State News Roundup

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Two teachers have filed a $1-billion class action against the convicted junk-bond salesman Michael Milken and a New York investment firm, claiming misappropriation of state pension funds.

The suit was filed in U.S. District Court in Seattle this month on behalf of Hal Buttery, a Washington State teacher, and Carol Whitmore, who teaches in Oregon.

The plaintiffs' lawyer, Steve W. Berman of Seattle, said his clients are suing on behalf of all the pension funds in their states because they have not been protected by the states. He said the suit may be extended to cover pension funds in Minnesota, Wisconsin, and Michigan as well.

Neither the Washington Education Association nor the Oregon Education Association is party to the suit. "We consider the lawsuit frivolous," said Karen Famous, the O.E.A.'S president.

The complaint alleges that Mr. Milken and the investment firm Kohlberg Kravis Roberts & Company violated their fiduciary responsibilities in investing money from the pension funds. It also charges the two violated the federal Racketeer Influenced and Corrupt Organizations Act and Investment Advisers Act.

Calling the suit "baseless and frivolous," a spokesman for the investment firm said it was brought by "publicity-seeking individuals who do not have standing... and are recklessly acting contrary to the interests of the beneficiaries of the Washington and Oregon pension funds."

The spokesman further said that the longstanding relationship between the firm and the state pension boards had been highly profitable for the pension funds.

Alabama cannot use a standardized test as an admission screen for students seeking education degrees from the state's public higher-education institutions, a federal judge has ruled.

U.S. District Judge Myron Thompson ruled this month that requiting prospective teaching students to get a 16 or 17 on the American College Testing examination has discriminated against blacks since 1977, when the requirement went into effect.

Evidence presented in the case noted that between 1983 and 1988, 73.6 percent of whites and 32.7 percent of blacks met the standard. Standardized-testing experts have also said that test results should only be used, along with other factors, to predict freshman-year academic performance.

Judge Thompson said the state had failed to show that A.C.T. results accurately predicted good teachers.

The Montana Supreme Court has refused to modify a rifling that declared the state's school-finance system unconstitutional, leaving many local districts unable to sell bonds to finance school construction.

The decision, which took effect in January 1991, was designed to give the state legislature an opportunity to revamp the way the state finances school construction.

The court declared that the ruling did not affect bonds sold before July 1991.

But because the legislature failed to act, several districts have found themselves unable to sell bends because the decision undermines the confidence of potential buyers in the safety of their investment.

The state attorney general, the board of public instruction, and the office of public instruction had petitioned the court to withdraw or modify its decision.

But Chief Justice J.A. Turnidge said that modifying the ruling would the set a"dangerous precedent." He added that it is the legislature's responsibility to improve the situation.

Officials in at least 10 counties argue that they need to build new schools or refurbish existing buildings but cannot float bends to support the construction. .

Vol. 11, Issue 08, Page 2

Published in Print: October 23, 1991, as State News Roundup
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