*The HONORABLE JOHN F. NANGLE, United States District

Judge for the Eastern District of Missouri, sitting by

designation.

 1 The HONORABLE H. FRANKLIN WATERS, Chief Judge, United States

District Court for the Western District of Arkansas.

___________

No. 94-3703

___________

Les Hadley, *

*

Plaintiff - Appellee, *

* Appeal from the United States

v. * District Court for the

* Western District of Arkansas.

North Arkansas Community *

Technical College, *

* Defendant - Appellant. * ___________

 Submitted: September 11, 1995

 Filed: February 14, 1996 ___________

Before LOKEN and LAY, Circuit Judges, and NANGLE,* District Judge.

LOKEN, Circuit Judge.

Les Hadley filed this civil rights action under 42 U.S.C. §

1983 alleging that his former employer, North Arkansas Community

Technical College ("NACTC"), violated his due process rights by

summarily terminating him as a vocational instructor. NACTC moved

for summary judgment, claiming that it is an arm of the State

entitled to Eleventh Amendment immunity from this federal court

damage action. The district court1 denied the motion, and we

remanded for further consideration in light of Sherman v. Curators

of Univ. of Mo., 16 F.3d 860 (8th Cir. 1994), and Greenwood v.
-2-

Ross, 778 F.2d 448 (8th Cir. 1985). The court then concluded in a

thorough opinion that NACTC is entitled to Eleventh Amendment

immunity and dismissed Hadley's claim. Hadley appeals. We affirm.

I.

The Eleventh Amendment immunizes an unconsenting State from

damage actions brought in federal court, except when Congress has

abrogated that immunity for a particular federal cause of action.

See generally Edelman v. Jordan, 415 U.S. 651 (1974). Section 1983

does not override Eleventh Amendment immunity. See Will v.

Michigan Dept. of State Police, 491 U.S. 58, 63 (1989), construing

Quern v. Jordan, 440 U.S. 332 (1979). Therefore, if NACTC is

entitled to the State of Arkansas's Eleventh Amendment immunity,

the district court properly dismissed Hadley's claim. 

A state agency or official may invoke the State's Eleventh

Amendment immunity if immunity will "protect the state treasury

from liability that would have had essentially the same practical

consequences as a judgment against the State itself." Pennhurst

State Sch. & Hosp. v. Halderman, 465 U.S. 89, 123 n.34 (1984),

quoting Lake Country Estates, Inc. v. Tahoe Reg. Planning Agency,

440 U.S. 391, 401 (1979); see Ford Motor Co. v. Department of

Treasury, 323 U.S. 459, 463-64 (1945). On the other hand, Eleventh

Amendment immunity does not extend to independent political

subdivisions created by the State, such as counties and cities.

See Lincoln County v. Luning, 133 U.S. 529 (1890). The issue is

whether NACTC "is to be treated as an arm of the State . . . or is

instead to be treated as a municipal corporation or other political

subdivision to which the Eleventh Amendment does not extend." Mt.

Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1977)

(holding that Ohio local school districts are like political

subdivisions and therefore not immune). State universities and
 2

For cases involving Eighth Circuit institutions, see Dover

Elevator Co. v. Arkansas State Univ., 64 F.3d 442, 446-47 (8th Cir.

1995); Richmond v. Board of Regents of Univ. of Minn., 957 F.2d

595, 599 (8th Cir. 1992); Sherman v. Curators of Univ. of Mo., 871

F. Supp. 344, 345 (W.D. Mo. 1994); Van Pilsum v. Iowa State Univ.

of Science and Tech., 863 F. Supp. 935, 937 (S.D. Iowa 1994);

Assaad-Faltas v. University of Ark. for Medical Sciences, 708 F.

Supp. 1026, 1030 (E.D. Ark. 1989), aff'd, 902 F.2d 1572 (8th Cir.),

cert. denied, 498 U.S. 905 (1990). A fact specific exception to

the general rule is Kovats v. Rutgers, the State Univ., 822 F.2d

1303, 1307 (3d Cir. 1987). 

 3See, e.g., Mitchell v. Los Angeles Community College Dist., 861 F.2d 198, 201-202 (9th Cir. 1988), cert. denied, 490 U.S. 1081

(1989); Goss v. San Jacinto Junior College, 588 F.2d 96, 98-99 (5th

Cir.), modified on other grounds, 595 F.2d 1119 (5th Cir. 1979);

Korgich v. Regents of New Mexico Sch. of Mines, 582 F.2d 549, 551

(10th Cir. 1978); Durrani v. Valdosta Technical Inst., 810 F. Supp.

301, 305 (M.D. Ga. 1992), aff'd, 3 F.3d 443 (11th Cir. 1993); Moche

v. City Univ. of New York, 781 F. Supp. 160, 165-66 (E.D.N.Y.

1992), aff'd, 999 F.2d 538 (2nd Cir. 1993); Thornquest v. King, 626

F. Supp. 486, 488-89 (M.D. Fla. 1985).

-3-

colleges almost always enjoy Eleventh Amendment immunity.2 On the

other hand, community and technical colleges often have deep roots

in a local community. When those roots include local political and

financial involvement, the resulting Eleventh Amendment immunity

questions tend to be difficult and very fact specific.3

Eleventh Amendment immunity reflects respect for state

sovereignty and a desire to protect the state treasury. A narrow

majority of the Supreme Court recently held that exposure of the

state treasury is a more important factor than whether the State

controls the entity in question. Hess v. Port Auth. Trans-Hudson

Corp., 115 S. Ct. 394 (1994). We see nothing inconsistent with the

majority's reasoning in Hess and the approach we have developed for

deciding whether a particular institution of higher learning is

entitled to Eleventh Amendment immunity. In addition, Hess

involved a bi-State compact entity, and the majority cautioned that

"there is good reason not to amalgamate Compact Clause entities

with agencies of 'one of the United States' for Eleventh Amendment

purposes." Id. at 402. Therefore, we adhere to the test that we
-4-

instructed the district court to apply on remand, which requires

that we 

examine the particular entity in question and its powers

and characteristics as created by state law to determine

whether the suit is in reality a suit against the state.

Courts typically look at the degree of local autonomy and

control and most importantly whether the funds to pay any

award will be derived from the state treasury.

Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir. 1985), quoting Laje

v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727 (5th Cir. 1982)

(citations omitted in original). 

II.

Like the district court, we begin by examining "the nature of

the entity created by state law." Mt. Healthy, 429 U.S. at 280;

see Seibert v. University of Okl. Health Sciences Ctr., 867 F.2d

591, 594-95 (10th Cir. 1989). Amendment 52 to the Arkansas

Constitution authorizes the General Assembly to establish community

college districts. The General Assembly has authorized the State

Board of Higher Education to formulate criteria for establishing

community colleges, and to certify proposed community college

districts. See Ark. Code Ann. §§ 6-61-505 to -510. A district is

created if a majority of the voters in the proposed district vote

in favor of establishing the community college. § 6-61-513. Under

a 1991 statute, technical colleges may "become part of the Arkansas

technical and community college system under the coordination of

the State Board of Higher Education." § 6-53-301(a) (Supp. 1993).

That law prompted the 1992 merger of North Arkansas Community

College and Twin Lakes Technical College into NACTC. 

By statute, the State must provide community colleges "[f]unds

for the general operation of an adequate comprehensive educational

program." Ark. Code Ann. § 6-61-601(a). To this end: 
-5-

The amount of state revenues to be recommended for

the general operation of each community college shall be

the difference between the recommended budget and the

total of income for general operation, including student

fees and any other income except local taxes. The

recommended budget for general operation shall be

sufficient to provide an adequate comprehensive

educational program . . . as determined by the [State

Board of Higher Education]. 

§ 6-61-601(c)(2). For purposes of state appropriation and

expenditure procedures, the term "State agency" includes "statesupported institutions of higher learning . . . functioning under

appropriation made by the General Assembly." § 19-4-801(1)(A).

For the 1993-94 fiscal year, 58.2% of NACTC's total budget was

provided by state funds appropriated by the General Assembly.

Moreover, the state treasury is structured to include an NACTC Fund

that is dedicated to the "maintenance, operation, and improvement"

of NACTC. § 19-5-303(m) (Supp. 1993).

To this point, it seems clear that NACTC is, both financially

and institutionally, an arm of the State, and that any damage award

to Hadley would inevitably be paid from the state treasury. Those

are the factors that led us to conclude in Dover Elevator, 64 F.3d

at 446-47, that Arkansas State University is entitled to Eleventh

Amendment immunity. But Arkansas community colleges also have

elements of local funding and control that require further

analysis. 

The Arkansas Constitution permits community colleges to be

partially funded at the local level:

The General Assembly shall prescribe the method of

financing such community college and technical

institutes, and may authorize the levy of a tax upon the

taxable property in such districts for the acquisition,

construction, reconstruction, repair, expansion,

operation, and maintenance of facilities therefor.
 4

Essentially, expenditures for land, buildings, and furniture

and equipment. See § 6-61-501(2).

-6-

Amendment 52, § 1. The General Assembly has made local financial

participation mandatory:

(a) Each community college district shall be

responsible for all capital outlay expenses4 . . . except

that the state may share the responsibility for capital

outlay expenses for any community college which has an

enrollment of at least one thousand (1,000) full-time

equivalent students . . . .

(b) Capital outlay expenses shall be paid from

gifts, grants, profits from auxiliary enterprises,

tuition, fees, local millages, and other local funds and

may be paid from state funds appropriated for such

purposes. 

§ 6-61-603 (Supp. 1993). Therefore, when the voters of Boone

County, Arkansas, voted in 1973 to establish NACTC's community

college district, they authorized the levy of a tax not to exceed

five mills on taxable property in the district "for the purchase of

land and for the construction and furnishing of buildings and

facilities for such college." That authority was extended

indefinitely in a special election in 1977. However, while local

tax revenues have financed NACTC buildings and improvements, those

funds are subject to most state accounting and budgetary

procedures, § 19-4-803(b)(2); NACTC is a "State agency" for

purposes of the Arkansas State Building Services Act, § 22-3-

102(5); and the campus is State owned. 

In fiscal 1993-1994, NACTC received $317,366 in local tax

revenues, some three percent of its total budget. Those funds were

dedicated to new acquisitions or the issuance of bonds to finance

new acquisitions. See § 19-4-803(b)(2) (college must use funds

from a millage levy "for the purposes stated on the ballot at the

time of the election authorizing the millage"); Ark. Const. Art.

16, § 11 ("no moneys arising from a tax levied for one purpose
 5

 "Operating expenses" include "funds devoted to or required

for the regular or ordinary expense of the college, including

administrative, maintenance, and salary expenses, but excluding

capital outlay expenses, student activity expenses, and expense for

intercollegiate athletics." § 6-61-501(3) (Supp. 1993); see also

§ 6-53-103(9) (Supp. 1993).

-7-

shall be used for any other purpose"). Although the General

Assembly has authorized community college districts to levy for

general college operations "[i]n the event the local board of a

community college wishes to spend larger sums of money than the

state funds provided for general operation," § 6-61-602(a), NACTC

has never received any funds for general operations from local tax

levies. In fiscal 1993-1994, NACTC's operating expense5 revenues

were 75.1% state appropriated funds, 22.1% tuition payments, and

2.8% federal grants and private donations.

In these circumstances, we conclude that Hadley's claim "is in

reality a suit against the state," Sherman, 16 F.3d at 863,

because "the funds to pay any award will be derived from the state

treasury," Dover Elevator, 64 F.3d at 446. Hadley argues that he

seeks damages of less than $250,000 and therefore any award could

be paid from other sources, such as future local tax increases,

tuition, federal grants, or other discretionary funds. However,

while there is dictum in Sherman suggesting it is relevant "whether

a judgment against the University can be paid from non-state funds

under the University's discretionary control," 16 F.3d at 865

(emphasis added), traditional Eleventh Amendment cases did not

require a speculative analysis of whether a college largely funded

by the State might be able to pay a judgment in the first instance

from other revenue sources, and Greenwood and Sherman were not

departures from prior Eleventh Amendment jurisprudence. See

Treleven v. University of Minnesota, No. 95-2019, 1996 WL 11102, at

*2 (8th Cir. Jan. 12, 1996). Mt. Healthy directs us to examine

"the nature of the entity," 429 U.S. at 280, not the nature of the

relief the plaintiff seeks.
 6

Arkansas has also characterized NACTC as a "state agency" in

other governmental contexts. For example, the Department of

Finance and Administration determined that community colleges are

state agencies for purposes of exempting them from taxation, and

the Attorney General determined that they are state agencies that

qualify for grants from the Natural and Cultural Resources Grants

and Trust Fund. 

 7The total local tax that may be levied for community college

purposes is ten mills. § 6-61-503(a). 

 8Accord Lewis v. Midwestern State Univ., 837 F.2d 197, 199

(5th Cir.), cert. denied, 488 U.S. 849 (1988); Van Pilsum, 863 F.

Supp. at 937-38. Conversely, the inquiry cannot end with the fact

that the State appropriates funds for a community college, because

then most local school districts would also be Eleventh Amendment

immune. See Mt. Healthy, 429 U.S. at 280. 

-8-

Arkansas calls NACTC a state agency6 and has made its daily

operations financially dependent upon the state treasury. The

district's never-exercised authority to supplement NACTC's

operating budget with limited local tax revenues7 does not change

the fact that the State has created an institution of higher

learning "that is dependent upon and functionally integrated with

the state treasury." Kashani v. Purdue Univ., 813 F.2d 843, 846

(7th Cir.), cert. denied, 484 U.S. 846 (1987). The relevant

funding inquiry cannot be whether NACTC enjoys some non-state

funding, such as user fees (tuition), because then most state

departments and agencies, and all state universities, would be

denied Eleventh Amendment immunity.8 Here, even if NACTC could

initially satisfy a judgment from other operating revenues, such as

tuition payments or federal grants, the judgment would produce a

higher operating budget shortfall that must, by state law, be

satisfied by an appropriation from the state treasury. Thus,

Hadley's action "is in essence one for the recovery of money from

the state." Ford Motor, 323 U.S. at 463-64.
-9-

III.

Moving from the critical subject of state funding to the less

important question of state control, we agree with the district

court that there is substantial, but far from total, state control

over NACTC. The State Board of Higher Education is comprised of

thirteen members appointed by the governor and confirmed by the

Senate. § 6-61-201(a)(1) (Supp. 1993). The State Board acting as

the State Community College Board has broad powers and duties to

guide and regulate community colleges. Ark. Code Ann. §§ 6-61-

501(5) (Supp. 1993), 6-61-505. The College Panel of the State

Board participates actively and widely in NACTC's day-to-day

operation. For example, the College Panel establishes minimum

qualifications for the college president, § 6-53-203(3) (Supp.

1993); evaluates NACTC budget requests, §§ 6-53-203(4) (Supp.

1993), 6-61-601; develops budget forms and determines that state

funds are properly spent, §§ 6-53-203(5),(6) (Supp. 1993), 6-61-

209; determines minimum tuition and fee levels, §§ 6-53-203(7)

(Supp. 1993), 6-53-208 (Supp. 1993), 6-61-215; recommends

establishing, expanding, or abolishing institutions, § 6-53-203(9)

(Supp. 1993); and reviews curriculum proposals and changes, §§ 6-

53-203(d) (Supp. 1993), 6-61-214 (Supp. 1993). The State Board

also approved the merger of North Arkansas Community College and

Twin Lakes Technical College into NACTC, the college's name change,

and the its degree programs and courses. 

However, the General Assembly has also granted substantial

control over NACTC's daily affairs to locally-elected officials.

NACTC has a Local Board of nine qualified electors of the community

college district who are elected on a nonpartisan basis for sixyear terms. § 6-61-520 (Supp. 1993). The Local Board, with the

advice of the State Board, has broad power to select college

officers; develop NACTC's education program; appoint a college

president and fix the president's compensation and terms of office;

appoint members of the administrative and teaching staffs and fix
 9

For example, most local school districts do not enjoy

Eleventh Amendment immunity because they are dependent on local

taxes and controlled by local governmental entities, like cities

and counties. However, California has chosen to structure its

public education entities so that all have Eleventh Amendment

immunity. See Belanger v. Madera Unified Sch. Dist., 963 F.2d 248,

251-52 (9th Cir. 1992), cert. denied, 113 S. Ct. 1280 (1993). 

-10-

their compensation and terms of employment; enter into contracts;

accept grants and contributions; acquire, own, lease, use, and

operate property; and exercise the right of eminent domain. § 6-

61-521. Thus, as the district court noted, NACTC with its Local

Board is significantly more autonomous than Arkansas state-wide

universities. On the other hand, when it comes to finances -- the

essence of the Eleventh Amendment inquiry -- the State Board's

ultimate authority is ensured by its power to withhold state

funding if NACTC fails to comply with "prescribed standards of

administration or instruction." § 6-53-105 (Supp. 1993).

Read together, the provisions delimiting the responsibility of

the State and Local Boards reveal a community college system that

blends state and local interests and authorities. The local

control is of course relevant but falls short, in our view, of

making NACTC the Eleventh Amendment equivalent of a political

subdivision. In the final analysis, while Eleventh Amendment

immunity is a question of federal law, the structuring of state

government is the province of the States. Nothing precludes a

State from delivering regional or even local governmental services

through an arm of the State, from permitting voters in an affected

locale to help staff a state agency, or from providing highly

structured local input to state agency decisionmaking.9 Here,

Arkansas calls NACTC a state agency, allows for substantial local

autonomy but provides ultimate state control, and -- most

importantly -- funds the agency's general operations primarily from

the state treasury. We agree with the district court that NACTC is

entitled to Eleventh Amendment immunity. 
 1

See Note, Clothing State Governmental Entities with Sovereign

Immunity: Disarray in the Eleventh Amendment Arm-of-the State

Doctrine, 92 Colum. L. Rev. 1243, 1291-96 (l992) (collecting

cases).

-11-

The judgment of the district court is affirmed. 

LAY, Circuit Judge, dissenting.

Today's decision amplifies the disarray of approaches applied

by lower courts when confronted with the defense of Eleventh

Amendment immunity by state-created entities. Little would be

served by setting forth the diverse reasoning of this Court or

other courts. These cases are already of historical record.1 My

disagreement with the majority opinion is that it is not faithful

to Supreme Court precedent or to this Court's rulings covering the

same issue.

Local Control 

On June 5, 1995, we remanded this case to make a complete

record as to "'local autonomy and control and most importantly,

whether the funds to pay any award will be derived from the state

treasury.'" Hadley v. North Arkansas Community Technical College,

No. 94-3703, 1995 WL 329591, at *1 (8th Cir. June 5, 1995) (per

curiam) (quoting Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir.

1985) (quoting Laje v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727

(5th Cir. 1982)); see Sherman v. Curators of Univ. of Mo., 16 F.3d

860, 863 (8th Cir. 1994)). Subsequent to our remand, the Supreme

Court issued its ruling in Hess v. Port. Auth. Trans-Hudson Corp.,

115 S.Ct. 394 (1994). As the Court therein observed, the issue of

ultimate control cannot be the determining factor in Eleventh

Amendment cases, "for the State may destroy or reshape any unit it

creates." 115 S. Ct. at 404. The majority concedes that NACTC

possesses a high level of local autonomy, but erroneously discounts
-12-

this factor because the state legislature calls NACTC a "state

agency" and "provides ultimate state control." Maj. Op. at 10.

I read the record much differently. In my judgment, the

record reveals that NACTC resembles a local school district, albeit

subject to state guidance, whose Local Board possesses broad

authority to direct the college educational program and apply the

college's resources to that end. The Local Board has broad power

over the direction of NACTC's educational program. Specifically,

the Local Board is empowered, inter alia, to: (1) select its

officers; (2) develop, with the advice of the State Board, the

educational program; (3) appoint, with the advice of the State

Board, a president and fix the compensation and terms of office of

the president who shall be the executive officer of the college's

Local Board; (4) appoint, upon nomination of the president, members

of the administrative and teaching staffs and fix their

compensation and terms of employment; (5) enter into contracts; (6)

accept grants or contributions of money to be used for any of its

purposes; (7) acquire, own, lease, use, operate and dispose of

property; (8) exercise the right of eminent domain; (9) make rules

and regulations to govern the college's administration and

operation; and (10) exercise all other necessary powers to operate

the college. Ark. Code Ann. § 6-61-521 (1987). 

Thus, viewed in light of the authority of the Local Board, the

State Board's role is more appropriately characterized as that of

an advisor, rather than that of a regulator. As the district court

acknowledged, for example, NACTC is significantly more autonomous

than Arkansas's universities. Dist. Ct. Op. at 19. NACTC has the

power to tax, to acquire, use, and own property in the college's

name, and to govern itself locally. 

Stated differently, I find merit in Hadley's contentions that

the State Board's supervision of NACTC is not appreciably different

from that it exercises over local school boards. Although the
 2

Arkansas statutory law thus defines community college: 

an educational institution established or to be

established by one (1) or more counties or cities of this

state offering a comprehensive program designed to serve

the postsecondary educational needs of its district and

the state including specifically, but without limitation,

occupational programs of varying types and levels of

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state approves NACTC decisions with respect to educational policy,

many if not most of them are initiated at the local level. For

example, while the consolidation of North Arkansas Community

College and Twin Lakes Technical College was subject to state

approval, NACTC's Local Board, and not the General Assembly or the

State Board, initiated that decision. The same is true of the

college's curricular decisions. Thus, although state law governs

several administrative aspects of the college's operations,

substantive judgments concerning NACTC's educational policy are

made locally. In sum, a thorough analysis of NACTC's local control

supports the conclusion that NACTC may not invoke the Eleventh

Amendment's protection.

NACTC's Financial Relationship with the State of Arkansas

The Supreme Court observed in Hess, however, that control

cannot be dispositive since it does not "hone in on the impetus for

the Eleventh Amendment: the prevention of federal court judgments

that must be paid out of a state's treasury." 115 S. Ct. at 404.

Rather, the "core concern" in Eleventh Amendment analysis is

whether a judgment against NACTC must be satisfied from the state

treasury. Id. at 406.

The means by which NACTC acquires funding is established by

Arkansas constitutional and statutory law. Amendment Fifty-two to

the Arkansas Constitution empowers the General Assembly to

establish districts to furnish community college instruction and

technical training.2 Ark. Const. amend. 52. Specifically,
difficulty, the first two (2) years of a baccalaureate

degree, community service offerings, and student guidance

and counseling services . . . . 

Ark. Code Ann. § 6-61-501(1) (Supp. 1993). 

-14-

Amendment Fifty-two provides that "[t]he General Assembly shall

prescribe the method of financing such community college and

technical institutes, and may authorize the levy of a tax upon the

taxable property in such districts for the acquisition,

construction, reconstruction, repair, expansion, operation, and

maintenance of facilities therefor." Id., § 1. The Amendment also

provides, however, that no such district shall be created and no

tax levied without the approval of a majority of the qualified

voters in the proposed district. Id., § 2. Thus, the creation of

a community college district is a joint venture between the state

of Arkansas and the local community. 

The Arkansas General Assembly has fulfilled its constitutional

mandate by legislating that "[f]unds for the general operation of

an adequate comprehensive educational program shall be provided by

the state." Ark. Code Ann. § 6-61-601(a) (1987). In the event the

college wishes to spend larger sums of money, it may raise

additional "general operation" monies by levying millage. § 6-61-

602(a). Local millage is subject to approval by the local

electorate, § 6-61-601(b), is limited to ten mills on the taxable

real and personal property in the district, § 6-61-517(b), and is

a continuing levy to be collected by county authorities in the

manner provided by law, § 6-61-517. 

NACTC has far greater discretion in its management of monies

received from nonstate sources. Bequests, gifts, and donations are

exempted from state accounting and budgetary procedures, § 19-4-

803, as are monies received from millage levied by the local

district, § 19-4-803(b)(1-2). NACTC may not use millage revenues,
 3

NACTC has submitted the issue of funding to the local

electorate on two occasions. In 1973, area voters passed a ballot

("the 1973 ballot") authorizing the creation of the community

college district and the levy of a tax on the assessed value of

taxable property therein. The 1973 ballot authorized a tax not to

exceed five mills on the dollar "for the issuance of bonds to

provide all or part of the funds for the purchase of land and for

the construction and furnishing of buildings and facilities for

such college." Dist. Ct. Op. at 11 (quoting the 1973 ballot). In

1977, area voters passed a second ballot ("the 1977 ballot") which

extended the bonding authority of the district and reauthorized the

tax. By its terms, the 1977 ballot authorized the issuance of

bonds "for the purpose of liquidating the District's presently

outstanding bonded indebtedness (incurred to finance construction

and furnishing of buildings and facilities for the College) and the

purpose of providing all or part of the funds for the construction

and furnishing of additional buildings and facilities for the

college." Id. (quoting the 1977 ballot).

 4The majority's reliance upon Dover Elevator Co. v. Arkansas

State University, 64 F.3d 442 (8th Cir. 1995), is misplaced. In

Dover, the University had no discretionary power independently to

raise revenue, as NACTC has. The record in Dover revealed that

Arkansas State University could not "'spend one penny without

appropriation to do so from the general assembly.'" Id. at 447

(quoting undisputed testimony in the record); see also id.

("because any award against ASU must be appropriated by the state

assembly from money under state control, . . . the district court

did not err in finding that ASU shares in the state's Eleventh

Amendment immunity" (emphasis added)).

-15-

however, for purposes other than those stated on the ballot. Dist.

Ct. Op. at 20-21.3 

As I read the majority opinion, it adopts an "impact" rule,

which apparently reasons that, since the school's general

operations are funded primarily by the state, any judgment paid by

NACTC "would produce a higher operating budget shortfall that must,

by state law, be satisfied by an appropriation from the state

treasury."4 Maj. Op. at 8.

I respectfully must disagree with this reasoning. On the

record presented here, it is clear that NACTC has independent

discretionary power to raise funds for educational purposes and
-16-

payment of money judgments. As the Court in Hess stated: "If the

expenditures of the enterprise exceed receipts, is the State in

fact obligated to bear and pay the resulting indebtedness of the

enterprise? When the answer is 'no'--both legally and practically-

-then the Eleventh Amendment's core concern is not implicated."

115 S. Ct. at 406. 

The record in this case reveals that the state is not

required, legally or practically, to indemnify NACTC for debts

incurred as a result of locally generated bond revenues. Arkansas

law states quite the opposite: "The bonds shall be revenue bonds

secured solely by the revenues pledged thereto, and in no event

shall they be considered a debt for which the faith and credit of

the State of Arkansas or any of its revenues are pledged." Ark.

Code Ann. § 6-61-1009 (Michie Supp. 1993). Thus, it is clear the

Eleventh Amendment's dominant concern is not implicated. 

Moreover, although the district court found that local tax

funds amount to an insignificant percentage of NACTC's overall

budget, Hadley is correct in asserting that NACTC might authorize

an additional levy of up to ten mills, ear-marking it for provision

of general operating funds. Dist. Ct. Op. at 11-12. Thus, it is

not the case that an award of backpay or nominal damages, assuming

Hadley were to prevail, "would necessarily implicate the state

fisc." Sherman, 16 F.3d at 864. I find this factor significant.

The power to levy taxes is not, as NACTC suggests, merely

incidental, but rather suggests the college is not exclusively

dependent upon the state.

Alternatively, Hadley suggests that NACTC has other sources of

discretionary funding, such as tuition, federal grants, private

donations, and "other" monies, from which a judgment against him

could be paid. NACTC correctly replies that, like funds from local

millage, these funds may only be used for specific, limited

purposes. Tuition monies, for example, are dedicated to the
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payment of "educational" expenses. Dist. Ct. Op. at 12. But the

fact that these monies are dedicated solely to "educational"

expenses does not necessitate the conclusion that an award of backpay to an instructor is not such an expense. Hadley suggests,

quite persuasively, that the payment of an instructor's salary

constitutes "the quintessential educational expense," Supp. Br. for

Appellee at 10, and asserts that the reduction of these expenses to

the form of a judgment does not render them non-educational, id.

I agree. Although the district court concluded otherwise, I find

no expressed rationale supporting that conclusion. The monies

involved here, if damages were to be awarded, constitute back

salary for an instructor. These are clearly educational expenses.

Although NACTC receives the majority of its funding from the state,

a judgment in Hadley's favor need not implicate the state treasury.

The college may levy additional millage or apply tuition monies

designated "educational" to satisfy the award.

In addition, the majority opinion is not faithful to the

unanimous Court's rationale in Mt. Healthy City Bd. of Educ. v.

Doyle, 429 U.S. 274 (1977). In Mt. Healthy, the Supreme Court

passed on the Eleventh Amendment defense proffered by a local

school board in the State of Ohio. In holding that the board was

akin to a political subdivision to which the Eleventh Amendment

does not extend, the Court stated: 

[The board] is subject to some guidance from the State

Board of Education, and receives a significant amount of

money from the State. But local school boards have

extensive powers to issue bonds, and to levy taxes within

certain restrictions of state law. On balance, the

record before us indicates that a local school board such

as petitioner is more like a county or city than it is

like an arm of the State. We therefore hold that it was

not entitled to assert any Eleventh Amendment immunity

from suit in the federal courts.

429 U.S. at 280-81 (Rehnquist, J.) (citations omitted).
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 A searching inquiry of the record reveals that NACTC enjoys

independence, financially and otherwise, such that, notwithstanding

its state's funding, it should be treated as an entity much like

any other political subdivision or local school board. Moreover,

upon analysis of the overall record, any judgment against NACTC

will not be paid from the state treasury. 

In summary, the majority's holding allows NACTC to enjoy the

benefits of local tuition monies and local property assessments

without sharing in the costs and responsibilities that attend the

power to generate such funds. NACTC must take the bitter with the

sweet. As we observed in Sherman:

[A governmental entity] cannot create its own eleventh

amendment immunity by structuring its resources so as to

pay all breach of contract damages out of state funds.

Thus, the question on remand is not whether the [entity]

chooses to pay contract damages out of state funds, but

whether a judgment against the [entity] can be paid from

non-state funds under [its] discretionary control.

16 F.3d at 864-65 (emphasis added).

The majority seeks to avoid our holding in Sherman by

indicating that it is dicta. This is puzzling to me since the

portion quoted in the text is the precise holding of the case. If

the test of Sherman is to be applied, then the majority is clearly

in error. There is no evidence in the present case that any

judgement here must necessarily be paid from state funds. The

state may be obligated to fund the college, but that is not the

criterion that determines whether a federal court judgment

obligates the state treasury. 

I respectfully dissent. 
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A true copy.

Attest:

CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.