent mandate proceedings, the trial court affirmed the Commission‘s findings with respect to both legal and practical compulsion. The Court of Appeal reversed, concluding that the districts were legally compelled to comply with the regulations because those regulations “apply to the underlying core functions of the community colleges, functions compelled by state law.” The court also rejected the Commission‘s finding that legal compulsion was inapplicable because noncompliance merely placed the districts at risk of
We reverse. Contrary to the Court of Appeal‘s interpretation, the fact that the standards set forth in the regulations relate to the districts’ core functions (matriculation, hiring of faculty and selecting curriculum, etc.) does not in itself establish that the districts have a mandatory legal obligation to adopt those standards. (See Kern, supra, 30 Cal.4th at p. 741.) The regulations make clear that if a district fails to comply, the California Community Colleges Chancellor has discretion to pursue any number of remedial measures that range from taking no action to “withhold[ing] or reduc[ing] all or part of the district‘s state aid.” (
Moreover, while the Court of Appeal appears to have reasoned that the districts have no true choice to comply with the regulations insofar as they depend on state aid to function, those arguments sound in practical, rather than legal, compulsion. (See generally City of Sacramento v. State of California (1990) 50 Cal.3d 51, 74 (City of Sacramento) [finding practical compulsion where “[t]he alternatives were so far beyond the realm of practical reality that they left the state ‘without discretion’ to depart from federal standards“].) Because the Court of Appeal chose not to address whether the districts established practical compulsion, we will remand the matter to allow the court to evaluate that issue in the first instance.
I. BACKGROUND
A. Summary of Applicable Statutes
1. Proposition 4 and implementing legislation
”
In 1984, the Legislature adopted statutory procedures for determining whether a statute or executive action (which includes executive orders and regulations) imposes state-mandated costs on a local agency. (See
In making that determination, the Commission is required to address a series of questions. First, it must decide whether the legal provision for which subvention is sought compels the local agency to act or merely invites voluntary action. If the provision compels action, the Commission must next decide whether the compelled activity requires the agency to provide “a new program or higher level of service.” (
first of those inquiries: whether the regulations at issue compel community college districts to act or, alternatively, merely invite voluntary action.
2. Statutes and regulations governing community colleges
California community colleges offer two-year degree programs and other forms of instruction. There are currently 73 community college districts that collectively operate 116 community colleges. Each community college district is run by a board of trustees (district board) (see
The Legislature has, however, cabined the authority of district boards in some ways.
The Legislature has assigned general oversight authority of the districts to the Board of Governors of the California Community Colleges (the Board of Governors), which enacts regulations and reviews major decisions of community college districts, such as the creation of new colleges. (See
The Legislature also directed the Board of Governors to adopt separate regulations that “[e]stablish minimum conditions entitling districts to receive state aid for support of community colleges” and to adopt procedures to “periodic[ally] review” whether each district has met those minimum conditions. (
Unlike the operating standards regulations, the districts are not expressly required to comply with the funding entitlement regulations. Instead, the Education Code and its implementing regulations provide that noncompliance authorizes the Chancellor to initiate a process that may result in withholding or reduction of state funding. (See
B. Procedural History
1. The Commission‘s resolution of the test claims
In June 2003, the Los Rios, Santa Monica, and West Kern community college districts filed test claims seeking reimbursement for costs associated with 27 sections of the Education Code and approximately 140 related regulations. The test claims included (among other provisions) the operating standards regulations and the funding entitlement regulations. After nearly a decade of review, the Commission issued a 164-page statement of decision that authorized reimbursement for over 90 of the alleged mandates, many of which related to the operating standards regulations implemented pursuant to
However, the Commission rejected all claims related to the funding entitlement regulations, concluding that the districts had failed to establish those regulations compelled them to take any action. The Commission reasoned that unlike the operating standards regulations, compliance with the funding entitlement regulations was not legally mandated, but instead operated to remove the possibility that the Board of Governors might withhold some portion of the noncomplying district‘s state aid. The Commission further explained that the regulations provided the Chancellor and the Board of Governors discretion to choose what “actions to take” in response to a district‘s noncompliance, meaning that a district might still retain all its aid even if it chose not to comply. The Commission noted that the districts’ evidence showed only one case in which the Chancellor had ever recommended that the Board of Governors withhold funding from a district, which occurred after the San Mateo Community College had failed to comply with an equal opportunity hiring regulation when choosing its new superintendent. The Board, however, ultimately rejected the Chancellor‘s recommendation to withhold funding and chose instead to increase monitoring over the district. The Commission concluded the case demonstrated that while “there is . . . a possible loss of funding, [there is no] . . . evidence of the certainty of this loss.”
2. The trial court‘s ruling
The districts filed a writ petition seeking reversal of the Commission‘s finding that the funding entitlement regulations did not qualify as a mandate.
The trial court affirmed the Commission‘s decision and adopted most of its reasoning. The court concluded that the districts “are not legally compelled to comply with the minimum conditions. Instead, . . . [they] only have to comply with the minimum conditions if they want to become entitled to receive state aid.” (Italics omitted.) The court also rejected the districts’ assertion that even if not legally compelled to comply, they were nonetheless practically compelled to do so “because they cannot operate without state funding and thus have no meaningful choice but to comply with the minimum conditions.” The court explained that it could not evaluate that assertion because the districts had “cite[d] no evidence in their briefs about how much community colleges receive from state aid, how much they receive from property taxes, and how much they receive from other funding sources. . . . With no evidence on this issue, . . . [the districts] fail to prove the key point (i.e., that they cannot operate without state funds).” (Italics omitted.) The trial court further concluded that even if there were sufficient evidence to support a finding that the districts relied on state funds to operate, the districts had failed to show that noncompliance was reasonably likely to result in the withholding of state funds. The court reasoned that while the funding entitlement regulations authorized the Chancellor “to withhold state aid if a district fails to comply,” the districts had not proved that “loss of state aid is... reasonably certain to occur” or that the amounts withheld would necessarily be “severe.” Like the Commission, the trial court cited evidence regarding the disciplinary action the Board of Governors had taken against San Mateo Community College District for failing to comply with funding entitlement regulations related to equal opportunity hiring. The trial court noted that the Board‘s meeting minutes showed it had rejected the Chancellor‘s recommendation to withhold $500,000 in state aid because “of the worry that doing so would negatively impact students.” In the court‘s view, these actions showed that it was “unlikely that a district would actually lose any state aid if it failed to comply with the minimum conditions.”
3. The Court of Appeal‘s partial reversal
The Court of Appeal reversed in part, concluding that the districts had shown they were legally compelled to comply with the funding entitlement regulations because those regulations related to the community college
The court further concluded that while the Commission had found “the [funding entitlement regulations] are not legally compelled because the community colleges are free to decline state aid,” that conclusion was “inconsistent with the statutory scheme and the appellate record.” The court explained that the California Constitution requires “a specific minimum level of state General Fund revenues be guaranteed and applied for the support of community college districts” and further requires that the state provide districts sufficient funding “to permit them to carry out their mission.” Without citing a specific source, the court noted that “in the most recent year for which the appellate record in this case provides information, more than half of California community college funding came from the state General Fund. In that same year, other funding sources, including federal funds, local funds, and student fees, provided significantly less support. Like public school districts in general, community college districts are dependent on state aid.” (Italics omitted.) Because the court found that the districts were legally compelled to comply with the funding entitlement regulations, it declined to address the trial court‘s alternative finding that the districts had failed to demonstrate they “faced practical compulsion based on severe and certain penalties.”
The Court of Appeal went on to rule, however, that the districts were not entitled to reimbursement for many of the funding entitlement regulations because the programs or services described within those regulations were duplicative of requirements imposed under the operating standards regulations, which the Commission had previously found to be reimbursable. In total, the Court of Appeal found that only six of the nineteen funding entitlement regulations involved programs or services that did not overlap with operating standards regulations or other statutory requirements the Commission had already found to be reimbursable. For those six regulations, the court remanded the matter back to the Commission to evaluate whether they imposed a new program or higher level of service within the meaning of the mandate law.
II. DISCUSSION
A. Standard of Review
“Courts review a decision of the Commission to determine whether it is supported by substantial evidence. [Citation.] Ordinarily, when the scope of review in the trial court is whether the administrative decision is supported by substantial evidence, the scope of review on appeal is the same. [Citation.] However, the appellate court independently reviews conclusions as to the meaning and effect of constitutional and statutory provisions. [Citation.] The question whether a statute or executive order imposes a mandate is a question of law. [Citation.] Thus, we review the entire record before the Commission...and independently determine whether it supports the Commission‘s conclusion that the conditions here were not ... mandates.” (Department of Finance v. Commission on State Mandates (2016) 1 Cal.5th 749, 762.)
B. Analysis
Respondents argue the Court of Appeal erred in finding the districts were legally compelled to comply with the funding entitlement regulations. They further contend that although the Court of Appeal did not reach the issue, we should additionally find that the districts failed to establish they were practically compelled to comply with those regulations.
Although the Commission‘s arguments regarding this secondary issue fall within the scope of our order granting review, we decline to address them. (
1. Distinction between legal compulsion and practical compulsion
When evaluating whether a statute or executive action compels compliance for purposes of subvention claims, we have identified two distinct theories of mandate: legal compulsion and practical compulsion. Legal compulsion occurs when a statute or executive action uses mandatory language that “‘require[s]’ or ‘command[s]‘” a local entity to participate in a program or service. (Kern, supra, 30 Cal.4th at p. 741; see Long Beach Unified Sch. Dist. v. State of California (1990) 225 Cal.App.3d 155, 174 [construing the term “mandates” in
Thus, as a general matter, a local entity‘s voluntary or discretionary decision to undertake an activity cannot be said to be legally compelled, even if that decision results in certain mandatory actions. In Kern, supra, 30 Cal.4th 727, for example, we held that school districts were not entitled to reimbursement for costs associated with a law that imposed new requirements related to the administration of certain voluntary, state-funded educational programs. Under the original statutes governing these voluntary educational programs, “participating school districts [we]re granted state or federal funds to operate the program, and [we]re required to establish ... advisory committees [to]... administer the program.” (Id. at p. 732.) The new law required participating districts to make those advisory committee meetings open to the public and provide the public notice of the meetings and post meeting agendas.
In rejecting the districts’ reimbursement claim for those new open meeting requirements, we explained that because the “notice and agenda provisions [were merely] mandatory elements of [voluntary] programs” (Kern, supra, 30 Cal.4th at p. 731), the districts were not legally compelled to comply with those provisions. (See id. at p. 742 [“activities undertaken at the option or discretion of a local government entity... do not trigger a state mandate and hence do not require reimbursement of funds — even if the local entity is obliged to incur costs as a result of its discretionary decision to participate in a particular program or practice“]; but see San Diego Unified School Dist. v. Commission on State Mandates (2004) 33 Cal.4th 859, 887 [declining to adopt a bright-line rule precluding reimbursement “whenever an entity makes an initial discretionary decision that in turn triggers mandated costs“].)
Kern also discussed the concept of “practical compulsion,” a theory of mandate that arises when a statutory scheme does not command a local entity to engage in conduct, but rather induces compliance through the imposition of severe consequences that leave the local entity no reasonable alternative but to comply. (See Kern, supra, 30 Cal.4th at pp. 748-752.) Relying on our decision in City of Sacramento, supra, 50 Cal.3d 51, the claimants in Kern argued that we should construe
Although we found the federal law did not legally compel states to extend unemployment insurance coverage to all public employees, we nevertheless concluded that “because the financial consequences to the state and its residents of failing to participate in the federal plan were so onerous and punitive — we characterized the consequences as amounting to ‘certain and severe federal penalties’ including ‘double...taxation’ and other ‘draconian’ measures [citation] — as a practical matter, for purposes of
We declined to resolve that issue, explaining that even if we were to assume “that our construction of the term ‘federal mandate‘... applies equally in the context of
Presumably, a school district will continue to participate only if it determines that ..., on balance, the funded program, even with strings attached, is deemed beneficial.” (Id. at p. 753, italics omitted.)5
2. The districts have failed to show legal compulsion
We first address the Court of Appeal‘s conclusion that the districts were legally compelled to comply with the funding entitlement regulations.
We are not persuaded that this enforcement scheme legally compels the districts to comply with funding entitlement regulations. As summarized above,
While the districts argue that the threat of such a penalty effectively forces community colleges to comply with the regulations (an issue discussed in more detail below), there is nothing in the statute or regulations that creates a mandatory legal obligation that they do so, which is the appropriate test for legal compulsion. If a community college district is willing to risk the possibility of losing some or all its state aid, there does not appear to be any mechanism (or at least none the parties have identified) that would allow the Chancellor or any other state entity to compel compliance as a matter of law.6
We do not dispute that many of the funding entitlement regulations are “in connection with” or relate to the “core functions” that community colleges are required to perform. We are not persuaded, however, that such a relationship is sufficient to establish legal compulsion. As we have previously explained, “[T]he proper focus under a legal compulsion inquiry is upon the nature of claimants’ participation in the underlying programs themselves.” (Kern, supra, 30 Cal.4th at p. 743.) Applying that standard here, the proper inquiry is whether the language of the funding entitlement provisions legally obligates the districts to comply with the conditions described therein, not whether those conditions relate to the core functions of the districts.
While the Court of Appeal may be correct that some (if not most) community college districts are heavily reliant on state aid — and thus have no true alternative but to act in a manner that secures their funding — those arguments sound in practical compulsion, rather than legal compulsion.7 (See generally Kern, supra, 30 Cal.4th at pp. 731, 751 [practical compulsion occurs when the local entity has ” ‘no true option or choice’ “]; City of Sacramento, supra, 50 Cal.3d at p. 74 [finding practical compulsion where the consequences of noncompliance “were so far beyond the realm of practical reality that they left the state ‘without discretion’ to depart from federal standards“].)
The Court of Appeal‘s reasoning is consistent with the primary argument the districts have raised throughout these proceedings, which also sounds in practical compulsion. In the trial court, for example, the districts argued that “the most serious error in the [Commission‘s] decision is the conclusion that the ‘minimum conditions’ of receiving state aid are not mandates because the Colleges may choose not to receive state funding. That conclusion is erroneous because the Colleges truly have no meaningful choice [but to comply].” In support, they cited City of Sacramento, supra, 50 Cal.3d 51, a case that turned on practical compulsion. (See ante, at pp. 17-19.) The districts’ briefing in the Court of Appeal contains essentially identical language, asserting that because noncompliance with the funding entitlement regulations could result in the “drastic loss” of funding necessary “to provide educational services, . . . the [c]olleges have no true choice but to comply.” Those same arguments remain central in the districts’ briefing before this court, where they again contend that “[t]he most serious error in the . . . Commission decision is . . . the conclusion that the minimum conditions of
In sum, while many of the directives in the funding entitlement regulations relate to the districts’ core educational functions, that is insufficient to show legal compulsion. Rather, to establish legal compulsion, the claimants had to show they had a mandatory duty to comply with the regulations. The districts have pointed to no such provision. Instead, they have asserted that because they rely on state aid to carry out their core functions, they have no true choice but to comply. For the reasons discussed above, we conclude that argument should be evaluated under the lens of practical, rather than legal, compulsion.
3. On remand, the Court of Appeal should consider practical compulsion
The districts also argue that regardless of whether legal compulsion applies in this case, the record makes clear they were compelled to comply with the funding entitlement regulations as a practical matter. (See Kern, supra, 30 Cal.4th at p. 731 [“we do not forget the possibility that a reimbursable state mandate might be found in circumstances short of legal compulsion“]; id. at p. 736 [leaving open question “whether . . . there are some circumstances in which a state mandate may be found in the absence of legal compulsion“]; id. at p. 744; see also Department of Finance, supra, 170 Cal.App.4th at pp. 1365-1366 [“if a local government participates ‘voluntarily,’ i.e., without legal compulsion or compulsion as a practical matter, in a program with a rule requiring increased costs, there is no requirement of state reimbursement“].)
The Department, however, contends (as it did in Kern) that we should narrowly interpret
Because the Court of Appeal found the districts were compelled to comply with the funding entitlement regulations as a matter of legal compulsion, it chose not to address any of the parties’ arguments regarding practical compulsion (also referred to as “nonlegal compulsion” [Kern, supra, 30 Cal.4th at p. 754]). Having now rejected the Court of Appeal‘s conclusion regarding legal compulsion, we find it “appropriate to remand for the [court] to resolve . . . in the first instance” whether the districts may be entitled to reimbursement under a theory of nonlegal compulsion. (Hamilton v. Asbestos Corp. (2000) 22 Cal.4th 1127, 1149 [“It is appropriate to remand for the Court of Appeal to resolve . . . in the first instance” issues that the court chose “not [to] reach because of its holdings“]; see People v. Goolsby (2015) 62 Cal.4th 360, 368 [reversing finding that
III. DISPOSITION
The Court of Appeal‘s judgment is reversed and the matter is remanded for further proceedings consistent with this opinion.
GROBAN, J.
We Concur:
CANTIL-SAKAUYE, C. J.
CORRIGAN, J.
KRUGER, J.
JENKINS, J.
GUERRERO, J.
COAST COMMUNITY COLLEGE DIST. v. COMMISSION ON STATE MANDATES
S262663
Concurring Opinion by Justice Liu
The Court of Appeal in this case concluded that community college districts are legally compelled to comply with the regulations setting forth the “minimum conditions entitling districts to receive state aid” (
I.
This case concerns the legal obligations of California‘s community college districts. Two sets of potential obligations are at issue: “minimum standards” and “minimum conditions.” (
The Education Code tells us where to look to understand the legal obligations of community college districts.
Because this statutory language is not free of ambiguity, we look to applicable regulations to discern what consequences may flow from noncompliance with the minimum conditions in order to decide whether they are legally compelled.
II.
Today‘s opinion focuses instead on the language of
Further, the court explains the procedure under
The parties have not supplied briefing or argument on the language in
I concur only in the judgment of reversal.
LIU, J.
Notes
As the concurrence expressly acknowledges, no party has ever presented such a theory at any point during this litigation, which has now been ongoing for almost two decades. (See conc. opn. of Liu, J, post, at p. 5.) From the start of the proceedings, the districts’ reimbursement claim has focused on