Fulton County Daily Report
Published: January 19, 2007

State preps for dust up over rural districts
By ALYSON M. PALMER AND ANDY PETERS

EVEN THOUGH Gov. Sonny Perdue says he wants to avoid a costly trial, he’s gearing up for a long court battle with rural schools over education funding.

Whether the litigation is decided in the courtroom or settled outside it, plaintiffs say the state needs to spend at least $1 billion more per year on schools.

A group of more than 50 poor, rural school districts is pressing its two-year-old suit against Georgia, claiming the state is violating its constitutional duty to provide an adequate education for all children. The coalition’s litigation mirrors legal fights that have taken place in nearly every other U.S. state. More than half of these legal fights have resulted in victories for the plaintiffs, according to the National Access Network of Columbia University, which tracks the cases.

And the remedies handed down by courts amount to a great deal more than pocket change. A November decision by New York state’s high court said the state was constitutionally required to give New York City $1.93 billion in 2004 dollars, adjusted for inflation and changes in a geographic cost index, in additional yearly operating funds. Joe Martin, a former Atlanta school board president who organized the coalition of rural Georgia schools, estimated his group’s litigation could cost the state at least $1 billion yearly, based on a complex formula that takes into account student enrollment growth, the share of local school districts’ funding and other factors.

But Perdue appears to be betting Georgia can win in court. This month he asked the Legislature to approve a special fund of $2.1 million to finance partially the legal fees of fighting the school districts. Perdue and Attorney General Thurbert E. Baker also hired two of the nation’s leading attorneys in defending states against education-finance suits—Sutherland Asbill & Brennan partners Rocco E. Testani and Alfred A. Lindseth. The two lawyers have represented New York, Minnesota, Connecticut and other states in similar cases.

The Georgia Legislature is also monitoring the case. The House and Senate education committees will meet jointly Monday to discuss the rural schools’ litigation. Meanwhile, lawyers are in the discovery process and depositions are scheduled to be taken in April, said Amy M. Totenberg, a lawyer for the plaintiff schools. A trial would not begin until March 2008 at the earliest. Consortium for Adequate School Funding v. Georgia, No. 2004CV91004 (Fult. Super., filed Sept. 14, 2004).

The group of rural school districts in Georgia floated a settlement proposal to Perdue in October, suggesting, among other items, budget adjustments to compensate rural school districts that have lower property-tax wealth than urban and suburban districts. However, the state never officially rejected the proposal, and the group of rural schools said the settlement offer is still on the table. The settlement offer did not include a specific amount the state would need to pay; but the Consortium has said the state’s Quality Basic Education Act funding formula was under-funded in the current fiscal year by about $1.2 billion.

The state’s reluctance to engage in talks with the group of rural schools suggests Perdue wants to go to trial, said Martin, executive director of the Consortium for Adequate School Funding and a former Democratic candidate for state school superintendent.

“They are prepared to spend a lot of money,” said Martin. “I suppose you could call this trench warfare.”

Perdue would prefer to find ways to improve education funding through “a public policy process,” rather than going to trial, said Perdue spokesman Bert Brantley.

“We don’t think a courtroom is an appropriate venue for discussing this,” Brantley said. “We’d much rather see a process where all the stakeholders find a long-term solution.”

Perdue also formed a task force and charged it with examining school finance.

But the coalition of rural school districts has hunkered down for a long court battle. The group recently expanded its legal team by hiring Atlanta lawyer Elizabeth J. Appley, who is also a lobbyist at the state Capitol. Appley joins Totenberg, as well as Weekes & Candler of counsel Thomas A. Cox of Decatur and attorney David C. Long of Mill Valley, Calif.

The consortium has paid about $1.25 million so far in legal fees, Martin said. If the case goes to trial, he said that amount would probably at least double to $2.5 million. The coalition pays its legal fees through yearly membership dues charged to the plaintiff school districts.

According to Russell D. Willard, spokesman for Attorney General Thurbert Baker, Sutherland has billed the state $493,112 in fees and $13,179 in expenses on the Consortium case. He said the state designated the Sutherland lawyers special assistant attorney generals in April 2006 and received the firm’s first bill on the matter in July.

Georgia certainly has some other big-ticket budget items looming on the horizon. State lawmakers have estimated that the cost for providing health care benefits to retired state employees and teachers could reach $20 billion. The Atlanta Regional Commission has estimated that the state faces a shortfall of at least $4.4 billion for funding transportation projects. And state health officials say the PeachCare for Kids health care insurance budget for poor children is at least $130 million short.

Seeking an ‘excellent education’

The coalition of poor rural schools first contacted Perdue with its concerns in 2003. The main thrust of their complaint was that poor school districts weren’t able to generate enough money for schools because they have little industry or commercial development. Since local school districts generate revenue through taxation of commercial and industrial property, a county with more industry can raise money easier than a county with no industry.

Consider that the property tax base in Brantley County, one of the school districts serving as a plaintiff, is $46,614 per pupil. Compare that to Fulton County’s property tax base of $227,860 per pupil.

The Consortium warned that it would pursue its goals in court if the state refused to negotiate. The state decided against negotiating with the group.

It responded to the suit with a motion to dismiss, making a range of arguments. Among other things, the state’s lawyers said that a 1981 school funding decision by the Supreme Court of Georgia foreclosed the plaintiffs’ arguments. The state also maintained that as a practical matter the suit sought help from the courts to force the Legislature to appropriate more money, which the state said would be contrary to the notion of separation of powers.

Meanwhile, before the shool districts filed their suit in September 2004, Perdue appointed the Governor’s Education Finance Task Force to study education finance. He charged the group with considering changes to the state’s Quality Basic Education formula.

A flow chart on the task force’s Web site set December 2006 as the projected deadline for the task force to issue its recommendations. But Dean Alford, chair of the group and a former State Board of Education member, said that the group is still working.

The task force, Alford said, is focusing on two areas—finalizing what he calls “cost models” and redefining the relationship between the state and the local school systems. The cost models are to get at what education in the state should cost—“not a basic, not an adequate, but an excellent education,” Alford said.

“That’s a question that’s never been asked and answered.”

The cost model work should be completed by July, with the task force’s full recommendations ready for the start of the 2008 legislative session, Alford said.

While litigation over the school finance system had been threatened generally since 1985, he said, it was not his understanding that the task force was created to ward off litigation.

“It greatly disappointed us when they filed the suit … because we think spending money on lawyers instead of students is not in the long run in the best interests of the state and for taxpayers,” he said.

Alford also refuted the idea that the task force—which meets publicly—privately was discussing solutions that would satisfy the plaintiffs. Two members of the task force—William A. Hunter and Shirley B. Brooks—have served on the board of directors of the plaintiffs’ coalition.

“The challenge the governor gave us, and the one we continue to operate under, is to go do the right thing. Period,” Alford said. “We are not being influenced one way or the other by the lawsuit.”

But simply setting up a task force doesn’t satisfy the constitutional requirement of providing an adequate education to everyone, Martin said. And so far the task force has little to show for its efforts, the plaintiffs said.

“They are functioning at a snail’s pace,” Totenberg said.

“They’ve been at work for two-and-a-half years and haven’t even come up with a general idea of what they’re going to recommend,” Martin said.

Judge: State standards are key

Meanwhile, the court case moves forward. On Dec. 28, 2005, the state Supreme Court declined to hear an appeal by the state over Fulton County Superior Court Senior Judge Elizabeth E. Long’s partial denial of its motion to dismiss the case. Last year, Long heard arguments from the parties over what standard should govern her review of the plaintiffs’ claims.

In its brief, the Consortium echoed the 1981 state Supreme Court opinion, McDaniel v. Thomas, 248 Ga. 632, that said an adequate education under the state’s constitution is one designed to produce individuals who can function in society. The brief also acknowledged the decision’s conclusion that “it is primarily the legislative branch of government which must give content to the term ‘adequate.’”

However, the Consortium’s brief contended that while education standards adopted by the legislative or executive branches—such as state proficiency and performance standards—could serve as “evidentiary referents” in the court’s assessment of the financing system, it was ultimately the court’s job to interpret what’s adequate under the Georgia constitution.

The state argued in its brief that an adequate education is primarily a legislative determination that “refers to the opportunity to obtain a traditional high school education.” The state’s brief emphasized local school boards’ obligations for school management.

In a four-page order issued Nov. 21, Long rejected what she said was a suggestion by the state that it could win simply by showing that its current amount of support—adjusted for inflation, enrollment and other factors—is at least as large as the more than $1 billion per year in state support of local schools evaluated by the Supreme Court in its 1981 opinion.

In its 1981 decision, the state Supreme Court affirmed that portion of a trial court order rejecting a suit under the state’s adequate education provision. But Long wrote that the 1981 opinion had simply said that the plaintiffs there had produced no evidence that a lack of state funding deprived any particular schoolchildren of an adequate education.

“Here then … if the Plaintiffs are able to produce evidence that shows that the current State funding for public education is so low that ‘it deprives students in any particular school district of basic educational opportunities,’ then they will have made their case,” wrote Long. However, she emphasized that enactments by the Legislature and State Board of Education would be crucial in determining what those basic opportunities are.

Molly A. Hunter, managing director of the National Access Network, said tying the standard of constitutional adequacy to statutes and regulations is unusual.

“Some courts have said, ‘well, we really don’t want to do that, this is a constitutional standard, and it’s not the same as a statutory or regulatory standard’… The constitutional concept is … just a higher level concept, so they typically define it aside from the statutes and regs,” she said.

Hunter said she could recall only one state, Idaho, where the courts had taken that approach. In 1993, the Supreme Court of Idaho held that the state’s educational standards, as set forth in regulations, were consistent with the state constitution’s requirement of a “thorough” education.

“It didn’t seem like a good solid rock on which to place a constitutional standard,” said Hunter, explaining that it led to lots of back and forth between the legislature and the courts. “The legislature not long after changed the statutes to what some would say was a lower level, and the court really didn’t buy that.”

Worth the cost

The rural schools’ litigation is undoubtedly expensive—both in terms of the short-term legal costs and the potential long-term costs of increased education finance.

Georgia’s cost of paying its lawyers could be extremely expensive. In the New York state case, which included a seven-month trial that ended in 2000, Sutherland’s team led by Lindseth, which represented the state, racked up $11.4 million in legal fees and expenses. That trial resulted in a win for the plaintiffs, a coalition of parents, students and organizations advocating for New York City schoolchildren. Sutherland did not handle the subsequent appeals in the case, other than to review briefs without pay.

The New York media blasted the firm for overspending taxpayer dollars, and a spokesman for then-New York Attorney General Eliot Spitzer told Newsday in 2001 that it had been a mistake to hire outside counsel and that Sutherland hadn’t been re-hired for the appeal because of the legal bills.

But some plaintiffs’ groups have avoided big legal bills.

Simpson Thacher & Bartlett represented plaintiffs in the New York state case pro bono, according to the firm’s Web site.

Nelson Mullins Riley & Scarborough represented the state of South Carolina pro bono in litigation, in which a judge ruled in December 2005 in favor of the plaintiff school districts. The Columbia, S.C.-based law firm estimated that its total cost in the case would have been about $6 million.

Then there is the cost of implementing what Georgia’s rural school districts want. While some tax increase might be necessary, Martin said there could be a parallel decrease in property taxes in some counties, because the state would be picking up a larger portion of the funding pie. Local school districts in Georgia generate their funding for schools through property taxes.

“We haven’t been shy that there is a price tag, and it’s certainly north of $1 billion,” Martin said. “But there would be an offset in local property taxes.”

Totenberg, the former general counsel for Atlanta Public Schools who is representing the Georgia plaintiffs, acknowledged that some Georgia legislators are concerned about the litigation resulting in a huge tax increase. But she said if the Legislature wants to improve education, more money must be spent.

“If you want a state that’s competitive nationally and internationally, and you now rank 49th or 50th in all areas of education,” she said, “then you’re in a bad position to be advancing economic arguments against us.”

Copyright 2007 ALM Properties, Inc.