Opinion ID: 2524503
Heading Depth: 2
Heading Rank: 1

Heading: Operational Financing

Text: [ถ 11] The legislature began immediately to respond to the Campbell decision. [4] It retained the services of Management Analysis & Planning Associates, L.L.C. (MAP), a well recognized and credentialed consulting firm with expertise in public school finance, to assist in developing a school operation financing system which would meet the constitutional standard established by this court. MAP's task was to develop a revenue distribution model which would assure adequate resources were distributed to provide a proper education for every Wyoming child based on the cost of education. It chose a block grant model to preserve as much local control as possible. The concept was that the model would produce the cost per average daily membership (ADM) and that cost would then be multiplied by an individual district's ADM to determine that district's allocation of funds. The first step was to identify the educational mission Wyoming had chosen, which came to be called the basket of goods and services, that must be available to all Wyoming school children and which the legislature codified as a list of core knowledge and skill areas. Wyo. Stat. Ann. ง 21-9-101(b) (LEXIS 1999). The second step was to identify the instructional components necessary to deliver the prescribed goods and services. In the third step, MAP was to determine the cost of the various components required, and the final step was the development of any adjustments which would be necessary for particular districts or students. [ถ 12] To determine the components of the delivery system, MAP relied upon professional literature, advice from professional associations, effective practices in other states, the professional judgment of groups of expert Wyoming educators randomly selected from various sized schools and school districts, and its own professional judgment. From all this information, MAP developed prototypical model schools capable of delivering the basket of educational goods and services required by the legislature. These model schools were to be the tools necessary to calculate the per pupil cost of educating Wyoming students. [ถ 13] MAP then set out to accomplish the most difficult part of its taskโdetermining the cost of providing the various components of the delivery system. It attempted to determine what providing the basket of goods and services should cost a school district in Wyoming. Over 80 percent of the school district costs are for personnel, primarily classroom teachers. To determine what it should cost to provide those classroom teachers, MAP looked at the counties where the greatest competition existed for professional jobs, Albany and Laramie. Teacher salaries in those counties were slightly lower than the statewide average. MAP chose the higher statewide average of $20,573 as the starting teacher salary for the model. Statewide average increases for advanced education and greater experience were then added to the beginning salary for a total prototype salary of $31,758. The average salary figures used by MAP were based upon the 1996-97 [5] school year. [ถ 14] The MAP study was presented to the legislature in 1997 with four computer simulations of various funding scenarios including Example 3 (MAP 3) which was the result of consultation with the Wyoming experts concerning class size and the required number of teachers. MAP 3 was not funded by the legislature, and to do so would have cost an additional $75,000,000. [6] The budget actually adopted by the legislature resulted in fewer teachers and larger classrooms for middle and high schools than provided for in the MAP 3 model. [ถ 15] Following the 1997 legislative session, various school districts and the Wyoming Education Association (WEA) filed suit challenging the constitutionality of the legislature's actions. The trial court held the MAP model was based on a valid cost of education study and the state carried its burden to prove the level of funding for elementary schools was adequate to deliver the required educational goods and services to those schools. However, the court expressed concerns that numerous technical adjustments contained in the model were not cost-based. In addition, the court concluded the state had failed to carry its burden of proof that funding for the middle and high schools was adequate to deliver the required basket. Consequently, the court found the system, in part, unconstitutional. The court, in recognition of the legislature's continuing work, reserved ruling on several issues including capital construction, which was not included in the MAP effort, pending the 1998 special and budget legislative session. The deadline for the completion of the capital construction portion of the financing system was extended to July 1, 1999. [ถ 16] Additional legislation was enacted during the 1998 special and budget legislative session which addressed the budget for middle and high schools, the small school adjustment, and other technical adjustments. A second trial commenced, which was in essence a continuation of the first, with most of the same parties involved. A coalition of small school districts, satisfied with the legislature's actions, had reached a settlement with the state. [ถ 17] Following the trial court's initial 1997 finding that the funding for the middle and high schools failed to meet the constitutional standard for providing the necessary funding for the full basket as determined by the legislature, two developments occurred. First, the legislature increased funding for middle schools from $5,770/ADM to $6,174/ADM and for high schools from $6,050/ADM to $6,405/ADM. See Wyo. Stat.Ann. ง 21-13-309(m)(ii) (LEXIS Supp.2000); 1997 Wyo. Spec. Sess. Laws ch. 3, ง 303; 1998 Wyo. Sess. Laws ch. 2, ง 701; 1999 Wyo. Sess. Laws ch. 110, ง 102. This resulted in slightly more teachers and smaller class sizes than the 1997 legislation. However, the class size remained larger, and the number of teachers remained smaller, than MAP 3. [ถ 18] Second, the legislature conducted the Wyoming Education Funding Adequacy Study in March 1998 in an effort to demonstrate the funding was adequate. A panel of professional educators from around the region was selected, specifically excluding any Wyoming educators. The educators were divided into teams and generally asked to review the resources contained in MAP 3, the 1997 legislation funding (HEA 2), and the 1998 legislation funding (SEA 2) to determine if the basket could be successfully delivered to every student. The teams were told to make numerous factual assumptions including the assumption that salaries were adequate to attract and retain qualified faculty. All the teams concluded that each of the resource levels provided adequate funds to deliver the basket. Importantly, however, they uniformly manipulated the models to add funds in some categories at the expense of others and decreased class sizes by adding additional teachers to the models. The same exercise was conducted in 1999 to consider the increased funding provided by the legislature that year, with the same result. [ถ 19] As additional evidence of the adequacy of funding, the state argued the districts that were litigating were also fully accredited under the existing financing. There was conflicting testimony by those districts whether they individually believed they were fully providing the basket of goods and services with existing financing. [ถ 20] After the second trial, the trial court concluded the constitution and the ruling in Campbell did  not demand perfection, but only that the level of funding be reasonably calculated to deliver an adequate education to students regardless of location. After considering all the evidence, the court found in general that the State has met its burden of proving that the revised school funding system is adequate to provide the basket of educational goods and services to Wyoming's students. With regard to the technical issues and adjustments, the trial court approved of some and held others unconstitutional. Those remaining before this court on appeal include:
[ถ 21] Both the MAP model and the funding legislation for the 1998-99 school year contained an error in the ADM calculation for kindergarten students. Kindergarten students were counted as full ADMs rather than one-half ADMs, which had the effect of reduced funding. That error was corrected in the 1999 budget. Wyo. Stat. Ann. ง 21-13-309(m)(i), (p), (s) (LEXIS Supp.2000). The school districts claim they were entitled to reimbursement for the amount they should have received during the 1998-99 school year had kindergarten students been properly included in the calculation. The trial court held that, absent proof the shortcoming impacted the school districts' ability to deliver the basket, their claim was denied.
[ถ 22] The MAP models used cost data based on the 1996-97 school year. The school districts contend the model was outdated from the beginning, and the state contends other inclusions in the budget, which were not required by the cost-based model, offset any shortcoming. [8] [ถ 23] Since the model is based on data from past years, the trial court recognized inflationary cost increases will, at some point, cause funding levels to become unconstitutionally inadequate. The legislature addressed this problem in Wyo. Stat. Ann. ง 21-13-309(r) (LEXIS Supp.2000), which provides: (r) The joint appropriations interim committee shall submit a recommendation to the legislature and governor, not later than November 1 of each year, regarding whether an external cost adjustment should be made, and if so, the amount of the adjustment. Neither the legislature nor the governor is required to act on such a recommendation. The joint appropriations interim committee recommended that the school finance formula for school year 2000-2001 be adjusted 1.3 percent for new inflation. The adjustment was adopted pursuant to Wyo. Stat. Ann. ง 21-13-309(o)(i)(A) (LEXIS Supp.2000), but the provision specifically excluded any inflation adjustment for the years preceding the 2000-2001 school year. See ง 21-13-309(o)(i)(A)(II). The trial court recognized that at some point the failure to adjust for inflation would cause schools to be unable to deliver the full basket, but concluded that point had not yet been reached.
[ถ 24] All parties agreed some type of small school adjustment is warranted because small schools face higher fixed costs per ADM than larger schools and cannot take advantage of economies of scale assumed in the model. In the 1997 process of developing the prototypes, MAP recommended a graduated adjustment because the marginal costs decline with the increase in students. For example, as students are added to a base of 30 for elementary schools, the cost of providing an adequate education declined from approximately $9,000 per ADM to approximately $6,000. These adjustments are made for elementary schools (K-8) of 200 or less and high schools (9-12) of 400 or less. In these small schools, additional adjustments are provided to fully reimburse the actual costs of student activities, food services, and utilities. The trial court concluded the evidence did not support the state's position that these adjustments were based upon actual cost differences, the legislature had consistently ignored its own experts on this point, and the small school adjustment was unconstitutional. Although the trial court agreed a small school adjustment is necessary to assure equality in education despite school size, it held such adjustments must reflect actual additional costs.
[ถ 25] Neither the original MAP report nor the 1997 legislation provided for a small school district adjustment, and the MAP expert testified such an adjustment was not justified by the data. However, prior to the 1999 legislative session, the small school districts proposed adjustments (known as the small school settlement) in exchange for their withdrawal from the litigation. After modification by MAP experts, the proposal, ultimately adopted by the legislature, provided adjustments for small school districts which were defined as those with 1,350 ADM or less. Wyo. Stat. Ann. ง 21-13-328(a) (LEXIS 1999). Qualifying districts receive $50,000 for each attendance center in addition to the one in which the district office is located. Wyo. Stat. Ann. ง 21-13-328(b) (LEXIS 1999). For districts with less than 900 ADM, an additional amount is provided for administration and additional funds are provided for maintenance and operations costs for districts with fewer than 1,100 ADM. Wyo. Stat. Ann. ง 21-13-328(c), (d) (LEXIS 1999). The trial court determined that the state did not establish these adjustments were cost-based.
[ถ 26] The 1999 legislation made adjustments allowing additional funds based on a concentration of certain special needs students in a district. The challengers claim that these adjustments are not cost-based and consequently result in either underfunding or no funding at all the actual costs of educating these students.
[ถ 27] If a district has a concentration of limited English speaking students equal to or in excess of 5 percent of its total ADM, it receives 15 percent more funding than the model provides for that grade level for each identified student. No evidence was provided to indicate what additional costs are actually incurred due to higher concentrations of limited English speaking students.
[ถ 28] If a district has economically disadvantaged students (measured by those enrolling in the federally subsidized lunch program) in excess of 150 percent of the statewide average, it receives $500 per economically disadvantaged student. The challengers contend the enrollment is not an accurate measurement of economically disadvantaged students, particularly at the middle and high school levels, the 150% trigger is arbitrary, and the additional $500 per student funding was not cost-based.
[ถ 29] No specific adjustment was made for gifted and talented students. MAP contended the model adequately provided funds for those students by assuming that 3 percent of the student population is gifted and providing an additional $9 per ADM. [ถ 30] The trial court found, while none of these adjustments was based on actual cost data, they were the product of professional judgment and, as such, were adequate. The court also relied upon MAP's contention that the small class size in its model would allow the flexibility to deal with these special needs students as well as behaviorally disordered students.
[ถ 31] Wyo. Stat. Ann. ง 21-13-323 (LEXIS 1999) provides an adjustment for teacher seniority based on the aggregate years of experience the teachers in the district have for the prior school year multiplied by the statewide average annual increase in salary for the designated base year of 1996-97. The school districts contend this adjustment does not reflect the actual cost for the district, which is correct. However, the trial court concluded that every district was treated the same and subjected to the same fiscal controls and the seniority adjustment did not violate the constitutional restrictions. [ถ 32] No adjustments are made for seniority for classified and administrative staff. The trial court concluded these items should be dealt with like all components which will experience inflation, recognizing at some point unadjusted funding will prevent the districts from fulfilling the constitutional mandate but that point had not yet been reached.
[ถ 33] Pursuant to MAP's recommendation, the legislature provided a regional cost-of-living adjustment to be applied to the model. Wyo. Stat. Ann. ง 21-13-309(o)(ii) (LEXIS Supp.2000), provides as follows: (ii) The amount, after the adjustment under paragraph (o)(i) of this subsection has been made, shall be further adjusted for regional cost of living differences. The adjustment for regional cost of living differences shall be based upon the Wyoming cost-of-living index, with the medical component omitted and with the housing component included but modified by excluding the price for rental of shelter subcomponent, as computed by the division of economic analysis, department of administration and information under rules promulgated by it with respect to the methodology under which the index shall be computed. The version of the index used shall be the average of the six (6) consecutive semi-annual index reports completed by January 1 prior to the school year for which it is to be used. The statute is based on the WCLI which provides data on 140 commodities throughout the state weighted based on the percentage of individual income spent on the item. Housing represents 40.9 percent, and the shelter portion of the housing component is over 30 percent, of the total 100 percent. MAP recommended removing the rental of shelter and medical portion of the index. It rationalized that, if housing were more expensive, districts would be located where other amenities exist and a full housing adjustment would overcompensate teachers. The medical costs were excluded from the index because monies to cover health insurance costs were included in the salary/benefits component of the model. The trial court disagreed and concluded that regional cost-of-living adjustments were appropriate but the modified index was inappropriate, did not accurately reflect the actual disparity in the cost of hiring teachers in various locations throughout the state, and was unconstitutional.
[ถ 34] In 1999, the legislature provided an adjustment of the cost of special education and transportation, which reimbursed the districts for 100 percent of the amount actually expended during the previous school year. Wyo. Stat. Ann. ง 21-13-321(b) (LEXIS 1999). However, if the ratio of special education or transportation spending to total district spending increases, the state reduces the funding by the excess which is over one hundred percent (100%) but less than one hundred ten percent (110%). Section 21-13-321(b)(ii)(C). That reduction is then refunded to the districts during the succeeding year if the Department of Education (DOE) finds those excess expenditures were necessary to provide essential special education services for the school year in which they occurred. Section 21-13-321(b)(ii)(D). The court concluded this approach was acceptable even though it did not provide full reimbursement in the same year and found administrative oversight does not constitute a penalty. Nor does the delay deprive the district of the ability to deliver the basket to special education students.
[ถ 35] The school districts also complain there were no adjustments for the actual cost of vocational and technical education, extra-duty pay, additional education for certified personnel, and routine maintenance. Again, the trial court found these items were either considered in the development of the model or were not significant enough to result in a district's inability to deliver the basket of goods and services. [ถ 36] In conclusion, the trial court found the small school adjustment, the small school district adjustment, and the regional cost-of-living adjustment unconstitutional and the balance of the 1999 revised school finance system constitutional.