W.Va. Court To Weigh Lottery-Fund Use for Debt

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West Virginia officials will go before the state supreme court next week to argue for a pioneering revenue source to pay school-construction bond debt: lottery funds.

Twice in the past year, the supreme court has slapped down school-construction-funding laws as violations of the state constitution.

The court's decision this time will determine the fate of a 10-year master plan approved by the legislature to repair and improve the state's school facilities. The law calls for the sale of $145 million in bonds and earmarks $18 million a year in lottery proceeds to pay interest on the debt.

Court approval would end more than a decade of false starts for lawmakers and school officials, who have been under court order to improve facilities to meet education-equality requirements. At every turn, however, a constitutional provision that prohibits the state from assuming long-term debt without voter approval has tripped them up.

After voters twice vetoed school-construction referendums during the 1980's, legislators on two occasions last year passed laws designating revenues to finance the bond issues. The first law tapped general revenues, while the second called for using a portion of sales-tax revenues.

The supreme court ruled both measures unconstitutional, arguing that the state could only use funds not previously allocated to the general-revenue fund.

Third Time Charmed?

In a footnote to its December 1993 opinion in the second case, however, the court planted the seed for yet another funding scheme. It suggested that lottery revenues could be used to service the bond debt, since they are handled outside the state general-revenue accounts.

The legislature seized on the idea, approving the latest proposal in a March special session. School officials are hopeful that the court will approve.

"You've heard the old adage, 'The third time's the charm,' haven't you?'' said James K. Brown, the lawyer representing state schools in the case.

Oregon is the only state that currently uses gaming proceeds to pay bond debt, according to Catherine Fleischmann, a vice president and bond analyst at Moody's Investors Services. It uses lottery revenues to finance a light-rail system.

Almost all bonds are financed with tax revenues, she noted.

"This is a whole different animal,'' Ms. Fleischmann said of West Virginia's law. "They're basically using a commodity. It's something new.''

James B. Lees Jr., a Charleston lawyer who challenged both previous laws on behalf of two callers to a talk-radio show he hosts, said he is not planning a new suit against the state. But, he maintained, such school-funding decisions still should be left to the voters.

State officials "didn't want to put it on the ballot with the first case, and they obviously still don't want it on the ballot,'' he said.

But school officials contend that the previous referendum rejections left lawmakers with few alternatives to comply with the court order to fix schools.

"The legislature had to do something about the mandate,'' said Superintendent of Schools Henry Marockie.

The supreme court issued the mandate in its 1981 ruling in Pauley v. Kelley. In a landmark decision, the ruling defined equal educational opportunity to include the quality of school facilities. It ordered the state to create a master plan for how it would provide equal facilities for each curriculum area.

Vol. 13, Issue 32

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