Court Opinion

ID: 3016282
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:15:22.497928+00
Date Added: 2024-06-11T08:52:32.523229
License: Public Domain

___________

                            No. 94-3703
                            ___________

Les Hadley,                      *
                                 *
     Plaintiff - Appellee,       *
                                 * Appeal from the United States
     v.                          * District Court for the
                                 * Western District of Arkansas.
North Arkansas Community         *
Technical College,               *
                                 *
     Defendant - Appellant.      *
                            ___________

                  Submitted:   September 11, 1995

                        Filed: February 14, 1996
                             ___________

Before LOKEN and LAY, Circuit Judges, and NANGLE,* District Judge.

LOKEN, Circuit Judge.

     Les Hadley filed this civil rights action under 42 U.S.C. §
1983 alleging that his former employer, North Arkansas Community
Technical College ("NACTC"), violated his due process rights by
summarily terminating him as a vocational instructor. NACTC moved
for summary judgment, claiming that it is an arm of the State
entitled to Eleventh Amendment immunity from this federal court
damage action.    The district court1 denied the motion, and we
remanded for further consideration in light of Sherman v. Curators
of Univ. of Mo., 16 F.3d 860 (8th Cir. 1994), and Greenwood v.

     *The HONORABLE JOHN F. NANGLE, United States District
     Judge for the Eastern District of Missouri, sitting by
     designation.
    1
      The HONORABLE H. FRANKLIN WATERS, Chief Judge, United States
District Court for the Western District of Arkansas.
Ross, 778 F.2d 448 (8th Cir. 1985). The court then concluded in a
thorough opinion that NACTC is entitled to Eleventh Amendment
immunity and dismissed Hadley's claim. Hadley appeals. We affirm.

                                I.

     The Eleventh Amendment immunizes an unconsenting State from
damage actions brought in federal court, except when Congress has
abrogated that immunity for a particular federal cause of action.
See generally Edelman v. Jordan, 415 U.S. 651 (1974). Section 1983
does not override Eleventh Amendment immunity.        See Will v.
Michigan Dept. of State Police, 491 U.S. 58, 63 (1989), construing
Quern v. Jordan, 440 U.S. 332 (1979).      Therefore, if NACTC is
entitled to the State of Arkansas's Eleventh Amendment immunity,
the district court properly dismissed Hadley's claim.

     A state agency or official may invoke the State's Eleventh
Amendment immunity if immunity will "protect the state treasury
from liability that would have had essentially the same practical
consequences as a judgment against the State itself." Pennhurst
State Sch. & Hosp. v. Halderman, 465 U.S. 89, 123 n.34 (1984),
quoting Lake Country Estates, Inc. v. Tahoe Reg. Planning Agency,
440 U.S. 391, 401 (1979); see Ford Motor Co. v. Department of
Treasury, 323 U.S. 459, 463-64 (1945). On the other hand, Eleventh
Amendment immunity does not extend to independent political
subdivisions created by the State, such as counties and cities.
See Lincoln County v. Luning, 133 U.S. 529 (1890). The issue is
whether NACTC "is to be treated as an arm of the State . . . or is
instead to be treated as a municipal corporation or other political
subdivision to which the Eleventh Amendment does not extend." Mt.
Healthy City Bd. of Educ. v. Doyle, 429 U.S. 274, 280 (1977)
(holding that Ohio local school districts are like political
subdivisions and therefore not immune).     State universities and

                               -2-
colleges almost always enjoy Eleventh Amendment immunity.2 On the
other hand, community and technical colleges often have deep roots
in a local community. When those roots include local political and
financial involvement, the resulting Eleventh Amendment immunity
questions tend to be difficult and very fact specific.3

     Eleventh Amendment immunity reflects respect for state
sovereignty and a desire to protect the state treasury. A narrow
majority of the Supreme Court recently held that exposure of the
state treasury is a more important factor than whether the State
controls the entity in question. Hess v. Port Auth. Trans-Hudson
Corp., 115 S. Ct. 394 (1994). We see nothing inconsistent with the
majority's reasoning in Hess and the approach we have developed for
deciding whether a particular institution of higher learning is
entitled to Eleventh Amendment immunity.        In addition, Hess
involved a bi-State compact entity, and the majority cautioned that
"there is good reason not to amalgamate Compact Clause entities
with agencies of 'one of the United States' for Eleventh Amendment
purposes." Id. at 402. Therefore, we adhere to the test that we

     2
      For cases involving Eighth Circuit institutions, see Dover
Elevator Co. v. Arkansas State Univ., 64 F.3d 442, 446-47 (8th Cir.
1995); Richmond v. Board of Regents of Univ. of Minn., 957 F.2d
595, 599 (8th Cir. 1992); Sherman v. Curators of Univ. of Mo., 871
F. Supp. 344, 345 (W.D. Mo. 1994); Van Pilsum v. Iowa State Univ.
of Science and Tech., 863 F. Supp. 935, 937 (S.D. Iowa 1994);
Assaad-Faltas v. University of Ark. for Medical Sciences, 708 F.
Supp. 1026, 1030 (E.D. Ark. 1989), aff'd, 902 F.2d 1572 (8th Cir.),
cert. denied, 498 U.S. 905 (1990). A fact specific exception to
the general rule is Kovats v. Rutgers, the State Univ., 822 F.2d
1303, 1307 (3d Cir. 1987).
     3
      See, e.g., Mitchell v. Los Angeles Community College Dist.,
861 F.2d 198, 201-202 (9th Cir. 1988), cert. denied, 490 U.S. 1081
(1989); Goss v. San Jacinto Junior College, 588 F.2d 96, 98-99 (5th
Cir.), modified on other grounds, 595 F.2d 1119 (5th Cir. 1979);
Korgich v. Regents of New Mexico Sch. of Mines, 582 F.2d 549, 551
(10th Cir. 1978); Durrani v. Valdosta Technical Inst., 810 F. Supp.
301, 305 (M.D. Ga. 1992), aff'd, 3 F.3d 443 (11th Cir. 1993); Moche
v. City Univ. of New York, 781 F. Supp. 160, 165-66 (E.D.N.Y.
1992), aff'd, 999 F.2d 538 (2nd Cir. 1993); Thornquest v. King, 626
F. Supp. 486, 488-89 (M.D. Fla. 1985).

                               -3-
instructed the district court to apply on remand, which requires
that we

     examine the particular entity in question and its powers
     and characteristics as created by state law to determine
     whether the suit is in reality a suit against the state.
     Courts typically look at the degree of local autonomy and
     control and most importantly whether the funds to pay any
     award will be derived from the state treasury.

Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir. 1985), quoting Laje
v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727 (5th Cir. 1982)
(citations omitted in original).

                               II.

     Like the district court, we begin by examining "the nature of
the entity created by state law." Mt. Healthy, 429 U.S. at 280;
see Seibert v. University of Okl. Health Sciences Ctr., 867 F.2d
591, 594-95 (10th Cir. 1989).       Amendment 52 to the Arkansas
Constitution authorizes the General Assembly to establish community
college districts. The General Assembly has authorized the State
Board of Higher Education to formulate criteria for establishing
community colleges, and to certify proposed community college
districts. See Ark. Code Ann. §§ 6-61-505 to -510. A district is
created if a majority of the voters in the proposed district vote
in favor of establishing the community college. § 6-61-513. Under
a 1991 statute, technical colleges may "become part of the Arkansas
technical and community college system under the coordination of
the State Board of Higher Education." § 6-53-301(a) (Supp. 1993).
That law prompted the 1992 merger of North Arkansas Community
College and Twin Lakes Technical College into NACTC.

     By statute, the State must provide community colleges "[f]unds
for the general operation of an adequate comprehensive educational
program." Ark. Code Ann. § 6-61-601(a). To this end:

                               -4-
          The amount of state revenues to be recommended for
     the general operation of each community college shall be
     the difference between the recommended budget and the
     total of income for general operation, including student
     fees and any other income except local taxes.        The
     recommended budget for general operation shall be
     sufficient   to   provide  an   adequate   comprehensive
     educational program . . . as determined by the [State
     Board of Higher Education].

§ 6-61-601(c)(2).     For purposes of state appropriation and
expenditure procedures, the term "State agency" includes "state-
supported institutions of higher learning . . . functioning under
appropriation made by the General Assembly."     § 19-4-801(1)(A).
For the 1993-94 fiscal year, 58.2% of NACTC's total budget was
provided by state funds appropriated by the General Assembly.
Moreover, the state treasury is structured to include an NACTC Fund
that is dedicated to the "maintenance, operation, and improvement"
of NACTC. § 19-5-303(m) (Supp. 1993).

     To this point, it seems clear that NACTC is, both financially
and institutionally, an arm of the State, and that any damage award
to Hadley would inevitably be paid from the state treasury. Those
are the factors that led us to conclude in Dover Elevator, 64 F.3d
at 446-47, that Arkansas State University is entitled to Eleventh
Amendment immunity.   But Arkansas community colleges also have
elements of local funding and control that require further
analysis.

     The Arkansas Constitution permits community colleges to be
partially funded at the local level:

     The General Assembly shall prescribe the method of
     financing   such   community   college   and   technical
     institutes, and may authorize the levy of a tax upon the
     taxable property in such districts for the acquisition,
     construction,    reconstruction,   repair,    expansion,
     operation, and maintenance of facilities therefor.

                               -5-
Amendment 52, § 1. The General Assembly has made local financial
participation mandatory:

          (a) Each community college district shall be
     responsible for all capital outlay expenses4 . . . except
     that the state may share the responsibility for capital
     outlay expenses for any community college which has an
     enrollment of at least one thousand (1,000) full-time
     equivalent students . . . .

          (b) Capital outlay expenses shall be paid from
     gifts, grants, profits from auxiliary enterprises,
     tuition, fees, local millages, and other local funds and
     may be paid from state funds appropriated for such
     purposes.

§ 6-61-603 (Supp. 1993).     Therefore, when the voters of Boone
County, Arkansas, voted in 1973 to establish NACTC's community
college district, they authorized the levy of a tax not to exceed
five mills on taxable property in the district "for the purchase of
land and for the construction and furnishing of buildings and
facilities for such college."       That authority was extended
indefinitely in a special election in 1977. However, while local
tax revenues have financed NACTC buildings and improvements, those
funds are subject to most state accounting and budgetary
procedures, § 19-4-803(b)(2); NACTC is a "State agency" for
purposes of the Arkansas State Building Services Act, § 22-3-
102(5); and the campus is State owned.

     In fiscal 1993-1994, NACTC received $317,366 in local tax
revenues, some three percent of its total budget. Those funds were
dedicated to new acquisitions or the issuance of bonds to finance
new acquisitions. See § 19-4-803(b)(2) (college must use funds
from a millage levy "for the purposes stated on the ballot at the
time of the election authorizing the millage"); Ark. Const. Art.
16, § 11 ("no moneys arising from a tax levied for one purpose

    4
     Essentially, expenditures for land, buildings, and furniture
and equipment. See § 6-61-501(2).

                               -6-
shall be used for any other purpose").       Although the General
Assembly has authorized community college districts to levy for
general college operations "[i]n the event the local board of a
community college wishes to spend larger sums of money than the
state funds provided for general operation," § 6-61-602(a), NACTC
has never received any funds for general operations from local tax
levies. In fiscal 1993-1994, NACTC's operating expense5 revenues
were 75.1% state appropriated funds, 22.1% tuition payments, and
2.8% federal grants and private donations.

     In these circumstances, we conclude that Hadley's claim "is in
reality a suit against the state,"      Sherman, 16 F.3d at 863,
because "the funds to pay any award will be derived from the state
treasury," Dover Elevator, 64 F.3d at 446. Hadley argues that he
seeks damages of less than $250,000 and therefore any award could
be paid from other sources, such as future local tax increases,
tuition, federal grants, or other discretionary funds. However,
while there is dictum in Sherman suggesting it is relevant "whether
a judgment against the University can be paid from non-state funds
under the University's discretionary control," 16 F.3d at 865
(emphasis added), traditional Eleventh Amendment cases did not
require a speculative analysis of whether a college largely funded
by the State might be able to pay a judgment in the first instance
from other revenue sources, and Greenwood and Sherman were not
departures from prior Eleventh Amendment jurisprudence.         See
Treleven v. University of Minnesota, No. 95-2019, 1996 WL 11102, at
*2 (8th Cir. Jan. 12, 1996). Mt. Healthy directs us to examine
"the nature of the entity," 429 U.S. at 280, not the nature of the
relief the plaintiff seeks.

    5
       "Operating expenses" include "funds devoted to or required
for the regular or ordinary expense of the college, including
administrative, maintenance, and salary expenses, but excluding
capital outlay expenses, student activity expenses, and expense for
intercollegiate athletics." § 6-61-501(3) (Supp. 1993); see also
§ 6-53-103(9) (Supp. 1993).

                               -7-
     Arkansas calls NACTC a state agency6 and has made its daily
operations financially dependent upon the state treasury.       The
district's never-exercised authority to supplement NACTC's
operating budget with limited local tax revenues7 does not change
the fact that the State has created an institution of higher
learning "that is dependent upon and functionally integrated with
the state treasury." Kashani v. Purdue Univ., 813 F.2d 843, 846
(7th Cir.), cert. denied, 484 U.S. 846 (1987).        The relevant
funding inquiry cannot be whether NACTC enjoys some non-state
funding, such as user fees (tuition), because then most state
departments and agencies, and all state universities, would be
denied Eleventh Amendment immunity.8    Here, even if NACTC could
initially satisfy a judgment from other operating revenues, such as
tuition payments or federal grants, the judgment would produce a
higher operating budget shortfall that must, by state law, be
satisfied by an appropriation from the state treasury.        Thus,
Hadley's action "is in essence one for the recovery of money from
the state." Ford Motor, 323 U.S. at 463-64.

    6
     Arkansas has also characterized NACTC as a "state agency" in
other governmental contexts.    For example, the Department of
Finance and Administration determined that community colleges are
state agencies for purposes of exempting them from taxation, and
the Attorney General determined that they are state agencies that
qualify for grants from the Natural and Cultural Resources Grants
and Trust Fund.
    7
     The total local tax that may be levied for community college
purposes is ten mills. § 6-61-503(a).
        8
       Accord Lewis v. Midwestern State Univ., 837 F.2d 197, 199
(5th Cir.), cert. denied, 488 U.S. 849 (1988); Van Pilsum, 863 F.
Supp. at 937-38. Conversely, the inquiry cannot end with the fact
that the State appropriates funds for a community college, because
then most local school districts would also be Eleventh Amendment
immune. See Mt. Healthy, 429 U.S. at 280.

                               -8-
                               III.

     Moving from the critical subject of state funding to the less
important question of state control, we agree with the district
court that there is substantial, but far from total, state control
over NACTC. The State Board of Higher Education is comprised of
thirteen members appointed by the governor and confirmed by the
Senate. § 6-61-201(a)(1) (Supp. 1993). The State Board acting as
the State Community College Board has broad powers and duties to
guide and regulate community colleges. Ark. Code Ann. §§ 6-61-
501(5) (Supp. 1993), 6-61-505.     The College Panel of the State
Board participates actively and widely in NACTC's day-to-day
operation.   For example, the College Panel establishes minimum
qualifications for the college president, § 6-53-203(3) (Supp.
1993); evaluates NACTC budget requests, §§ 6-53-203(4) (Supp.
1993), 6-61-601; develops budget forms and determines that state
funds are properly spent, §§ 6-53-203(5),(6) (Supp. 1993), 6-61-
209; determines minimum tuition and fee levels, §§ 6-53-203(7)
(Supp. 1993), 6-53-208 (Supp. 1993), 6-61-215; recommends
establishing, expanding, or abolishing institutions, § 6-53-203(9)
(Supp. 1993); and reviews curriculum proposals and changes, §§ 6-
53-203(d) (Supp. 1993), 6-61-214 (Supp. 1993). The State Board
also approved the merger of North Arkansas Community College and
Twin Lakes Technical College into NACTC, the college's name change,
and the its degree programs and courses.

     However, the General Assembly has also granted substantial
control over NACTC's daily affairs to locally-elected officials.
NACTC has a Local Board of nine qualified electors of the community
college district who are elected on a nonpartisan basis for six-
year terms. § 6-61-520 (Supp. 1993). The Local Board, with the
advice of the State Board, has broad power to select college
officers; develop NACTC's education program; appoint a college
president and fix the president's compensation and terms of office;
appoint members of the administrative and teaching staffs and fix

                               -9-
their compensation and terms of employment; enter into contracts;
accept grants and contributions; acquire, own, lease, use, and
operate property; and exercise the right of eminent domain. § 6-
61-521. Thus, as the district court noted, NACTC with its Local
Board is significantly more autonomous than Arkansas state-wide
universities. On the other hand, when it comes to finances -- the
essence of the Eleventh Amendment inquiry -- the State Board's
ultimate authority is ensured by its power to withhold state
funding if NACTC fails to comply with "prescribed standards of
administration or instruction." § 6-53-105 (Supp. 1993).

     Read together, the provisions delimiting the responsibility of
the State and Local Boards reveal a community college system that
blends state and local interests and authorities.        The local
control is of course relevant but falls short, in our view, of
making NACTC the Eleventh Amendment equivalent of a political
subdivision.    In the final analysis, while Eleventh Amendment
immunity is a question of federal law, the structuring of state
government is the province of the States.      Nothing precludes a
State from delivering regional or even local governmental services
through an arm of the State, from permitting voters in an affected
locale to help staff a state agency, or from providing highly
structured local input to state agency decisionmaking.9       Here,
Arkansas calls NACTC a state agency, allows for substantial local
autonomy but provides ultimate state control, and -- most
importantly -- funds the agency's general operations primarily from
the state treasury. We agree with the district court that NACTC is
entitled to Eleventh Amendment immunity.

       9
        For example, most local school districts do not enjoy
Eleventh Amendment immunity because they are dependent on local
taxes and controlled by local governmental entities, like cities
and counties.   However, California has chosen to structure its
public education entities so that all have Eleventh Amendment
immunity. See Belanger v. Madera Unified Sch. Dist., 963 F.2d 248,
251-52 (9th Cir. 1992), cert. denied, 113 S. Ct. 1280 (1993).

                               -10-
        The judgment of the district court is affirmed.

LAY, Circuit Judge, dissenting.

     Today's decision amplifies the disarray of approaches applied
by lower courts when confronted with the defense of Eleventh
Amendment immunity by state-created entities.     Little would be
served by setting forth the diverse reasoning of this Court or
other courts. These cases are already of historical record.1 My
disagreement with the majority opinion is that it is not faithful
to Supreme Court precedent or to this Court's rulings covering the
same issue.

Local Control

     On June 5, 1995, we remanded this case to make a complete
record as to "'local autonomy and control and most importantly,
whether the funds to pay any award will be derived from the state
treasury.'" Hadley v. North Arkansas Community Technical College,
No. 94-3703, 1995 WL 329591, at *1 (8th Cir. June 5, 1995) (per
curiam) (quoting Greenwood v. Ross, 778 F.2d 448, 453 (8th Cir.
1985) (quoting Laje v. R.E. Thomason Gen. Hosp., 665 F.2d 724, 727
(5th Cir. 1982)); see Sherman v. Curators of Univ. of Mo., 16 F.3d
860, 863 (8th Cir. 1994)). Subsequent to our remand, the Supreme
Court issued its ruling in Hess v. Port. Auth. Trans-Hudson Corp.,
115 S. Ct. 394 (1994). As the Court therein observed, the issue of
ultimate control cannot be the determining factor in Eleventh
Amendment cases, "for the State may destroy or reshape any unit it
creates." 115 S. Ct. at 404. The majority concedes that NACTC
possesses a high level of local autonomy, but erroneously discounts

    1
     See Note, Clothing State Governmental Entities with Sovereign
Immunity: Disarray in the Eleventh Amendment Arm-of-the State
Doctrine, 92 Colum. L. Rev. 1243, 1291-96 (l992) (collecting
cases).

                                 -11-
this factor because the state legislature calls NACTC a "state
agency" and "provides ultimate state control." Maj. Op. at 10.

     I read the record much differently.      In my judgment, the
record reveals that NACTC resembles a local school district, albeit
subject to state guidance, whose Local Board possesses broad
authority to direct the college educational program and apply the
college's resources to that end. The Local Board has broad power
over the direction of NACTC's educational program. Specifically,
the Local Board is empowered, inter alia, to:       (1) select its
officers; (2) develop, with the advice of the State Board, the
educational program; (3) appoint, with the advice of the State
Board, a president and fix the compensation and terms of office of
the president who shall be the executive officer of the college's
Local Board; (4) appoint, upon nomination of the president, members
of the administrative and teaching staffs and fix their
compensation and terms of employment; (5) enter into contracts; (6)
accept grants or contributions of money to be used for any of its
purposes; (7) acquire, own, lease, use, operate and dispose of
property; (8) exercise the right of eminent domain; (9) make rules
and regulations to govern the college's administration and
operation; and (10) exercise all other necessary powers to operate
the college. Ark. Code Ann. § 6-61-521 (1987).

     Thus, viewed in light of the authority of the Local Board, the
State Board's role is more appropriately characterized as that of
an advisor, rather than that of a regulator. As the district court
acknowledged, for example, NACTC is significantly more autonomous
than Arkansas's universities. Dist. Ct. Op. at 19. NACTC has the
power to tax, to acquire, use, and own property in the college's
name, and to govern itself locally.

     Stated differently, I find merit in Hadley's contentions that
the State Board's supervision of NACTC is not appreciably different
from that it exercises over local school boards.      Although the

                               -12-
state approves NACTC decisions with respect to educational policy,
many if not most of them are initiated at the local level. For
example, while the consolidation of North Arkansas Community
College and Twin Lakes Technical College was subject to state
approval, NACTC's Local Board, and not the General Assembly or the
State Board, initiated that decision.    The same is true of the
college's curricular decisions. Thus, although state law governs
several administrative aspects of the college's operations,
substantive judgments concerning NACTC's educational policy are
made locally. In sum, a thorough analysis of NACTC's local control
supports the conclusion that NACTC may not invoke the Eleventh
Amendment's protection.

NACTC's Financial Relationship with the State of Arkansas

     The Supreme Court observed in Hess, however, that control
cannot be dispositive since it does not "hone in on the impetus for
the Eleventh Amendment: the prevention of federal court judgments
that must be paid out of a state's treasury." 115 S. Ct. at 404.
Rather, the "core concern" in Eleventh Amendment analysis is
whether a judgment against NACTC must be satisfied from the state
treasury. Id. at 406.

     The means by which NACTC acquires funding is established by
Arkansas constitutional and statutory law. Amendment Fifty-two to
the Arkansas Constitution empowers the General Assembly to
establish districts to furnish community college instruction and
technical training.2    Ark. Const. amend. 52.      Specifically,

     2
      Arkansas statutory law thus defines community college:

     an educational institution established or to be
     established by one (1) or more counties or cities of this
     state offering a comprehensive program designed to serve
     the postsecondary educational needs of its district and
     the state including specifically, but without limitation,
     occupational programs of varying types and levels of

                               -13-
Amendment Fifty-two provides that "[t]he General Assembly shall
prescribe the method of financing such community college and
technical institutes, and may authorize the levy of a tax upon the
taxable property in such districts for the acquisition,
construction, reconstruction, repair, expansion, operation, and
maintenance of facilities therefor." Id., § 1. The Amendment also
provides, however, that no such district shall be created and no
tax levied without the approval of a majority of the qualified
voters in the proposed district. Id., § 2. Thus, the creation of
a community college district is a joint venture between the state
of Arkansas and the local community.

     The Arkansas General Assembly has fulfilled its constitutional
mandate by legislating that "[f]unds for the general operation of
an adequate comprehensive educational program shall be provided by
the state." Ark. Code Ann. § 6-61-601(a) (1987). In the event the
college wishes to spend larger sums of money, it may raise
additional "general operation" monies by levying millage. § 6-61-
602(a).    Local millage is subject to approval by the local
electorate, § 6-61-601(b), is limited to ten mills on the taxable
real and personal property in the district, § 6-61-517(b), and is
a continuing levy to be collected by county authorities in the
manner provided by law, § 6-61-517.

     NACTC has far greater discretion in its management of monies
received from nonstate sources. Bequests, gifts, and donations are
exempted from state accounting and budgetary procedures, § 19-4-
803, as are monies received from millage levied by the local
district, § 19-4-803(b)(1-2). NACTC may not use millage revenues,

     difficulty, the first two (2) years of a baccalaureate
     degree, community service offerings, and student guidance
     and counseling services . . . .

Ark. Code Ann. § 6-61-501(1) (Supp. 1993).

                               -14-
however, for purposes other than those stated on the ballot. Dist.
Ct. Op. at 20-21.3

     As I read the majority opinion, it adopts an "impact" rule,
which apparently reasons that, since the school's general
operations are funded primarily by the state, any judgment paid by
NACTC "would produce a higher operating budget shortfall that must,
by state law, be satisfied by an appropriation from the state
treasury."4 Maj. Op. at 8.

     I respectfully must disagree with this reasoning.   On the
record presented here, it is clear that NACTC has independent
discretionary power to raise funds for educational purposes and

         3
        NACTC has submitted the issue of funding to the local
electorate on two occasions. In 1973, area voters passed a ballot
("the 1973 ballot") authorizing the creation of the community
college district and the levy of a tax on the assessed value of
taxable property therein. The 1973 ballot authorized a tax not to
exceed five mills on the dollar "for the issuance of bonds to
provide all or part of the funds for the purchase of land and for
the construction and furnishing of buildings and facilities for
such college." Dist. Ct. Op. at 11 (quoting the 1973 ballot). In
1977, area voters passed a second ballot ("the 1977 ballot") which
extended the bonding authority of the district and reauthorized the
tax.   By its terms, the 1977 ballot authorized the issuance of
bonds "for the purpose of liquidating the District's presently
outstanding bonded indebtedness (incurred to finance construction
and furnishing of buildings and facilities for the College) and the
purpose of providing all or part of the funds for the construction
and furnishing of additional buildings and facilities for the
college." Id. (quoting the 1977 ballot).
     4
      The majority's reliance upon Dover Elevator Co. v. Arkansas
State University, 64 F.3d 442 (8th Cir. 1995), is misplaced. In
Dover, the University had no discretionary power independently to
raise revenue, as NACTC has. The record in Dover revealed that
Arkansas State University could not "'spend one penny without
appropriation to do so from the general assembly.'" Id. at 447
(quoting undisputed testimony in the record); see also id.
("because any award against ASU must be appropriated by the state
assembly from money under state control, . . . the district court
did not err in finding that ASU shares in the state's Eleventh
Amendment immunity" (emphasis added)).

                               -15-
payment of money judgments. As the Court in Hess stated: "If the
expenditures of the enterprise exceed receipts, is the State in
fact obligated to bear and pay the resulting indebtedness of the
enterprise? When the answer is 'no'--both legally and practically-
-then the Eleventh Amendment's core concern is not implicated."
115 S. Ct. at 406.

     The record in this case reveals that the state is not
required, legally or practically, to indemnify NACTC for debts
incurred as a result of locally generated bond revenues. Arkansas
law states quite the opposite: "The bonds shall be revenue bonds
secured solely by the revenues pledged thereto, and in no event
shall they be considered a debt for which the faith and credit of
the State of Arkansas or any of its revenues are pledged." Ark.
Code Ann. § 6-61-1009 (Michie Supp. 1993). Thus, it is clear the
Eleventh Amendment's dominant concern is not implicated.

     Moreover, although the district court found that local tax
funds amount to an insignificant percentage of NACTC's overall
budget, Hadley is correct in asserting that NACTC might authorize
an additional levy of up to ten mills, ear-marking it for provision
of general operating funds. Dist. Ct. Op. at 11-12. Thus, it is
not the case that an award of backpay or nominal damages, assuming
Hadley were to prevail, "would necessarily implicate the state
fisc." Sherman, 16 F.3d at 864. I find this factor significant.
The power to levy taxes is not, as NACTC suggests, merely
incidental, but rather suggests the college is not exclusively
dependent upon the state.

     Alternatively, Hadley suggests that NACTC has other sources of
discretionary funding, such as tuition, federal grants, private
donations, and "other" monies, from which a judgment against him
could be paid. NACTC correctly replies that, like funds from local
millage, these funds may only be used for specific, limited
purposes.   Tuition monies, for example, are dedicated to the

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payment of "educational" expenses. Dist. Ct. Op. at 12. But the
fact that these monies are dedicated solely to "educational"
expenses does not necessitate the conclusion that an award of back-
pay to an instructor is not such an expense.      Hadley suggests,
quite persuasively, that the payment of an instructor's salary
constitutes "the quintessential educational expense," Supp. Br. for
Appellee at 10, and asserts that the reduction of these expenses to
the form of a judgment does not render them non-educational, id.
I agree. Although the district court concluded otherwise, I find
no expressed rationale supporting that conclusion.      The monies
involved here, if damages were to be awarded, constitute back
salary for an instructor. These are clearly educational expenses.
Although NACTC receives the majority of its funding from the state,
a judgment in Hadley's favor need not implicate the state treasury.
The college may levy additional millage or apply tuition monies
designated "educational" to satisfy the award.

     In addition, the majority opinion is not faithful to the
unanimous Court's rationale in Mt. Healthy City Bd. of Educ. v.
Doyle, 429 U.S. 274 (1977).    In Mt. Healthy, the Supreme Court
passed on the Eleventh Amendment defense proffered by a local
school board in the State of Ohio. In holding that the board was
akin to a political subdivision to which the Eleventh Amendment
does not extend, the Court stated:

     [The board] is subject to some guidance from the State
     Board of Education, and receives a significant amount of
     money from the State.     But local school boards have
     extensive powers to issue bonds, and to levy taxes within
     certain restrictions of state law.       On balance, the
     record before us indicates that a local school board such
     as petitioner is more like a county or city than it is
     like an arm of the State. We therefore hold that it was
     not entitled to assert any Eleventh Amendment immunity
     from suit in the federal courts.
429 U.S. at 280-81 (Rehnquist, J.) (citations omitted).

                               -17-
     A searching inquiry of the record reveals that NACTC enjoys
independence, financially and otherwise, such that, notwithstanding
its state's funding, it should be treated as an entity much like
any other political subdivision or local school board. Moreover,
upon analysis of the overall record, any judgment against NACTC
will not be paid from the state treasury.

     In summary, the majority's holding allows NACTC to enjoy the
benefits of local tuition monies and local property assessments
without sharing in the costs and responsibilities that attend the
power to generate such funds. NACTC must take the bitter with the
sweet. As we observed in Sherman:

     [A governmental entity] cannot create its own eleventh
     amendment immunity by structuring its resources so as to
     pay all breach of contract damages out of state funds.
     Thus, the question on remand is not whether the [entity]
     chooses to pay contract damages out of state funds, but
     whether a judgment against the [entity] can be paid from
     non-state funds under [its] discretionary control.
16 F.3d at 864-65 (emphasis added).

     The majority seeks to avoid our holding in Sherman by
indicating that it is dicta.    This is puzzling to me since the
portion quoted in the text is the precise holding of the case. If
the test of Sherman is to be applied, then the majority is clearly
in error.    There is no evidence in the present case that any
judgement here must necessarily be paid from state funds.      The
state may be obligated to fund the college, but that is not the
criterion that determines whether a federal court judgment
obligates the state treasury.

     I respectfully dissent.

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A true copy.

     Attest:

          CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

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