Court Hears Challenge to State Control of Tax Payments

By Tom Mirga — November 07, 1984 5 min read

Washington--The U.S. Supreme Court heard arguments last week in a case challenging the right of states to direct the way that counties allocate more than $100 million annually in federal payments in lieu of property taxes for schooling and other services.

According to legal observers, the outcome of the case, Lawrence County v. Lead-Deadwood School District No. 40-1 (Case No. 83-240), could affect school finances in many Western states, where millions of acres of land are owned by the federal government and thus are not subject to property taxes, a major source of school revenue.

Lost Revenue

Under the Payments in Lieu of Taxes Act, the federal government provides grants to counties to offset property-tax revenues lost as a result of the presence of national forests, parks, wilderness areas, and water projects. The grants are to be used “for any governmental purpose.”

At issue in the case heard by the Justices is a South Dakota law requiring that the federal aid be distributed by local government units in the same manner as general tax revenue. Under this formula, the Lead-Deadwood schools would receive 60 percent of the federal money, or about $60,000 a year.

Lead-Deadwood school officials filed a complaint in state circuit court in February 1982 seeking an order requiring the county to distribute the funds in accordance with the state law. Lawrence County officials, meanwhile, filed a countersuit challenging the state law, arguing that it violates the Constitution’s supremacy clause because it frustrates the Congress’s intent that county officials be given absolute discretion to use the federal money as they see fit.

A state trial court held in favor of the county, but the state supreme court overturned the lower court’s ruling in May 1983.

Although South Dakota at present is the only state that has enacted such a law, observers point out that other states could follow suit if the Court upholds the statute’s constitutionality.

Fundamental Purpose

“The fundamental purpose and intent of this act is to confer upon counties the ability to decide how they are affected by the presence of that government land and how those federal dollars can best be used,” Alan Raywind, the county’s lawyer, told the Justices last week.

He added that under the federal law, “counties are to be allowed to spend the money for a panoply of services.”

Roger Tellinghuisen, another lawyer for the county, said after the hearing that the county would probably use most of the funds for road construction, search and rescue, and other services related directly to the upkeep of the Black Hills National Forest, the federally owned land generating the payments. The funds, now totaling $400,000 after four years of legal wrangling, are being held in escrow pending the outcome of the case, he said.

Supremacy Clause

A.P. Fuller, the lawyer for the Lead-Deadwood schools, argued that the Constitution’s supremacy clause does not prohibit all state regulation in areas dealt with by federal legislation, but only those wherecompliance with both federal and state law is impossible or where the state law stands as a complete obstacle to Congressional objectives.

“The county is governed by the constitution of South Dakota. It is not sovereign to itself,” Mr. Fuller told the Justices. “The legislature has created the counties. They are creatures of state government and have powers that the legislature has allowed them to have. This statute gives them guidance as to what they can do.”

Mr. Fuller added that in his view “the county is already distributing its revenue in a reasonable way.”

“The law directs them to continue doing the same with respect to federal payments in lieu of taxes,” he said. “The state’s just saying, ‘Do it the way you’re doing it now.”’

The Court is not expected to hand down an opinion in the case until late this winter.

Other Action

In other action last week:

The Court heard arguments in Webb v. County Board of Education of Dyer County, Tenn. (No. 83-1360), a case involving the payment of lawyers’ fees.

In the Webb lawsuit, the Court was asked to decide whether the lawyer for a teacher who won a race-bias claim against the school district was entitled to fees for work he did in optional state administrative proceedings.

Federal district and appeals courts held that fees could not be awarded to the teacher’s lawyer because the Civil Rights Act of 1871, the law that the race-bias claim was filed under, does not require that state administrative remedies be exhausted as a condition to filing a suit in federal court. The Civil Rights Attorney’s Fees Act provides for an award of legal fees for parties who prevail in lawsuits filed under the civil-rights law.

A decision in the case is not expected until late winter.

The Court declined to review a Minnesota Supreme Court ruling that a part-time teacher who was not hired on a full-time basis by a school board, allegedly because of her husband’s political views, has standing to sue under Section 1983 of the Civil Rights Act of 1871 for deprivation of her constitutional right of free association.

The teacher claimed that the school board denied her full-time status because her husband, a member of the board of a neighboring school district, had often expressed “pro-teacher” views. The case is Independent School District No. 196 v. Cybske (No. 84-350).

The Court declined to hear Kimble v. Worth County R-III Board of Education (No. 84-398), a case involving the dismissal of a Missouri school employee for alleged “immoral conduct.”

The employee, a librarian and part-time teacher, claimed that the immoral-conduct charges were brought against her by the county school superintendent after she asked the school board why district administrators’ dues to the community teachers’ association were paid by the board but teachers’ dues were not. The superintendent alleged that the librarian had occasionally taken items of low value from her school.

The school board dismissed the librarian in April 1982. A Missouri circuit court ordered her reinstated, but a state court of appeals overturned that ruling. The Missouri Supreme Court refused to hear the case, saying that the librarian had failed to meet a deadline for filing her appeal.

The Court declined to hear Enright v. Board of School Directors of the City of Milwaukee (No. 84-331), in which the parents of a child killed by a man observed near school grounds the day of the murder sought to press a denial-of-due-process claim under Section 1983 of the Civil Rights Act of 1871 against the school board. The Wisconsin Supreme Court had ruled that the availability of similar claims under a state “wrongful-death” statute satisfied due-process requirements.

The Court declined to review Giglio v. Dunn (No. 84-314), in which lower federal courts had ruled that a tenured New York school principal who claimed he was forced to resign under pressure was not entitled to a “pre-coercion” hearing. The courts held that New York State’s provision of post-employment hearings for school employees who lose their jobs satisfies the due-process requirements of the 14th Amendment.

A version of this article appeared in the November 07, 1984 edition of Education Week as Court Hears Challenge to State Control of Tax Payments