No. 88-3818 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

HELENA ELEMENTARY SCHOOL DISTRICT NO. 1 AND HIGH SCHOOL 

DISTRICT NO 1 OF LEWIS & CLARK COUNTY; BILLINGS ELEMENTARY 

SCHOOL DISTRICT NO 2 AND HIGH SCHOOL DISTRICT NO 2 OF 

YELLOWSTONE COUNTY; et al., 

Plaintiffs and Respondents, 

and 

MONTANA EDUCATION ASSOCIATION et al., 

IntervenorsIPlaintiffs and Respondents, 

-vsTHE STATE OF MONTANA; and THE MONTANA BOARD OF PUBLIC EDUCATION; 

and THE MONTANA SUPERINTENDENT OF PUBLIC INSTRUCTION, 

Defendants and Appellants, 

and 

C. J. HOLJE,BERNT WARD and ROBERT FREDERICH on behalf of the residents 

and taxpayers of Sheridan County, Montana, and all others similarly 

situated, 

Intervenors/Defendants and Appellants 

HAYS-LODGE POLE ELEMENTARY SCHOOL DISTRICT NO 50 AND HIGH SCHOOL DISTRICT 

NO 50, AND BLAINE COUNTY; et al. and the ASSOCIATTON OF INDIAN IMPACT 

SCHOOLS OF MONTANA, 

IntervenorsIDefendants and Appellants 

APPEAL FROM: The District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Henry Loble, Judge presiding. 

COIJNSEL OF RECORD: 

For Appellant: 

Terry G. Spear, Crowley Law Firm, Billings, Montana 

Hays-Lodge Pole School Dist #50, et al. 

Beda Lovitt, Helena, Montana, Montana Superintendent of 

Public Instruction 

Benjamin Hilley, Hilley & Loring, Bigfork, Montana 

for Montana Education Association 

Hon. Marc Racicot, Attorney General, Helena, Montana 

Clay R Smith, Assistant Attorney General, Helena, for 

State of Montana 

W. William Leaphart, Helena, Montana 

Loren O'Toole, Plentywood, Montana 

Donald A. Garrity, Helena, Montana 
For Respondent: 

James H. Goetz, Goetz, Madden & Dunn, Rozeman, Montana 

For Amicus Curiae: 

Charles E. Erdmann, Helena, Montana 

Bruce W.Moerer, Helena, Montana 

Dennis Lopach, Helena, Montana 

Submitted: January 13, 1989 

Decided: February 1, 1989 
Mr. 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 1972 Montana 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 school s 

violate the education article, Art. XI of the Montana 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 promulgated bv 

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 it may not in 
any manner factor that into an equalization formula without 

meeting federal requirements. 

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 in Montana 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 also have 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 only be made from cash on hand. 

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 the MGFRW7 is funded by county 

and state equalization revenues. These equalization revenues 

are derived from levies of 45 mills on all taxable propertv 

in each county and state aid from such sources as earmarked 
revenues, surplus county Foundation Program revenue, and 

direct legislative appropriations. 

The remaining 20% of the funding of MGFBFlV is through 

permissive mill levies of up to 6 mills for elementary districts and 4 mills for high school districts. These levies 

are made without a vote. If the school district is unable to 

obtain the MGFRFW level through permissive levies and other 

specified nonlevy revenue, state permissive equalization 

revenues are used to make 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-Fng under 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 all General Fund budgets were obtained from this level 

of funding. In contrast, in 1950, the Foundation Program 

furnished 81.2% of all general fund revenues in Montana, 

1-eaving less than 20% of revenues to he obtained by local 

levies and 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 disparities of spending 

per pupil as high as 8 to 1 in comparisons between 

similarly-sized school districts. We affirm the following 

unchallenged findings of the District Court: 

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 Superintendent at Drummond, was previously Superintendent for Geraldine schools. The two 

school districts are very close in size, at both 

the elementary and high school levels. Geraldine's 

taxable valuation, however, is more than twice that 

of Drummond's. The tax efforts for the elementary 

schools are comparable, while Geraldine levies more 

General Fund mills than does Drummond at the high 

school level. Consequently, Geraldine spends 

approximately $1,000 more 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 

district had the same amount of money 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 individuals has many 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 12 districts to observe the schools first hand, 

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 the better funded schools tended to 

offer more enriched and expanded curricula than 
those offered in the schools with 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 than were 

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 

educational opportunity. 

*The better funded districts have a greater 

flexibility in the reallocation of resources 

to programs 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 

financial resources. 

R. Mattson, M. Pace, and J. Picton, Does Money Make 

- a Difference in the -- Quality - of Education -- in the 

Montana Schools? 

218. Intervenor-Plaintiff MEA commissioned a 

study similar to that conducted by Plaintiffs' 

Study Team. Dr. Gary Gray, an assistant professor 

in Eastern Montana College's School of Education, 

studied educational opportunities in a number of 

high and low spending school districts in Montana. 

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 expenditure category. 

219. Dr. Gray concluded that there are substantial differences in educational opportunities 

among Montana school districts, which are manifested significantly between the high versus low expenditure categories which he studied. More 

specifically, he found that wealthier districts 

offered more science classes, in labs which were 
typi-cally larger, 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 "hands on" learning experiences 

than students in poorer 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 

Programs were much stronger in the high 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 special collections. 

222. With respect to facilities, high expenditure districts reported that they have not had to 

defer necessary maintenance or work 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 expenditure districts. 

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 

deficiences and problems are not consistantly found 

in relatively higher spending districts. 

[footnotes and 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 Senate Bill 71. See, 55 15-10-401, -402, 

-411, and -412, MCA. The District 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-defendant Hays-Lodge Pole Elementary School Dist., 

et al., (Hays-Lodge Pole) is an association of Montana public 

schools which receive "874" funds by reason of 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 School Accreditation 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 

inequalities present in the school finance system. The court 
ordered that the present system of school funding may 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. XI Sec. 1, Mont.Const., provides: 

(1) It is the goal of the people 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 

preservation of their cultural integrity. 

(3) The legislature shall provide a basic 

system of free quality public elementary and secondary schools. The legislature may provide such 

other educational institutions, public libraries, 

and educational programs as it deems desirable. 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 transcript of 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 Court must first look to the plain meaning 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 "is guaranteed" to each person 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 clear and 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 all parttes to 

have been distributed in an equitable manner, and then suggests that because 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 under Art. 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 educational 
institutions and programs, and that the state's share of the 

cost of the basic system shall be distributed in an equitable 

manner. There is nothing in the plain wording of subsection 

(3) to suggest that the clear statement of the obligations on 

the part of the Legislature in some manner was intended to he 

a limitation on the guarantee of equal educational opportunity contained in subsection (1). The guarantee provision of 

subsection (1) is not limited to any one branch of government. Clearly the guarantee of equal 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 evidence presented at the trial of this case clearly 

and unequivocally established large differences, unrelated to 

"educationally relevant factors," in per 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's minimum accreditation standards. 

The State attempted to present an argument at trial that 

equality of educational opportunity is more appropriately 

measured by output, that is, by analvsis of the success of 
students 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 agree with 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 

spending per 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. XI Sec. 8, Mont. 

Const., requires that spending disparities among the districts be allowed to exist. That section provides: 

School district trustees. The supervision and 

control of schools in each school district shall be 

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 shall be 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 funding may 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 that Art. XI Sec. 8, Mont.Const., does not allow the 

type of spending disparities outlined in the above quoted 

findings of fact. 

In 1972, when our Constitutional Convention met, approximately 65% of General- Fund revenues were funded through the 
Foundation 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 Foundation Program, forcing an excessive reliance 

on permissive and voted levies, the State has failed to 

provide a system of quality public 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 in Montana 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 under Art. X, Sec. 1, Mont.Const., we do not 

find it necessary to consider the equal protection 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 District Court, and in particular 

do not rule upon the determination by the District Court that. 

education is a fundamental right. 

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 of 
the 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 

Legislature has the power to increase or reduce various parts 

of these elements, and in addition to add other elements for 

such funding. 

While this opinion discusses spending disparities so far 

as pupils are concerned, we do not suggest that financial 

considerations of that type are the sole elements of a quality education or of equal educational opportunity. There are 

a number of additional factors which are a significant part 

of the education of each person in Montana, 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 any way suggest they are irrelevant, for the financing of education is only one aspect nf 

equal educational opportunity. Our opinion is intentionally 

limited to the elements discussed 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 by 
the State, limit teachers' cl-ass loads, outline a minimum 

instructional program (for example, 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, the minimum 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 finding no. 261 of the District Court that the 

accreditation standards establish a minimum upon which quality education can be built. 

After reviewing the Board's argument and the transcript, 

we conclude that the findings and conclusion in question 

should be a-mended as requested. We therefore hold that 
findings 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, the minimum accreditation standards do 

not fully define a quality education. 

[Finding of Fact 270.1 In sum, the Montana School 

Accreditation Standards are minimum standards upon 

which quality education must 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 children who reside on or whose 

parents are employed on federal property, including Indian 

lands, or who have a parent on active duty in the military. 

Hays-Lodge Pole asserts that, contrary to the District 

Court's finding, Public Law 81-874 has as one of its purposes 

assisting with the special problems in Indian education and 

is not only a federal effort to replace lost tax revenue 

resulting from the federal presence. It argues 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 on 
and near Indian reservations +or additional school fundinq 

because of the extraordinary educational difficulties present 

- language barriers, poverty, unemployment, and cultural 

differences. It maintains that any inequity present in "874" 

districts will vanish when the Montana funding system is 

equalized without consideration of "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. 20 U.S.C.A. S 240(d) (Supp. 1988). 

The District Court recognized this requirement in its finding 

no. 235, and found that Montana's system had not secured that 

federal approval. We specifically affirm the District 

Court's Conclusions No. 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. [See Gwinn Area 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. XI Sec. 1(2), Mont.Const., states as fol.l.ows with 

regard to our American Indians: 

The state recognizes the distinct and unique cultural heritage of the American Indians and is 
committed 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 to meet 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 denying plaintiffs' 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 one which: 

. . . 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 

active beneficiary is not forced to bear the burden 

alone and the "stranger" .el passive) beneficiaries do not receive their benefits 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 Serrano v. 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 "substantial 
benefit" 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 such benefit would accrue unless the Legislature acts. We conclude 

that the District Court properly denied attorney fees. We 

affirm the District Court's denial of plaintiffs' request for 

attorney fees . v 

We approve the District Court's rationale that "in order 

to provide the Legislature with the opportunity to search for 

and present an equitable system of school financing,'' the 

holdings in this case should not become immediately effect ive . 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 that date. 

We Concur: 
Justice John C. Sheehy, concurring: 

I concur emphatically with the foregoing opinion but wish to 

comment respecting the entitlement of plaintiffs to attorney fees. 

We cite Serrano v. Priest (Cal. 1977) , 569 P. 2d 1303, 1310- 

1311, to the effect that the common fund theory and the substantial 

benefit theory do not at this time present a basis for attorney 

fees. Not to be forgotten, however, is that in Serrano, the court 

awarded the plaintiffs attorney fees on the "private attorney 

general1! theory. If, as we all hope, because of the efforts of the 

plaintiffs an equitable funding of education is eventually 

established, all of the requisites for an award of attorney fees 

on the private attorney general theory would be present in my view. 

~~~-Rx Justice 4. A%--%