UPDATE State Supreme Court denies rehearing request in school funding case


LITTLE ROCK — The Arkansas Supreme Court on Thursday refused to reconsider its ruling in a school funding case that officials say could threaten the foundation of the state’s funding system for public education.

Without comment, the high court denied the request for a rehearing in the case of school districts that won their challenge of the state’s practice of withholding local property tax revenue from districts whose millage revenues exceeded the state-mandated funding level.

Gov. Mike Beebe and Attorney General Dustin McDaniel petitioned the court to reconsider its 4-3 decision in a lawsuit filed by the Fountain Lake and Eureka Springs school districts. The court agreed with the districts that they do not have to surrender to the state Department of Education money they received through a statewide 25-mill tax in excess of the mandated level of funding for public schools.

The decision not to rehear the case also was 4-3, with Justices Karen Baker, Paul Danielson, Donald Corbin and Courtney Goodson in the majority, and Chief Justice Jim Hannah along with Justice Cliff Hoofman and Special Justice George Ellis dissenting.

Of the four justices who voted in the majority last month, only Corbin was on the court prior to 2006. He joined the court in 1991.

For most districts in the state the 25-mill tax, also known as the URT, or Uniform Rate of Tax established by Amendment 74, falls short of the mandated school funding amount, so the state makes up the difference. A few districts’ URT revenue exceeds the funding amount, and those districts had been required to hand over the excess funds to the Department of Education before the court’s Nov. 29 ruling.

“My clients and I are very pleased that the court upheld its position. We believe it was a correct interpretation of the law, both the constitution and statute,” Eugene Sayre, lawyer for the school districts, said Thursday. “The administration will now go to the Legislature and will move the battle from the Supreme Court to the General Assembly.”

Beebe said Thursday the court’s refusal to rehear the case could mark a chipping away of the mandate set by the court in the Lake View school funding case, which was resolved less than six years ago after 15 years of litigation.

Asked if he would like to see the Legislature provide a fix for how the state handles excess funds raised by school districts under Amendment 74, Beebe said he would.

“But that’s begging the whole point,” he added. “Whether you get the legislative fix or not, that’s a relatively small amount of money in terms of the big picture. What it does is, it is the first chink in the armor for what was intended with the constitutional amendment and a total departure from the previous precedents about the 25 mills being a state tax.”

McDaniel said Thursday he was not surprised that the court chose not to take the unusual step of reconsidering its ruling, but he believed it was important to try.

“We think that there are some real questions that were created by this case — most importantly, an indication that equity and adequacy no longer are tied together,” he said.

McDaniel said the Legislature could pass legislation to resolve the questions raised by the court’s ruling, “but that’s going to be, I think, a challenging effort. I have not seen a great deal of enthusiasm from legislative members to do that.”

House Speaker Davy Carter, R-Cabot, also said he has not seen much interest in taking up the issue in the session that began Monday.

“To date, that’s not a topic on either side that I’m hearing from the membership is on a high priority list,” he said.

Sen. Johnny Key, R-Mountain Home, chairman of the Senate Education Committee, said that “I don’t know that we need to fix anything.”

“Every district is going to get what they are going to get based on their daily membership, based on the foundation funding. So taking money from those districts is not going to change what we distribute to anyone else,” he said.

In his petition for rehearing, McDaniel had asked the court to state explicitly whether it intended to overturn language in the Dupree v. Alma School District case of the 1980s and the Lake View case that began in 1992 and was resolved in 2007. McDaniel said that in those cases the court established that educational opportunities for all students must be substantially equal and that differences in funding between school districts must have a rational basis.

McDaniel told the court if it did not intend to overturn the two landmark school funding cases, it should state how much of a funding imbalance between districts is acceptable.

Beebe had argued in a separate brief that the intent of Amendment 74 was to create some degree of equity in the way property taxes are used to fund schools, not to remove equity from the equation.

Sayre has argued that school districts are allowed to levy their own property taxes above the mandated 25 mills and keep that money, so the possibility of some districts receiving more in property taxes than others is already contemplated in the law.

Sayre said Thursday that if the court had sided with the Department of Education, the department would be taking close to $1,000 per pupil from Eureka Springs and $1,300 per student from Fountain Lake. He said that would make the so-called wealthy districts some of the most poorly funded in the state, in large part because they receive just $400 per student in categorical funding, or funding that targets students needing special assistance, whereas the state average is close to $3,000.

There are now eight school districts with millage revenues that exceed the state-mandated school funding level, Sayre said. That the number could rise to as many as 25 to 29 because of land valuations in areas of the state with heavy gas drilling, he said.