Opinion ID: 1384601
Heading Depth: 1
Heading Rank: 1

Heading: the oklahoma public school financing system

Text: Article 1 § 5 of the Oklahoma Constitution provides for the establishment and maintenance of a system of public schools within the State. [3] Article 13 § 1 of the Constitution places the obligation of doing so upon the Legislature. [4] In its efforts to carry out this duty, the Legislature has designed a system of financing public elementary and secondary education which relies primarily on two sources of revenue  local and state sources. A third, minor source of funding is the federal government.
The greatest local sources of revenue for financing public education are various ad valorem taxes levied on the real and personal property within the school districts. Each county must levy a tax of four mills on the dollar valuation of all taxable property in the county for school purposes. Unless a different method is provided by law, the proceeds of this levy must be apportioned among the county school districts based upon the legal average daily attendance [ADA] for the preceding school year. [5] The school districts themselves also can levy taxes. Upon certification of need by the board of education any school district may levy an additional tax of fifteen mills on the dollar valuation of all taxable property in the district. [6] Upon the voters' approval, a district also may make an emergency levy of up to five mills and a local support levy of up to ten mills. The emergency and local levies may only provide sufficient additional revenue to meet the district's needs for the fiscal year as determined by the local board. [7] Thus, the maximum ad valorem tax levy allowed by law for a school district's general operating fund is thirty-five mills on the value of the taxable property within the district. Additional ad valorem taxes also may be approved by the district's voters for education-related purposes. Article 10 § 10 of the Oklahoma Constitution allows a levy of up to five mills for a building fund, which may be used for erecting or repairing school buildings and for purchasing furniture. Article 10 § 26 permits a school district to incur in any one year an indebtedness in an amount, including existing indebtedness, of up to five percent of the valuation of the taxable property of the district for all purposes. If there is an absolute need, a district may increase such indebtedness to ten percent for the purpose of acquiring or improving school sites, constructing, repairing, remodeling or equipping buildings, or acquiring school furniture or equipment. Small local sources of revenue for financing public schools include certain dedicated taxes and fees, tuition and transfer fees, and proceeds from the sale or rental of property. Because local sources of revenue are derived primarily from ad valorem taxes, the amount of that revenue varies greatly among the school districts. This variation may be caused by several factors, including differences in assessment ratios and in the methods employed to establish property values. The greatest factor is the difference in property wealth, upon which the tax is based, among the districts. These differences greatly affect the amount of revenue per pupil which each district can raise for the support of its schools. This variation in property wealth can be seen by comparing the assessed valuation of property per ADA among the districts. [8] For 1978-79, the assessed valuation per ADA for all school districts in the state was $11,264.42. In contrast, all but five of the plaintiff school districts had assessed valuations per ADA below the state average; and the average among the plaintiff districts was only $7,780.40. The effect of these differences in property wealth among the districts becomes more apparent by comparing the amount of local revenue per pupil in ADA which is available to the districts. All of the plaintiff school districts levy the full thirty-five mills allowed by law; yet they still cannot raise as much revenue per pupil as can the wealthier districts, some of which levy at a lower rate. In addition, when this action was commenced, all of the plaintiff districts were levying the full five mills allowed by law for a building fund, and all but two levied a tax for a sinking fund. In contrast, thirty-eight of the remaining districts either had no tax, or were levying less than five mills, for a building fund, and one hundred seventy-four districts levied no tax for a sinking fund. Twenty school districts had no tax for either a building fund or a sinking fund. The level of property wealth within a district also affects the amount of indebtedness which the district may incur for acquiring and improving school sites, constructing and equipping school buildings, and acquiring school furniture and equipment. As stated above, the state constitution prevents a district from becoming indebted beyond a certain level, even though the district's voters may be willing to tax themselves at greater rates to satisfy such indebtedness. This limitation obviously affects all school districts of the State; but it has a greater impact upon the less wealthy ones, whose maximum levels of indebtedness naturally are much smaller.
The other primary source of revenue for public schools is the State itself. State sources of revenue include various taxes designated for school purposes, proceeds from the permanent school fund and monies allocated for specific programs or expenditures. The most important source, State Aid, [9] was designed to allow the State and the local school districts to work together to provide full educational opportunities for every child in Oklahoma. The State Aid program consists of two parts, Foundation Program Aid and Incentive Aid. [10] The Foundation Program consists of a certain amount of money per pupil which the Legislature has determined to be necessary to operate a minimum program within a school district. From this amount are subtracted various sums, known as Foundation Program Income, which are received by a district from certain sources. One of these items is the net assessed valuation of the property within the district during the preceding year multiplied by fifteen mills. In theory, Foundation Program Income reflects a district's wealth and ability to support itself. A transportation supplement is added to the difference between the Foundation Program and Foundation Program Income. The total of these is Foundation Aid. In addition to Foundation Aid, a district also may receive certain funds known as Incentive Aid. [11] The Incentive Aid formula has a two-fold purpose: (1) to reflect the district's property valuation per ADA in relation to the average valuation per ADA within the State and (2) to recognize the effort, in the form of mills exceeding fifteen, which the district makes by way of levies to finance its schools. The formula includes minimum and maximum amounts which the school districts may receive. As a result, districts which otherwise would not qualify for Incentive Aid, or would qualify for only a smaller amount, receive at least the minimum amount; and districts whose need is greater may not receive more than the maximum amount. All districts receive some Incentive Aid, with the poorest districts receiving only about twice as much as the richest. In addition to the monies distributed through Foundation and Incentive Aid, a large portion of the funds appropriated for education are allocated to flat grants to all school districts. These grants have been awarded on a purely categorical basis, without consideration of the district's financial ability. Some grants have been distributed through the State Aid program for special education, vocational education and transportation. The largest allocation of this type has been for school personnel salary increases. The Legislature has increased these grants over the years; and so the percentage of the total education funds which are allocated to the State Aid program has become smaller. In recent years state resources have begun to constitute a greater percentage of total school revenues. As recently as 1968-69, local sources accounted for more than half the revenues received by the districts. After that time period, this figure began to decline and the percentage provided by the State began to increase. In 1978-79 the districts received 53% of their total revenues from the State and only 36% from local sources.
A third source of revenue for financing public education is the federal government. Most of these funds are granted on a categorical basis and restricted to specific uses designated by federal law. In 1978-79 federal funds constituted 11% of the revenues received by Oklahoma school districts. These federal funds cannot be used to reduce State Aid. [12] In short, the present system of financing public education permits a wide difference in the amount of revenues available per pupil among the several school districts. Local sources vary primarily because of differences in property wealth among the districts. State Aid provides some additional support but does not equalize the total amount of funds per ADA which is available through both local and state sources.
The plaintiffs claim the present system violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution and several provisions of the state constitution because the system fails to provide equal educational opportunities for all children in the State. Although they do not define the phrase equal educational opportunities, the plaintiffs allege only that the educational opportunities which they are able to provide or receive are materially inferior to those of other, wealthier school districts. Thus, by equal educational opportunities the plaintiffs mean equal revenues per ADA. With this in mind, we next examine the plaintiffs' claims.