Opinion ID: 1384601
Heading Depth: 1
Heading Rank: 3

Heading: constitutional challenge to oklahoma's system of ad valorem taxation

Text: At the outset we are faced with a challenge to certain elements of the school finance system that has been before this court in recent years. We believe that we should address this issue before considering other aspects of the plaintiffs' claims. As stated earlier, local revenues are derived primarily from ad valorem taxes and vary greatly because of differences in property wealth among the school districts. The plaintiffs claim that these variations are compounded by other factors. First, taxable property is valued less frequently in some counties than in others. Second, the county assessors have not employed a standard method in valuing the property in the respective counties. Third, different classes of property are valued by different methods, even within the same county. Finally, there has often been a wide variation in the assessment ratios imposed on the value of taxable property, both among the districts and within the districts themselves. Because of these alleged defects, the plaintiffs claim that the very foundation of the ad valorem system of taxation  the valuation of taxable property  is unconstitutionally discriminatory. As a result, any formula for distribution of State Aid based on the assessed valuation of property contains the same problems and is also unconstitutional. Issues relating to assessment procedures for purposes of ad valorem taxation have been before this court since 1975. They are dealt with in three cases that are styled State of Okl. ex rel. Poulos v. State Bd. of Equal. [14] and in Cantrell v. Sanders. [15] The purpose of this litigation has been to ensure taxpayer equality through the uniform application of the laws governing ad valorem taxation. In Poulos I we held that (1) the Legislature's manifest intention was to equalize ad valorem assessments, (2) a system which does not equalize ad valorem assessments throughout the state is unfair and invidiously discriminatory and (3) it is the mandatory constitutional and statutory duty of the State Board of Equalization to adjust and equalize the valuation of taxable property of the several counties in the State. [16] We also held that the United States and Oklahoma Constitutions do not require precise uniformity but only a rate which is inherently and basically fair to all citizens. [17] Because the State Board of Equalization failed to establish a suitable plan of compliance, we directed in Poulos II that the Board satisfy its duty by establishing a definite percentile equally applicable to all counties with permissible deviations not to exceed three percentage points above or below the assessment rate. [18] In Cantrell we held that the county assessor is statutorily required to set an assessment percentage uniformly applicable to all real property within the county. [19] We also held that under Article 10 § 8 of the Oklahoma Constitution real property is to be assessed at no more than thirty-five percent of its use value. [20] Furthermore, we expressed a desire that uniform standards of classifying property be established in order to facilitate the application of uniform procedures for valuation. [21] Because the wide diversity of assessment percentages applied by county assessors had been increasing and the Board had failed continuously to equalize such assessments, we finally ruled in Poulos III  in accordance with recommendations by the Oklahoma Tax Commission for state-wide equalization  that all property subject to ad valorem taxation would be assessed at twelve percent of its taxable value with permissible inter-county deviations of not more than three percentage points above or below the mean. In addition, we held that the three classifications of real property and the methodology for determining the value of property in each class, as approved by the Board in 1981, should apply for the year 1982 and thereafter until changed by the Board or the Legislature. [22] While we are aware of the inequities demonstrated by the Poulos and Cantrell cases, nevertheless we reject the plaintiffs' assertion that these render the present school financing system unconstitutional. Article 10 of the state constitution created the system of ad valorem taxation which was then vitalized in 68 O.S. 1981 §§ 2401 et seq. No allegation was made in the proceeding below that this system as designed is unconstitutional or intended to create inequities. Rather, the plaintiffs' attack is directed at alleged violations by the county assessors, the Oklahoma Tax Commission and the State Board of Equalization, none of whom is party to this action. If the practices of these officials or agencies are deficient, then these may be challenged in a proper suit. Moreover, there is an obvious and substantial difference between such deficiencies and the relief which the plaintiffs seek in this case. The fact that there may be flaws in the administration of the ad valorem tax does not support a claim that the entire school finance system is unconstitutional simply because some of its revenues are derived from those taxes. We find support for today's pronouncement in two other factors. First, a report by the Oklahoma Tax Commission in July, 1983 showed that seventy of the state's seventy-seven counties were found to be in compliance with the guidelines for assessment ratios established in Poulos III. [23] Of those counties in compliance the lowest ratio was 9.01 and the highest was 13.42. The noncomplying counties were ordered by the State Board of Equalization to raise their property valuations [24]  which they all subsequently did [25]  in order to bring their assessment ratios into compliance with the guidelines. Second, 70 O.S.Supp. 1986 § 18-109.1 is designed to provide for greater equalization of State Aid with respect to determining the chargeable valuation of taxable real property. This section provides that, for the purpose of financial support through the State Aid formula, the real property portion of the valuations for school districts in counties having an assessment ratio in excess of 12% shall be computed at only 12%. [26] For those counties which have an assessment ratio of between 9% and 12% and which are not certified to have a revaluation program, the real property portions are to be computed at 12%. [27] The purpose of these provisions is to eliminate any differences in assessment ratios among the several counties insofar as these affect the distribution of State Aid. Those counties whose assessment ratios are below the level charged by the statute will be encouraged to raise them to avoid being penalized by the formula. Because all counties of the state have established assessment ratios within the guidelines set by this court, and the present State Aid formula is designed to minimize the effects of any actual variations in the ratios among the counties, we find that the plaintiffs have failed to allege an actionable claim that the present system of financing public education is unconstitutional on that basis. The question remains whether the plaintiffs have alleged other facts sufficient to support a claim under the United States or the Oklahoma Constitution.