State appeals major ELA victory on mandated cost funding 

Legislature’s practice of deferring payments was ruled unconstitutional

(Editor’s note: This is an update to a California School News story originally published Dec. 10, 2008.)

The state of California is seeking to overturn a major victory that CSBA’s Education Legal Alliance and other petitioners secured last year, with an estimated $160 million in future reimbursements of state-mandated costs imposed on schools on schools at stake. A final decision by the 4th District Court of Appeal in San Diego is not expected until mid-2010, according to Richard L. Hamilton, director of CSBA’s Education Legal Alliance.

San Diego Superior Court Judge Charles R. Hayes had ruled last Dec. 4 that the state Legislature’s practice of budgeting $1,000 for each of the 38 mandated programs that were applicable to schools then, and indefinitely deferring payment on the balance due is unconstitutional. The judge’s ruling would have prohibited this deferral practice in the future.

“The state's appeal means that the trial court's decision will be held in abeyance pending the outcome of the appeal,” Hamilton explained today. “A harbinger of this recently filed appeal was the fact that the Legislature and Gov. Arnold Schwarzenegger ignored the trial court's decision and only budgeted $1,000 again for 2009-10 for each mandated program—and they added a 39th mandated program, the California High School Exit Exam, that is now subject to the deferral.”

December ruling

In his Dec. 4 decision, Hayes agreed with petitioners’ arguments that the California Constitution requires the state to budget full reimbursement of local governments—including school districts—for the cost of state-imposed mandates. The state’s practice since 2002 (with the exception of 2006) of only budgeting $1,000 for each mandate created a cost shift that voters had prohibited with Proposition 4, approved in 1979, after schools lost the ability to raise revenues on their own.

“The state has improperly shifted the costs for state-mandated programs from the state to the school districts and county offices of education,” Hayes said in his 12-page ruling. “This practice requires the districts and county offices to continue to provide state-mandated programs and services while deferring payment for those services to some unknown future date well beyond the one-year period of time contemplated in the government code. This could not have been the intent of the California voters when approving Proposition 4.”

“By budgeting only $1,000 and deferring the balance due, lawmakers and the governor have relied upon a gimmick to balance the education budget,” Hamilton had said at the time.

The state Attorney General’s Office, which represented the governor’s Department of Finance in the case, never challenged the notion that money was owed schools or that it mandated activities. But Judge Hayes dismissed the state’s position that the practice did not cause harm to schools.

“The adverse effects of the state’s failure to provide funding for mandated programs are being experienced by virtually all of the state’s school districts,” Hayes wrote in his decision.

“Districts have been forced to divert increasing amounts from their ‘unrestricted’ funds—funds that are necessary to support the core educational program—state-mandated programs that may or may not reflect local needs and priorities.”

CSBA is joined in the litigation by Clovis Unified School District, Riverside Unified School District, San Diego Unified School District, San Diego County Office of Education and San Jose Unified School District. The lawsuit is funded by the Education Legal Alliance, with contributions from School Innovations & Advocacy. Petitioners are represented by Deborah Caplan and Eugene Hill of Olson, Hagel & Fishburn, LLP, with SI&A Chief Counsel Abe Hajela consulting.