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N.D. Supreme Court Upholds Finance System

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While finding North Dakota's school-finance system to be flawed and unfair, the state supreme court has failed to uphold a lower court's ruling that the system was unconstitutional.

On a 3-to-2 vote, justices agreed late last month with a district judge's finding of unconstitutionality. But the court could not muster the required four-justice supermajority to officially declare it so.

Nevertheless, the court made clear its disenchantment with the inequities of the system.

"The present educational-funding system seriously discriminates against some students and significantly interferes with their right to equality of educational opportunities,'' the three-justice majority wrote.

"Because educational opportunities are not substantially uniform,'' the court said, "the existing system of educational funding needs fixing.''

By distributing funding primarily on the basis of local property wealth, the justices said, the existing finance system fails to provide equal educational opportunities.

Despite being let off the hook legally, Gov. Edward T. Schafer and other state officials who were defendants in the case pledged to work together to see that state funding of schools becomes more equal.

"We must address the system's flaws and fix them adequately,'' Mr. Schafer said in his State of the State Message given after the ruling.

Any legislative action is a year off, though, since the biennial legislature does not meet again until January 1995. A special session for this year is not expected.

Frustrating Defeat

Last month's ruling hands a disappointing defeat to the plaintiffs, nine school districts and 31 taxpayers and parents who filed suit in 1989.

They alleged that the system relied too much on the ability of each district to raise revenue through local property taxes.

Those plaintiffs tasted victory last February when District Court Judge William F. Hodny ruled that all of the state's school-funding mechanisms violated both the education and equal-protection provisions of the state constitution and required a "comprehensive overhaul.'' (See Education Week, Feb. 17, 1993.)

The state appealed the case to the supreme court, putting the ruling in legal limbo and prompting state lawmakers to hold off legislative action pending the case's outcome.

In the high court's ruling, two mechanisms in particular earned the disapproval of the majority.

The three justices found the state's attempt to equalize the distribution of foundation aid--by slightly penalizing property-wealthy districts--to be inadequate. They also criticized the fact that some districts receive state reimbursement for transportation costs in excess of their expenses, while other districts are given less than half of their actual costs.

Calvin N. Rolfson, a lawyer for the plaintiffs, said last week that his clients would not seek a rehearing of the case before the supreme court. Instead, he said, they will work off the strength of the justices' condemnation of the system to lobby the legislature.

If the legislature chooses to maintain the status quo, however, Mr. Rolfson promised another lawsuit.

In that event, some observers predicted, the largely sympathetic dissenting opinion by the high court's chief justice could be turned into the crucial fourth vote for unconstitutionality.

'Do It Together'

In his speech last month, Mr. Schafer said he would work with the state education department and the legislative leadership to "develop a process that addresses the issues surrounding the court decision'' and produce a "common legislative agenda.''

Noting that he and Mr. Schafer have not always agreed, Superintendent of Public Instruction Wayne G. Sanstead, who while a defendant in the case has frequently criticized the system's inequities, said he was heartened by the Republican Governor's remarks.

"I think we've got to do it together, knowing full well there's a lot of challenge implicit in the effort,'' Mr. Sanstead said last week.

Mr. Sanstead, a former Democratic legislator and lieutenant governor, said he thought that the tone of the court decision was sufficiently stern to have made an impression on lawmakers.

Mr. Sanstead said his department would study how other states have reformed their school-finance systems.

A Political Quandary

Between now and next year's legislative session, Governor Schafer said, an interim education-finance committee composed of House and Senate members is to be the forum for reform proposals.

The panel was scheduled this week to hold its first meeting since the court decision.

The committee was set up last year to deal with a potential ruling against the state by the supreme court that would require immediate action, such as a special session.

Even without a constitutional mandate now, noted Speaker of the House Rick Berg, the committee may have to address a central political quandary of school-finance reform--that under a more equitable funding formula, some districts will lose funds while others will gain.

"To pass legislation, there needs to be protection ... for the school districts that would lose money,'' Mr. Berg, a member of the committee, said.

Providing districts with that money--perhaps $80 million in the last year of a hypothetical four-year phase-in of a new formula--would ultimately require new taxes, Mr. Berg acknowledged.

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