Opinion ID: 1198839
Heading Depth: 3
Heading Rank: 2

Heading: The General and Uniform Clause under Hull v. Albrecht

Text: ¶ 8 In Hull v. Albrecht, we described several components of a school financing system that complies with Article XI, Section 1. We noted that legislatively established standards for adequate capital facilities are a core component of a general and uniform public school financing system. 190 Ariz. at 524, 950 P.2d at 1145. Then, [o]nce a standard is set, the legislature must choose a funding mechanism that does not cause substantial disparities and that ensures that no school in Arizona falls below the standard. Id. Thus, Hull establishes a two-pronged test for assessing whether a school financing system meets the state constitutional requirements: (1) the state must establish minimum adequate facility standards and provide funding to ensure that no district falls below them; and (2) the funding mechanism chosen by the state must not itself cause substantial disparities between districts. ¶ 9 Once the state fulfills its responsibilities, [a] district may then choose to go above, but not below, the statewide standards for capital facilities. Id. Accordingly, the constitution does not forbid a financing system that allows districts to seek local sources of revenue, such as property taxation, to surpass the state standards.
¶ 10 The first prong of the test set forth in Hull includes two components: the state must create minimum adequacy standards for capital facilities and must ensure, through state funding, that all districts comply with them. 190 Ariz. at 524, 950 P.2d at 1145. The Act meets this test. ¶ 11 The Act itself creates some building standards. The standards included in the Act regulate the basic physical infrastructure of school buildings, mandate compliance with local codes, and set minimum gross square footage requirements. Students FIRST § 44 (adding Arizona Revised Statutes (A.R.S.) § 15-2011). The Act also directs the School Facilities Board (SFB), a new nine-member administrative agency, to promulgate additional requirements. The SFB must set standards for all facilities and equipment necessary to achieve the state's academic requirements, including school sites, classrooms, libraries, cafeterias, auditoriums or multi-purpose rooms, technology, transportation, and facilities for science, arts and physical education. Id. Thus, on its face, the Act complies with the requirement that a general and uniform school financing system include statewide minimum adequacy standards for capital facilities. [2] ¶ 12 The state also must ensure that every school district complies with the minimum adequacy standards. Hull, 190 Ariz. at 524, 950 P.2d at 1145. The Act meets this requirement by mandating that every school district must comply with the standards and by providing state monies sufficient to fund each district's compliance. The Act charges the SFB with responsibility for monitoring the adequacy of each school district's facilities. Students FIRST § 44 (adding A.R.S. § 15-2002). If deficiencies exist, the SFB may distribute funds from several new funding sources in order to (1) bring existing facilities up to standards; (2) construct new facilities for growing districts; and (3) maintain all capital facilities at the adequacy level. Id. (adding A.R.S. §§ 15-2002, -2021, -2031, & -2041). By providing state funds and empowering the SFB to oversee compliance with the standards, the Act fulfills the state's constitutional obligation to finance adequate capital facilities. See Hull, 190 Ariz. at 524, 950 P.2d at 1145. Accordingly, the Act satisfies both components of the first prong of the test set out in Hull.
¶ 13 The second prong of the Hull test requires that the legislature fund public schools through a financing system that does not itself cause substantial disparities between districts. 190 Ariz. at 524, 950 P.2d at 1145. By failing to fulfill this requirement, the Act fails to provide for the establishment and maintenance of a general and uniform public school system. ¶ 14 At the outset, we emphasize that nothing in the constitution prohibits a school financing system that allows districts to go above and beyond state-mandated adequate facilities by individually accessing local financing sources. See Roosevelt, 179 Ariz. at 242, 877 P.2d at 815; Hull, 190 Ariz. at 524, 950 P.2d at 1145. Indeed, we have noted that local control is a historically important value that may contribute to the overall effectiveness of the public school system, see Roosevelt, 179 Ariz. at 242, 877 P.2d at 815, and that the ability to go above and beyond the state system is the key to local control. Hull, 190 Ariz. at 523, 950 P.2d at 1144. Financial disparities caused by local control do not run afoul of the state constitution because [f]actors such as parental influence, family involvement, a free market economy, and housing patterns are beyond the reach of the `uniformity' required by art. XI, § 1. Roosevelt, 179 Ariz. at 242, 877 P.2d at 815. But the general and uniform requirement will not tolerate a state funding mechanism that itself causes disparities between districts. ¶ 15 The Act establishes two local financing options for school districts. Which option is available depends upon whether a district (1) participates in the state funding plan (participating districts), or (2) opts out of state funding and pays for its capital needs solely through local financing (opt-out districts). Students FIRST § 7 (adding A.R.S. § 15-341(A)(31)). Districts may opt out only if they certify their compliance with the state minimum adequacy standards and gain approval of the option from their electors. Id. Opt-out districts must report annually to the SFB to ensure that they remain in compliance; districts that fall below the standards will be forced back into the state funding plan. Id. ¶ 16 Under the existing school finance system, districts can seek funding based on local property taxation through two methods: capital override elections and general obligation bonding. Override elections allow individual districts, with voter approval, to fund budget increases by raising local property taxes. See A.R.S. § 15-481. General obligation bonds, on the other hand, allow a district to leverage its tax base by incurring debt to be repaid through future property taxes. See A.R.S. § 15-491; A.R.S. tit. 15, art. 7. ¶ 17 Under the Act, the mechanisms available to school districts for seeking funding through local property taxation vary dramatically between opt-out and participating districts. An opt-out district may use both capital override elections and general obligation bonding. Students FIRST §§ 10 & 35 (amending A.R.S. §§ 15-481 & -1021(B)). Participating districts, unlike opt-out districts, may not issue general obligation bonds. Students FIRST § 35 (amending A.R.S. § 15-1021(A)). Those districts therefore are no longer able to employ the historically most important method of securing local funds for school system financing. Moreover, the assessment ratios applicable to property in participating districts differ from those applicable in opt-out districts. [3] In participating districts, equivalent, or compressed, assessment ratios apply to all types of property. Id. § 67 (adding A.R.S. § 42-15012). Because commercial property within opt-out districts is subject to a higher assessment ratio than is residential property, see A.R.S. §§ 42-227 & -162, capital overrides in a participating district will place a proportionally higher tax burden on residential property owners than will overrides of the same amount in an opt-out district. This disparity may significantly weaken participating districts' opportunity to raise funds through overrides. ¶ 18 As part of the option to permit districts to first comply with the Students FIRST requirements and then to provide additional funds through bonding and override elections, the opt-out provision in isolation is not a facial violation of the general and uniform clause. The Act's option allowing districts to choose local financing in lieu of state funding is not itself unconstitutional. Once the state has assured compliance with state standards, allowing districts to rely on their local property bases to secure local funding to surpass those state standards is not unconstitutional. ¶ 19 But when the restriction on bonding and the compression of school district assessment ratios are considered in conjunction with the opt-out provision, the system as a whole creates significant distinctions in the local funding mechanisms between opt-out and participating districts. Differentially enabling two classes of districts to access their respective property bases results in systemic, structural differences in the ability of districts to exceed state minimums through local funding. Because of these structural differences, the Act as a whole continues to formalize and perpetuate a structure that fails the general and uniform test. ¶ 20 Once the Students FIRST plan assures compliance with adequate standards, differences between districts that result from disparate property wealth or voter willingness to fund capital improvements are not unconstitutional. Roosevelt, 179 Ariz. at 242, 877 P.2d at 815; Hull, 190 Ariz. at 524, 950 P.2d at 1145. Differences perpetuated by the financing system itself are unconstitutional. Roosevelt, 179 Ariz. at 242, 877 P.2d at 815; Hull, 190 Ariz. at 523, 950 P.2d at 1144. Like the systems we rejected as constitutionally infirm in Roosevelt and Hull, Students FIRST will necessarily cause substantial disparities between public school districts. Those disparities will result not from factors such as parental influence, family involvement, voter willingness to incur debt for public schools, a free market economy, or housing patterns. Rather, the disparities will result from the funding mechanism chosen by the state. The Arizona Constitution forbids that result.