Opinion ID: 2571648
Heading Depth: 1
Heading Rank: 3

Heading: The constitutional debt limitation and its application to the school district's obligation.

Text: ¶ 18 The school district also concedes that it is willing to resolve this dispute by paying Southern the money it sought  if it is lawful to make such a payment. However, it argues that it would be unconstitutional for it to pay Southern from funds which it did not receive during the year in which the contract was effective. Southern contends that it is not. ¶ 19 Article 1, § 5 of the Oklahoma Constitution provides for the establishment and maintenance of a system of public schools within the State. [19] Article 13, § 1 of the Constitution places the obligation of establishing and maintaining a free public school system on the Legislature. [20] Funding for mandated education is constitutionally and statutorily allocated based on the number of children attending school within a district for the preceding year. [21] School districts are required to provide educational services to children who reside in a juvenile treatment facility. [22] ¶ 20 Article 10, § 26 of the Oklahoma Constitution prohibits school districts from becoming indebted, in any manner, or for any purpose, by an amount exceeding the income and revenue provided for a fiscal year without the assent of three fifths of the voters. [23] This constitutional provision forces school districts to operate on a cash basis, and it prevents indebtedness payable out of tax revenues from extending beyond one year. [24] This section serves not only as a restriction on the school district, but also on the Legislature. [25] ¶ 21 Southern relies on Willow Wind, Inc. v. City of Midwest City, 1989 OK 171, 790 P.2d 1067, and we agree that it is instructive. In Willow Wind, this Court addressed a type of debt which would not violate the constitutional debt limitations of § 26. [26] Willow Wind, involved a city which enacted ordinances that provided for a method by which private developers could construct water and sewer lines, dedicate them to the city, and receive back a portion of the cost of construction over the next fifteen years. Pursuant to the ordinances, the city reimbursed the developers from assessments collected from subsequent developers who benefitted from the facilities for fifteen years or until the developer recouped ninety percent of the costs, whichever occurred sooner. The city withheld an administrative fee of ten percent. ¶ 22 Four years after the ordinances were enacted, the city repealed them on the ground that they were unconstitutional. In addressing the constitutionality of the arrangement, the Court recognized that: 1) a debt is a promise to pay a certain amount, with interest, within a fixed time, out of taxes taken from all of the people, including those not benefitted; and 2) a city creates an indebtedness when it borrows money to be paid, with interest, from taxes in the future, whether such taxes are formally levied at one time, covering that future, or yearly, to meet the payments when about to mature. [27] The Court determined that the city's obligation under the ordinances was to reimburse ninety percent of any amount it might collect. The period of collection was limited to fifteen years, whether any funds were collected, and there was no certain amount owed by the city. ¶ 23 Although the arrangement was a debt in the sense of an obligation, the Court held that the ordinance did not constitute deficit financing for purposes of the constitutional debt limitations because the ordinance provided: no promise to pay a certain amount; the amount to be paid was taken from those who directly benefitted from the water and sewer lines; and there was no guarantee that the developers would be paid anything. [28] Here, Southern advanced the costs of providing education to the children to the school district, until the school district received funding which was specifically attributable to the children. Under the terms of the contract, the school district was not obligated to repay Southern a specific amount. [29] Rather, reductions from what Southern owed corresponded only to the State aid received, if any, from children living at the juvenile facility. [30] ¶ 24 Nothing in the agreement obligated the school district if the State determined that none of the allocations available were attributable to the children living at the facility, or if the State were unable to make allocations because of budgetary shortfalls. Nor does the agreement attempt to bind the State from making appropriation decisions. [31] Under the unique facts presented, and the particular way in which the obligation at issue here was incurred, we view this cause as one which is similar to the type of obligation involved in Willow Wind. ¶ 25 We are not persuaded that the obligation imposed by this type of arrangement is within the purview of those which are precluded by § 26 [32] because, like the obligation involved in Willow Wind, there was no deficit financing. [33] The contract merely precluded the school district from obtaining a double recovery from Southern and the State. Additionally, if this type of arrangement violated the constitutional debt limitations, numerous school board members across the State could be held personally liable for agreeing to similar contracts. [34] Consequently, we hold that, under the facts presented, the school district's obligation is not a debt for purposes of the constitutional debt limitation pursuant to the Okla. Const. art. 10, § 26.