Judge Orders Montana To Revise Finance Formula by October 1989

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A Montana judge has set an October 1989 deadline for the legislature to make major revisions in the state's school-funding formula.

In a decision handed down this month, State District Judge Henry Loble ruled that Montana's existing foundation-grant program has failed to provide equal educational opportunities to all students.

Judge Loble, whose district includes the state capital of Helena, ordered the legislature to have a more equitable system in place by the beginning of the 1989-90 school year.

"Montana has not met its burden of providing equality of educational opportunity," Judge Loble wrote in a 143-page opinion. "The disparate wealth of the various districts brings about this inequality."

68 Districts Plaintiffs

The decision came in a lawsuit filed three years ago by 68 property-poor school districts in the state. The plaintiff districts argued that spending disparities between their schools and those in Montana's richest communities have widened in recent years.

Like many state funding systems, the Montana formula sets both a minimum "foundation" level of per-pupil spending, and a minimum local tax rate. If local resources are not enough to pay for the required spending, the state covers the difference.

But the plaintiffs argued that these foundation grants have not4kept pace with inflation and do not cover a number of rapidly rising instructional costs.

Judge Loble noted that the state's share of total education spending has declined steadily over the past 15 years, forcing districts to rely more heavily on local resources.

"The vast majority of districts find it necessary, in order to properly fund a basic quality education, to resort to funds derived from the voted local levy," the judge wrote.

Because of these trends, said James Goetz, the lawyer representing the plaintiffs in the case, spending gaps of as much as $2,500 per student are not uncommon under the existing system.

The state, on the other hand, defended the system, arguing that the existing foundation level gives even the poorest districts a respectable ranking when compared with national spending averages.

State attorneys also pointed out that Montana students from both poor and wealthy districts have tended to score well on nationally normed tests. But Judge Loble ruled that this in itself did not justify the spending disparities.

Similar Rulings Elsewhere

Nationally, Judge Loble is the third state judge in less than a year to demand major finance reforms. Last May, a Texas judge ruled against that state's school-funding system. An appeal of the decision is pending. (See Education Week, May 6, 1987.) A West Virginia judge has threatened to redistribute millions of dollars in state aid to local schools unless voters there approve a proposed constitutional amendment creating a statewide property-tax levy. (See Education Week, Sept. 30, 1987.)

As in those two cases, the Montana decision appears likely to create additional complications for a state already facing severe budget problems. Last year, economic slumps in the critical mining and agricultural sectors led the legislature to freeze school spending at 1986-87 levels.

Local school districts are also facing hard times. In 1986, the state's voters overwhelmingly approved a ballot measure prohibiting further property-tax increases.

"We have had over 300 districts that have reduced their budgets this year," said Ed Argenbright, the state's superintendent of public instruction and one of the defendants named in the lawsuit.

In the wake of the court's ruling, Mr. Argenbright said, he fears that the legislature will be unable to equalize funding levels without taking state money away from high-spending districts.

'A Real Possibility'

Those fears are well-founded, according to State Representative Ray Peck, the Democrat who is chair4man of the Joint Legislative Finance Committee.

The ruling, he said, may force the legislature to "pull some districts down in order to level out the differences."

"That's not my preferred choice, but it's a real possibility," he said.

Officials also expressed concern that the ruling may cause problems for some 60 districts that have Indian reservations within their jurisdiction. Because such land is tax- exempt, the districts receive about $21 million in federal impact aid.

The current funding formula ignores those payments. But Judge Loble's ruling appears to require the legislature to take the federal aid into account, which could sharply reduce state aid to the districts.

Although state officials have not yet formally decided whether to appeal Judge Loble's decision to the state Supreme Court, Superintendent Argenbright indicated that such a move was virtually certain.

But with the legislature not due to convene until January 1989, 10 months before the judge's deadline, political leaders are moving quickly to weigh the potential cost of the decision and to study their options.

According to Mr. Peck, his committee is already reviewing alternative ways of complying with the court order. Legislative leaders, he added, were planning to meet with Gov. Ted Schwinden last week to discuss the situation.

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