DURANT v STATE OF MICHIGAN; SCHMIDT v STATE OF MICHIGAN
Docket Nos. 104458-104492
Supreme Court of Michigan
Decided July 31, 1997
456 Mich. 175
Argued April 10, 1997 (Calendar No. 13).
On remand, the Court of Appeals, DANHOF, C.J., and CAVANAGH and MACKENZIE, JJ., determined that elementary and secondary education as a whole was not a state-mandated activity under
Macomb Circuit Judge George R. Deneweth subsequently was appointed Special Master. With permission, the plaintiffs filed a first amended complaint, alleging that the state had failed to maintain its share of the school district‘s necessary costs in performing a wide range of specified, state-mandated activities. On second remand, the Court of Appeals, DANHOF, C.J., and GILLIS and MACKENZIE, JJ., adopted the Master‘s recommendations that special education, special education transportation, driver‘s education, and the school lunch and supplemental milk programs were state-mandated аctivities within
Gerald Schmidt, fifty other taxpayers, and fifty-one school districts brought an action in the Court of Appeals under
The Court of Appeals consolidated Durant and Schmidt and added a third group of thirty-three actions (Docket Nos. 93547-93577, 93658, 125691) raising similar issues that had been filed in the Court of Appeals and held in abeyance pending the Supreme Court‘s decision in Schmidt. In an opinion per curiam, the Court of Appeals, DOCTOROFF, C.J., and MACKENZIE and CORRIGAN, JJ., appointed Wayne Circuit Judge James E. Mies as Special Master to succeed Judge Deneweth (Docket No. 161321). 203 Mich App 507 (1994). Thereafter, in an opinion per curiam, the Court adopted the rеcommendations of the Special Master with regard to post-Schmidt issues not relevant to this appeal (Docket No. 161321). 213 Mich App 500 (1995). The defendants appeal.
In an opinion per curiam, signed by Chief Justice MALLETT, and Justices CAVANAGH, BOYLE, and KELLY, the Supreme Court held:
Special education and special education transportation are state-mandated activities or services within the meaning of
- Special education is required by state law. Nothing in
art 9, § 29 relieves a local unit of government of its state-mandated duty to provide an activity such as special education where federal law creates a similar obligation. The language of§ 29 and other provisions of the Headlee Amendment suggest that the voters did not intend an exception for federal mandates. - The school lunch program is mandated by state law within the meaning of
art 9, § 29 . Under the federal National School Lunch Act,42 USC 1756 , in which some Michigan school districts voluntarily participate, federal grants to a state are conditioned on the state supporting the program with a match payment equal to at least thirty percent of a prior year‘s federal grant to the state. The act does not require that all local school districts in a state participate in the program in order for the state and participating districts to receive federal aid. The state match payment is part of the state-financed proportion of necessary costs. Section 29 requires that the state maintain its proportionate financing for the nеcessary costs of a state-mandated activity. If these criteria are met, it does not matter that a portion of the base-year aid was designed to maximize the benefits of a local districts’ voluntary choice to receive federal aid. Art 9, § 29 moneys are “funds constitutionally dedicated for specific purposes” within the meaning ofart 5, § 20 . The funding required byart 9, § 29 is dedicated for the purpose of fulfilling the state‘s obligation to support state-mandated activities and services. The argument that the state‘s ability to deal with impending deficits will be impeded by the decision in this case and that it will be forced to impose educational cuts most heavily on the districts that are least able to afford it, because those are the districts that receive unrestricted aid not protected byart 9, § 29 , is outdated in light of the substantial reform in school financing made by adoption of Proposal A, amendingart 9, §§ 3 ,5 ,8 , and11 . Further, the state would be free to reduce or eliminate state mandates and, thus, reduce its obligations underart 9, § 29 .- In future cases, the correct remedy will typically be limited to a declaratory judgment. However, the defendants’ prolonged recalcitrance in these cases necessitates a substantial recovery aimed at providing taxpayer relief and assisting the districts to recover from the effects of underfunding. The people‘s directive in
§ 32 “to enforce”§ 29 was intended as a general directive, giving the Court the duty and authority to enforce§ 29 in the way which would most effectuate the balances struck by the people in the Headlee Amendment. To deny taxpayers relief would be to deny the reality that they have suffered real dollar losses throughout this protracted litigation. It would also ignore that, where the Headlee Amendment anticipated specific compliance problems, it provides specific relief for the taxpayers, and might also provide incentive for protracted litigation in the future. It would ignore the many effects of underfunding on general education students. The defendants did not interject the special education issue on which most of the damages turned until еight years into the litigation, contradicting their prior statements. When the Court of Appeals resolved the issue against the defendants, the defendants declined to honor the Court of Appeals decision for almost seven years. However, affirming the full judgment of the Court of Appeals would be inconsistent with the balances struck by the Headlee Amendment and by Proposal A. The aim is to give plaintiffs meaningful redress (to “enforce”§ 29 ) without undermining the current security enjoyed by the state taxpayers. - Money damages, without interest, are to be paid to the plaintiff school districts for the full amount of underfunding of each district during 1991-92, 1992-93, and 1993-94. The board of education of each plaintiff school district is to determine the appropriate distribution between taxpayer relief and projects for the benefit of the district. The checks and balances of the democratic process will assure that each board of education effectively assesses the harm to be addressed and the method of addressing it.
Affirmed in part.
Justice BRICKLEY, joined by Justices RILEY and WEAVER, concurring in part and dissenting in part, agreed with the reasoning of the majority opinion in parts I, II, III, and IV, but dissented with respect to part V regarding the remedy it contends is authorized under
The fact that the people included a revenue refund for a violation of
Through the majority‘s vague understanding of “enforce,” it has created a license to fashion any remedy that it deems fit. The ordinary person would understand
Whether the Court awards damages to the school districts, local taxpayers, or both, state taxpayers will ultimately foot the bill. Although the state has demonstrated prolonged recalcitrance in resolving this matter, it hardly justifies foisting what may be the largest damage award in state history on the very parties—taxpayers—that the Headlee Amendment was intended to protect. A damage award against the state is a damage award against the state taxpayer, and taxpayers cannot be compensated by paying money to themselves. State taxpayers benefitted from the state‘s ability to shift special education expenses to the local level, and, as the local tax burden rose, the corresponding state tax burden fell. Thus, the net effect of declining state special education funding on taxpayers was neutral. Accordingly, the majority‘s reliance on the “real dollar losses” of local taxpayers is misplaced.
The school districts’ claim of damages is unconvincing because the school districts exist in a representative capacity, acting on behalf of local taxpayers and students. Because a school district stands in relation to the state as does a subsidiary to its parent corporation, it does not have an inherent right to damages. Its claim to damages can only be as worthy as those of the students and the taxpayers it represents. For divergent reasons, neither of these groups warrants financial relief. Although taxpayers may have had their millages increased at a local level, all Michigan taxpayers benefitted from lower state taxes made possible, in part, by the state‘s declining responsibility for special education costs. Consequently, taxpayers did not necessarily suffer real dollar losses. The sure, simple, and most direct way in which to give the taxpayers relief is to award the school districts a declaratory judgment. The majority‘s remedy will punish the Michigan taxpayers, whom the Headlee Amendment was intended to protect, by requiring an increase in state taxes, cuts in state programs, or both.
Justice WEAVER, concurring in part and dissenting in part, concurred with the reasoning and result of the majority opinion in parts I, II, III, and IV, but would hold with Justice BRICKLEY that a declaratory judgment is appropriate in these consolidated cases. Declaratory judgment is the best way to insure that the taxpayers are not forced to carry the burden, for a second time, of the underfunded mandates. Further, if the majority wishes to insure taxpayer relief, it should mandate that the school districts directly return all the money damages to the taxpayers rather than rely on the expectation that the democratic process will inform and shape distribution of the award. The majority‘s instructions leave the door open for a school district not to refund even a penny to the taxpayer and to create for itself a windfall from the money damages. The average taxpayer on the street will have neither the knowledge, the time, nor the energy to seek the refund to which the majority says he is entitled. The democratic process has already made clear that the taxpayer is tired of being burdened by state and local governments.
213 Mich App 500; 541 NW2d 278 (1995) affirmed in part.
Amici Curiae:
Alfred H. Hall, Senate Majority Counsel, Philip K. Douma, House Minority Counsel, and Lisa K. Gigliotti, Michael G. O‘Brien, Michael R. Severino, and Mark J. Newman, Assistants Senate Majority Counsel, for Dick Posthumus, Ken Sikkema, Harry Gast, Donald Gilmer, Dan DeGrow, and Glenn Oxender.
White, Przybylowicz, Schneider & Baird, P.C. (by Karen Bush Schneider and Thomas A. Baird), and Hoekenga & Farrell, P.C. (by Daniel J. Hoekenga), for Michigan Education Association.
Thrun, Maatsch & Nordberg, P.C. (by Gordon W. Van Wieren, Jr., Lisa L. Swem, and Cheryl Takacs Bell), for Michigan School Districts.
PER CURIAM. Today we consider and resolve five questions relating to the Maintenance-of-Support Clause of
- Are special education and special education transportation state-mandated activities or services within the meaning of
art 9, § 29 ? Yes. - Is the “state match” payment for school lunches part of the “state financed proportion” for the purpose of computing compliance with
art 9, § 29 ? Yes. - Are payments that are required of the state by
art 9, § 29 “funds constitutionally dedicated for specific purposes” and exempt from executive order reduction underConst 1963, art 5, § 20 ? Yes. - Are plaintiffs’ attorney fees in this case part of the costs that may be recovered under
Const 1963, art 9, § 32 ? Yes. - What is the appropriate remedy for the violation of
art 9, § 29 in this case? A money judgment for plaintiff school districts for the full amount of underfunding for 1991-92, 1992-93, and 1993-94, to use for refunds for taxpayers, tax relief, or other public purposes.
THE HEADLEE AMENDMENT
Sections 25 through 34 of article 9 of the Constitution of 1963 were adopted pursuant to initiative petition, Proposal E, at the general election of November 7, 1978.2 They are popularly called the “Headlee Amendment.” The Headlee Amendment imposes on state and local government a fairly complex system of revenue and tax limits. These are summarized in
There are three main elements.
The third element of the Headlee system is summarized in
HISTORY OF PROCEEDINGS
This case is a consolidation of three groups of original actions filed in the Court of Appeals under
The Court of Appeals is an appellate court that has not been set up to conduct trials, much less trials involving complex factual questions. It initially ruled that the plaintiffs must first exhaust administrative remedies under the act passed by the Legislature to implement the Headlee Amendment, 1979 PA 101,
On remand from this Court, the Court of Appeals ruled on a number of significant points in the continuing progress of the case. The most basic substantive question at that time was whether elementary and secondary education as a whole was a state-mandated activity9 within the requirements of
The Court of Appeals accepted the suggestion and appointed Macomb Circuit Judge George R. Deneweth as Special Master. The case was submitted on live testimony, depositions, extensive stipulations of facts, and lengthy briefs. Among the many issues
raised by the parties and addressed in the Special Master‘s report are the four issues raised by defendant in this appeal. On each of these issues, the Special Master and Court of Appeals have consistently ruled in favor of plaintiffs. The Court of Appeals accepted the Master‘s holdings that special education, special education transportation, driver‘s education, and school lunch and supplemental milk programs were state-mandated activities within
In the meantime, a second group of plaintiffs, consisting of fifty-one taxpayers and fifty-one school districts, filed their own original action in the Court of Appeals, Schmidt v State of Michigan (Docket No. 132677). Their complaint for relief was modeled on the first amended complaint in Durant. In the context of the multiple school districts, a question appeared that had been hidden in Durant, which had only one school district plaintiff. In Schmidt, the proportional support that the state had provided in base year 1978-79 varied from district to district, even for the same activity. The assumption of the complaint was that these built-in variances would be maintained. The complaint asked for a money judgment for each school district on the basis of the state‘s failure to maintain funding at each district‘s base-year level.
The Court of Appeals dismissed the Schmidt claim in an unpublished order, entered November 9, 1990 (Docket No. 132677).11 The order stated that a claim for underfunding under the first sentence of
On appeal, this Court reversed. Unlike
The result of Schmidt was that all the computations in Durant were inaccurate. We remanded Durant to the Court of Appeals in light of Schmidt. 441 Mich 930 (1993).
On remand, the Court of Appeals consolidated Durant and Schmidt and added a third
ANALYSIS
I. SPECIAL EDUCATION AND SPECIAL EDUCATION TRANSPORTATION
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law.
Defendants concede that special education15 is required by state law.16 However, they argue that when an activity is required or imposed by federal law, it is not required by state law within the meaning of
Plaintiffs argue that defendants are misreading Schmidt. There is no exception in
The Court of Appeals, on second remand, 186 Mich App 105, rejected defendants’ arguments “because state law imposes a stricter obligation on the state and its local units of government and because these governmental entities are charged with the duty of establishing and implementing specific programs and related services . . . .”
We first consider and reject defendants’ arguments that we recognized a federal exception in Schmidt. We then consider whether we should now recognize such an exception.
Defendants do not base their argument for a federal-mandate exception on the language of
Plaintiffs sought to frame their social security costs claim as though social security coverage constituted a separate state-required activity or service. However, social security coverage is directly imposed by federal law and therefore
not required by state law within the meaning of
§ 29 . Second, social security coverage does not constitute an activity or service within the meaning of§ 29 . [441 Mich 262.]
Neither of these reasons helps defendants here. First, special education is “required . . . by state law” within the language of
The question remains whether there is such an exception. In deciding that question, we are guided by very basic rules of constitutional interpretation. In Traverse City School Dist v Attorney General, 384 Mich 390, 405; 185 NW2d 9 (1971), we stated that the primary rule of constitutional interpretation is the
rule of “common understanding” described in 1 Cooley, Constitutional Limitations (8th ed), p 143:
“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 or 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.’ (Cooley‘s Const Lim 81.)”
Chief Justice COOLEY also stated for this Court:
[I]n seeking for its real meaning[,] we must take into consideration the times and circumstances under which the State Constitution was formed—the general spirit of the times and the prevailing sentiments among the people. Every constitution has a history of its own which is likely to be more or less peculiar; and unless interpreted in the light of this history, is liable to be made to express purposes which were never within the minds of the people in agreeing to it. This the court must keep in mind when called upon to interpret it; for their duty is to enforce the law
which the people have made, and not some other law which the words of the constitution may possibly be made to express. [People v Harding, 53 Mich 481, 485; 19 NW 155 (1884).]
So, the question is whether the great mass of the people would have meant the following language to convey an exception for state mandates that are also federal mandates—or whether such an exception is a dark and abstruse meaning:
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Governmеnt, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs. The provision of this section shall not apply to costs incurred pursuant to
Article VI, Section 18 . [Const 1963, art 9, § 29 .]
There is certainly nothing in the language to suggest to the reader that there is an exception for federal mandates.
Nothing in
There are, moreover, three suggestions in the language of
While defendants urge a federal-mandate exception only for
Although of lesser import, we think the following three items suggest that a federal-mandate exception can only be found by a “dark or abstruse” reading of
Second, defendants did not start arguing in favor of a federal-mandate exception until the hearings before Special Master Deneweth, eight years after the commencement of these proceedings.22 A meaning “most obvious to the common understanding” would have certainly made its appearance before that. Before that time, defendants had stated to this Court that special education was a state-mandated activity under
Third, the drafters’ notes comment on whether there are exceptions to the Headlee requirements for federal mandates. Because the drafters’ intent might have been different than the meaning given by the great mass of the people and the notes were published after passage of the amendment and were not available when the people voted, the notes are not authoritative. Durant, supra, 424 Mich 382, n 12. They are one tool available to the courts. Schmidt, supra, 441 Mich 257, n 24. In particular, the notes are one indication of a contemporaneous reading of the amendment. They state, with regard to
It was the drafters’ intent to include all necessary state mandated cost increases in this provision, including but not limited to: changes in general law which increase local governmental costs, e.g., increases in the state minimum wage law; changes in the civil and criminal statutes, e.g., mandatory sentencing; federally encouraged changes in state law, e.g., unemployment compensation coverage; collective bargaining or compulsory arbitration mandates, land use regulations, etc. [Emphasis added.]
With regard to
Directly or indirectly federally mandated spending increases are not exempted from the provisions of this section. It is the concensus [sic] that any problems arising from such federal requirements would be cured later on by a federal tax limitation amendment.
Both of these suggest the absence from
II. STATE MATCH SCHOOL LUNCH PAYMENTS
State law has long authorized local school districts to provide free and full-cost meals to students. 1927 PA 319, part 2, ch 5, § 6; 1929 CL 7424, now
Defendants admit that the school lunch program is mandated by state law within the meaning of
Defendants argue that the school districts voluntarily participate in the federal school lunch program, in the sense that they do not have to apply for and receive federal funds. They receive the state match payment only because they choose to accept federal funds. Defendants note that the amount of the state match payment is fixed and required by federal law and not subject to state control. Defendants argue that federal programs are not required by state law and are not activities or services within the meaning of
We reject defendants’ arguments. We have already concluded that there is no exception in
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law ....
In applying the provision to the school lunch program, there are two questions. First, is school lunch an activity or service mandated by stаte law? Defendants admit it is.
The defendants are really asking us to create an exception to
First and most important, no such exception is apparent in
Second, once the people adopted Headlee, the state lost direct control over the amount of all Headlee-required aid to local units of government. The state lost its freedom to reduce aid below the base-year proportion. This was the clear intent of
Defendants argue that the state match payment has made well in excess of $100,000,000 a yeаr in federal funds available to local school districts without any increase in costs to the local districts. Defendants argue that treating the state‘s cost in obtaining this benefit turns
III. EXECUTIVE ORDER REDUCTIONS
Defendants argue that state payments required by
No appropriation shall be a mandate to spend. The governor, with the approval of the appropriating committees of the house and senate, shall reduce expenditures authorized by appropriations whenever it appears that actual revenues for a fiscal period will fall below the revenue estimates on which appropriations for that period were based. Reductions in expenditures shall be made in accordance with procedures prescribed by law. The governor may not reduce expenditures of the legislative and judicial branches or from funds constitutionally dedicated for specific purposes. [Emphasis supplied.]
Plaintiffs argue that
We agree with plaintiffs.
Defendants imply that the state‘s ability to deal with impending deficits will be impeded by this aspect of today‘s decision and that it will force the state to impose educational cuts most heavily on the districts that are least able to afford it, because those are the districts who receive unrestricted aid not protected by
IV. ATTORNEY FEES
Defendant argues that the Court of Appeals erred when it concluded that attorney fees are included in “costs” recoverable by a successful taxpayer in a suit under
Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article and, if the suit is sustained, shall receive from the applicable unit of government his costs incurred in maintaining such suit.
We have recently addressed this question in Macomb Co Taxpayers Ass‘n v L‘Anse Creuse Public Schools, 455 Mich 1; 564 NW2d 457 (1997). For the reasons stated there, we affirm the award of attorney fees.
We note that plaintiffs submitted their claim for costs before the Special Master. Defendants disputed whether all the costs were incurred regarding matters on which plaintiffs’ suit was “sustained.” The Special Master issued a decision with regard to all cost issues up to the date of his decision, June 16, 1995. The decision gave substantial relief to defendants on the issue raised. We further note that defendants did not appeal that recommendation in the Court of Appeals or here. We regard that amount as finally resolved. Costs incurred after June 16, 1995, remain open.
V. REMEDY
This is the first case of underfunding under
A
We begin, as always, with the words of the constitution, in this case,
Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article and, if the suit is sustained, shall receive from the applicable unit of government his costs incurred in maintaining such suit.
The question is what did the great mass of the people intend in directing the Court of Appeals “to enforce”
B
Declaratory relief coupled with an award of damages is appropriate in this case as a result of the prolonged “recalcitrance” of the defendants, and the damage award can, on this basis, be limited to the years 1991-1994.33 Any other remedy, particularly one that would grant declaratory relief alone, would authorize the state to violate constitutional mandates with little or no consequence. The intent of the people in enacting
The enactment of
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay thе unit of Local Government for any necessary increased costs. The provision of this section shall not apply to costs incurred pursuant to Article VI, Section 18.
Although a remedy was not established under the express provisions of
Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article and, if the suit is sustained, shall receive from the applicable unit of government his costs incurred in maintaining such suit.
By authorizing the Court of Appeals to “enforce” the provisions of
Even if one departs from the common understanding of the people and examines declaratory judgment as practiced in the courts, the result is the same: declaratory judgment actions can result in monetary relief. Actions for declaratory relief are intended to minimize avoidable losses and the unnecessary accrual of damages.35
Having concluded that damages are not precluded where declaratory relief is used, we further conclude that the instant case is one in which damages are “necessary or proper.” The prolonged “recalcitrance” of the state in shirking its obligations to fund state-mandated services clearly cannot be cured by declaratory relief alone. Had it been possible to resolve this issue by declaratory judgment, the state would have funded the services in question after the 1990 Court of Appeals decision, while at the same time seeking a declaratory judgment from this Court on its continuing obligation under the Headlee Amendment to fund those services.39 Having chosen instead to ignore the Court of Appeals ruling, we see no choice but to award damages against the state.
To deny monetary relief here might provide incentive for protracted litigation in the future. Here, defendants did not interject the issue on which most of the damages turned (special education, issue I) until eight years into the litigation.40 The argument, when raised, contradicted prior statements by defendants (that special education was a state mandated activity under Headlee). The argument was not based on the language of Headlee. When the Court of Appeals resolved that issue against defendants, defendants declined to honor the Court of Appeals decision for almost seven years.
C
We now turn to the question of who should receive the judgment. The Headlee Amendment is a taxpayers’ amendment.
To deny taxpayers relief would be to deny the reality that they have suffered real dollar losses throughout this protracted litigation. It would also ignore that, where the Headlee Amendment anticipated specific compliance problems, it provides specific relief for the taxpayers.44
While the Headlee Amendment is a taxpayers’ amendment, the requirement of
While we conclude that plaintiffs must be given some relief in this case, we also conclude that affirming the full judgment of the Court of Appeals would be inconsistent with the balances struck by the Headlee Amendment and by Proposal A. Any judgment would be paid out of state funds, collected from state taxpayers. The taxpayers of the eighty-four districts represented by plaintiff taxpayers are, in turn, state taxpayers. State taxpayers were also to be protected by provisions of the Headlee Amendment, albeit not
D
We affirm that portion of the Court of Appeals judgment that awards money damages, without interest,45 to plaintiff
Although we have no concern regarding the correctness of awarding damages to the taxpayer, we stop short of ordering any particular method of distribution because each of the affected districts and its
respective taxpayers have sustained discrete harms that are beyond the capability of the Court to evaluate. Instead, we award damages to the plaintiff school districts with the expectation that the democratic process will inform and shape distribution of the award. In so doing, each board of education will exercise its discretion to determine and tailor its award in a manner that best fits the needs of its constituents. Appropriate remedies include, but are not limited to, distributing the award to taxpayers in relation to the amount of increased taxes they paid during 1991-92, 1992-93, and 1993-94 as a result of the increase in millage over base year 1978-79, due to underfunding, distributing the award to all property-owning taxpayers, to all local taxpayers, or use of the award by the district for other public purposes. We have full confidence that the checks and balances of democratic decision making in each local unit of government will effectively assess the harm to be redressed and the method of addressing it.
E
Justice BRICKLEY makes a number of thoughtful points in his dissent from our decision to award money damages in this case which deserve a response.
The dissent accurately notes that
We think this analysis unnecessarily focuses the question of the scope of enforcement under
The point is that
The dissent also cites the Missouri case, Fort Zumwalt, as support and we do not dispute that there is some support for the partial dissent there. We note, however, that the dissent significantly disagrees with Fort Zumwalt. The partial dissent is willing to issue an order to the state to fund the activity in question. The Missouri court was only willing to free the local unit of government from the duty to obey the state mandate. While this might be effeсtive relief for new mandates, it would hardly be practicable in the case of a continuing mandate such as special education where the school districts are under contract with thousands of staff, have massive capital investments and have established portions of the student body relying on the continuity of services.
In replying to our opinion, the dissent indicates that the people ratifying the Headlee Amendment would have anticipated situations, under
The dissent observes, accurately, that the remedy in this case has been fashioned, in part, because the state has been derelict for so long in its duty. The history of defendants’ conduct justifies the conclusion that the state has been derelict too long. Not only did defendants argue to this Court in 1985 that we ought to hold that
The dissent argues that the appropriate response is political, not judicial. The suggestion that the appropriate response is political ignores both the fact that the state‘s dereliction has persisted through three administrations and the fact that the people have directly ordered the courts to enforce
The dissent notes, with some eloquence, the tension that flows from the fact that local taxpayers are also state taxpayers. It is this tension that has caused us to conclude that we should not affirm the entire judgment of the Court of Appeals that
The dissent argues that the Court may do no more than interpret the law and we “must presume that the other branches of government, once informed of their constitutional duties, will execute them to the letter and the spirit of the law.” We reply that
The dissent minimizes the continuing effect that underfunding has on the continuing operation of plaintiff school districts, while it acknowledges that regular education programs have probably been reduced to divert local resources to cover the state underfunding. All students in plaintiff school districts have, for their entire careers as students, been potentially subject to innumerable consequences of local budgetary constraints, such as: larger class sizes, decreased access to librarians, loss of enrichment programs, use of outdated books and archaic physical plants and delays in purchase of new equipment, for instance computers. While we can no more quantify the dollar value of these losses than we can give an objective figure to recompense the loss of an arm, we regard this harm as real and deserving of relief.
The dissent argues, “Although taxpayers may have had their millage increased at a local level, all Michigan taxpayers benefited from lower state taxes made possible, in part, by the state‘s declining responsibility for special education costs.” Thus, “taxpayers did not necessarily suffer ‘real dollar losses.‘” This argument is no more than a judicial disagreement with the electorate over the validity of the policy behind
Lastly, the dissent indicates that “the local taxpayer would not want this kind of relief.” We believe the taxpayers would appreciate relief both in the form of a direct benefit to plaintiffs and, as the electorate which adopted Headlee, with the courts’ willingness to abide by the direction to enforce
F
We are acutely conscious of the limitations of judicial competence in developing workable standards to regulate government conduct. We acknowledge also that the Legislature, no less than this Court, interprets the document that binds both institutions and is obligated and entitled to make its own good faith judgments regarding the implications of the Headlee Amendment when enacting policy as the people‘s representatives. However, for the reasons stated above, we find the only viable remedy to be one that awards declaratory relief coupled with monetary damages for the years 1991-1994. In this way, “the great mass of people” will be better assured that the Court effectively “enforced” the provisions of
213 Mich App 500 affirmed except as to remedy; remedy affirmed in part.
MALLETT, C.J., and CAVANAGH, BOYLE, and KELLY, JJ., concurred.
BRICKLEY, J. (concurring in part and dissenting in part). I agree with the reasoning of the majority opinion in parts I, II, III, and IV. However, I respectfully dissent from the majority‘s decision in part V regarding the remedy it
ANALYSIS
I. REMEDY FOR A VIOLATION OF ART 9, § 29
The people enacted
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs. The provision of this section shall not apply to costs incurred pursuant to
Article VI, Section 18 .
Examined by itself, this section only describes the obligations of the state for financing new and existing services that it mandates. There is no description in
The purposes of this section are vindicated by the general enforcement provision,
Any taxpayer of the state shall have standing to bring suit in the Michigan State Court of Appeals to enforce the provisions of Sections 25 through 31, inclusive, of this Article and, if the suit is sustained, shall receive from the applicable unit of government his costs incurred in maintaining such suit.
Section 32 does not anticipate that the Court will order the state, under
This conclusion is not only supported by the language of the amendment, but also by the fact that the people expressly included a financial remedy in a different provision,
For any fiscal year in the event that Total State Revenues exceed the revenue limit established in this section by 1% or more, the excess revenues shall be refunded pro rata based on the liability reported on the Michigan income tax and single business tax (or its successor tax or taxes) annual returns filed following the close of such fiscal year. If the excess is less than 1%, this excess may be transferred to the State Budget Stabilization Fund. [Emphasis added.]
Similarly,
This conclusion is further supported by the analysis of the Missouri Supreme Court in addressing the same issue under its constitutional amendments. See Fort Zumwalt School Dist v Missouri, 896 SW2d 918 (Mo, 1995). The state of Missouri adopted the virtually identical reform of its tax system in its constitution in 1980 on the basis of Michigan‘s Headlee Amendment. We directed the parties in our June 10, 1997, order to provide further briefing on the issue of remedy, including the issue whether declaratory relief was the appropriate relief as in Fort Zumwalt. The Missouri Supreme Court examined a case in which the state of Missouri had failed to provide funding for special education services (a state-mandated service) and concluded that the state was protected by sovereign immunity because its enforcement provision,
Article X, Section 23, authorizes taxpayer suits to enforce the provisions of Section 21 [parallel to Michigan‘s
art 9, § 29 ] without saying what remedies are available other than attorneys fees and costs. If Section 23 is a consent by the state to be sued for general money damages to enforce Section 21, the consent exists by way of inference or implication. This Court will not infer or imply that a waiver of sovereign immunity extends to remedies that are not essential to enforce the right in question.Other equally effective but lеss onerous remedies than permitting a money judgment against the state are available to enforce a taxpayer‘s interests under Section 21. Specifically, a declaratory judgment relieving a local government of the duty to perform an inadequately funded required service or activity is an adequate remedy. [Fort Zumwalt, supra at 923.]
I agree with the basic point. There are other less onerous remedies available to the plaintiff school districts. We should not conclude that there is a grant of authority to bring an action for monetary damages against the state of Michigan without an express statement by the people or Legislature.
II. THE MAJORITY‘S DECISION
The majority has drawn a different conclusion in the instant case, reasoning that an ordinary person would understand
The people ratifying these amendments, in my opinion, likely believed that it would be easy to identify when the state either (1) enacted a new program but failed to provide for the funding or (2) reduced funding for an existing state-mandated service, and that the courts would then expeditiously order the end of the violation. Hence, with this understanding, there would be no reason to provide for monetary damages because there would not be a situation in which the state had failed to comply in past years. The drafters of the Headlee Amendment, and the people ratifying it, did not likely anticipate that it would take seventeen years for this Court to issue a definitive ruling on the amendment‘s application.
In reaching its conclusion, the majority has not attempted to root its pragmatic decision in the amendment. The majority hаs limited the relief to three years, 1991-92, 1992-93, and 1993-94. The Court awards a money judgment to the school districts to use for refunds to the taxpayers, tax relief, or other public purposes. This effectively gives the school districts complete discretion in deciding
Moreover, I am not persuaded that the result is consistent with the basic point of the Headlee Amendment, which is to provide relief for taxpayers. See Durant, supra at 378. The majority has indicated that it anticipates that this monetary relief “typically will not be necessary in future
The majority‘s decision to only give tax relief to these taxpayers suggests to me that the majority is really punishing the state of Michigan for its dereliction in failing to meet its obligations. See ante, p 204.2 Although I believe that the state must meet its constitutional duties, if there is a fear that the state may fail to comply in the future because we are only able to give declaratory relief, I believe that the appropriate response is political, not judicial.
The sad irony of this final chapter in the Durant saga is that the result of the “taxpayers revolt“—the 1978 Headlee Amendment—is an award of damages against the taxpayers of Michigan. Whether the Court awards damages to the school districts, local taxpayers, or both, state taxpayers will ultimately foot the bill. The magnitude of the Cоurt‘s judgment is staggering. The Court awards $211 million to the plaintiff school districts. And yet, not even a single child has claimed to have been denied special education services during the pendency of this lawsuit.
Although I acknowledge the state‘s “prolonged recalcitrance” in resolving this matter, it hardly justifies foisting what may be the largest damage award in state history upon the very parties—taxpayers—that the Headlee Amendment was intended to protect.
The Court‘s award of damages rests uneasily on the following two arguments. The first is that
[t]o deny taxpayers relief would be to deny the reality that they have suffered real dollar
losses throughout this protracted litigation. [Ante, p 212 (emphasis added).]
With the best of intentions, the Court aspires to give relief to taxpayers for their “real dollar losses.” However, this justification overlooks one simple fact: local taxpayers are state taxpayers. A damage award against the state is a damage award against the state taxpayer. Contrary to the majority‘s apparent belief, taxpayers cannot be compensated by making them pay money to themselves.
The same principle that explains why a damage award against the state cannot give taxpayer relief—local taxpayers are state taxpayers—also suggests another fact. State taxpayers benefited from the state‘s ability to shift special education expenses to the local level. In other words, even though a taxpayer‘s local millage may have risen, that taxpayer was also enjoying the benefits of reduced state spending, which resulted in a lower state tax burden. Thus, as the local tax burden rose, the corresponding state tax burden fell. Therefore, it would appear that the net effect of declining state special education funding on taxpayers was neutral. Accordingly, the majority‘s reliance on the “real dollar losses” of local taxpayers is misplaced.
The majority‘s second reason for requiring the taxpayers to, in effect, pay for special education twiсe is that
[t]o deny monetary relief here might provide incentive for protracted litigation in the future. [Ante, p 210.]
This argument assumes that it is the Court‘s role to remove “incentives” for protracted litigation on the part of the state. The Court‘s place is to interpret the law, not to guide, control, or direct the activities of the other branches of government. We must presume that the other branches of government, once informed of their constitutional duties, will execute them to the letter and spirit of the law. In the unfortunate event that they choose to diverge from their explicit constitutional obligations, the remedy must be political, not judicial.
Further, in its attempt to exact a penalty from the state for its transgressions, the Court inadvertently punishes the taxpayer, the party who will ultimately pay the bill in this case.
The school districts’ claim to damages is unconvincing because the school districts exist in a representative capacity, acting on behalf of local taxpayers and students. Because a school district stands in relation to the state as does a subsidiary to its parent corporation, it does not have an inherent right to damages. Its claim to damages can only be as worthy as that of whom it represents, the students and the taxpayers. For divergent reasons, neither of these groups warrants financial relief.
The students can be organized into two groups on the basis of the educational services they received—special education and general education. Special education students were not affected by reduced state funding because each of the school districts made accommodations in other areas to ensure that special education programs met state requirements. For example, the school districts may have increased local millages or cut other programs.
General education programs, on the other hand, may have suffered cutbacks resulting from the shifting of resources from general education to special education. In such cases, howevеr, it is impossible to unring the bell, given the passage of time. Those general education students who were affected have moved ahead to the next grade, and many have been graduated. Indeed, many of these new graduates will be helping to pay for the state‘s “prolonged recalcitrance.” Notwithstanding the folly of trying to estimate the value of such damages, retroactive damages simply cannot replace a missed educational opportunity.
Thus, the school districts can have no claim to damages through the taxpayers they represent. Although taxpayers may have had their millages increased at a local level, all Michigan taxpayers benefited from lower state taxes made possible, in part, by the state‘s declining responsibility for special education costs. Consequently, as discussed above, taxpayers did not necessarily suffer “real dollar losses.”
It is undisputed that those programs were maintained during the pendency of this lawsuit. Local taxpayers paid for them, either through higher local taxes or reduced regular education programs. Awarding damages to the school districts asks the taxpayers to pay for those programs a second time.
Even though local taxpayers may receive token payments from their school districts, everyone knows where the funds for those payments come from: the State Treasury, which is funded by tax dollars. The state taxpayer will also bе funding the administrative costs to distribute this “relief.”
In my view, the taxpayer can do without this kind of relief. Most likely, the local taxpayer would not want this kind of relief, especially when that “relief” comes out of his own pocket—deducting, of course, administrative expenses. The sure, simple, and most direct way in which to give the taxpayers relief is to award a declaratory judgment. This acknowledges the state‘s future obligations under the Headlee Amendment. It also recognizes that this lawsuit is simply not susceptible to damages. And, it avoids a misguided, cumbersome award of damages that confers no net benefit on the taxpayers. Instead, the majority‘s remedy will punish the Michigan taxpayers whom the Headlee Amendment was intended to protect, by requiring an increase in state taxes, cuts in state programs, or both.
Accordingly, this Court should limit the scope of its relief to a declaratory judgment for the plaintiffs.3
RILEY and WEAVER, JJ., concurred with BRICKLEY, J.
WEAVER, J. (concurring in part and dissenting in part). I concur with the reasoning and result of the majority opinion parts I, II, III, and IV. I dissent from the majority‘s proposed remedy and instead concur with Justice BRICKLEY‘s reasoning and conclusion that a declaratory judgment is appropriate in these consolidated cases.
I write separately to add that I believe that declaratory judgment is the best way to insure that the taxpayers are not forced to carry the burden, for a second time, of the underfunded mandates. Further, if the majority wishes to insure taxpayer relief, see ante, p 216, with their judicially created, arbitrary award of money damages, it should mandate that the school districts directly return all the money damages to the taxpayers rather than rely on “the expectation that the democratic process will inform and shape distribution of the award.” Ante, p 215. The majority‘s instructions leave the door open for a recalcitrant or well-meaning school district not to refund even a penny to the taxpayer and to create for itself a windfall from the money damages. Meanwhile, the average taxpayer on the street (who may not even know about the case and probably at most will be entitled to a $100 refund) will have neither the knowledge, the time, nor the energy to try through “the democratic process” to get a refund that the majority says he is entitled to without having to argue with the school board or file another lawsuit.1
The “democratic process” has already made clear, through the taxpayer-initiated enactment of the Headlee Amendment and through Proposal A, that the taxpayer is
Notes
Contrary to the majority‘s misleading statement, ante, p 214, that the dissenters believe that the taxpayers are not the appropriate recipients of monetary relief in these cases, it is precisely the taxpayer‘s wallets that the dissenters seek to relieve with a declaratory judgment. A declaratory judgment insures that the taxpayers will not pay a second time for services already received.We conclude that any award of damages should be distributed to the plaintiff school districts and apportioned to taxpayers within each district, if appropriate. [Ante, p 214 (emphasis added).]
*
*
*
[W]e [authorize distribution of money damages] to the plaintiff school districts with the expectation that the democratic process will inform and shape distribution of the award. In so doing, each board of education will exercise its discretion to determine and tailor its award in a manner that best fits the needs of its constituents. Appropriate remedies include, but are not limited to, distributing the award to taxpayers in relation to the amount of increased taxes they paid during 1991-92, 1992-93, and 1993-94 as a result of the increase in millage over base year 1978-79, due to underfunding, distributing the award to all property-owning taxpayers, to all local taxpayers, or use of the award by the district for other public purposes. We have full confidence that the checks and balances of democratic decision making in each local unit of government will effectively assess the harm to be redressed and the method of addressing it. [Ante, p 215 (emphasis added).]
While we anticipate that monetary relief typically will not be necessary in future
§ 29 cases, defendants’ prolonged recalcitrance in this case necessitates a substantial recovery aimed primarily at providing a remedy for the harm caused by underfunding. [Ante, p 204 (emphasis added).]
Having placed a limit on state spending, it was necessary to keep the state from creating loopholes either by shifting more programs to units of local government without the funds to carry them out, or by reducing the state‘s proportion of spending for “required” programs in effect at the time the Headlee Amendment was ratified. [Livingston Co v Dep‘t of Management & Budget, 430 Mich 635, 644; 425 NW2d 65 (1988).]
The board of a local school district shall provide special education programs and services designed to develop the maximum potential of each handicapped person in its district on record under section 1711 for whom an appropriate educational or training program can be provided in accordance with the intermediate school district special educаtion plan . . . .
Thus, the California Court was reluctant to read an exception for federal mandates into the California Constitution where the voters did not expressly approve such an exception. We agree with that approach.Articles XIII A and XIII B work in tandem, together restricting California governments’ power both to levy and to spend for public purposes. Moreover to the extent “federally mandated” costs are exempt from prior statutory limits on local taxation . . . , article XIII A eliminates the exemption insofar as it would allow levies in excess of the constitutional ceiling. [50 Cal 3d 59.]
Subsection (1) of
The board of a K to 12 school district shall, and the board of another school district may, establish and operate a program under which lunch is made available to all full-time pupils enrolled and in regular daily attendance at each public school of the school district.
The programs must meet “[n]utritional standards prescribed by the United States department of agriculture pursuant to section 9 of the national school lunch act,
Property taxes and other local taxes and state taxation and spending may not be increased above the limitations specified herein without direct voter approval. The state is prohibited from requiring any new or expanded activities by local governments without full state financing, from reducing the proportion of state spending in the form of aid to local governments, or from shifting the tax burden to local government. A provision for emergency conditions is established and the repayment of voter bonded indebtedness is guaranteed. Implementation of this section is specified in Sections 26 through 34, inclusive, of the Article.
