United States Court of Appeals

FOR THE EIGHTH CIRCUIT

____________________________________________

Nos. 97-1794EA, 97-1855EA, 97-2394EA, 97-2406EA

____________________________________________

_____________ *

*

No. 97-1794EA *

_____________ *

*

Little Rock School District, *

*

Plaintiff - Appellee, *

*

Servicemaster Management Services, *

*

Intervenor Plaintiff, *

*

Blytheville School District; Bryant * On Appeal from the United

School District; Fort Smith School * States District Court

District; West Memphis School District; * for the Eastern District

Altus-Denning School District; * of Arkansas.

Ashdown School District; Barton-Lexa *

School District; Batesville School *

District; Biggers-Reyno School District; *

Black Rock School District; Bright Star *

School District; Brinkley School *

District; Centerpoint School District; *

Clarendon School District; Cotton Plant *

School District; Cutter Morning Star *

School District; Dewitt School District; *

Dollarway School District; Foreman *

School District; Fountain Lake School *

District; Gillett School District; Glen *

Rose School District; Guy-Perkins *

School District; Hoxie School District; *
-2-

Jonesboro School District; Kirby *

School District; Lavaca School District; *

Lewisville School District; Magazine *

School District; Malvern School *

District; Mammoth Spring School *

District; Manila School District; *

Maynard School District; Oden School *

District; Ozark School District; *

Plainview-Rover School District; *

Pocahontas School District; Prairie *

Grove School District; South Conway *

School District; Spring Hill School *

District; Stamps School District; *

Stephens School District; Turrell *

School District; Van Buren School *

District; Warren School District; *

Watson Chapel School District; *

West Fork School District; White Hall *

School District; Winslow School *

District; Wonderview School District; *

Yellville-Summit School District; Alma *

School District; Alread School District; *

Beebe School District; Bentonville *

School District; Bergman School *

District; Berryville School District; *

Blevins School District; Booneville *

School District; Bradford School *

District; Buffalo Island School District; *

Caddo Hills School District; Carthage *

School District; Charleston School *

District; Corning School District; *

County Line Public School District; *

Crossett School District; Decatur *

School District; Dermott School *

District; Dumas School District; *

Elaine School District; Fordyce School *

District; Gosnell School District; *
-3-

Grady School District; Greeb County *

Technical Schools; Green Forest *

School District; Greenland School *

District; Greenwood School District; *

Harrisburg School District; Hamburg *

School District; Holly Grove School *

District; Huttig School District; Jackson *

County School District; Junction City *

School District; Lakeside School *

District; Lead Hill School District; *

Leslie School District; Marion School *

District; Marshall School District; *

Mayflower School District; McGehee *

School District; Mountainburg School *

District; Nettleton School District; *

Newport School District; Ola School *

District; Paragould School District; *

Parkin School District; Pleasant View *

School District; Quitman School *

District; Rural Special School *

District; Saratoga School District; *

Searcy School District; Smackover *

School District; Southside School *

District #2 Bee Branch; Strong School *

District; Stuttgart School District; *

Valley Spring School District; *

Waldron School District; Weiner *

School District; Wickes School *

District; and Wynne School District; *

*

Intervenor Plaintiffs - Appellants, *

*

North Little Rock Classroom Teachers *

Association; Pulaski Association of *

Classroom Teachers; Little Rock *

Classroom Teachers Association; *

Ed Bullington; Khayyam Davis; *
-4-

John Harrison; Alvin Hudson; Tatia *

Hudson; Milton Jackson; Lorene *

Joshua; Leslie Joshua; Stacy Joshua; *

Wayne Joshua; Katherine Knight; *

Sara Facen; Derrick Miles; Janice *

Miles; John M. Miles; NAACP; *

Joyce Person; Brian Taylor; Hilton *

Taylor; Parsha Taylor; Robert *

Willingham; and Tonya Willingham, *

*

Intervenor Plaintiffs, *

*

v. *

*

North Little Rock School District; and *

Pulaski County Special School District, *

*

Defendants - Appellees, *

*

State of Arkansas, *

*

Defendant, *

*

Office of Desegregation Monitor, *

*

Claimant, *

*

Northeast Arkansas School District, *

*

Movant, *

*

-------------------------------------------- *

*

Dale Charles; Robert L. Brown, Sr.; *

Gwen Hevey Jackson; Diane Davis; *

and Raymond Frazier, *

*

Plaintiffs, *
-5-

v. *

*

Pulaski County Board of Education; *

Patricia Gee, Individually and in Her *

Official Capacity as a Member of the *

Board of Education of the Little Rock *

School District, a Public Body; *

George Cannon, Dr., Individually and *

in His Official Capacity as Member of *

the Board of Education of the Little *

Rock School District, a Public Body; *

Katherine Mitchell, Dr., Individually *

and in Her Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; W.D. Hamilton, also *

known as Bill Hamilton, Individually *

and in His Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; Cecil Bailey, Individually *

and in His Official Capacity as a *

Member of the Pulaski County Board *

of Education, a Public Corporate; *

Thomas Broughton, Individually and *

in His Official Capacity as a Member *

of the Pulaski County Board of *

Education, a Public Corporate; and *

Martin Zoldessy, Dr., Individually and *

in His Official Capacity as a Member *

of the Pulaski County Board of *

Education, a Public Corporate, *

*

Defendants, *

*

Arkansas Department of Education, *

*

Respondent. *
-6-

_____________ *

*

No. 97-1855EA *

_____________ *

*

Little Rock School District, *

*

Plaintiff - Appellee, *

*

Servicemaster Management Services; *

Blytheville School District; Bryant *

School District; Fort Smith School *

District; West Memphis School District; *

Altus-Denning School District; *

Ashdown School District; Barton-Lexa *

School District; Batesville School *

District; Biggers-Reyno School District; * On Appeal from the United

Black Rock School District; Bright Star * States District Court

School District; Brinkley School * for the Eastern District

District; Centerpoint School District; * of Arkansas.

Clarendon School District; Cotton Plant *

School District; Cutter Morning Star *

School District; Dewitt School District; *

Dollarway School District; Foreman *

School District; Fountain Lake School *

District; Gillett School District; Glen *

Rose School District; Guy-Perkins *

School District; Hoxie School District; *

Jonesboro School District; Kirby *

School District; Lavaca School District; *

Lewisville School District; Magazine *

School District; Malvern School *

District; Mammoth Spring School *

District; Manila School District; *

Maynard School District; Oden School *

District; Ozark School District; *

Plainview-Rover School District; *

Pocahontas School District; Prairie *
-7-

Grove School District; South Conway *

School District; Spring Hill School *

District; Stamps School District; *

Stephens School District; Turrell *

School District; Van Buren School *

District; Warren School District; *

Watson Chapel School District; *

West Fork School District; White Hall *

School District; Winslow School *

District; Wonderview School District; *

Yellville-Summit School District; Alma *

School District; Alread School District; *

Beebe School District; Bentonville *

School District; Bergman School *

District; Berryville School District; *

Blevins School District; Booneville *

School District; Bradford School *

District; Buffalo Island School District; *

Caddo Hills School District; Carthage *

School District; Charleston School *

District; Corning School District; *

County Line Public School District; *

Crossett School District; Decatur *

School District; Dermott School *

District; Dumas School District; *

Elaine School District; Fordyce School *

District; Gosnell School District; *

Grady School District; Greeb County *

Technical Schools; Green Forest *

School District; Greenland School *

District; Greenwood School District; *

Harrisburg School District; Hamburg *

School District; Holly Grove School *

District; Huttig School District; Jackson *

County School District; Junction City *

School District; Lakeside School *

District; Lead Hill School District; *

Leslie School District; Marion School *
-8-

District; Marshall School District; *

Mayflower School District; McGehee *

School District; Mountainburg School *

District; Nettleton School District; *

Newport School District; Ola School *

District; Paragould School District; *

Parkin School District; Pleasant View *

School District; Quitman School *

District; Rural Special School *

District; Saratoga School District; *

Searcy School District; Smackover *

School District; Southside School *

District #2 Bee Branch; Strong School *

District; Stuttgart School District; *

Valley Spring School District; *

Waldron School District; Weiner *

School District; Wickes School *

District; Wynne School District; *

North Little Rock Classroom Teachers *

Association; Pulaski Association of *

Classroom Teachers; Little Rock *

Classroom Teachers Association; *

Ed Bullington; Khayyam Davis; *

John Harrison; Alvin Hudson; Tatia *

Hudson; Milton Jackson; Lorene *

Joshua; Leslie Joshua; Stacy Joshua; *

Wayne Joshua; Katherine Knight; *

Sara Facen; Derrick Miles; Janice *

Miles; John M. Miles; NAACP; *

Joyce Person; Brian Taylor; Hilton *

Taylor; Parsha Taylor; Robert *

Willingham; and Tonya Willingham, *

*

Intervenor Plaintiffs, *

*

v. *
-9-

North Little Rock School District; and *

Pulaski County Special School District, *

*

Defendants - Appellees, *

*

State of Arkansas, *

*

Defendant, *

*

Office of Desegregation Monitor, *

*

Claimant, *

*

Northeast Arkansas School District, *

*

Movant, *

*

-------------------------------------------- *

*

Dale Charles; Robert L. Brown, Sr.; *

Gwen Hevey Jackson; Diane Davis; *

and Raymond Frazier, *

*

Plaintiffs, *

*

v. *

*

Pulaski County Board of Education; *

Patricia Gee, Individually and in Her *

Official Capacity as a Member of the *

Board of Education of the Little Rock *

School District, a Public Body; *

George Cannon, Dr., Individually and *

in His Official Capacity as Member of *

the Board of Education of the Little *

Rock School District, a Public Body; *

Katherine Mitchell, Dr., Individually *

and in Her Official Capacity as a *
-10-

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; W.D. Hamilton, also *

known as Bill Hamilton, Individually *

and in His Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; Cecil Bailey, Individually *

and in His Official Capacity as a *

Member of the Pulaski County Board *

of Education, a Public Corporate; *

and Thomas Broughton, Individually *

and in His Official Capacity as a *

Member of the Pulaski County Board *

of Education, a Public Corporate; *

*

Defendants, *

*

Arkansas Department of Education, *

*

Respondent - Appellant, *

*

Martin Zoldessy, Dr., Individually and *

in His Official Capacity as a Member of *

the Pulaski County Board of Education, *

a Public Corporate, *

*

Defendant. *

*

_____________ *

*

No. 97-2394EA *

_____________ *

*

Little Rock School District, *

*

Plaintiff - Appellee, *

*
-11-

Servicemaster Management Services; *

Blytheville School District; Bryant *

School District; Fort Smith School *

District; West Memphis School District; *

Altus-Denning School District; *

Ashdown School District; Barton-Lexa *

School District; Batesville School *

District; Biggers-Reyno School District; *

Black Rock School District; Bright Star *

School District; Brinkley School *

District; Centerpoint School District; *

Clarendon School District; Cotton Plant *

School District; Cutter Morning Star *

School District; Dewitt School District; *

Dollarway School District; Foreman *

School District; Fountain Lake School * On Appeal from the United

District; Gillett School District; Glen * States District Court

Rose School District; Guy-Perkins * for the Eastern District

School District; Hoxie School District; * of Arkansas.

Jonesboro School District; Kirby *

School District; Lavaca School District; *

Lewisville School District; Magazine *

School District; Malvern School *

District; Mammoth Spring School *

District; Manila School District; *

Maynard School District; Oden School *

District; Ozark School District; *

Plainview-Rover School District; *

Pocahontas School District; Prairie *

Grove School District; South Conway *

School District; Spring Hill School *

District; Stamps School District; *

Stephens School District; Turrell *

School District; Van Buren School *

District; Warren School District; *

Watson Chapel School District; *

West Fork School District; White Hall *
-12-

School District; Winslow School *

District; Wonderview School District; *

Yellville-Summit School District; Alma *

School District; Alread School District; *

Beebe School District; Bentonville *

School District; Bergman School *

District; Berryville School District; *

Blevins School District; Booneville *

School District; Bradford School *

District; Buffalo Island School District; *

Caddo Hills School District; Carthage *

School District; Charleston School *

District; Corning School District; *

County Line Public School District; *

Crossett School District; Decatur *

School District; Dermott School *

District; Dumas School District; *

Elaine School District; Fordyce School *

District; Gosnell School District; *

Grady School District; Greeb County *

Technical Schools; Green Forest *

School District; Greenland School *

District; Greenwood School District; *

Harrisburg School District; Hamburg *

School District; Holly Grove School *

District; Huttig School District; Jackson *

County School District; Junction City *

School District; Lakeside School *

District; Lead Hill School District; *

Leslie School District; Marion School *

District; Marshall School District; *

Mayflower School District; McGehee *

School District; Mountainburg School *

District; Nettleton School District; *

Newport School District; Ola School *

District; Paragould School District; *

Parkin School District; Pleasant View *

School District; Quitman School *
-13-

District; Rural Special School *

District; Saratoga School District; *

Searcy School District; Smackover *

School District; Southside School *

District #2 Bee Branch; Strong School *

District; Stuttgart School District; *

Valley Spring School District; *

Waldron School District; Weiner *

School District; Wickes School *

District; Wynne School District; *

North Little Rock Classroom Teachers *

Association; Pulaski Association of *

Classroom Teachers; Little Rock *

Classroom Teachers Association; *

Ed Bullington; Khayyam Davis; *

John Harrison; Alvin Hudson; Tatia *

Hudson; Milton Jackson; Lorene *

Joshua; Leslie Joshua; Stacy Joshua; *

Wayne Joshua; Katherine Knight; *

Sara Facen; Derrick Miles; Janice *

Miles; John M. Miles; NAACP; *

Joyce Person; Brian Taylor; Hilton *

Taylor; Parsha Taylor; Robert *

Willingham; and Tonya Willingham, *

*

Intervenor Plaintiffs, *

*

v. *

*

North Little Rock School District; and *

Pulaski County Special School District, *

*

Defendants - Appellees, *

*

State of Arkansas, *

*

Defendant, *

*
-14-

Office of Desegregation Monitor, *

*

Claimant, *

*

Northeast Arkansas School District, *

*

Movant, *

*

-------------------------------------------- *

*

Dale Charles; Robert L. Brown, Sr.; *

Gwen Hevey Jackson; Diane Davis; *

and Raymond Frazier, *

*

Plaintiffs, *

*

v. *

*

Pulaski County Board of Education; *

Patricia Gee, Individually and in Her *

Official Capacity as a Member of the *

Board of Education of the Little Rock *

School District, a Public Body; *

George Cannon, Dr., Individually and *

in His Official Capacity as Member of *

the Board of Education of the Little *

Rock School District, a Public Body; *

Katherine Mitchell, Dr., Individually *

and in Her Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; W.D. Hamilton, also *

known as Bill Hamilton, Individually *

and in His Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; Cecil Bailey, Individually *

and in His Official Capacity as a *
-15-

Member of the Pulaski County Board *

of Education, a Public Corporate; *

and Thomas Broughton, Individually *

and in His Official Capacity as a *

Member of the Pulaski County Board *

of Education, a Public Corporate; *

*

Defendants, *

*

Arkansas Department of Education, *

*

Respondent - Appellant, *

*

Martin Zoldessy, Dr., Individually and *

in His Official Capacity as a Member of *

the Pulaski County Board of Education, *

a Public Corporate, *

*

Defendant. *

*

_____________ *

*

No. 97-2406EA *

_____________ *

*

Little Rock School District, *

*

Plaintiff - Appellee, *

*

Servicemaster Management Services, *

*

Intervenor Plaintiff, *

*

Blytheville School District; Bryant *

School District; Fort Smith School *

District; West Memphis School District; *

Altus-Denning School District; *

Ashdown School District; Barton-Lexa *
-16-

School District; Batesville School *

District; Biggers-Reyno School District; *

Black Rock School District; Bright Star *

School District; Brinkley School *

District; Centerpoint School District; *

Clarendon School District; Cotton Plant *

School District; Cutter Morning Star *

School District; Dewitt School District; *

Dollarway School District; Foreman *

School District; Fountain Lake School *

District; Gillett School District; Glen *

Rose School District; Guy-Perkins *

School District; Hoxie School District; *

Jonesboro School District; Kirby *

School District; Lavaca School District; *

Lewisville School District; Magazine *

School District; Malvern School * On Appeal from the United

District; Mammoth Spring School * States District Court

District; Manila School District; * for the Eastern District

Maynard School District; Oden School * of Arkansas.

District; Ozark School District; *

Plainview-Rover School District; *

Pocahontas School District; Prairie *

Grove School District; South Conway *

School District; Spring Hill School *

District; Stamps School District; *

Stephens School District; Turrell *

School District; Van Buren School *

District; Warren School District; *

Watson Chapel School District; *

West Fork School District; White Hall *

School District; Winslow School *

District; Wonderview School District; *

Yellville-Summit School District; Alma *

School District; Alread School District; *

Beebe School District; Bentonville *

School District; Bergman School *

District; Berryville School District; *
-17-

Blevins School District; Booneville *

School District; Bradford School *

District; Buffalo Island School District; *

Caddo Hills School District; Carthage *

School District; Charleston School *

District; Corning School District; *

County Line Public School District; *

Crossett School District; Decatur *

School District; Dermott School *

District; Dumas School District; *

Elaine School District; Fordyce School *

District; Gosnell School District; *

Grady School District; Greeb County *

Technical Schools; Green Forest *

School District; Greenland School *

District; Greenwood School District; *

Harrisburg School District; Hamburg *

School District; Holly Grove School *

District; Huttig School District; Jackson *

County School District; Junction City *

School District; Lakeside School *

District; Lead Hill School District; *

Leslie School District; Marion School *

District; Marshall School District; *

Mayflower School District; McGehee *

School District; Mountainburg School *

District; Nettleton School District; *

Newport School District; Ola School *

District; Paragould School District; *

Parkin School District; Pleasant View *

School District; Quitman School *

District; Rural Special School *

District; Saratoga School District; *

Searcy School District; Smackover *

School District; Southside School *

District #2 Bee Branch; Strong School *

District; Stuttgart School District; *

Valley Spring School District; *
-18-

Waldron School District; Weiner *

School District; Wickes School *

District; and Wynne School District, *

*

Intervenor Plaintiffs - Appellants, *

*

North Little Rock Classroom Teachers *

Association; Pulaski Association of *

Classroom Teachers; Little Rock *

Classroom Teachers Association; *

Ed Bullington; Khayyam Davis; *

John Harrison; Alvin Hudson; Tatia *

Hudson; Milton Jackson; Lorene *

Joshua; Leslie Joshua; Stacy Joshua; *

Wayne Joshua; Katherine Knight; *

Sara Facen; Derrick Miles; Janice *

Miles; John M. Miles; NAACP; *

Joyce Person; Brian Taylor; Hilton *

Taylor; Parsha Taylor; Robert *

Willingham; and Tonya Willingham, *

*

Intervenor Plaintiffs, *

*

v. *

*

North Little Rock School District; and *

Pulaski County Special School District, *

*

Defendants - Appellees, *

*

State of Arkansas, *

*

Defendant, *

*
-19-

Office of Desegregation Monitor, *

*

Claimant, *

*

Northeast Arkansas School District, *

*

Movant, *

*

-------------------------------------------- *

*

Dale Charles; Robert L. Brown, Sr.; *

Gwen Hevey Jackson; Diane Davis; *

and Raymond Frazier, *

*

Plaintiffs, *

*

v. *

*

Pulaski County Board of Education; *

Patricia Gee, Individually and in Her *

Official Capacity as a Member of the *

Board of Education of the Little Rock *

School District, a Public Body; *

George Cannon, Dr., Individually and *

in His Official Capacity as Member of *

the Board of Education of the Little *

Rock School District, a Public Body; *

Katherine Mitchell, Dr., Individually *

and in Her Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; W.D. Hamilton, also *

known as Bill Hamilton, Individually *

and in His Official Capacity as a *

Member of the Board of Education of *

the Little Rock School District, a *

Public Body; Cecil Bailey, Individually *

and in His Official Capacity as a *
The Hon. Richard S. Arnold stepped down as Chief Judge of the United States 1

Court of Appeals for the Eighth Circuit at the close of business on April 17, 1998. He

has been succeeded by the Hon. Pasco M. Bowman II.

-20-

Member of the Pulaski County Board *

of Education, a Public Corporate; and *

Thomas Broughton, Individually and *

in His Official Capacity as a Member *

of the Pulaski County Board of *

Education, a Public Corporate; *

*

Defendants, *

*

Arkansas Department of Education, *

*

Respondent, *

*

Martin Zoldessy, Dr., Individually and *

in His Official Capacity as a Member of *

the Pulaski County Board of Education, *

a Public Corporate, *

*

Defendants. *

___________

Submitted: February 24, 1998

Filed: July 1, 1998

___________

Before RICHARD S. ARNOLD, Chief Judge, HEANEY and WOLLMAN, Circuit

1

Judges.

___________

RICHARD S. ARNOLD, Chief Judge.
-21-

In these appeals we are asked once again to interpret certain provisions of the

agreement by which the parties to the Pulaski County, Arkansas, school-desegregation

case settled their dispute. The question presented is whether changes made by the

State of Arkansas in the funding of retirement and health insurance for teachers violated

that agreement. The Little Rock School District, the Pulaski County Special School

District, and the North Little Rock School District (which we shall collectively call "the

districts") claim that by making the changes in question the State violated undertakings

it made in the settlement agreement. The District Court, Susan Webber Wright, J., held

for the districts on summary judgment. We affirm. 

I. 

This case has to do with two important categories of school operating expenses:

contributions for teacher retirement and employees' health insurance. When the parties

agreed to settle this case, in 1989, the extant system of school funding by the State of

Arkansas provided for direct payment by the State of both of these categories of costs.

The General Assembly appropriated funds earmarked for these purposes. These funds

were separate from another, larger, appropriation for general State aid to public school

districts, generally known as Minimum Foundation Program Aid (MFPA). We shall

call this system of funding, under which the State separately paid for teacher retirement

and health insurance, the Act 34 system, after Act 34 of 1983 (Ex. Sess.), codified as

Ark. Code Ann. §§ 6-20-301 et seq. (Michie Repl. 1993) (repealed in large part 1995).

In 1995, the General Assembly enacted a new system of school funding.

Separate appropriations for teacher retirement and health insurance were no longer

made. Each local school district, including the districts involved in this case, was

required to pay its own contributions for teacher retirement, Act 1194 of 1995, § 13,

codified as Ark. Code Ann. § 24-7-103 (Michie Repl. 1996), and health insurance, Act

1194 of 1995, § 14, codified as Ark. Code Ann. § 6-17-1117 (Michie Supp. 1997).
-22-

Districts began to receive their State aid in one large pot, so to speak, combining what

had been called MFPA with funds that under the previous system had been earmarked

for teacher retirement and health insurance. (There were refinements and exceptions

to this system, but our general description is sufficient for present purposes.) Under

Act 917 of 1995, codified as Ark. Code Ann. §§ 6-20-301 et seq. (Michie Supp. 1997)

-- the Equitable School Finance System Act of 1995, this new general fund was

apportioned among the several districts in accordance with two main criteria: the

number of pupils, called Average Daily Membership (ADM), and the wealth of the

districts, with poorer districts getting relatively more money, in order to reduce the

disparity in per-pupil expenditures between the poorer and the wealthier districts across

the State. This change was made in response to a decision of the Chancery Court of

Pulaski County, Arkansas, which had held the disparity in funding violative of the State

Constitution. Lake View Sch. Dist. v. Tucker, No. 92-5318 (Pulaski Co., Ark., Ch.

Ct., Nov. 9, 1994). 

The difficulty with this change, from the point of view of the three Pulaski

County districts, was that it affected, to their disadvantage, the basis on which funds

from the State would be available to them for teacher-retirement and health-insurance

purposes. These districts, as we shall explain further later in this opinion, are

"employee heavy." They have proportionally more employees, including teachers, than

they have pupils, when compared with school districts generally throughout the State.

This is so at least partly because of special desegregation obligations imposed on the

districts by the settlement agreement. Funds distributed according to a formula heavily

influenced by ADM, therefore, are not so great as they would be if the earlier system,

which simply funded retirement and health insurance for all employees, generally

speaking, had been continued. During fiscal year 1995-96, the sum total of State aid

received by the districts was more, in absolute dollar terms, than it had been in 1994-95

under the Act 34 system, but it was less than it would have been had the Act 34 system,

including earmarked funding for retirement and health insurance, been retained.
NLRSD argues that the State's actions also violate Section II.F, NLRSD Br. at 2

17-18. This section reads as follows, in pertinent part: 

The State will not exclude the Districts from any

compensatory education, early childhood development, or

other funding programs or discriminate against them in the

development of such programs or distribution of funds under

any funding programs. 

This provision may actually fit the present case better than Sections II.E and II.L,

which are the focus of the District Court's opinion and most of the parties' arguments.

We are affirming largely on the basis of the District Court's reasoning, however, so we

need not pursue the applicability of Section II.F. 

-23-

It is now time to describe the provisions of the settlement agreement that,

according to the districts, were violated by these changes. Two sections of the

agreement are principally at issue, Sections II.E and II.L. The relevant part of Section 2

II.E reads as follows: 

In addition to any payment described elsewhere in

this agreement, the State will continue to pay the following

costs: 

* * *

(6) The State's share of any and all programs for

which the Districts now receive State funding.

Section II.L reads as follows:

The State shall take no action (including the

enactment of legislation) for the purpose of retaliating

against the Districts (including retaliatory failure to increase

State aid and retaliatory reduction in State aid) because of
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this Litigation or this settlement. The State will enact no

legislation which has a substantial adverse impact on the

ability of the Districts to desegregate. Fair and rational

adjustments to the funding formula which have general

applicability but which reduce the proportion of State aid to

any of the Districts shall not be considered to have an

adverse impact on the desegregation of the Districts. 

The District Court held, in brief, that teacher-retirement and health-insurance

funding, as they existed under the former system of public school financing, were

"programs" within the meaning of Section II.E. The funding formula for such

programs, the Court said, citing our opinion in Little Rock Sch. Dist. v. Pulaski County

Special Sch. Dist., 83 F.3d 1013 (8th Cir. 1996), could be adjusted in a way that is

generally applicable to all districts, but only if the adjustment is "fair and rational," in

the words of Section II.L. The changes at issue are not "fair and rational" in the present

context because they work to the disadvantage of the three districts. The new funding

scheme does not take into account the number of employees, but only ADM and the

districts' wealth. The three districts are "employee heavy," as we said in Little Rock

Sch. Dist., supra, 83 F.3d at 1018. The changes in funding for teacher retirement and

health insurance therefore violate the settlement agreement, the Court held. 

II.

The State, acting through the Arkansas Department of Education, appeals. The

Alma School District and 110 other districts from all parts of the State, also appeal,

having been allowed by the District Court to intervene for this purpose. The

intervenors are apprehensive that if the three Pulaski County districts win, securing

additional funding for themselves, the State money going to the intervenor districts will

be reduced. (This is not necessarily true, but we understand why the intervenors feel

they have an interest to protect.)
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Appellants' first argument is that it was error to grant summary judgment because

there were genuine issues of material fact that needed to be tried. The first such fact,

the State says, is whether funds specifically earmarked for teacher retirement and health

insurance are now being distributed as part of the new system of Equalization Funding.

We cannot see why this "fact" - if it really is a fact, instead of just a description of a

legislative change in how the State distributes aid to local school districts - is important

or material. The essential nature of the change is undeniable. The State used to pay

separately for teacher retirement and health insurance, and it did so on a basis that

necessarily took into account the number of each district's employees. Money still goes

to the districts that may be used for these purposes, but the amount has been folded into

the over-all Equalization Funding system, and it no longer has anything to do with

numbers of employees. As the District Court phrased it, "items like teacher retirement

and health insurance, which were previously paid directly by the State, were put into one

large pool." Little Rock Sch. Dist. v. Pulaski County Special Sch. Dist., No. LR-C-82-

866, slip op. 9 (E.D. Ark., memorandum opinion and order filed Feb. 18, 1997).

Whether this change is characterized as a complete abandonment of State aid for teacher

retirement and health insurance, or simply as a change in the way the State chooses to

fund these programs (a description which seems more realistic to us) is not important

to the result in this case. 

The second fact the State claims was in genuine dispute was whether the new

funding system distributes funds on a "pure" per-student, or ADM, basis. The State says

the districts took that position in the District Court, whereas in fact the new funding

system is based not only on ADM but also the wealth of each individual district. In our

view, it does not matter what position the districts took below. The important question

is on what basis the District Court acted, and that Court clearly did not think or say that

the new system was based only on ADM. "[T]he new funding scheme," the Court said,

"is based upon ADM, equalized by the wealth of the district." Little Rock Sch. Dist. v.

Pulaski County Special Sch. Dist., No. LR-C-82-866, slip op. 5 (E.D. Ark.,

memorandum opinion and order filed Apr. 22, 1997) (emphasis supplied).
-26-

The key point is not whether the new system is based only on ADM, but that it gives no

weight at all to numbers of employees. 

So we agree with the District Court that there were no genuine issues of material

fact. That being so, was it right to enter judgment for the districts as a matter of law?

We think the answer is yes. To begin with, there is no doubt that the teacher-retirement

and health-insurance funding systems in effect at the time the settlement agreement was

signed, in 1989, are "programs" within the meaning of Section II.E. In Little Rock Sch.

Dist., supra, 83 F.3d at 1017-18, we held that the State's payment of workers'

compensation costs was such a "program," and we see no way to distinguish the present

case. Our opinion in that case points the way towards the proper solution of the present

appeal. There, we had before us two distinct actions of the State: first, a decision to

discontinue entirely State payments for workers' compensation for employees of school

districts, and, second, the State's decision to distribute, as an interim measure, certain

sums as "seed money" to help school districts make the transition to paying their own

workers' compensation costs. We held that the first decision did not violate the

settlement agreement, but that the second one did. Explaining this result, we said: 

[W]e do not believe that the State's action regarding

the "program" necessarily violates the Settlement Agreement.

The program in effect at the time of the Settlement

Agreement, as we see it, was equal State funding of workers'

compensation for all school districts. Thus, the State can

change its funding scheme for workers' compensation, so

long as the change is, in the words of the Settlement

Agreement, "fair and rational" and of "general applicability."

We see this portion of the Settlement Agreement as an

anti-retaliation clause. Its purpose, by its very words, is to

prevent the State from cutting other programs in order to pay

for its desegregation commitments. If, for example, the
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State had passed a statute decreasing or eliminating workers'

compensation payments for the settling districts only, while

maintaining its system of paying the costs to other school

districts, this portion of the Settlement Agreement would

clearly have been offended. The State did not do that,

however. Rather, it changed the funding formula for all

districts in the State. So long as that change affects all

districts to the same degree, it does not run afoul of the

Settlement Agreement. 

That, however, does not end our inquiry. When the

State disbursed "seed money" to help school districts make

the transition to paying their own workers' compensation

costs, it paid about one-half of the expense statewide. In the

Pulaski County districts, it paid only about one-third of the

expense. This disparity arose because the State's formula

used enrollment rather than number of employees to

determine how much money each district would receive. The

Pulaski County districts are employee heavy compared to

other districts, increasing their workers' compensation costs.

This result is precisely what the anti-retaliation clause was

meant to prevent. It funds the Pulaski County districts to a

lesser degree than other districts in the state. It is of no

moment that the State reached this result in a mathematically

consistent manner. The District Court correctly held that the

State must disburse seed money to the Pulaski County

districts in the same percentage as it does statewide. 

83 F.3d at 1018. 

Thus, we read Sections II.E and II.L together, in an attempt to make sense out of

them as a unified whole. The State's discontinuance of payment for workers'

compensation, because it was made on an even-handed basis and applicable generally

to all school districts, was, in our judgment, not a violation of paragraph II.E. Reading

E and L together, we took the view that the State could discontinue a funding program
On the present appeal, NLRSD argues that we were wrong in so interpreting

3

Section II.E. NLRSD brief at 22-23. In NLRSD's view, Section II.E is a free-standing,

independent requirement. The State must continue to pay its share of any and all

programs in existence at the time of the settlement agreement, whatever its reasons for

desiring to change them, and whatever the effect of such changes. Certainly this is one

way to read the agreement, and a plausible way, at that. We did not so interpret

Sections II.E and II.L in our previous decision, however, and that decision has become

the law of this case. We do not choose to reexamine it. We have power to do so, but

the arguments now advanced against our prior interpretation do not seem to us

sufficiently compelling to enable us to describe our prior opinion as egregiously wrong

or unjust, and some such description would be necessary to avoid the law-of-the-case

doctrine. 

-28-

if it did so in a generally applicable manner and on a fair and rational basis. The State's 3

reason for changing its full, no-questions-asked funding of workers' compensation was

to give the individual school districts a financial incentive to reduce workers'

compensation premiums, by paying more attention to safety in the workplace, for

example. This purpose, combined with the fact that the change affected all school

districts equally, convinced us that the change did not violate Section II.E. In effect, we

read the last part of Section II.L, referring to "[f]air and rational adjustments to [a]

. . . funding formula which have general applicability . . . ," as modifying not only the

specific prohibitions of Section II.L, but also the provisions of Section II.E(6). 

With this previous opinion in mind, we agree with the District Court that the

actions taken by the State in the present case closely resemble the "seed money" issue in

the previous case. "Seed money" disbursed by the State covered about one-half of

workers' compensation costs statewide, while paying only about one-third of this expense

for the three Pulaski County districts. The new funding system for teacher-retirement and

health-insurance costs produces the same sort of disparity, though the exact amount of

the disparity is open to debate. Because the three Pulaski County districts are "employee

heavy," as noted above, when compared to school districts in Arkansas generally, the

State funds they are now receiving cover proportionally less of their teacher-retirement

and health-insurance costs. The District Court explained the
-29-

matter in terms we find persuasive. We quote from the Court's order on teacher

retirement, but the language applies equally to health insurance:

The Court thus finds that there is no genuine factual

dispute that instead of directly funding each district based

upon the number of employees, the State has included funds

for teacher retirement in the new funding scheme which

distributes funds on a per ADM basis equalized by the wealth

of the district. Just as the workers' compensation "seed

money" formula worked to the detriment of the employeeheavy Pulaski County school districts, so too does the

distribution of teacher retirement contributions through the

new funding formula give the districts less money to fund

teacher retirement. While the three Pulaski County school

districts may fare better under the new funding scheme from

a state aid perspective, there is no question that the amount of

their teacher retirement funding, previously directly funded by

the State based upon the eligible salaries paid to their

employees, will be reduced and result in unequal state funding.

There is a difference between the State's decision not to

fund workers' compensation and to end direct state funding of

teacher retirement. The rationale concerning workers'

compensation was that the shift of responsibility to the school

districts would prompt them to take measures to reduce their

workers' compensation costs. Although the State argues the

same rationale applies concerning teacher retirement, there are

factors, including desegregation obligations, beyond the

control of school districts which dictate the number of

employees and salaries of teachers. For example, the LRSD

desegregation plan obligates the district to implement a fouryear-old program, to staff incentive schools with instructional

aides, theme specialists, computer aides, art teachers, physical

education teachers, social workers, counselors, auxiliary

teachers, media specialists, and supervision aides, among

many others. The
-30-

magnet and interdistrict schools require additional staff such

as theme and curriculum specialists. In the PCSSD, numerous

positions are required to fulfill desegregation plan obligations,

such as home school counselors, curriculum coordinators,

theme specialists, and staffing for its desegregation division,

such as an assistant superintendent and director of

desegregation. Likewise, the NLRSD incurs expenditures as

a direct result of the requirements of the desegregation plan,

such as an assistant superintendent for desegregation, reading

tutors and support personnel, HIPPY staffing and support,

computer technicians, junior and senior high remedial reading,

and homebound teachers. Thus, it is clear that the districts are

not in a position to control their teacher retirement costs in the

sense that the districts might control workers' compensation

costs.

Little Rock Sch. Dist. supra, slip op. at 9-11 (memorandum opinion and order filed

February 18, 1997) (footnote omitted).

For these reasons, we agree with the District Court that the changes in state

funding at issue in this case did violate the settlement agreement. In reaching this

conclusion, we are mindful that Judge Wright has been responsible for administering and

interpreting the settlement agreement for some time now, ever since 1990, when she took

over this case. Our review of the District Court's interpretation of the settlement

agreement is, as a formal matter, de novo. But we still think it appropriate to pay some

heed to the reasoned determinations of the experienced District Judge, who faces

decisions in this case every month, if not every week. The orders granting summary

judgment on the teacher-retirement and health-insurance issues will be affirmed. 

On remand, it will be up to the District Court, in the first instance, to decide

exactly what relief is appropriate. The three Pulaski County districts should be placed

in a position no worse than they would have occupied if the previous system of funding
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for teacher retirement and health insurance had not been changed. This does not mean

that these districts are entitled to receive both an amount equivalent to what the old

system would have produced for teacher retirement and health insurance, and the whole

amount now paid to them as Equalization Funding. Such a result would be double

recovery, a windfall. But the districts are entitled to be held harmless against any adverse

effect of the funding change. This means that it will be up to the District Court, after

appropriate submissions from the parties, to calculate, as near as may be, the difference

between what the old system -- MFPA plus teacher retirement plus health insurance --

would have produced, and what the new system -- Equalization Funding in one lump sum

-- is producing. The appellants suggest that this effort will necessarily involve

speculation. Admittedly it cannot be exact, but we believe that the District Court can

make a reasonable and informed estimate. 

The orders appealed from are affirmed, and the cause remanded to the District

Court for further proceedings consistent with this opinion. 

It is so ordered. 

A true copy.

Attest:

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