No. 88-3818

INTHE SUPREME COURTOF THE STATE OF MONTANA

1989

HELENA ELEMENTARY SCHOOL DISTRICTNO. 1AND HIGH SCHOOL DISTRICTNO 1 OF LEWIS & CLARK COUNTY;BILLINGS ELEMENTARY SCHOOLDISTRICTNO 2AND HIGH SCHOOLDISTRICTNO 2 OF YELLOWSTONE COUNTY;et al., Plaintiffsand Respondents, and MONTANA EDUCATION ASSOCIATION et al., IntervenorsIPlaintiffsand Respondents,-vsTHE STATEOF MONTANA; and THEMONTANA BOARD OF PUBLIC EDUCATION; and THEMONTANA SUPERINTENDENTOF PUBLIC INSTRUCTION, Defendantsand Appellants, and C. J. HOLJE,BERNTWARD and ROBERT FREDERICHonbehalf of the residents and taxpayersof SheridanCounty, Montana,and all others similarly situated, Intervenors/DefendantsandAppellants HAYS-LODGEPOLEELEMENTARY SCHOOLDISTRICTNO 50AND HIGH SCHOOL DISTRICT NO 50,AND BLAINE COUNTY; et al. and theASSOCIATTON OF INDIAN IMPACT SCHOOLSOFMONTANA, IntervenorsIDefendantsand Appellants

APPEAL FROM: TheDistrict Court of the First JudicialDistrict,

Inand for the County of Lewis and Clark, The Honorable Henry Loble,Judgepresiding.

COIJNSEL OF RECORD:

ForAppellant: Terry G. Spear,Crowley Law Firm,Billings,Montana Hays-Lodge Pole SchoolDist #50,et al. Beda Lovitt,Helena, Montana,Montana Superintendent of Public Instruction Benjamin Hilley,Hilley & Loring,Bigfork,Montana forMontana Education Association Hon. Marc Racicot,Attorney General,Helena,Montana Clay R Smith,Assistant Attorney General,Helena, for State ofMontana 

### W. William Leaphart, Helena,Montana Loren O'Toole, Plentywood,Montana DonaldA. Garrity, Helena,MontanaFor Respondent: James H. Goetz, Goetz, Madden & Dunn, Rozeman,Montana

ForAmicus Curiae: Charles E. Erdmann, Helena, Montana BruceW.Moerer, Helena, Montana Dennis Lopach, Helena, Montana

Submitted: January 13, 1989 Decided: February 1, 1989Mr. Justice Fred J. Weber delivered the Opinion of the Court.

In this action for declaratory judgment, plaintiffs challenge the constitutionality of the 1985-86 method of funding public elementary and secondary schools in the State of Montana. The District Court for the First Judicial District, Lewis and Clark County, ruled in its primary holding that the system of funding violated the 1972Montana Constitution. We affirm the holding of unconstitutionality, although on a narrower ground than that used by the District Court. The issues upon which we decide this case and our conclusions are: 1. Does Montana's system of funding the public schools violate the education article,Art. XIof theMontana Constitution? We conclude that the system of funding does violate Art. X. We do not find it necessary to consider the equal protection analysis under Art. 11, Sec. 4, of the Montana Constitution. 2. Should this Court clarify the District Court's findings regarding the accreditation standards promulgatedbv the Montana Roard of Public Education? We conclude that some clarification is required. 3. Did the District Court err in its findings and conclusions relating to consideration in the equalization process of federal "874" funding? We affirm the holding of the District Court that Montana presently may not factor "874" revenue into the equalization formula because our system does not meet the federal definition of an equalized program. In its review of Montana's system of funding for public schools, the Legislature may desire to review the nature and extent of "874" funding, even thouqh itmay not inany manner factor that into an equalization formula without meeting federalrequirements. 4. Did the District Court err in denying plaintiffs' attorney fees? We affirm the denial of attorney fees. In the 1985-86 school year, there were 545 school districts inMontana with a total student enrollment of 153,869. These included 382 elementary and 163 secondary districts. Nearly 45% of Montana schools have enrollments of less than 100 students. The six-week-long trial included extensive evidence and testimony about the complex combination of federal, state, and local sources through which Montana's public elementary and secondary schools are funded. In addition to the General Fund, each school district uses up to nine other types of budgeted funds. These include transportation funds, teacher retirement funds, debt service funds, and building reserw funds. Some of these depend upon voted levies and all are primarily funded on a district or county level. School districts alsohave nonbudgeted funds including food service, traffic education, rental funds, sick leave reserves,block grants, building funds, endowment funds, and interlocal agreement funds. Expenditures from these nonbudqeted funds may onlybe made from cash onhand. The General Fund,which provides 70% of school fundinq in Montana, includes several components. In 1949, the Montana Legislature enacted the Montana School Foundation Program. Under that program, every two years the legislature sets "Maximum General Fund Rudqet Without a Vote" (MGFRFn7) schedules for elementary and secondary school districts in the state. Eighty per cent of theMGFRW7 is funded by county and state equalizationrevenues. These equalization revenues

are derived from levies of 45 mills on all taxable propertv in each county and state aid from such sources as earmarkedrevenues, surplus county Foundation Program revenue, and direct legislativeappropriations. The remaining 20% of the funding of MGFBFlV is through permissive mill levies of up to 6mills for elementary districts and 4 mills for high school districts. These levies

aremade without avote. If the school district isunable to obtain the MGFRFW level through permissive levies and other specified nonlevy revenue, state permissive equalization

revenues areused tomake up the difference. The evidence shows that, in 1985-86, most school districts adopted budgets in excess of the MGFBWV. They utilized a third stage of fund-Fngunder which monies were obtained primarily from propertv tax levies voted by each school district. Other revenues which were used in thj-s third level of funding included vehicle taxes, interest income,tuition income,and federal "874" funds. By 1985-86, 35%of allGeneralFund budgetswere obtained from this level of funding. In contrast, in 1950, the Foundation Program furnished 81.2% of all general fund revenues in Montana, 1-eavingless than 20% of revenues to he obtained by local leviesand other sources. Plaintiffs presented voluminous evidence to support their theory that the system of funding public education in Montana is unconstitutional. The evidence established great. differences in the wealth of the various school districts and,more significantly,established disparitiesof spending per pupil as high as 8 to 1 in comparisons between similarly-sized school districts. We affirm the following unchallenged findingsof the DistrictCourt:

214. Several Plaintiff witnesses had experience either as teachers or administrators in other Montana districts, including some relatively wealthier districts. Mr. Walt Piipo, for example,currently Superintendentat Drummond,waspreviously Superintendent for Geraldine schools. The two school districts are very close in size, at both the elementary and high school levels. Geraldine's taxablevaluation, however, ismore than twice that of Drummond's. The tax efforts for the elementary schoolsare comparable,while Geraldine leviesmore General Fund mills than does Drummond at the high school level. Consequently, Geraldine spends approximately $1,000more per ANR than Drummond at the elementary level, and over $2,000 more per ANR at the high school level. Approximately 40% of Geraldine's General Fund revenues derive from the voted levy, while at Drummond, the voted levy supplies approximately 15% of General Fund revenue. This illustrates the fact that wealthier districts are able to rely to a greater extent on the voted levy to generate revenues for the General Fund. 215. Mr. Piipo testified unequivocally that Geraldine schools have advantages, and offer opportunites, which Drummond schools cannot afford. Geraldine has much greater budget flexibility to address educational needs and goals than does Drummond. Mr. Piipo testified that there is no question that the educational opportunities afforded students in Drummond could be improved if the districthad the same amount ofmoney as Geraldine. 216. The fact that spending disparities result in unequal educational opportunities was established more systematically by Plaintiffs' experts Dr. Ron Mattson, Mary Pace, and Dr. John Picton. Each of these individualshasmany years' experience in Montana public education. They comprised a "Study Team" which was commissioned by the Plaintiffs to do a comparative study of several pairs of school districts in the State. They compared three pairs of elementary districts, and three pairs of secondary districts. Schools in each pair were of similar size, with one spendina considerably more per pupil than the other. In addition to analyzing the budget data for each of these districts, members of the Study Team visited all 12districts to observe the schools firsthand, and to conduct interviews with administrators and teachers. 7.The Study Team identified clear differences between the schools in each of the pairs. They found that thebetter funded schoolstended to offer more enriched and expanded curricula thanthose offered in the schoolswith less money. The richer schools were also better equipped in the areas of textbooks, instructional equipment, audio-visual instructional materials, and consumable supplies. With respect to buildings and facilities, the districts with more money were better able to maintain their facilities thanwere the poorer districts. The Study Team concluded: *Availability of funds clearly affect the extent and quality of the educational opportunities. *There is a positive correlation between the level of school funding and the level of educationalopportunity. *The better funded districts have a greater flexibility in the reallocation of resources toprograms where there is a need. *The differences in spending between the better funded and underfunded districts are clearly invested in educationally related programs. *All 12 school districts in this study exhibited a responsible and judicious use of their financialresources.

R. Mattson,M. Pace,and J. Picton,DoesMoney Make a Difference in the Quality of Education in the 

### - -- 

## - -- Montana Schools? 218. Intervenor-PlaintiffMEA commissioned a study similar to that conducted by Plaintiffs' Study Team. Dr. Gary Gray, an assistantprofessor in Eastern Montana College's School of Education, studied educational opportunities in a number of high and low spending school districts inMontana. His methodology differed from that of the Plaintiffs' Study Team, but he arrived at essentially the same conclusions. Dr. Gray used an extensive checklist of indicators to compare educational opportunities among school districts within two expenditure classifications, a low expenditure category,and high expenditurecategory. 219. Dr. Gray concluded that there are substantial differences in educational opportunities among Montana schooldistricts, which are manifested significantly between thehigh versus low expenditure categories which he studied. More specifically, he found that wealthier districts offered more science classes, in labs which weretypi-callylarger, better stocked with more equipment and consumable supplies, with more storage, and generally more functional than those in poorer districts. Consequently, students in wealthier districts had more "handson" learning experiences than students inpoorer districts. Dr. Gray found the same things to be true in the home economics and industrial arts programs. Similarly, schools with more money tended to offer a wider and more enriched range of courses in the language arts, including foreign languages. 220. In the specialty areas of physical education, music, and art, the wealthier schools offered more opportunities. Gifted and Talented Programsweremuch stronger in thehigh expenditure districts. Consistant with the situation in many Plaintiff districts, Dr. Gray found that many of the low expenditure districts could not even afford to offer a Gifted and Talented Program. 221. With respect to computers, he found significant differences, with the high expenditure districts having more and better computers and computer labs. He also found significant differences between the two expenditure categories for library and media center services, with the high expenditure districts having larger and newer book collections, larger periodical collections, larger reference collections, larger audio-visual collections,and better specialcollections. 222. With respect to facilities,high expenditure districtsreported that they have nothad to defer necessary maintenance orwork projects due to a lack of funds,as have low expenditure districts. 223. Wealthier districts also offer a wider range of extracurricular activities to students than low expendituredistricts. 224. In sum, the comparative evidence establishes that spending differences among similarly sized school districts in the State result in unequal educational opportunities for students. Furthermore, the comparative evidence verifies the fact that the deficiencies and problems identified by Plaintiff witnesses are part of a consistent pattern in lower-spending districts, and that such deficiencesandproblems are not consistantly found in relatively higher spending districts. [footnotesand citations to exhibits omitted]The problems were compounded by the adoption of Initiative 105 in the November 1986 general election. In 1987 the Legislature adopted SenateBill 71. See,55 15-10-401,-402, -411,and -412,MCA. TheDistrict Court correctly found that the net effect was to freeze property tax levies at 1986 levels,which resulted in the locking in of any disparities and inequities. Federal "874" funding is not presently included in the State's computations for the funding of schools. However, plaintiffs' experts did include "874" funds in some of their studies comparing the wealth of various school districts. Intervenor-defendantHays-Lodge Pole Elementary SchoolDist., et al., (Hays-Lodge Pole) is an associationofMontanapublic schools which receive "874" fundsby reasonof the attendance of Indian students on and around the 7 federal treaty reservations in Montana. Hays-Lodge Pole argued that "874" funds should remain outside of the State's budgetary process. The District Court concluded that education is a fundamental right under Montana's Constitution. It concluded that, under the 1985-86 system of funding public elementary and secondary schools, disparities in per pupil spendinq among schools as a result of disparities in local property wealth do not even pass the rational basis test of equal protection analysis. It concluded that the concept of local control is not related to the spending disparities now present. It further concluded that the State's budgetary difficulties do not constitute a 1-egal defense to these inequalities. The court also concluded that the Montana SchoolAccreditation standards do not define the constitutional right to education. It concluded that the treatment of federal "874" funding for schools with Indian enrollment exacerbates the inequalitiespresent in the school finance system. The courtordered that the present system of school fundingmay remain in effect until October 1, 1989, and retained jurisdiction, but left to the Legislature the task of fashioning a constitutional funding system. The State of Montana and defendants Holje, Ward, and Frederich appeal the District Court's determination that the present system of school funding is unconstitutional. The Montana Board of Public Education asks this Court to clarify the comments in the District Court's findings concerning the role of accreditation standards which the Board establishes. Hays-Lodge Pole raises five allegations of error in the District Court's ruling that federal "874" funding should he considered for purposes of equalization. Plaintiffs cross-appeal on the denial of their request for attorney fees. I Does Montana's system of funding the public schools violate the education article, Art. X, of the Montana Constitution? Art. XISec. 

### 1,Mont.Const., provides:

(1) It is the goal of thepeople to establish a system of education which will develop the full educational potential of each person. Equality of educational opportunity is guaranteed to each person of the state. (2) The state recognizes the distinct and unique cultural heritage of the American Indians and is committed in its educational goals to the preservationof their cultural integrity. (3) The legislature shall provide a basic system of freequalitypublic elementary and secondary schools. The legislature may provide such other educational institutions, public libraries, and educational programs as itdeemsdesirable. It shall fund and distribute in an equitable manner to the school districts the state's share of the cost of the basic elementary and secondary school system.By referring to the discussions in the transcriptof the 1972 Montana Constitutional Convention, the State contends the provision in subsection (1) that "[elquality of educational opportunity is guaranteed to each person," is an aspirational goal only. We disagree with that contention. In interpreting the Constitution, as in statutory construction, this Courtmust first look to the plainmeaning of the words used. State ex rel. Cashmore v. Anderson (1972), 160 Mont. 175, 184, 500 P.2d 921, 926. In the first sentence of Art. X, Sec. 1(1), the framers of the Constitution clearly stated the "goal" of the people to establish a system of education which will develop the full educational potential of each person. In the next sentence, the framers did not

use the term "goal." Instead they stated that equality of educational opportunity "isguaranteed"to eachperson of the state. As we review our Constitution, we do not find any other instance in which the Constitution "guarantees" a particular right. We conclude that the plain meaning of the second sentence of subsection (1) is that each person 

### - is guaranteed equality of educational opportunity. The plain meaning of that sentence is clearand unambiguous. The State argues that the last sentence of subsection (3) limits the Legislature's duty in connection with the guarantee of equal educational opportunity. It points out that Foundation Program funds are conceded by allparttes to have been distributed in an equitable manner, and then suggests thatbecause the State has distributed such funds in an equitable manner as required under the last sentence of subsection (3), the Legislature has met its constitutional obligations as required underArt. 

### X, Sec. 1. Art. X, Sec. 1(3), Mont.Const., requires that the Legislature shall provide a basic system of free quality education, that it may provide various types of educationalinstitutions and programs, and that the state's share of the cost of thebasic system shallbe distributed in an equitable

manner. There is nothing in the plain wording of subsection

(3) to suggest that the clear statementof the obligations on the part of the Legislature in some mannerwas intended to he

a limitation on the guarantee of equal educational opportunity contained in subsection (1). Theguarantee provision of subsection (1) is not limited to any one branch of government. Clearly the guarantee ofequal educational opportunity is binding upon all three branches of government, the legislative as well as the executive and judicial branches. We specifically conclude that the guarantee of equality of educational opportunity applies to each person of the State of Montana, and is binding upon all. branches of government whether at the state, local, or school district level. We hold that the last sentence of subsection (3) is not a limiting provision on the guarantee of equal educational opportunity contained in subsection (1). The evidencepresented at the trial of this case clearly and unequivocally established largedifferences,unrelated to "educationallyrelevant factors,"inper pupil spending among the various school districts of Montana. The evidence also demonstrated that the wealthier school districts are not funding frills or unnecessary educational expenses. Plaintiffs' expert witnesses testified that discrepancies in spending as large as the ones present in Montana translate, in their opinions, into unequal educational opportunities. There was also unrebutted testimony that Foundation Program funding falls short of even meeting the costs of complying with Montana'sminimum accreditation standards. The State attempted topresent an argument at trial that equality of educational opportunity is more appropriately measured by output, that is, 

### by analvsis of the success ofstudents from the different school districts,rather than by input 

### of dollars. The District Court concluded that the State had failed to submit convincing evidence on the output theory 

### of measurement. We agreewith that conclusion on the basis of this record. The District Court found similarly unpersuasive the argument that statewide fiscal difficulties in the last few years somehow excuse the disparities in the spendingper pupil in the various school districts. We agree with the District Court that such fiscal difficulties in no way justify perpetuating inequities. The State also argued that the Constitutional directive of local control of school districts,Art. XISec. 8,Mont. Const., requires that spending disparities among the districtsbe allowed to exist. That sectionprovides:

School district trustees. The supervision and control of schools in each school district shallbe vested in a board of trustees to be elected as provided by law. While Section 8 does establish that the supervision and control of schools shallbe vested in the board of trustess, there is no specific reference to the concept of spending disparities. Further, as made especially apparent after the passage of Initiative 105, the spending disparities among Montana's school districts cannot be described as the result of local control. In fact, as the District Court correctly found, the present system of fundingmay be said to deny to poorer school districts a significant level of local control, because they have fewer options due to fewer resources. We conclude thatArt. XISec. 8,Mont.Const., does not allow the type of spending disparities outlined in the above quoted findingsof fact. In 1972, when ourConstitutional Conventionmet, approximately 65% of General-Fund revenues were funded through theFoundation Program. Con.Con. Tr. 2157. The transcript of the debate on Art. X, Sec. 1(3), Mont.Const., clearly expresses the delegates' concern with that level of fundinq. See, for example,Con.Con. Tr. 1981-86, 2152-59. We conclude that as a result of the failure to adequately fund the FoundationProgram, forcing an excessive reliance

on permissive and voted levies, the State has failed to provide a system of qualitypublic education granting to each student the equality of educational opportunity guaranteed under Art. X, Sec. 1, Mont.Const. We specifically affirm that portion of the District Court's Conclusion of Law 17 which holds that the spending disparities among the State's school districts translate into a denial of equality of educational opportunity. We hold that the 1985-86 system of funding public elementary and secondary schools inMontana is in violation of Article X, Section 1 of the Montana Constitution. In analyzing school funding under an equal protection analysis pursuant to the provisions of Art. 11, Sec. 4, Mont.Const., the District Court concluded that education is a fundamental right and also made numerous and extensive findings of fact and adopted a number of conclusions of law. Because we have concluded that the school funding system is unconstitutional underArt. X, Sec. 1,Mont.Const., we do not find itnecessary to consider the equalprotection issue. We therefore make no decision with regard to the findings of fact and conclusions of law relating to the equal protection of the laws analysis of the DistrictCourt,and inparticular donot rule upon the determinationby the DistrictCourt that. education is a fundamentalright. Several of the parties suggested that in the event we concluded the school funding was unconstitutional,we should spell out the percentages which are required on the part ofthe State under the Foundation Program and for the d-istricts under the voted levy system. P7e are not able to reach that type of a conclusion. As previously indicated, the 1985-86 school funding involved more than 20 different funds. The control of such funds is primarily in the Legislature. Our opinion is not directed at onlv one element of the system of funding public schools in Montana, as we recognize that the Legislaturehas thepower to increase or reduce variousparts of these elements, and in addition to add other elements for such funding. While this opinion discusses spendingdisparities so far as pupils are concerned, we do not suggest that financial considerationsof that type are the sole elements of aquality education or of equal educational opportunity. There are

a number of additional factors which are a significantpart of the educationof each person inMontana, including but not limited to such elements as individual teachers, classroom size, support of the parents of students, and the desire and motivation on the part of the student which moves him or her to seek earnestly after an education. By not discussinq these elements,we do not in anyway suggest they are irrelevant, for the financing of education is only one aspect nf equal educational opportunity. Our opinion is intentionally limited to the elementsdiscussed in the opinion.

Should this Court clarify the District Court's findings regarding the accreditation standards promulgated by the Montana Board of Public Education? Under Art. X, Sec. 9(3)

### ,Mont.Const.

## , the Montana Board of Public Education (Board) has general supervisory power

over the public school system. The Board has adopted statewide accreditation standards for elementary and secondary schools. Those standards require teachers to be certified bythe State, limit teachers' cl-ass loads, outline a minimum instructionalprogram (forexample, courses required for high school graduation), and establish minimum size,maintenance, and safety standards for school facilities. The Board argues that these standards establish the instructional component of

a basic system of free quality public elementary and secondary schools. It objects to the District Court's findings

no. 262 and 270, which read as follows:

262. The testimony of superintendents, teachers, and trustees clearly establish that from a professional educators' perspective, theminimum Accreditation Standards in no way define a qualitv education.

270. In sum, the Montana School Accreditation Standards are minimum standards only, and do not provide the basis for defining quality education.

The Board also objects to the last sentence of the court's conclusion no. 18:

18. 

# . 

# . . Thus, the Montana School Accreditation Standards do not define either the constitutional rights of students or the constitutional responsibilities of the State of Montana for funding its public elementary and secondary schools.

The Board moved the District Court to amend the above findings, but the motion was deemed denied after 45 days had passed, under Rule 59(d), M.R.Civ.P. None of the parties disagree with findingno. 261 of the District Court that the accreditation standardsestablish aminimum upon which quality education canbe built. After reviewing the Board's argumentand the transcript,

we conclude that the findings and conclusion in question should be a-mended as requested. We therefore hold thatfindings of fact 262 and 270 and conclusion of law 18 shall be amended to read as follows:
[Finding of Fact 262.1 The testimony of superintendents, teachers, and trustees clearly establishes that from the professional educators' perspective, theminimum accreditation standardsdo not fullydefine a quality education.

[Findingof Fact 270.1 In sum, the Montana School Accreditation Standards are minimum standards upon which quality educationmust be built.

[Conclusion of Law 18.1 Thus, the Montana School Accreditation Standards do not fully define either the constitutional rights of students or the constitutional responsibilities of the State of Montana for funding its public elementary and secondary schools.

111 Did the District Court err in its findings and conclusions relating to consideration in the equalization process of federal "874" funding? Public Law 81-874 ("874") was enacted by the United States Congress in 1950. It provides federal payments to school districts which serve childrenwho reside on orwhose parents are employed on federal property, including Indian lands, or who have a parent on active duty in themilitary. Hays-Lodge Pole asserts that, contrary to the District Court's finding, PublicLaw 81-874 has as one of itspurposes assisting with the special problems in Indian education and is not only a federal effort to replace lost tax revenue resulting from the federalpresence. Itargues also that the court's finding that, in some districts, "874" funding has been used as tax relief is irrelevant and shows only the State's neglect of the special needs of Indian children. It contends that "874" funding is closely tied to the need onand near Indian reservations +or additional school fundinq because of the extraordinary educational difficultiespresent



## - language barriers, poverty, unemployment, and cultural differences. Itmaintains that any inequity present in "874" districts will vanish when the Montana funding system is equalizedwithout considerationof "874" funding and that the history of neglect of Indian education justifies judicial protection of the benefits provided by "874" fundinq. Hays-Lodge Pole argues that the District Court erred in ruling that the Legislature may consider "874" funding in equalization. This issue is resolved by the federal statutory requirement that the United States Secretary of Education must approve of Montana's equalization plan before "874" fundinq may be taken into account. 20U.S.C.A. S 240(d)(Supp.1988). The District Court recognized this requirement in its finding

no. 235,and found thatMontana's systemhad not secured that federal approval. We specifically affirm the District Court's ConclusionsNo. 20:

20. A state may factor 

### P. L. 81-874 revenue into its school finance equalization system only if the system meets the federal definition of an equalized program, subject to the determination of the Secretary of Education. [SeeGwinnArea Community Schools 

### v. State of Michigan, 741 F.2d 840

(6th Cir. 1984)l ~ontana presently does not and may not factor P. 

### L. 81-874 revenue into the Foun-- dation Program equalization formula, because Montana's system does not meet the federal definition of an equalized progra-m.

Art. XISec. 1(2), Mont.Const., states as fol.l.owswith regard to ourAmerican Indians:

The state recognizes the distinct and unique cultural heritage of the American Indians and iscommitted in its educational goals to the preservation of their cultural integrity.

That provision establishes a special burden in Montana for the education of American 1ndia.n children which must be addressed as a part of the school funding issues. We do invite the attention of the Legislature and the executive branch to Montana's failure tomeet the federal equalization requirements. As a part of the changes to be made in Montana's school funding system, it may be appropriate to meet the federal equalization requirements in order that "874" funding may be factored into the State's equalization formula. IV Did the District Court err in denyingplaintiffs' attorney fees? Plaintiffs argue that they are entitled to recover their reasonable attorney fees under the "common fund" doctrine. This Court has described that doctrine as onewhich:



# . . 

# . provides that when a party through active litigation creates, reserves or increases a fund, others sharing in the fund must bear 

### a portion of the litigation costs including reasonable attorney fees. The doctrine is employed to spread the cost of litigation among all beneficiaries so that the activebeneficiary is not forced to bear the burden alone and the "stranger" .el passive) beneficiaries do not receive theirbenefits at no cost to themselves.

Means v. Montana Power Co. (Mont. 1981), 625 P.2d 32, 37, 38 St.Rep. 351, 355-56. See also Serranov. Priest (Cal.1977),

The District Court concluded that the common fund doctrine did not apply in this case because no common fund was created from which attorney fees and expert witness fees could he paid. Tn a similar manner, under the "substantialbenefit" concept which has grown out of the common fund doctrine, the District Court concluded that no substantial benefit had resulted from its opinion and that no suchbenefit would accrue unless the Legislature acts. We conclude that the District Court properly denied attorney fees. We affirm the DistrictCourt's denial ofplaintiffs' request for attorney fees

# . v We approve the DistrictCourt's rationale that "in order toprovide the Legislaturewith the opportunity to search for and present an equitable system of school financing,'' the holdings in this case should not become immediately effective

# . We modify the reservation of jurisdiction by the District Court to provide that this Court specifically retains jurisdiction until July 1, 1989, and on that date the holdings of this opinion shall become fully in effect for all school terms comrnencins after thatdate.

We Concur:

### JusticeJohnC. Sheehy,concurring: I

### concuremphatically with the foregoing opinion butwish to comment respectingtheentitlementofplaintiffstoattorney fees. We cite Serranov. Priest (Cal. 1977)

## , 569 P.

### 2d 1303, 1310- 1311,totheeffectthatthecommon fund theoryandthesubstantial benefit theory do not at this timepresent a basis for attorney fees. Not tobe forgotten, however, is that inSerrano, thecourt awarded the plaintiffs attorney fees on the "private attorney general1!theory. If,asweallhope,because oftheefforts ofthe plaintiffs an equitable funding of education is eventually established, all of the requisites for an award of attorney fees

ontheprivateattorney general theory would bepresent inmyview. 

# ~~~-Rx Justice 

# 4.A%--%