This is quite a commentary on one of the world's leading public educational systems.

Underlying all of the problems is the fact that the present system of financing is totally inequitable and irrational. There is no business in the world that could survive on a financing scheme similar to the school financing system. I think the recent experience in the District of Columbia, which has turned into almost a comedy situation, illustrates the point. They cannot tell you how many teachers they have, what they are spending, or how much it costs to educate children. There is no relationship between the amount of money made available and actual costs. The educational system is second highest to defense in terms of public expenditure and you cannot find out what anything costs and what it is being spent for.

It is out of this kind of situation that the lawsuits we have discussed this morning have arisen.

They do not get at all the problems I mentioned earlier; they focus on the problems of collection and distribution of revenues for public school financing.

In brief: There have been 12 lawsuits decided in this area, six of these in Federal Court, the others in State courts.

As you know, the first case started out in Illinois, McInnis v. Olgilvie in 1968, in which the Federal judge decided that he could not handle it. The issue was too broad. He had not been given a manageable standard.

The plaintiffs, he thought, were asking for distribution of funds according to educational need, and not according to any other more measurable standard of equality.

Finally, he could not see anything irrational with a system where money was handed out on a basis of local property tax values, as opposed to the cost of education.

The McInnis was followed by two others that took the same line, an Oklahoma case and a Virginia case, both of which were negative. The movement stopped for a while until last summer, in August 1971. with the California decision in the Serrano case. This represented a shift in terms of the kind of standard that the plaintiffs were seeking from the court. Instead of talking about educational need, they set a standard of fiscal neutrality; the money cannot be handed out on the basis of wealth, other than the wealth of the State as a whole. They sought to break the connection between the property tax and the distribution of the State funds, because that nexus prevented equality of distribution.

Serrano was followed quickly by a case out of Minnesota which came out with a similar decision adopting the Serrano reasoning. Then in December, Rodriguez was decided in Texas by the three-judge Federal court. The ruling followed Serrano, with a slight twist. The court found education to be a fundamental interest but also declared that the Texas system was so irrational, it should be knocked out even without a fundamental interest finding.

Rodriguez is probably the case that will move first to the U.S. Supreme Court. An appeal has already been filed; we do not know whether the court will review it or not, but we assume it will.

Finally, we have a case that will be discussed, Robinson v. Cahill from New Jersey, that is one of the most interesting cases in terms of the interpretation of the State constitution.

As you know, almost every State constitution requires the State to provide a system of education. In New Jersey, it requires a "thorough and efficient" education, and other States have similiar qualifying words. These words have had no content for years. They have not been interpreted by the courts.

The New Jersey case says that the "thorough and efficient" requirement should be taken seriously, that the State is, in effect, mandated to live up to that standard. You will hear more about that from Mr. Ruvoldt.

In Illinois, three cases have recently been filed; they are also relying on unusual wording in the State constitution. The constitution was amended in 1970, I believe, to state specifically, that the State shall provide the primary financing in the school area. Suits are now being filed by a variety of people, to get that interpreted as meaning over 50 percent. This would mean a fairly good increase in local aid.

There have been a couple of other decisions, generally along the line of Serrano: A positive Wyoming decision, a negative New York State decision-that relied on McInnis-and an Arizona decision.

That is roughly the scorecard in terms of what has been decided. It is easier to run that down than to say what it all means.

It is clear from the ruckus that occurred after Serrano, a lot of people thought it meant things that it did not mean.

Serrano established a negative standard. It did not say you have to go out and do anything specific. It said simply, that you cannot give school funds to localities on the basis of the wealth of the locality. This permits a tremendous range of solutions.

It allows anything from a substantial increase in the State's equalization contribution, you could have California providing sufficiently more State funds so the local property tax contribution was no longer the dominant contribution. You could have equal dollar expenditures, provided from a variety of tax devices; you could have power equalization, something dreamed up by professors out in California, whereby the State lets local school districts pick their own tax rate, and then guarantees that comparable rates will produce comparable amounts of money, by taking from the rich to give to the poor. And then you could have a more sophisticated kind of formulation of distribution. They are all possible, they are not ruled out. Judging from the past actions of State legislators they will probably opt for the minimum. It is unlikely in many of our States that the legislature will select the optimum plan. In New York, for example, the Fleischmann Commission has come up with some very exciting proposals; to provide extra funds for disadvantaged kids, to leveling off with property tax, with the State assuming special responsibility for the handicapped and other kind of difficult problem children. But given the climate in New York today, the taxpayer revolution in that State, it is unlikely that these provisions will be enacted. Even if New York had a Serrano decision, such measures would not be required. That is the tough thing with these cases, and one of the things that produces frustration on the part of lawyers. The lawyers can help to remove the obstacles to reform but they cannot shape the future except to a minimum extent. It is interesting, cities were among the biggest pushers for this kind of reform. After the Serrano decision there were mayors all over the Country calling us; they wanted to file suit tomorrow. But it has been

learned since that some of the solutions allowable under Serrano, like equal dollar expenditures, do not necessarily improve the position of the cities.

In fact, if the existing tax structure is maintained, some of the big cities could have more money taken away, and get back less per capita than at present.

There are of course formulations that will take care of the needs of the cities, by building in extra costs for the differences in salaries, and construction costs and all of the various things that makes cities more expensive places to run schools, and also taking into account the extra costs of disadvantaged kids.

But, as I said, these are not required, and unless you have a progressive legislature, it will probably not come about.

Another bit of confusion over the Serrano decision, it does not require abolition of the property tax. You can rely on a more limited local property tax contribution or you can have a State property tax.

You must, however, be sure that the predominant contribution to a local budget is not based exclusively on the value of land in that area. As I indicated earlier, the Serrano decision does not increase State. control. It encourages greater State control of financing, but in no way affects control of other areas-curricula, hiring, none of the other major decisions that have to be made in regard to schools.

We have right now two lines of legal decisions, one based on State constitutional provisions, breathing new life into some of those provisions, the other based on the 14th amendment of the U.S. Constitution, defining what equality with regarding to handing out school money means under that amendment.

Both of these lines of legal thinking will go through a lengthy period of evolution, unless the Supreme Court suddenly brings everything to a halt. In that event, the State cases may proceed independently. It is probable also that particularly in the Federal Constitution line of cases a lot of new ramifications will develop.

The next few years in school finance litigation may be similar to the history of the voting rights decisions. These cases started out with the principle of one man, one vote, and then in subsequent challenges to more conditioned problems like multi-member districts, you had to develop new standards. Probably, the fiscal neutrality standard will be formed in the same fashion. There will be subsequent decisions that build in specific, much more concrete criteria than the Serrano decision ;unless there is a major reversal, it is likely we will see a continual development in this direction.

One of the biggest issues just emerging that Serrano only touches on is the whole way that property taxes are collected.

Serrano focused primarily on distribution. The resolution it came up with will necessarily require some shift in revenue raising praetices, but it does not get at property assessment practices. The property tax is probably the single most corrupt tax in the country, in the way it is administered. But there is nothing in Serrano that requires, for example, a State to have more control over its local assessors, or better State review of local assessments, or great uniformity of assessment, or any of the other steps, that have been recommended for years to change the property taxes. Of the decided cases, only the Robinson case touches upon this problem. As you know, it requires school funds to be raised from a State tax in the future.

There are decisions coming along, one out of Texas, Dallas, Fort Worth, and another city in that State, are claiming that property taxes are administered in such an unfair way in Texas that only urban areas where they have professional assessors, pay more taxes and get less back because of high assessments than less urban areas where there are nonprofessional assessors who just toss a coin and generally come up with lower assessments.

The urban areas also have far more tax exempt property. They have State facilities and Federal facilities, that everybody in the State benefits from, but they must pay for them, and finally, the cities claim they are getting less money back, compared to their contribution. There is a Federal court decision out of Alabama, that invalidates that State's highly unequal assessment practices and a similar one in Kentucky, decided in State court a couple of years ago.

Some of these cases, like the Serrano case order the State legislature to come up with a new constitutional assessment scheme. Even under such an order, some States are not terribly interested in doing so, so that you have in Alabama, for example, a great deal of resistance to legislative compliance with the Federal court order.

I would like to touch briefly on what the States have done, I think you will get more of this for each individual State, as we deal with those. There has been a long-term effort in a number of States to change school finance laws. In Michigan, for example, it started with the Constitutional convention in 1961; 11 years have passed and the State is still piddling around with this issue. In many States, there are State Legislative Commissions, there are private commissions, there are tax commissions, all of which have documented the inequities, but it does not appear that State legislatures, because of the basic shift required in resource allocations, are very enthusiastic about taking the necessary steps.

Show them what is necessary is not enough; without a bigger shove, they do not want to do it.

The cases do provide a shove. They produce a court order, saying all school funds will be cut off, until the system is changed.

Another big shove could be provided by the Federal Government. Probably this is a more satisfactory way of doing it, a better way than bringing 50 lawsuits, each of which costs between $50,000 and $100,00, and which give rise to the unhappy feelings litigation usually produces. I think we all feel that if the Federal Government increases its assistance to education, in any substantial manner, and even under xisting programs, it must condition its grants to the States on a ommitment to put their own houses in order.

Something like a title VI for school financing is needed, providing *hat any Federal money given out for schools be given out only after a showing that the State has taken steps to clean up its own finances. I think also that the suggestion that appears in Mr. Perkins' bill of some sort of Federal contribution to equalize educational resources mong the States is a very sound one.

That is a problem the Serrano case does not get at; Serrano is based on the 14th amendment that deals with intrastate action, and not with interstate problems.

I think there should be a continuation of categorical programs to meet special national priorities. For example, the children who are being helped by title I are still a national problem.

Until the States devise ways of dealing with the children of welfare recipients or until title I demonstrates how to do it, it is probably sensible to continue title I at its present level or higher.

I think that the Office of Education should be required to evaluate the impact of any money it distributes.

As I mentioned earlier, there is at present little analysis of the data collected.

I also think that local districts receiving funds should be required to disclose to the public data demonstrating how they run their school systems. The story of the Hobson case here in the District of Columbia shows how hard it is to get such data and how far a citizen must go to find out what is going on in his own school system.

Finally, the Federal Government must provide some kind of research and data capability. The lawsuits themselves have been an incredible stimulation for the collection of data that should have been collected for decades, but was not being collected. For the first time. schools are being required to show in court what kind of money they spend on their students, and what the results have been.

It is absurd this was never done before, but I think the Office of Education can now lead the way showing what needs to be collected, how it should be analyzed, and then making it public. It really is difficult to believe; when the issue of big cities first came up, there was nobody in the Federal Government you could call, to find out how much more education costs in a city because of salary increases, or because of construction costs: to obtain figures on disadvantaged kids to quantify the differences in educational needs. It was impossible to determine if the educators were just pulling numbers out of the air. Those are the main comments that I wanted to make. I would like to call on the attorneys in the order in which the decisions were decided, so that you can see the evolution of the legal thinking.

The first case was the Serrano case, and we have Terry J. Hatter. Jr., from that scene, who can tell you about that case.

Mr. PUCINSKI. Mr. Hatter, your prepared statement will go in the record at this point.

(The statement referred to follows:)

STATEMENT OF TERRY J. HATTER, JR., WESTERN CENTER ON LAW AND POVERTY,

LOS ANGELES, CALIF.

I am Terry J. Hatter, Jr., executive director of the Western Center on Law and Poverty in Los Angeles, and associate clinical professor of law at the university of Southern California.

I come to you today with a unique concern for the issues you are studying. First, because they are of direct importance to thousands of clients of Legal Services programs in Southern California, and, indeed, across the entire nation. And second, because the recent landmark decision of the California Supreme Court regarding the State's methods of financing public elementary and secondary schools resulted from a case, Serrano v. Priest, initiated by the Western Center on behalf of a number of our clients in East Los Angeles.

The Center was joined in this suit by attorneys from other Legal Services programs, the San Francisco Board of Education, the Mexican American Legal Defense and Education Fund, the Youth Law Center in San Francisco, the Mexi can American Bar Association of California, and law professors from USC, UCLA and the University of California Law School in Berkeley, as well as by a number of private attorneys.

Clearly, almost overnight the matter of school financing has become one of the major domestic issues of the decade. Since the California ruling in Serrano