local school districts in providing an education. Although most state constitutions make education a state responsibility, roughly 50% of the funds used to support public schools are derived from local property taxes. In many districts, local property wealth is insufficient to adequately support the schools. The local funds are supplemented by two kinds of grants from the state: flat grants of equal value regardless of the needs of the school district, and by equalization grants, calculated according to local property values. Most of the equalization formulae applied by the states today are outdated and are too small to reduce the differences between poor and rich districts or to absorb the rising costs of education. The result of this funding approach is that for public education, the area of public expenditure second only to defense, funds are allocated on the basis of property wealth rather than on the basis of costs or expected out-puts.

B. THE LAWSUITS

As of the present date, 39 lawsuits have been filed challenging the constitutionality of state school finance laws in 22 states. (See Appendix A, (1) a listing of cases filed as of Jan. 1972, and (2) copies of the court decisions in the four cases under discussion today.) Twelve of these have reached at least an initial level of decision. In 1969-70 three federal court cases were decided on preliminary motions: McInnis v. Ogilvie in Illinois; Burrus v. Wilkerson' in Virginia; and Board of Education of Independent School District #20 v. Oklahoma in Oklahoma. In these cases plaintiffs were asking the courts to declare state education finance laws unconstitutional because they did not distribute funds according to educational need. The courts held that this standard was so vague as to be unmanageable and dismissed the cases. It should be noted that the complaints in these cases and the data submitted in their support were not sufficiently specific to show the courts how "educational need" might be broken down into measurable components.

In August 1971, in Serrano v. Priest the Supreme Court of California reversed a dismissal by a lower California court and declared the California system of school finance unconstitutional. The court found education to be a "fundamental interest" entitled to special protection and held that the resources provided for education cannot be based on wealth other than the wealth of the state as a whole. The court based its findings on the Fourteenth Amendment of the United States Constitution, but found parenthetically that the fi nance law also violated the California state constitution. The case is presently before a trial court for a hearing on the facts.

Serrano gave rise to the filing of a substantial number of lawsuits across the country. One of these was Van Dusartz v. Hatfield decided in October 1971 by a federal court in Minnesota. The court in denying a motion to dismiss, declared the Minnesota school finance statute (which had expired) unconstitutional. The Minnesota legislature subsequently enacted a new law that overcame many of the challenged deficiencies; the suit has been dropped.

In December 1971, after a full trial on the merits a three judge federal court in Texas found in Rodriguez v. San Antonio Independent School District that the Texas public education finance statute "subsidizes the rich at the expense of the poor." The court held that the statute was discriminatory both on racial (against Mexican-American students) and poverty grounds. The court found as in Serrano that education is a fundamental interest, but stated that the Texas statute would be unconstitutional even if education were not a fundamental interest, because it was without "reasonable basis." Notice of appeal to the Supreme Court has been filed by the defendants in Rodriguez, making it the first post-McInnis case to reach the Court. It is unlikely, however, that a hearing on the case will be scheduled before the October 1972 term.

The most recent significant decision in the school finance litigation movement is Robinson v. Cahill, handed in January 1972 after a lengthy trial by the Superior Court of New Jersey. In Robinson the court invalidated the New Jersey finance scheme on the basis of both the federal and state constitutions. The

The Supreme Court affirmed the McInnis and Burrus cases per curiam.

5 The cases not discussed here include: Guerra v. Smith, another challenge to the Texas finance statutes that will probably be held in abeyance pending a Supreme Court decision in Rodriguez; Hargrave v. Kirk, a case challenging the Florida millage rollback law that was remanded for further hearings by the Supreme Court in 1971; Spano v. Board of Education of Lapeland Central School District No. 1, a case dismissed by a New York State court that relied on McInnis; Hallins v. Shofstall, a Serrano-based opinion rendered by an Arizona State court; and Sweetwater County Planning Committee for the Organizations of School Districts v. Hinkle, a Wyoming Supreme Court decision which quoted extensively from Serrano, but was decided on other grounds.

court specifically held that unless the state distributed education funds in a manner that recognized variations in regional costs as well as variations in the cost of educating children with special learning problems, it was in violation of the state constitutional requirement to provide a "thorough and efficient" education for all children in the state. The court also invalidated New Jersey's I present property tax levy for education by holding that education in the state must be funded out of state revenues collected on the basis of a uniform tax. 1. What the Decided Lawsuits Require and Do Not Require

The Serrano line of cases create a negative standard: the quality of a child's education cannot be dependent upon the wealth of the district in which he goes to school. This does not mean that all variations in funding among districts must be eliminated. It means rather that variations will be allowed only if they are justified by a compelling state interest."

The Serrano decisions do not mandate any particular formula. A State can do anything from: (a) modernizing its equalization formula by increasing the state contribution to the point that the taxes generated by the local property tax are not a dominant contribution; (b) providing equal dollar expenditure per pupil throughout the state; (c) "power equalizing" districts, that is, permitting each district to select its own tax rate (within a given range) and then making certain through state contributions that equal rates will produce the same amounts of revenue; (d) developing more advanced, flexible formulae that take into consideration municipal overburden factors; regional variations in such education costs as teachers salaries and construction and the varying educational requisites of handicapped and disadvantaged children. (A more elaborate description of the kins of alternative financing schemes acceptable under the Serrano line of decisions attached as Appendix B.)

The Serrano suits do not require abolition of the property tax, nor do they mandate reforms in assessment practices. They affect collection and distribution of the property tax only to the extent that property values are the dominant factor in controlling the distribution of state revenues. Nor do the Serrano decisions, despite the initial hopes of city officials, necessarily benefit the cities. It is entirely possible that some financing schemes legitimate under Serrano, such as equal dollar expendtures per pupil, if collected under the present property tax system, could result in greater tax burdens for cities and, in some instances, fewer dollars for education. Major cities have relatively high tax valuations (in part caused by the fact that urban property assessment practices are much more rigorous than suburban or rural pactices); but they have to support a variety of expensive services not provided by less population dense areas from the same tax base. Those burdens are not taken into consideration under present tax schemes. On the distribution side, per pupil expenditures equal to the rest of the state would not take into consideration the higher costs incurred by cities in funding union-negotiated teacher salaries or in educating large numbers of disadvantaged children. Since it is likely that many state legislatures will be interested only in meeting the minimum

For example, a property-rich district could receive more than average funding if the cost of living within the district was above average or if the district needed special funds to work with exceptional children. The additional allotments would not, however, result in the kinds of disparities that presently exist between rich and poor districts. This refers to the fact that the property values upon which education taxes are levied in urban centers are also being drawn upon to support other high cost social services that are not provided in less concentrated population centers.

See Berke & Callahan, "Serrano v. Priest: Milestone or Millstone for School Finance," Journal of Public Law, Spring, 1972. This analysis shows that the only areas that would clearly stand to benefit under an equal dollar expenditure scheme are rural areas. They estimate that such a formula would have the following effects on major cities:

requirements of the court decisions, the outlook under Serrano for urban areas is not reassuring.

Robinson v. Cahill, the only suit based on a state constitution, presents a different picture. Although it does not impose a specific formula, it restricts the solutions available to the state legislature (1) by requiring a uniform state tax to support education and (2) by defining the constitutional requisite of a "thorough and efficient" education as one that requires the funds distributed to be based on actual costs. This means that the state formula will have to take into consideration the needs of population centers with a substantial concentration of problem children.

2. New Issues Raised in Pending or About To Be Filed Lawsuits

As usually happens after the enunciation of a new constitutional principle, the post-Serrano suits are seeking to give added dimension to the "fiscal neutrality" standard, by building in the kinds of specific requirements that the court provided in Robinson v. Cahill. In Dade County Classroom Teachers' Ass'n v. State Board of Education of Florida, for example, the plaintiffs complain that "the expenditure of equal dollars per child does not create equality in education opportunities," and allege that "greater financial effort is required to provide the same learning opportunity in denser urban areas." As representatives of such urban areas, they allege that the administrative costs involved in running their schools are greater and that because of the large number of economically deprived children in their schools, they "need more money for more programs merely to provide equivalent learning opportunities." To meet the constitutional requirement of equal educational opportunities for all children. they ask the court to declare the Florida school finance law unconstitutional and to require the legislature to pass a new law. Other urban centers, such as Detroit and New York are contemplating similar suits that will undoubtedly particularize the constitutional protections even further."

Other cases in federal court promise to expand upon issues pertaining to the assessment and collection of property taxes that were raised under the state constitution in Robinson v. Cahill but only touched upon in Serrano. For example, in Fort Worth Independent School District v. Edgar, now pending before a three-judge Federal court in Texas, the Dallas, Fort Worth, and Houston school districts are challenging the present manner in which Texas collects property taxes for school purposes as well as the manner in which those taxes are redistributed by the state. The plaintiffs allege that they contribute more than their share to the state school fund because their property is assessed at full market value, while other districts are assessed at rates as low as five percent of market value. Since the state contribution to local districts increases as the district's assessed valuation declines, the complaining districts receive a smaller state contribution than do other districts where assessments are carried out improperly. Fort Worth claim to have lost $2.632,878 in school year 1969–70, Dallas $5,395,487 and Houston $5,587,960.10 Similar losses will be incurred as long as the present scheme is maintained. Plaintiffs seek an injunction to bar the state from "assessing and collecting taxes on any basis that is not equal and uniform."

The implications of the Fort Worth case to the Serrano decision are clear: a state that seeks to equalize local tax efforts, to require property-rich communities to provide increased contributions to a state school fund that will. in turn, be used to support property-poor communities, will face a second set of equal protection challenges unless at the same time it equalizes the manner in which its property taxes are assessed and collected. In fact, whether or not Serrano is upheld, a new line of legal decisions, will, probably require the states to clean up their property tax administration."

In summary, it is likely that over the next year, a number of new decisions will be handed down by federal and state courts in the school finance field

It is also probable that litigants will seek to break overall school finance inequities down into a number of smaller parts. For example, Johnson v. New York State Education Department, 319 F. Supp. 271 (E.D.N.Y. 1970), aff'd, -F. 28 (2d Cir. 1971). a case recently decided by the 2d Circuit and now pending before the U.S. Supreme Court seeks to compel school officials to provide free text books to poor children to enable them to benefit from the educational process.

10 The suit also complains that tax exemptions to certain state and federal properties that are located in the plaintiff districts but that serve the state as a whole impose undue tax burdens on plaintiffs.

11 See, for example, Russman v. Luckett, et al., 391 S.W. 2d 694, compelling uniform assessment in Kentucky pursuant to the state constitution and Lee V. Boswell, U.S. Dist. Ct. M.D. Ala., June 29, 1971), declaring invalid under the due process and equal protection clauses of the U.S. Constitution the provision in the Alabama Code that allowed county officials to determine local assessment rates.

that will further refine the constitutional requirements of an equal educational opportunity.

C. THE STATE LEGISLATURES

The record of the state legislatures is for the most part a dismal one. In many states, the issue of school finance reform has been pending for over a decade. Extensive documentation and sound proposals for reform have not led To action. In fact, it is precisely this inaction that gave rise to the finance reform litigation in the first place.

Even affirmative decisions by the courts may not stimulate the legislatures to act in the necessary manner. As indicated above, the present decisions based upon the U.S. Constitution do not yet go far enough to insure a truly equitable distribution of education resources. They allow legislatures to opt for a reshuffling of existing resources, half-measures that will give rise to another call for reform a decade from now. Some legislatures may even resist the court erders altogether, as has occasionally been the experience under orders pertaining to desegregation, reapportionment and reassessment,* Resistance, unfortunately, will give rise to more lawsuits.

Each of the attorneys on the panel will give you a rundown on what his state legislature has done to date in response to an affirmative court ruling. I would like to give a summary history of school finance reform in the State of Michigan as an example of the kinds of problems that are likely to be encountered.

The need to rewrite Michigan's school finance law was first discussed at the state's constitutional convention in 1961. No action was taken, however, until October 1966 when the legislature authorized an investigation of school finance. In 1967 the results of the investigation were reported; the major recommendation was a shift to a statewide property tax for the support of the public schools. The recommendation was not acted upon. In the summer of 1968, the Detroit School Board filed suit against the state seeking to overturn the existing laws and to establish new standards that would take into account local variations in the cost of providing equal educational opportunities.12 In October 1969, Governor Milliken submitted a major legislative package to the legislature that included two constitutional reforms: institution of a statewide property tax with the consequent elimination of local propery tax levies for school purposes. The legislature rejected the constitutional amendments as well as a number of other legislative recommendations for reorganizing the publie school system. After two years of inaction, Gov. Milliken, himself, filed suit against the State Treasurer requesting the court to enjoin the distribution of funds under the present status and to declare Michigan's school finance status unconstitutional. Finally, while the suit was still pending, the Governor once again sought to obtain a constitutional amendment, this time going over the heads of the legislature through a petition for popular initiative. To date, none of these efforts has succeeded.

13

Michigan may not be typical. But it illustrates the reluctance of state legislafures to assume a greater burden in funding the schools or to undo the present bias of the distribution formulae in favor of rich districts. The political reasons for this reluctance are obvious: the required shifting of resources is not only a "poverty" program but it is one that reduces the resources available to the rich in a highly visible fashion.14

"For example, after the landmark decisions in Lee V. Boswell, supra, the state legislature, despite federal court order to carry out a uniform reassessment of all property in Alabama, Las refused to allocate sufficient funds to comply with the order.

Among Governor Milliken's education reform proposals are:

1. To abolish the State Board of Education and replace it with an appointed State Superintendent of Public Instruction.

2 To establish regional school districts to replace the existing intermediate school districts.

3. To establish a commission to reorganize local school districts to a minimum size of 200 pupils allowing for extenuating circumstance.

4. To set up a budget review system wherein local school districts submit budgets regional boards, to the State Department of Education to the Executive Office, and ally to the Legislature.

To spend $100,000 annually to encourage neighborhood social and cultural centers for hool dropouts.

6. To expand the current program of pupil testing and to fund innovative improvement

Erograms.

To set up an advisory board which would work with the Department of Education er a three year period to develop teacher incentive.

A summary run-down of the actions taken in the four states under discussion today Attached as Appendix C.

D. THE ROLE OF THE FEDERAL GOVERNMENT

The nation is facing an unprecedented opportunity to restructure its system of financing public schools. As indicated earlier, the present irrational system of financing, characterized by gross inequities in class and race, is a major cause of the decline of confidence in the public school system. The federal government is in a key position to reverse the decline and to insure that the opportunity for reform is acted upon positively. We recommend:

1. A substantial increase in federal expenditures to support the general costs of elementary and secondary education. These funds should be distributed in a manner that encourages and insures equalization of school resources both intrastate and inter-state.** Specifically:

No grant under any federal aid to education program should be made to a state that has not taken or committed itself to take steps (in conformance with federally established standards) (1) to assume a greater burden of the costs of local education and (2) to insure that its total education resources-federal. state and local-are distributed in a manner that insures equality of educational opportunity.

To insure appropriate state action, the Congress should pass a flexible law. similar in general approach to Title VI of the Civil Rights of 1964, that forbids federal agencies from giving financial support to state education agencies that discriminate unlawfully against the poor in their systems for financing public schools and in their educational offerings. The law should include general standards that recognize regional variations and variations in the cost of edu cating different kinds of children. It should also provide a private right of action to insure vigorous enforcement.

2. Federal categorical programs designed to stimulate reforms in areas that are of national concern, such as the programs funded under Title I of the ESEA Title I should be terminated only when a successful demonstration phase is completed and the states are in a position to assume them through genera funding.

3. Federal insistence that all school districts receiving federal aid collect vali management data showing fiscal input and educational output and that they mak all such data available to the public; and finally,

4. Federal funding of: research, data collection and evaluation in regard t education finance and education methodology.

The Congress is today in a position to insure that the legal principles enunci ated in Serrano v. Priest and subsequent decisions result in a return to the radica concept of universal education on which the founding fathers based this demo racy. We urge you to carry out that task expeditiously and equitably.

LAWYERS' COMMITTEE EXPANDS ITS SCHOOL FINANCE PROJECT

The "American way" of financing public schools may be unconstitutional. Th California Supreme Court so ruled on August 30, 1971, on the facts of Serrano Priest. The record in that case showed that children who live in relatively poo low tax-base areas are provided educational resources substantially inferior t those in wealthier areas.

The laws that govern the distribution of educational resources in most state are subject to Serrano-type challenges. In almost every state in the Union, the is a wide disparity in the resources of local districts that bears no relationshi to local taxing effort, costs or educational needs. The usual state pattern financing uses the local school district as the basic financing unit. Each unit responsible for raising over half its school resources through a tax levied c property, thereby tying school finances to local wealth. Where "equalizing grants are provided by the state, they generally fail to compensate for spirallin school costs and shifting property values; in some states "equalizing” gran actually reinforce disparities between rich and poor districts.

In New York, Maryland and Massachusetts special commissions are collecti the facts on existing school finance formulae and devising new ones. In ov twenty states law suits have been filed challenging the constitutionality of sta aid formulae and reliance on the property tax. A Presidential commission is alt analyzing the problem.

**Federal assistance to reduce inter-state disparities should be provided only whe the differences result from the poverty of the state rather than the state's unwillingne to tax itself.