DURANT v STATE OF MICHIGAN
Docket No. 230859
Court of Appeals of Michigan
May 10, 2002
251 MICH APP 297
Submitted September 6, 2001, at Lansing. Leave tp appeal sought.
In an opinion by SAWYER, J., and separate opinions by NEFF, P.J., and FITZGERALD, J., concurring with the legal conclusions reached by Judge SAWYER, the Court of Appeals held:
- Funds allocated in subsection 20(1) of 2000 PA 297 to the “foundation allowance” per membership pupil may be used to meet the state‘s obligations under both Proposal A and the Headlee Amendment as long as the foundation allowance is equal to, or greater than, the sum of the state‘s obligations under Proposal A and the Headlee Amendment. The funding scheme contained in 2000 PA 297 is constitutional. Any use of that portion of the per pupil foundation allowance fixed in subsection 20(1) that remains after the state has funded the local school districts at the 1994-95 level to fund the state‘s Headlee Amendment obligation is not constitutionally prohibited.
- The constitution imposes two obligations on the Legislature with respect to school funding. Proposal A requires the Legislature to provide funding at the minimum level provided in 1994-95, approximately $5,000 per pupil. The Headlee Amendment obliges the state to provide certain special education funding in addition to the minimum funding of $5,000 per pupil. The constitution is satisfied if the amount appropriated by the Legislature meets the state‘s total minimum funding obligation.
NEFF, P.J., concurring, stated that the legal conclusion reached in this matter is supported by a strict legal analysis of the legislative scheme of 2000 PA 297 and the constitution. The funding scheme in 2000 PA 297, and the resulting freeze of the foundation allowance, is a subterfuge, a shell game, but one that the strict language of the constitutional amendment, divorced from the common understanding of the voters who approved Proposal A, allows. The outcome in this case does not keep faith with the implementing legislation, 1993 PA 336, or with what state officials told voters Proposal A meant. The revision of the school aid allocation scheme found in 2000 PA 297 is contrary to the intent of the ratifiers of Proposal A and is not what the voters understood would happen when they passed Proposal A.
FITZGERALD, J., concurring, stated that the legal conclusion reached in this matter is supported by the strict language of Proposal A. This conclusion does not comport with the common understanding of the voters who approved Proposal A. However, where, as here, the text of the constitutional provision is unambiguous, the interpretation that the great mass of the people themselves would give the provision is of no regard.
Summary disposition must be granted in favor of the defendants.
Pollard & Albertson, P.C. (by Dennis R. Pollard and Richard E. Kroopnick), for the plaintiffs.
Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, Jane O. Wilensky, Edith C. Harsh, Deborah Anne Devine, Gary L. Hicks, Matthew H. Rick, and Darrin F. Fowler, Assistant Attorneys General, for the defendants.
Amicus Curiae:
White, Schneider, Baird, Young & Chiodini, P.C. (by James A. White and Kathleen Corkin Boyle), for Michigan Education Association.
SAWYER, J. This original action,1 commonly referred to as ”Durant III,” requires this Court to revisit and reexamine the interplay between
In response to this Court‘s decision in Durant II, the Legislature enacted 2000 PA 297. Plaintiffs now challenge the constitutionality of that act. For the reasons expressed below, we conclude that 2000 PA 297 is constitutional.
2000 PA 297 creates a tripartite funding scheme the parties refer to as either the “three bucket” or the “three pot” approach. The state provides an overview of this approach in its brief in opposition to plaintiffs’ motion for summary disposition as follows:
- Allocate the appropriation for the state share of the Proposal A obligation at the 1994-95 level. (§ 22a).
- Allocate the appropriation for the Headlee Amendment obligations at the state financed proportions for special education and special education transportation. (§ 51c).
- Calculate the amount under the former appropriation sections (§§ 20, 20j, 51a(2), 51a(3) and 51a(12)).
The appropriations made under Step 1 (§ 22a) and Step 2 (§ 51c) are subtracted from the total in step 3. - The remainder equals the § 22b appropriation, an additional discretionary payment.
Sum of former appropriation sections
- 22a appropriation (Proposal A obligation)
- 51c appropriation (Headlee Amendment obligation)
= 22b appropriation.
A more detailed explanation of this three-bucket funding method is set forth in a February 6, 2001, Department of Education Bulletin as follows:
PAYMENT MECHANISM UNDER THE DURANT SOLUTION (NEW Sections 22a, 22b, and 51c)
Beginning in FY2001, foundation allowance payments and supplemental payments to local school districts and PSAs will no longer be paid out of Section 20 and 20j and special education payments to those entities will no longer be paid out of Section 51a. Rather, the amounts calculated pursuant to those sections will be used to determine the amount of state payments under NEW Section 22b. This payment mechanism, described below, has been designed to demonstrate the State‘s compliance with the foundation allowance guarantee under Proposal A and the minimum special education reimbursement obligation pursuant to the Headlee amendment:
Section 22a allocates a per pupil amount to meet the Proposal A guarantee of a FY95 foundation allowance per pupil.
Section 51c allocates an amount to meet the Headlee obligation equal to 28.6138% of a district‘s special education costs plus 70.4165% of the district‘s special education transportation costs.
Section 22b allocates a discretionary payment equal to the sum of the calculated amounts under Sections 20, 20j,
51a(2), 51a(3), and 51a(12) minus the amounts paid in Sections 22a and 51c.
NEW Section 22a allocates to each local school district, university school, and public academy that operated during FY95 and is in operation in the current year an amount per pupil sufficient to guarantee revenue in the amount of its FY95 total state and local per pupil revenue for school operating purposes, as guaranteed under Section 11 of Article IX of the State Constitution of 1963 (“Proposal A“). The payments under this section for a local school district will be calculated by subtracting from the FY95 foundation allowance or $6,500.00, whichever is less, the current year per pupil local operating revenue from the nonhomestead millage levy. The figure used for the current year per pupil local operating revenue is equal to the current year nonhomestead taxable value (less any captured assessed valuation under TIFA, LDFA, DDA, or Brownfield), multiplied by the lesser of 18 mills or the number of mills levied by the district for FY94, divided by the district‘s current year membership. If a hold harmless district‘s FY95 hold harmless millage rate, as certified by the Department of Treasury for the 1994 tax year, multiplied by the district‘s current year taxable value per pupil no longer generates the full hold harmless amount per pupil (that is, the difference between the district‘s FY95 foundation allowance and $6,500.00), the amount paid under Section 22a will be increased to include that shortfall. The per pupil payments under this section for a university school or PSA that was in operation in FY95 and is operating in the current year will be equal to the university school‘s or PSA‘s FY95 per pupil payment under Section 20.
NEW Section 51c allocates to districts (including a university school and PSAs) an amount equal to 28.6138% of total approved costs of special education (excluding costs reimbursed under section 53a), and 70.4165% of total approved costs of special education transportation.
NEW Section 22b allocates to districts (including a university school and PSAs) an amount equal to the difference between the sum of the calculations under Section 20
(foundation allowance), 20j (hold harmless supplemental), 51a(2) (special education foundation allowances and “categorical” payments), 51a(3) (special education “hold harmless“), and 51a(12) (other special education foundation allowances); minus the payments made under new Sections 22a and 51c. These Section 22b payments are not to be considered per pupil revenue for school operating purposes under Section 11 of Article IX of the State Constitution. Finally, in order to receive these funds, districts are required to administer a standardized department-approved assessment of basic educational skills for pupils in grades first through fifth.
The practical effect of this three-bucket approach is that, although subsection 20(1) of 2000 PA 297 sets the basic foundation allowance at $5,700 per membership pupil for 1999-2000, at $6,000 per membership pupil for 2000-01, at $6,300 per membership pupil for 2001-02, and at $6,700 per membership pupil for 2002-03, the state is calculating and funding its obligation under
This leads us to the current litigation. Plaintiffs are 458 taxpayers, 423 school districts, and 33 intermediate school districts, who have commenced this original action pursuant to
23. However, in enacting 2000 PA 297, the defendant state has again utilized revenue guaranteed to school districts in Michigan for general or unrestricted school operating purposes, i.e., “foundation allowance revenue,” pursuant to Proposal A in order to satisfy the state‘s independent and additional funding obligation to those school districts under § 29 of the Headlee Amendment in order to defray the costs incurred by those school districts to provide special education programs and services, inclusive of special education transportation services, in the proportion which applied in 1978 when the Amendment was adopted.
24. By operation of 2000 PA 297, school districts in Michigan were unconstitutionally underfunded Three Hundred Ninety-Six Million Five Hundred Thirty Thousand Two Hundred Four Dollars ($396,530,204.00) for the 1999-2000 school year and are presently being underfunded Four Hundred Seventeen Million Four Hundred Three Thousand One Hundred Fifty-Eight Dollars ($417,403,158) for the 2000-2001 school year and will be underfunded Four Hundred Fifty-Two Million One Hundred Thirty-Three Thousand Two Hundred Fifty Dollars ($452,133,250.00) for the 2001-2002 school year and will be underfunded Four Hundred Sixty-Six Million Ninety-Five Thousand One Hundred Twenty-Three Dollars ($466,095,123.00) for the 2002-2003 school year because per pupil revenue guaranteed to school districts in Michigan for general or unrestricted school operating purposes pursuant to Proposal A, Const 1963, art 9, § 11, as amended, has been allocated or transferred in order to satisfy the state‘s independent and additional funding obligation to those school districts pursuant to § 29 of the Headlee Amendment, Const 1963, art 9, § 29, for the costs incurred to provide special education programs and services, inclusive of special education transportation ser-
vices, in the proportion which applied in 1978 when the Amendment was adopted.
The essence of plaintiffs’ argument is that once the Legislature has allocated money to the “foundation allowance,” that money is unavailable to satisfy the state‘s obligations under the Headlee Amendment even if that foundation allowance is greater than the minimum required under
Plaintiffs assert with dispositive conviction that the fact that each school district will receive exactly the same amount that it would have received under the funding scheme struck down in Durant II is proof certain that the funding scheme employed in 2000 PA 297 is nothing more than a “shell game” that is equally unconstitutional. However, even if true, this does not render the three-bucket funding scheme unconstitutional per se. The fact that each school district might receive the same amount of funding under 2000 PA 297 that it received under 1997 PA 142 and 1998 PA 339 is of no moment with regard to the constitutionality of the funding scheme.
Durant II stands generally for the propositions that Michigan‘s Constitution prohibits the Legislature from using the per pupil funding guaranteed by Proposal A to satisfy the state‘s obligation under the Headlee Amendment and that such a use of per pupil funding guaranteed by Proposal A not only violates
If plaintiffs offer the correct construction of
Beginning in the 1995-96 state fiscal year and each state fiscal year after 1995-96, the state shall guarantee that the total state and local per pupil revenue for school operating purposes for each local school district shall not be less than the 1994-95 total state and local per pupil revenue for school operating purposes for that local school district . . . . [
Const 1963, art 9, § 11 .]
The rule of “common understanding” is the primary rule of constitutional interpretation. Durant II, 238 Mich App 210. The parameters of this rule have been articulated as follows:
“‘A constitution is made for the people and by the people. The interpretation that should be given it is that which reasonable minds, the great mass of the people themselves, would give it. “For as the Constitution does not derive its force from the convention which framed, but from the people who ratified it, the intent to be arrived at is that of the people, and it is not to be supposed that they have looked for any dark and abstruse meaning in the words employed, but rather that they have accepted them in the sense most obvious to the common understanding, and ratified the instrument in the belief that that was the sense designed to be conveyed.“‘” [Durant v Michigan, 456 Mich 175, 192; 566 NW2d 272 (1997) (Durant I), quoting 1 Cooley, Constitutional Limitations (8th ed), p 143.]
Although evidence of the common understanding of the voters may be ascertained from the “times and circumstances” surrounding the ratification of the constitutional provision and the purposes sought to be accomplished, Durant I, 456 Mich 192, quoting People v Harding, 53 Mich 481, 485; 19 NW 155 (1884); Soap & Detergent Ass‘n v Natural Resources
The language employed in
In light of the clear language of
In short, the constitution imposes two obligations on the Legislature with respect to school funding. First, under Proposal A, it must provide funding at the minimum level provided in 1994-95, or approximately $5,000 per pupil. Second, under the Headlee Amendment, the state is obligated to provide certain special education funding in addition to the minimum funding of $5,000 per pupil. These sums added together represent the total minimum funding obligation of the state under the constitution. If the amount appropriated by the Legislature meets that minimum amount, then the constitution is satisfied.
Plaintiffs would have us look at the label, not the substance, placed on various school funding components by the Legislature. That is, the essence of their position is that, once the Legislature has labeled money “foundation allowance,” that money is unavailable to satisfy the Legislature‘s obligations under the Headlee Amendment even where that “foundation allowance” is in excess of the minimum required by Proposal A. Not only does this argument elevate the label over the substance, it also completely ignores the fact that
We must look past the labels and grasp the substance. The substance of the constitution is that the Legislature must appropriate a certain minimum amount of money to each school district on the basis of the 1994-95 funding levels plus additional obligations imposed under the Headlee Amendment. The substance of 2000 PA 297 is that the Legislature has met this obligation. And just as the Legislature may
In short, it matters not what label the Legislature chooses to place on various funding components or whether there is a commingling of funds under common labels. What matters is whether the total appropriation meets or exceeds the minimum funding levels imposed by Proposal A and the Headlee Amendment. 2000 PA 297 achieves that result. It is, therefore, constitutional.
In light of our resolution of this issue, we need not address the procedural issues raised by the parties.
Summary disposition is granted to defendants. No costs, a question of public importance being involved.
NEFF, P.J. (concurring). While I concur with the legal conclusion reached by my colleagues, I write separately to express my recognition that the right result lingers beneath the bare language of
The primary rule of constitutional interpretation is the rule of “common understanding.” Durant v Michigan (On Remand), 238 Mich App 185, 210; 605 NW2d
I
There shall be established a state school aid fund which shall be used exclusively for aid to school districts, higher education, and school employees’ retirement systems, as provided by law. Sixty percent of all taxes imposed at a rate of 4% on retailers on taxable sales at retail of tangible personal property, 100% of the proceeds of the sales and use taxes imposed at the additional rate of 2% provided for in section 8 of this article, and other tax revenues provided by law, shall be dedicated to this fund. Payments from this fund shall be made in full on a scheduled basis, as provided by law. Beginning in the 1995-96 state fiscal year and each state fiscal year after 1995-96, the state shall guarantee that the total state and local per pupil revenue for school operating purposes for each local school district shall not be less than the 1994-95 total state and local per pupil revenue for school operating purposes for that local school district, as adjusted for consolidations, annexations, or other boundary changes. However, this guarantee does not apply in a year in which the local school district levies a millage rate
for school district operating purposes less than it levied in 1994.
I agree with my colleagues that the specific language of
The history of Proposal A leaves no doubt that the “per pupil revenue” in
Proposal A altered the constitutionally prescribed tax revenue base for public education. Historical notes to
The specifics with regard to how this funding mechanism would operate were set forth in 1993 PA 336. Section 20 of 1993 PA 336 established a statewide basic foundation allowance to begin at $5,000 per pupil in combined state and local revenue for the 1994-95 state fiscal year, with the amount of the foundation allowance to be adjusted each year on the basis of changes in state tax revenues and local school district pupil counts. 1993 PA 336, subsections 20(1) and (2).
Subsection 20(2) of 1993 PA 336 provided in relevant part:
For 1995-96 and each succeeding fiscal year, the basic foundation allowance shall be determined by multiplying the amount of the basic foundation allowance for the immediately preceding state fiscal year by the final index calculated under this subsection. The result is the amount of the basic foundation allowance per membership pupil for the current state fiscal year.
The practical import of subsection 20(2) was that the foundation grant would be adjusted for future fiscal
When the Legislature enacted 1993 PA 336, voters were thereafter faced with two choices on March 15, 1994: (1) pass Proposal A, raising the sales tax and securing guaranteed funding for schools in the constitution, or (2) defeat Proposal A, raising the income tax and providing no guarantees regarding school funding. Either way, the foundation grant system of funding schools was implemented.1 The difference was that Proposal A guaranteed the foundation grant; the alternative, the statutory plan, did not.
If voters approved Proposal A, the State School Aid Fund would provide each school district with a foundation grant of per pupil revenue as unrestricted funding, guaranteed not to fall below the amount established for 1994-95, essentially $5,000.
III
An examination of voter information concerning Proposal A in the three-month period between the effective date of § 20 of 1993 PA 336 and the election, reports of voter sentiment, and official statements by Proposal A proponents, leave no doubt that
Proposal A passed by a sixty-nine to thirty-one percent margin. Durant II, supra at 197. The pro-Proposal A message to voters was that Proposal A had “built-in safeguards to foster fairness for consumers, taxpayers and the state‘s 1.5 million school children“:
Proposal A is more than a choice between raising the sales tax to 6 percent vs. raising the state income tax to 6 percent under a backup plan.
The ballot measure offers what schools have desperately sought for decades—reliable, stable funding.
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For taxpayers and consumers, let‘s compare Proposal A to the backup plan
Proposal A is a constitutional amendment, making it tamper-resistant. Changing it requires another ballot question or a three-fourths vote by both state houses.
“Plan B,” as some call the backup plan, is constructed by the Legislature and thus prone to the fancies of current and future lawmakers.
Constitutionally-mandated school funding enhances stability. The divisive and dicey millage votes which schools have depended on for decades will be largely gone. There should be no more Kalkaskas—schools that shut down in mid-school year because they‘ve run out of money.
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Michigan voters hold history in their hands, and should make the most of it with a resounding “yes” on March 15. [Editorial, Proposal A, It‘s fairest for taxpayers, school kids, Lansing State Journal, February 27, 1994, p 6A.]
The “guarantee” of a foundation grant dedicated to school operating expenses as per pupil revenue was a constant refrain in voter information regarding Proposal A. For example, shortly after the passage of the school finance package on Christmas Eve 1993, Governor Engler touted Proposal A as the right choice for voters in his 1994 State of the State address, urging voters to pass Proposal A because it would, among other things, provide: ”Constitutionally guaranteed full funding for public schools.” (Emphasis added.)
The Governor‘s casting of Proposal A as a constitutional guarantee of full funding for schools was adopted in other analyses of Proposal A:
The current [State School Aid] formula will be completely replaced by a guaranteed foundation allowance that will provide state funds for all districts.
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The guaranteed foundation allowance for 1994-5 will be $5,000 per membership pupil. This amount will annually be indexed to: 1) the growth in the state revenues that are
dedicated to the state school aid fund, and 2) changes in the number of pupils. This double indexing provision is designed to ensure that the state will have the capacity to fund schools in future years. [Harvey, Moore & VerBurg, March 15, 1994 Ballot Issue, Michigan‘s Public Education: School Reform and Funding Changes, Michigan State University Extension, p 3.]
Voters were informed that constitutional amendments under the ballot plan “[g]uarantee that the total state and local per pupil revenue for school operating in future years will not be less than the amount for 1994-5.” Id. at 4. The common understanding was not only that Proposal A guaranteed base operating funds for local schools, but also that these funds would normally increase year to year:
Under the new system, school aid is based on a per-pupil foundation grant, where districts receive a flat amount per pupil and locally raised school mills are much less important than in the past.
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Once reached, the $5,000 foundation grant will increase each year at the same rate as state school aid fund revenue, adjusted for the change in pupil count. Categorical funding will be rolled into the foundation grant, with the exception of special education, adult education, and a few other programs.
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FY 1994-95 funding will be distributed to districts with a base between $4,200 and $6,500 per student according to a formula. This formula guarantees each district an increase in funding over FY 1993-94 levels, but the more a district now spends, the smaller its increase.
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Districts that now spend more than $6,500 per pupil are guaranteed $160 per pupil more than they spend in 1993-94.
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The FY 1994-95 state payment to districts with a foundation guarantee of $6,500 per pupil or less is the difference between the foundation guarantee and local revenue per pupil . . . . Under both plans the FY 1994-95 state payment to districts with a foundation guarantee of more than $6,500 per pupil is the difference between $6,500 and local revenues per pupil. [Cummings, School Finance Reform: Which Districts Will Benefit Most?, Public Sector Consultants, Inc, February 14, 1994, pp 1-2 (emphasis added).]
The message to voters was that the foundation grant of unrestricted per pupil revenue was guaranteed by Proposal A, subject to a minimum floor level of $5,000 per pupil:
The constitutional amendment also guarantees that 60 percent of all sales tax revenues resulting from the current 4-percent rate, plus 100 percent of all revenues raised by the additional 2 percentage points in the sales tax rate, will be earmarked for a constitutionally established school aid fund. The amount of money spent on schools this year is constitutionally guaranteed as a floor for school spending in all future years.
Thus, the constitutional amendment would prevent a direct repeat of the state lottery gimmick, in which lottery money went into the school aid fund, but other school aid appropriations were cut. [Preventing More Tax Hikes, The Detroit News, January 23, 1994, p 2B (emphasis added).]
The Detroit Free Press attributed similar statements to official sources: According to administration officials, “the ballot proposal guarantees a minimum level of funding,” which would better protect schools in the event that tax revenues plummeted unexpectedly. Bell, The Other Shoe Drops in Fight over Which
As recently as October 2001, explanations of Proposal A continued to equate the foundation allowance set in subsection 20(1) of the State School Aid Act with the per pupil funding guaranteed in
The two key provisions of [P]roposal A were (1) the replacement of most school property taxes with an increased sales and other use taxes and (2) the adoption of a minimum “foundation” grant of $5,000 per pupil that would come from the state. This school year, the foundation grant is set at $6,500 per pupil.
Proposal A had five major objectives: (1) Reduce property taxes; (2) Reduce reliance on local property taxes to provide school funding; (3) Increase the state‘s share of school funding; (4) Assure a minimum level of per pupil funding; and (5) Reduce the funding disparities between school districts.
Since the passage of Proposal A seven years ago, most people agree that all of the major objectives have been achieved.
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Proposal A guarantees each district a minimum level of per pupil funding. In 1994, fifty-five percent of Michigan‘s school districts were getting less than $4,500 per student. In the 2001-02 school year, all Michigan school districts will receive at least $6,500 per student. Since the passage of Proposal A, overall state per pupil funding has outpaced the rate of inflation. [School Finance Reform Lessons from Michigan, Testimony by Matthew I. Brouillette, Director of Education Policy, Mackinac Center for Public Policy, Prepared for the Pennsylvania House of Representatives, Select Committee on Public Education Funding, October 10, 2001, <http://www.psrn.org/SC%20Oct%2010%20armstrong/ed%20policy.html>.]
Proposal A was presented to voters in combination with 1993 PA 336, so closely linked that when voters adopted Proposal A, the implementing legislation, already enacted, automatically activated. The plan laid before voters was a constitutionally guaranteed per pupil revenue amount, enacted as the basic foundation allowance. Voters accepted this guarantee, no doubt adopting Proposal A with the understanding that it was tamper resistant. Nonetheless, changing financial times can tempt, even taint, later interpretation of constitutional mandates. Lockwood v Comm‘r of Revenue, 357 Mich 517, 551-552; 98 NW2d 753 (1959).
IV
The allocation scheme in 2000 PA 297 breaks faith with all these representations and promises because it makes an artificial distinction—never intended or expressed—between the constitutionally guaranteed per pupil revenue and the legislative foundation grant. This legislative scheme begins in subsection 20(1) by setting forth the annual foundation allowance, i.e., per pupil revenue amount, for successive fiscal years from the State School Aid Fund. However, these foundation allowances are not allocated solely to unrestricted per pupil funding for general school operating costs as in the past and as promised the voters when they were urged to pass Proposal A. In fact, these foundation allowances now are not allocations at all; they are used only for calculation purposes as base figures.
FITZGERALD, J. (concurring). I agree that the legal conclusion reached by Judge SAWYER is supported by the strict language of