LITTLE ROCK — Five years after the long-running Lake View case was resolved, legislators likely will revisit the thorny issue of equity in public education funding in the session that starts next month following a state Supreme Court ruling that some say threatens to undermine Arkansas’ new school funding system.
In a 4-3 decision, the state’s highest court ruled last month that school districts which collect money through a statewide 25-mill property tax in excess of the state-mandated funding level can keep the excess funds.
The state had argued that districts with excess funds — there are six fitting that description — must surrender the extra money to the state Department of Education to ensure that a statewide tax does not disproportionately benefit more affluent districts.
Critics of the ruling, including Gov. Mike Beebe, say it could weaken the foundation of a system built on sweeping school reforms and nearly $1 billion in additional funding to pay for them.
The Lake View case began in 1992 as a lawsuit by the Lake View School District challenging the way school funds were distributed. In 2002 the Supreme Court declared the school funding system unconstitutional, saying it did not distributed public education funding adequately and equitably.
Lawmakers adopted fundamental changes in public school policy and raised taxes to improve funding. In 2007, the Supreme Court ruled that the state was complying with the constitutional mandate to provide all students the means for an adequate education.
For the handful of districts collecting more through the 25-mill tax than the level of funding required to achieve adequacy, the state Department of Education has been requiring that they hand over the excess funds to the state. The Fountain Lake and Eureka Springs school districts argued in a lawsuit that they should be allowed to keep the excess money, and the Supreme Court agreed.
Justice Paul Danielson wrote for the majority that if the General Assembly wants to provide a mechanism for distributing excess funds to other districts, it could do so. The state is expected to seek a rehearing in the case, but barring an unusual decision by the court to reverse itself, some legislators may try to take Danielson up on his suggestion.
“I think it will come up,” said Rep. Uvalde Lindsey, D-Fayetteville, who won a Senate seat in November without opposition and will serve on the Senate Education Committee in the upcoming session. “As many folks have said, the issue is you’re chipping away at the Lake View decision.”
Lindsey said he had no plans to file a bill to allow the state to claim excess funds collected under the 25-mill tax, but “I’m sure someone will.”
“The intent of the legislation was that all of the 25 mills went to the state to be distributed in a manner that ensured that all school districts were treated adequately and equitably,” he said.
Beebe, despite disagreeing with the Supreme Court’s decision, has expressed concerns about the precedent that would be set by a legislative fix. Talking to reporters on Nov. 29, the day the opinion was released, he noted that the 25-mill tax was created by Amendment 74 to the Arkansas Constitution. The amendment was passed in 1996 in response to the filing of the Lake View lawsuit.
“The mere fact that (Danielson) suggests that the Legislature can by statute in effect alter the constitutional amendment in a way as substantive and as basic as that illustrates, really, what I think the danger is going forward with future governors and future legislators that want to change the essence of the constitutional mandate that the people passed in Amendment 74,” Beebe said.
Lindsey said he believes the Legislature could take action without opening a door to future tinkering with Lake View or Amendment 74.
“I think you’re restoring the intent of the agreement under Lake View,” he said. “The Supreme Court tinkered with Lake View, in my supposition, and the Legislature is fixing what the Supreme Court undid.”
But Republican legislative leaders say they are content to leave the ruling alone. Republicans will hold majorities in both chambers of the Legislature next year.
Sen. Johnny Key, R-Mountain Home, who will chair the Senate Education Committee next year, pointed out that state law allows school districts to pass their own millages in excess of the mandatory 25 mills and keep that money.
“What is the difference between a district who passes a millage over the 25 mills to have enhanced learning opportunities versus a district like Fountain Lake or Eureka Springs that by nature of their valuation they’re already getting more than the per-pupil funding?” he said. “From a practical standpoint of what it means to the students, there really doesn’t seem to be a difference there.”
Republican House Caucus leader Rep. Bruce Westerman, R-Hot Springs, said allowing districts to keep excess money from the 25-mill tax will not cause any district to receive less than the mandated per-student funding amount.
“With the ruling, somebody show me how one school will get one penny less than they’re currently receiving,” he said. “And if the ruling had been the other way, show me how one school would get one penny more.”
Sen. Jimmy Jeffress, D-Crossett, who currently chairs the Senate Education Committee but was prevented by term limits from seeking re-election this year, criticized the ruling, saying it threatens to tear apart the “patchwork quilt” that is the resolution of Lake View. But Jeffress also said he has concerns about a legislative fix.
“I’m like Gov. Beebe. I just hate to see any entity go to tinkering with what we’ve done,” he said.
Richard Abernathy, executive director of the Arkansas Association of Education Administrators, said the ruling left him with many questions, one of them being what kind of tax Amendment 74 created.
“Is it a state tax? If it is, then how does the state tax property?” he said. “Because there’s another constitutional amendment that says they can’t tax property. The justices ruled and said it was a special tax. Well what does a special tax mean and what exactly are the rules for a special tax?”
Abernathy said he did not know what position the association might take, but he believes there is a need for legislative clarification “either way.”
“There’s more questions than there are answers at this point,” he said.