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Property-Tax Hike in Kansas City For Desegregation Plan Is Upheld

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A federal district judge can order increases in property taxes, but not income taxes, to fund costly school-desegregation remedies in Kansas City, Mo., an appellate panel has ruled.

The federal appellate ruling last month lets stand a massive court-ordered property-tax hike imposed last fall on the city's residents to help fund the school district's desegregation efforts, which are among the most comprehensive and expensive ever undertaken.

But it also strikes down an income-tax surcharge imposed within the district's boundaries. The three-judge appeals panel ruled that U.S. District Judge Russell G. Clark, who ordered the surcharge, overstepped his constitutional authority and "invaded the province of the legislature."

In a move that was perhaps more significant than its rulings on the controversial tax issues, the U.S. Court of Appeals for the Eighth Circuit also upheld major elements of the district's comprehensive desegregation plan. The plan seeks ultimately to make the quality of education provided in the inner-city district comparable to that offered by nearby suburban schools.

Its three components--improved instructional offerings, the nation's most sweeping magnet-school plan, and extensive construction and renovation projects--will cost more than $100 million a year to implement, a fact that has fueled a contentious debate over funding.

State Liability Increased

Lawyers for both the Kansas City Municipal School District and the black plaintiffs in the case said they were "very, very pleased" by the ruling, because it not only approves the plan, but also requires that it be "fully funded."

But Missouri officials had harsh criticism for the decision, which had resulted from their appeal of some 13 earlier orders in the case.

Though Gov. John Ashcroft praised the elimination of the income-tax surcharge, he said in a statement that the ruling "apparently does little to remedy the outrageous and unprecedented massive court plan imposed on the people of Kansas City by the federal courts."

State officials have not yet decided whether to seek a rehearing before the full panel of judges on the Eighth Circuit Court or ask the U.S. Supreme Court to review the case.

Earlier rulings had determined that the state was partially responsible for the continuing segregation in the district and had assigned it a major portion of the liability for funding the plan. The new ruling may force the state to pay an even larger share.

"Should the funds that [the school district] can provide for desegregation expenses under today's decision fall short," Judge John R. Gibson wrote for the panel, "the remainder must be paid by the state."

In an opinion concurring in part and dissenting in part, Chief Judge Donald P. Lay said the issue of the property-tax increase could have been avoided by making the state fully liable for the unfunded balance of the plan.

Thus far, Judge Clark, who is4overseeing the case, has issued orders for nearly $300 million in capital improvements to the district's schools, $140 million to implement a long-range magnet-school plan, and almost $50 million annually for instructional improvements.

District officials estimate that the cost of the plan, including construction and renovation, will top $165 million during the coming year. The district's operating budget, by comparison, is $126 million.

George F. Garcia, Kansas City's superintendent of schools, defends the plan's scale, saying that "the order calls for making the Constitution whole, and you can't put a price tag on that."

Property Tax Upheld

Judge Clark imposed the new taxes last fall after Kansas City voters had repeatedly defeated both levy increases and bond issues placed on the ballot by the school board. The district has not had a bond passage or levy increase since 1969. The judge has urged the state to relax its requirement that such issues be approved by two-thirds of the voters.

"The head-in-the-sand attitude of the state is costing it tens of millions of dollars," said Arthur A. Benson 2nd, the lawyer representing black plaintiffs in the case.

The state had been joined in its appeal of the tax orders by several other parties, including the U.S. Justice Department, U.S. Senator John Danforth of Missouri, the State of Kansas, and the Landmark Legal Foundation, a public-interest law firm representing Kansas City taxpayers.

In its opinion, the Eighth Circuit Court ruled that Judge Clark had not abused his discretion in ordering the property-tax increase, which nearly doubled the levy in the district. (See Education Week, Sept. 23 and Sept. 30, 1988.)

"In doing so," the opinion states, Judge Clark "followed clear authority that restrictions and limitations of state law which impede the disestablishment of a dual school system may be set aside to remedy the constitutional violations."

"The right most prominently involved here is the right to a public education free of racial discrimination," the panel added. "That right may not be submitted to a vote: It depends on the outcome of no elections."

However, the three-judge panel said that in the future, Judge Clark's tax orders could be made "minimally obtrusive" by allowing the district to set its own levy rate. Judge Clark should set an upper limit on the levy, the panel said, after considering the historical levy rates in Kansas City as well as the current rates in surrounding communities.

Refund Issue Open

In overturning the 1.5 percent income-tax surcharge imposed by Judge Clark, the appeals panel wrote that such a tax "restructures the state's scheme of school financing and creates an entirely new form of taxing authority."

The panel also noted that "none of the parties to this litigation seriously urged the district court to adopt [the surcharge] as part of a judicial remedy."

The panel ordered an immediate end to the income-tax collections, and required that all unexpended funds be returned to taxpayers.

A major legal squabble is likely to emerge over whether the district must refund the entire $30 million collected since the surcharge was imposed.

State officials and Jerald L. Hill, president of the Landmark Legal Foundation, have argued that the entire amount of the "unconstitutional" tax should be returned to taxpayers.

Lawyers for the district, on the other hand, point to the Eighth Circuit Court's statement in the opinion that "any refund orders must be crafted recognizing ... that the constitutional violations must be remedied and the remedies fully funded."

Suburban Districts

In a separate development in the ongoing dispute, lawyers for the black plaintiffs have filed a new suit in federal district court against three predominantly white suburban districts that they allege have refused to accept black transfer students from the city schools.

Some 188 black Kansas City students applied to the suburban districts this spring on a tuition-paying basis, and all were turned down, Mr. Benson said.

Those denials constitute illegal discrimination because the districts have accepted white nonresident students, he said.

Although 11 suburban districts were dismissed from the original case under an earlier ruling, the State of Missouri has been ordered to pay the tuition and transportation expenses of any black Kansas City student accepted by a suburban district under a voluntary student-transfer plan.

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