Case Title: Lincoln County School Dist. No. One v. State

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1999-07-21T00:00:00Z

Document:
Lincoln County School Dist. No. One v. State1999 WY 108985 P.2d 964Case Number: 98-344Decided: 07/21/1999Supreme Court of Wyoming
 
LINCOLN COUNTY SCHOOL DISTRICT NO. ONE, Appellant 
(Intervening Plaintiff)

v.

THE STATE OF WYOMING; 
JUDY CATCHPOLE, Superintendent of Public Instruction; MAX MAXFIELD, State 
Auditor; GARY CRUM, MARK HIGDON, JULIANN WILKINS-HUGHES, JON KIRKBRIDE, RUSS 
KIRLIN, JAY LYON, DONN J. McCALL, ROBERT McKIM, KATE MISSETT, JUDY RICHARDS, and 
BRENT YOUNG, Members of the Wyoming State Board of Education, Appellees 
(Defendants).

 

Appeal from the District 
Court of Laramie County, The Honorable Nicholas G. Kalokathis, 
Judge.

Steven F. 
Freudenthal of Herschler, Freudenthal, Salzburg, Bonds & Zerga, P. C., 
Cheyenne, Wyoming; and Joseph B. Bluemel, Kemmerer, Wyoming, representing 
appellant.

Raymond B. 
Hunkins, Special Assistant Attorney General of Jones, Jones, Vines & 
Hunkins, Wheatland, Wyoming; and John B. "Jack" Speight, Robert T. McCue, and 
Dominique D. Y. Cone, Special Assistant Attorneys General of Hathaway, Speight 
& Kunz, LLC, Cheyenne, Wyoming, representing 
appellees.

Before 
LEHMAN, C. J.; THOMAS, MACY & GOLDEN, JJ.; and DAN R. SPANGLER, D. J. 
(RET.)

SPANGLER, District Judge 
(Retired).

[¶1]      The appellant, 
being granted leave to intervene in the case of Campbell County School District 
v. State, Civil No. 129-59, challenged the constitutionality of that portion of 
the school funding reform legislation which provides for transitional funding 
from the old to the new funding process. After a bench trial, the district court 
upheld the legislation.

[¶2]      We 
affirm.

ISSUES

[¶3]      The appellant 
presents this issue:

Whether the 
funding limit of $250,000.00 in Hold Harmless funding, applicable only to 
recapture/grey area school districts, is unconstitutional and void under the 
equal protection provisions of WYO CONST. art. III, § 27 and art. I, § 34, when 
no such limit applies to all other school districts. This funding limit is found 
at Section 306(a)(v), as added to 1997 Special Session Laws, Section 306 by 
Section 601 of 1998 Special Legislative Session, Senate File 54, Enrolled Act 
No. 2.

The appellees 
state the issue as follows:

A. Is the 
traditional distinction between wealthy and other school districts 
constitutional in laws which ease the transition to cost-based school 
funding?

LEGAL AND 
FACTUAL HISTORY

[¶4]      In the case of 
Washakie County School District Number One v. Herschler, 606 P.2d 310 (Wyo.), 
cert. denied, 449 U.S. 824 (1980), this Court held that school funding 
disparities based upon the wealth of school districts were unconstitutional as a 
denial of equal protection. In response, the Wyoming Constitution was amended to 
allow the recapture of local revenues from some school districts for 
distribution to others. Wyo. Const. art. 15, § 17. This created what has been 
referred to as "recapture districts," "gray area districts," or "wealthy 
districts." All districts were guaranteed a minimum level of funding, known as 
the guaranteed funding entitlement. 

[¶5]      The wealthy 
districts were those which generated more than their guaranteed funding 
entitlement. They were allowed to keep various percentages of revenues in excess 
of their entitlement. The recapture districts were required to return any excess 
above the bonus amount to the state. The gray area districts were those which 
raised more money than their guaranteed funding entitlement but did not exceed 
the bonus amount. The appellant was a gray area or recapture district each 
school year from the commencement of this arrangement in the 1983-1984 school 
year through the 1996-1997 school year, with the exception of two 
years.

[¶6]      In the case of 
Campbell County School District v. State, 907 P.2d 1238 (Wyo. 1995), this Court 
reiterated its holding in the Washakie County School District Number One case 
and directed that school funding must be based upon costs, not upon the wealth 
of individual districts. The decision held that the bonus to wealthy districts 
was unconstitutional and directed the legislature to fund the districts based 
upon what it costs to provide a proper education. Campbell County School 
District, 907 P.2d  at 1279-80.

[¶7]      During the 1997 
Special Session, the legislature modified the public school finance reform 
legislation, providing that all districts are entitled to only the amount which 
it costs to educate their students. 1997 Wyo. Spec. Sess. Laws ch. 3, §§ 
101-701. Thus, wealthy districts were subject to recapture of their local 
revenue in excess of their cost-based formula amount. Because this would have 
resulted in some districts receiving less funding than under the previous law, 
the legislature enacted transitional measures, including a "hold harmless" 
provision. The pertinent portions of the hold harmless provision are as 
follows:

Section 306. 
1998-1999 and following.

(a) 
Notwithstanding W.S. 21-13-309(p) as created in this act and using computations 
of district general fund revenues by the state department based upon reports 
from districts required by the department:

(i) For school 
year 1998-1999, revenues available to any school district shall not be less than 
ninety-eight percent (98%) of the total general fund revenues available to that 
district during the 1997-1998 school year, but subject to the limitation in 
paragraph (vi) of this subsection.

(ii) For school 
year 1999-2000, revenues available to any school district shall not be less than 
ninety-eight percent (98%) of the total general fund revenues available to that 
district during the 1998-1999 school year, but subject to the limitation in 
paragraph (vi) of this subsection.

. . . 
.

(v) The 
additional funding to be provided to a district under paragraphs (i) and (ii) of 
this subsection is limited to not more than two hundred fifty thousand dollars 
($250,000.00) in each year if the total local resources for the district for the 
1997-1998 school year as computed under W.S. 21-13-310, as it was in effect for 
that school year, was greater than the foundation program amount for that school 
district for that school year as computed under W.S. 21-13-309(k), as it was in 
effect for that school year.

1998 Wyo. Sess. 
Laws ch. 2, § 601. The appellant challenges § 306(a)(v) in this 
action.

[¶8]      The hold harmless 
provision applies to districts, such as the appellant, which lost some funding 
for the 1998-1999 school year as compared to the 1997-1998 school year and which 
will lose funding for the 1999-2000 school year as compared to the 1998-1999 
school year. Even though the cost-based funding for these districts might be 
less than 98% of their prior year's funding, the provision allows additional 
funding up to the 98% level. But for the historically wealthy districts, these 
hold harmless payments are limited to $250,000.

[¶9]      For the 1997-1998 
school year only, the legislature also allowed school districts to levy an 
additional tax of not more than six mills by school board action. Wyo. Stat. 
Ann. § 21-13-102(a) (Michie Supp. 1998) (amended 1999). The appellant increased 
its levy by the full six mills, generating $1,715,000. Its revenues were 
affected as follows: 

Year Revenue 
1996-1997 $6,660,000 1997-1998 $8,200,000 1998-1999 
$6,470,000

[¶10]   The appellant states that, because 
of the $250,000 cap on hold harmless payments which applies to recapture/gray 
area districts, its percentage loss of revenues from 1997-1998 to 1998-1999 was 
ten times the percentage loss of any other school district affected by the cap. 
The appellees respond that none of the other wealthy school districts which 
received hold harmless payments at 98% levied the full six mills for the 
1997-1998 school year. If these other districts had levied the full six mills, 
they also would have been affected by the $250,000 limit on the hold harmless 
funding.

DISCUSSION

[¶11]   The appellant contends that the 
$250,000 cap deprives it of equal protection of the laws. Its theory is that the 
classification impinges upon the fundamental right to a quality education and is 
subject to the strict scrutiny test, requiring that the state demonstrate a 
compelling state interest in the disparate treatment. The appellant quotes this 
passage from the Campbell County School District case:

Because the 
right to an equal opportunity to a proper public education is constitutionally 
recognized in Wyoming, any state action interfering with that right must be 
closely examined before it can be said to pass constitutional muster. Such state 
action will not be entitled to the usual presumption of validity; rather, the 
state must establish its interference with that right is forced by some 
compelling state interest and its interference is the least onerous means of 
accomplishing that objective.

907 P.2d  at 
1266-67.

[¶12]   The strict scrutiny standard is not 
the proper test for the transitional funding legislation. The Campbell County 
School District decision held that there was an unconstitutional interference 
with the right to a public education when school funding was based not upon the 
cost to educate students but upon the wealth of individual districts. The 
transitional funding legislation does not interfere with educational rights. It 
is part of a process in which all districts will eventually be funded on a cost 
basis. The revenue allocated to the appellant for the school year in question, 
1998-1999, was calculated under the same cost-based formula which was used for 
all school districts. The appellant is claiming a fundamental right to funding 
in excess of its costs. That is not a right protected by the Campbell County 
School District case.

[¶13]   The appellant claims that the 
$250,000 cap is also unconstitutional under the less rigorous rational 
relationship test. It states that the classification does not have a rational 
relationship to a legitimate state interest under the four-part test established 
in Allhusen v. State By and Through Wyoming Mental Health Professions Licensing 
Board, 898 P.2d 878, 885-86 (Wyo. 1995). In applying the test, we must 
determine

(1) what class 
is harmed by the legislation and has that group been subjected to a tradition of 
disfavor by our laws; (2) what is the public purpose to be served by the law; 
(3) what is the characteristic of the disadvantaged class that justifies 
disparate treatment; and (4) how are the characteristics used to distinguish 
people for disparate treatment relevant to the purpose the challenged law 
purportedly intends to serve.

[¶14]   Addressing the first element of the 
Allhusen decision, we are not persuaded that any class has been harmed by the 
transitional legislation. The class allegedly harmed consists of the 
traditionally wealthy districts. Instead of being placed directly on a 
cost-based funding program, the districts were given the opportunity to levy an 
additional six mills for the 1997-1998 school year. As a result, the appellant 
enjoyed substantial revenues in excess of costs. In addition, the class of 
wealthy districts has not been subjected to a tradition of disfavor by our laws. 
To the contrary, that class has benefited from years of funding in excess of a 
cost-based formula.

[¶15]   Second, the public purpose to be 
served by the transitional funding law is to afford some protection to the class 
of which the appellant is a member. Instead of being placed directly on 
cost-based funding, for two years these districts are guaranteed funding at 98% 
of the previous year, with a $250,000 cap on additional funding to meet that 
percentage.

[¶16]   Third, is there a characteristic of 
the disadvantaged class that justifies disparate treatment? We cannot conclude 
that the class has been harmed, so it is not disadvantaged. The characteristic 
that justifies disparate treatment of this class is its wealth in relation to 
other districts. This class has benefited from its financial condition for a 
number of years.

[¶17]   The fourth factor examines how the 
characteristics used to distinguish people for disparate treatment are relevant 
to the purpose that the challenged law purportedly intends to serve. The purpose 
of the challenged law is to provide some assistance to districts in the 
transition to cost-based funding while placing a limit upon that assistance. 
Their relative wealth is relevant to this purpose. The $250,000 cap is justified 
by the historic wealth of these districts and by the mandate to establish a 
cost-based funding mechanism. Accordingly, we hold that the classification in 
the transitional school funding legislation has a rational relationship to a 
legitimate state interest.

[¶18]   Finally, the appellant asserts that 
the $250,000 cap is unconstitutional as applied to it. The appellant cites Board 
of County Commissioners v. Geringer, 941 P.2d 742, 748 (Wyo. 1997), for the 
proposition that, in the expenditure of public funds, citizens in one county or 
area are entitled to have the law function in such a way that public funds are 
expended equitably. In that case, this Court found that it was unconstitutional 
for the legislature to refuse funding for the county court in Sublette County 
while it funded county courts in six other counties which were similarly 
situated. However, in the case before us, the appellant has been subject to the 
same standards that were applied to the other members of its class. The formula 
for funding at 98% of prior years with a $250,000 cap was applied to all the 
recapture/gray area districts. The appellant has not been singled out. The 
transitional provisions are not special legislation.

CONCLUSION

[¶19]   We conclude that § 306(a)(v) does 
not violate the equal protection provisions of the Wyoming Constitution. It does 
not interfere with the right to a proper public education. The classification in 
the law has a rational relationship to a legitimate state interest in making the 
transition to a cost-based school funding system. The district court's judgment 
is, therefore, affirmed.