DONALD S DURANT V STATE OF MICHIGAN
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STATE OF MICHIGAN
COURT OF APPEALS
DONALD S. DURANT, et al,
FOR PUBLICATION
May 10, 2002
9:25 a.m.
Plaintiffs,
v
No. 230859
STATE OF MICHIGAN, DEPARTMENT OF
EDUCATION, STATE OF MICHIGAN,
DEPARTMENT OF MANAGEMENT AND
BUDGET, and TREASURER OF THE STATE
OF MICHIGAN,
Defendants.
Updated Copy
August 16, 2002
Before: Neff, P.J., and Sawyer and Fitzgerald, JJ.
NEFF, P.J. (concurring).
While I concur with the legal conclusion reached by my colleagues, I write separately to
express my recognition that the right result lingers beneath the bare language of Const 1963, art
9, § 11 (Proposal A). This case can be summed up in one sentence: "That may be what the
Constitution says, but it is not what it means." The outcome in this case does not keep faith with
the implementing legislation, 1993 PA 336. It does not keep faith with what state officials told
voters Proposal A meant. Most importantly, it is undoubtedly not what the voters understood
when they passed Proposal A by an overwhelming margin in 1994.
The primary rule of constitutional interpretation is the rule of "common understanding."
Durant v Michigan (On Remand), 238 Mich App 185, 210; 605 NW2d 66 (1999) (commonly
referred to as Durant II). A constitutional provision should be given that interpretation "'which
reasonable minds, the great mass of the people themselves, would give it,'" taking into account
the times and circumstances under which the constitution was adopted. Id. at 211 (quoting
Durant v Michigan, 456 Mich 175, 192; 566 NW2d 272 (1997) (Durant I). However, such rules
of interpretation are employed only where the text of the constitutional provision is
indeterminate. MGM Grand Detroit, LLC v Community Coalition for Empowerment, Inc, 465
Mich 303, 309; 633 NW2d 357 (2001); Michigan Coalition of State Employee Unions v Civil
Service Comm, 465 Mich 212, 222; 634 NW2d 692 (2001).
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I
Const 1963, art 9, § 11 provides:
There shall be established a state school aid fund which shall be used
exclusively for aid to school districts, higher education, and school employees'
retirement systems, as provided by law. Sixty percent of all taxes imposed at a
rate of 4% on retailers on taxable sales at retail of tangible personal property,
100% of the proceeds of the sales and use taxes imposed at the additional rate of
2% provided for in section 8 of this article, and other tax revenues provided by
law, shall be dedicated to this fund. Payments from this fund shall be made in full
on a scheduled basis, as provided by law. Beginning in the 1995–96 state fiscal
year and each state fiscal year after 1995–96, the state shall guarantee that the total
state and local per pupil revenue for school operating purposes for each local
school district shall not be less than the 1994–95 total state and local per pupil
revenue for school operating purposes for that local school district, as adjusted for
consolidations, annexations, or other boundary changes. However, this guarantee
does not apply in a year in which the local school district levies a millage rate for
school district operating purposes less than it levied in 1994.
I agree with my colleagues that the specific language of art 9, § 11 does not require that
the annual foundation allowance set by the Legislature be allocated as unrestricted per pupil
operating revenue. However, a review of the times and circumstances surrounding the passage of
Proposal A leaves no doubt that these two school finance terms were sold to the voting public as
one and the same. Per pupil revenue is the common language of school finance. Despite the
rhetoric, everything boils down to a per pupil revenue amount when it comes time for
comparisons. How much is it this year? How much will it increase next year?
The history of Proposal A leaves no doubt that the "per pupil revenue" in art 9, § 11 is a
cross reference to the "foundation allowance" in subsection 20(1) of the State School Aid Act
MCL 388.1620(1), 2000 PA 297, subsection 20(1)—the unrestricted school operating funds
promised as the cornerstone of Michigan's school finance reform. "The per pupil funds
guaranteed by art 9, § 11 are commonly referred to as the 'foundation allowance.'" Durant II,
supra at 197. A review of the times and circumstances surrounding the passage of Proposal A
shows that the annual foundation allowance enacted by the Legislature in subsection 20(1) of the
State School Aid Act was understood to be the constitutionally guaranteed per pupil revenue
allocated to local districts to operate schools. There was no disconnect between the proposed
constitutional language and the legislatively enacted language: different terms, same meaning.
II
Proposal A altered the constitutionally prescribed tax revenue base for public education.
Historical notes to Const 1963, art 9, § 11; Durant II, supra at 196-197. With the passage of
1993 PA 145 and 1993 PA 336, the Legislature eliminated local property tax revenue as the
primary source of public school funding and replaced formula funding with a "foundation grant"
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system, which distributed state aid payments to each local school district through a foundation
allowance per membership pupil. 1993 PA 336, § 20; Durant II, supra at 196, 212.
The specifics with regard to how this funding mechanism would operate were set forth in
1993 PA 336. Section 20 of 1993 PA 336 established a statewide basic foundation allowance to
begin at $5,000 per pupil in combined state and local revenue for the 1994-95 state fiscal year,
with the amount of the foundation allowance to be adjusted each year on the basis of changes in
state tax revenues and local school district pupil counts. 1993 PA 336, subsections 20(1) and (2).
Subsection 20(2) of 1993 PA 336 provided in relevant part:
For 1995-96 and each succeeding fiscal year, the basic foundation
allowance shall be determined by multiplying the amount of the basic foundation
allowance for the immediately preceding state fiscal year by the final index
calculated under this subsection. The result is the amount of the basic foundation
allowance per membership pupil for the current state fiscal year.
The practical import of subsection 20(2) was that the foundation grant would be adjusted for
future fiscal years by the percentage change in the growth of State School Aid Fund revenue,
adjusted by any change in the pupil membership of a school district.
When the Legislature enacted 1993 PA 336, voters were thereafter faced with two choices
on March 15, 1994: (1) pass Proposal A, raising the sales tax and securing guaranteed funding
for schools in the constitution, or (2) defeat Proposal A, raising the income tax and providing no
guarantees regarding school funding. Either way, the foundation grant system of funding schools
was implemented.1 The difference was that Proposal A guaranteed the foundation grant; the
alternative, the statutory plan, did not.
If voters approved Proposal A, the State School Aid Fund would provide each school
district with a foundation grant of per pupil revenue as unrestricted funding, guaranteed not to
fall below the amount established for 1994-95, essentially $5,000. 1963 Const, art 9, § 11;
Senate Fiscal Agency, Issue Paper: School Finance Reform, Analysis of the Ballot and Statutory
Reform Proposals, January 10, 1994, p 18. In addition to the per pupil foundation allowance,
local school districts would continue to receive certain categorical funding, including special
education funding mandated under Const 1963, art 9, § 29 (the Headlee Amendment). HouseSenate Fiscal Agency, The Michigan School Aid Act Compiled and Appendices, October 1994,
pp 56, 64 (Table 3). This is the promise of Proposal A that has been perverted by semantic
hijinks, shown by the artificial distinction drawn between the per pupil revenue language of
Proposal A and the foundation grant language of the legislation.
1
"[S]chools will be funded at a world-class level no matter how you choose." Opinion of
Governor John Engler, presented in Proposal A[,] Is There a Better Way to Fund Schools, Help
Economy?, The Detroit Free Press, March 11, 1994, p 11A.
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III
An examination of voter information concerning Proposal A in the three-month period
between the effective date of § 20 of 1993 PA 336 and the election, reports of voter sentiment,
and official statements by Proposal A proponents, leave no doubt that art 9, § 11, as amended,
was commonly understood to guarantee the annual foundation allowance set by the Legislature in
subsection 20(1) as local school per pupil revenue for district operating expenses.
Proposal A passed by a sixty-nine to thirty-one percent margin. Durant II, supra at 197.
The pro-Proposal A message to voters was that Proposal A had "built-in safeguards to foster
fairness for consumers, taxpayers and the state's 1.5 million school children":
Proposal A is more than a choice between raising the sales tax to 6 percent
vs. raising the state income tax to 6 percent under a backup plan.
The ballot measure offers what schools have desperately sought for
decades—reliable, stable funding.
* * *
For taxpayers and consumers, let's compare Proposal A to the backup plan
Proposal A is a constitutional amendment, making it tamper-resistant.
Changing it requires another ballot question or a three-fourths vote by both state
houses.
"Plan B," as some call the backup plan, is constructed by the Legislature
and thus prone to the fancies of current and future lawmakers.
Constitutionally-mandated school funding enhances stability. The divisive
and dicey millage votes which schools have depended on for decades will be
largely gone. There should be no more Kalkaskas—schools that shut down in
mid-school year because they've run out of money.
* * *
Michigan voters hold history in their hands, and should make the most of
it with a resounding "yes" on March 15. [Editorial, Proposal A, It's fairest for
taxpayers, school kids, Lansing State Journal, February 27, 1994, p 6A.]
The "guarantee" of a foundation grant dedicated to school operating expenses as per pupil
revenue was a constant refrain in voter information regarding Proposal A. For example, shortly
after the passage of the school finance package on Christmas Eve 1993, Governor Engler touted
Proposal A as the right choice for voters in his 1994 State of the State address, urging voters to
pass Proposal A because it would, among other things, provide: "Constitutionally guaranteed
full funding for public schools." (Emphasis added.)
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The Governor's casting of Proposal A as a constitutional guarantee of full funding for
schools was adopted in other analyses of Proposal A:
The current [State School Aid] formula will be completely replaced by a
guaranteed foundation allowance that will provide state funds for all districts.
* * *
The guaranteed foundation allowance for 1994-5 will be $5,000 per
membership pupil. This amount will annually be indexed to: 1) the growth in the
state revenues that are dedicated to the state school aid fund, and 2) changes in the
number of pupils. This double indexing provision is designed to ensure that the
state will have the capacity to fund schools in future years. [Harvey, Moore &
VerBurg, March 15, 1994 Ballot Issue, Michigan's Public Education: School
Reform and Funding Changes, Michigan State University Extension, p 3.]
Voters were informed that constitutional amendments under the ballot plan "[g]uarantee
that the total state and local per pupil revenue for school operating in future years will not be less
than the amount for 1994-5." Id. at 4. The common understanding was not only that Proposal A
guaranteed base operating funds for local schools, but also that these funds would normally
increase year to year:
Under the new system, school aid is based on a per-pupil foundation grant,
where districts receive a flat amount per pupil and locally raised school mills are
much less important than in the past.
* * *
Once reached, the $5,000 foundation grant will increase each year at the
same rate as state school aid fund revenue, adjusted for the change in pupil count.
Categorical funding will be rolled into the foundation grant, with the exception of
special education, adult education, and a few other programs.
* * *
FY 1994-95 funding will be distributed to districts with a base between
$4,200 and $6,500 per student according to a formula. This formula guarantees
each district an increase in funding over FY 1993-94 levels, but the more a district
now spends, the smaller its increase.
* * *
Districts that now spend more than $6,500 per pupil are guaranteed $160
per pupil more than they spend in 1993-94.
* * *
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The FY 1994-95 state payment to districts with a foundation guarantee of
$6,500 per pupil or less is the difference between the foundation guarantee and
local revenue per pupil . . . . Under both plans the FY 1994-95 state payment to
districts with a foundation guarantee of more than $6,500 per pupil is the
difference between $6,500 and local revenues per pupil. [Cummings, School
Finance Reform: Which Districts Will Benefit Most?, Public Sector Consultants,
Inc, February 14, 1994, pp 1-2 (emphasis added).]
The message to voters was that the foundation grant of unrestricted per pupil revenue was
guaranteed by Proposal A, subject to a minimum floor level of $5,000 per pupil:
The constitutional amendment also guarantees that 60 percent of all sales
tax revenues resulting from the current 4-percent rate, plus 100 percent of all
revenues raised by the additional 2 percentage points in the sales tax rate, will be
earmarked for a constitutionally established school aid fund. The amount of
money spent on schools this year is constitutionally guaranteed as a floor for
school spending in all future years.
Thus, the constitutional amendment would prevent a direct repeat of the
state lottery gimmick, in which lottery money went into the school aid fund, but
other school aid appropriations were cut. [Preventing More Tax Hikes, The
Detroit News, January 23, 1994, p 2B (emphasis added).]
The Detroit Free Press attributed similar statements to official sources: According to
administration officials, "the ballot proposal guarantees a minimum level of funding," which
would better protect schools in the event that tax revenues plummeted unexpectedly. Bell, The
Other Shoe Drops in Fight over Which Tax Gets Big Boost, The Detroit Free Press, February 26,
1994, p 1A (emphasis added).
As recently as October 2001, explanations of Proposal A continued to equate the
foundation allowance set in subsection 20(1) of the State School Aid Act with the per pupil
funding guaranteed in art 9, § 11 and represent that this per pupil funding has constantly
increased:
The two key provisions of [P]roposal A were (1) the replacement of most
school property taxes with an increased sales and other use taxes and (2) the
adoption of a minimum "foundation" grant of $5,000 per pupil that would come
from the state. This school year, the foundation grant is set at $6,500 per pupil.
Proposal A had five major objectives: (1) Reduce property taxes; (2)
Reduce reliance on local property taxes to provide school funding; (3) Increase the
state's share of school funding; (4) Assure a minimum level of per pupil funding;
and (5) Reduce the funding disparities between school districts.
Since the passage of Proposal A seven years ago, most people agree that
all of the major objectives have been achieved.
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* * *
Proposal A guarantees each district a minimum level of per pupil funding.
In 1994, fifty-five percent of Michigan's school districts were getting less than
$4,500 per student. In the 2001-02 school year, all Michigan school districts will
receive at least $6,500 per student. Since the passage of Proposal A, overall state
per pupil funding has outpaced the rate of inflation. [School Finance Reform
Lessons from Michigan, Testimony by Matthew I. Brouillette, Director of
Education Policy, Mackinac Center for Public Policy, Prepared for the
Pennsylvania House of Representatives, Select Committee on Public Education
Funding, October 10, 2001, <http://www.psrn.org/SC%20Oct%2010%20
armstrong /ed%20policy.html>.]
The common understanding of art 9, § 11 undoubtedly was consistent with this information.
Proposal A was presented to voters in combination with 1993 PA 336, so closely linked
that when voters adopted Proposal A, the implementing legislation, already enacted,
automatically activated. The plan laid before voters was a constitutionally guaranteed per pupil
revenue amount, enacted as the basic foundation allowance. Voters accepted this guarantee, no
doubt adopting Proposal A with the understanding that it was tamper resistant. Nonetheless,
changing financial times can tempt even taint, later interpretation of constitutional mandates.
Lockwood v Comm'r of Revenue, 357 Mich 517, 551-552; 98 NW2d 753 (1959).
IV
The allocation scheme in 2000 PA 297 breaks faith with all these representations and
promises because it makes an artificial distinction—never intended or expressed—between the
constitutionally guaranteed per pupil revenue and the legislative foundation grant. This
legislative scheme begins in subsection 20(1) by setting forth the annual foundation allowance,
i.e., per pupil revenue amount, for successive fiscal years from the State School Aid Fund.
However, these foundation allowances are not allocated solely to unrestricted per pupil funding
for general school operating costs as in the past and as promised the voters when they were urged
to pass Proposal A. In fact, these foundation allowances now are not allocations at all; they are
used only for calculation purposes as base figures.
The revision of the school aid allocation scheme found in 2000 PA 297 is most certainly
contrary to the intent of the ratifiers of Proposal A. Rather than allocating the entire per pupil
foundation allowance set in subsection 20(1) of 2000 PA 297 to local school districts for
unrestricted reimbursement of school operating costs, the act creates a foundation allowance for
computation purposes only, and, in effect, caps the actual foundation allowance payment to local
school districts at $5,000, despite a State School Aid Act provision that identifies a higher per
pupil foundation allowance, and despite public pronouncements by various elected officials
identifying that higher per pupil foundation allowance as being the primary source of school
funding. As a consequence, the per pupil revenue amount for local school districts for school
operating expenses has been subjected to a de facto reduction on the balance sheet, but not in the
eyes of the public. This funding scheme, this freeze of the foundation allowance, is a subterfuge,
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a shell game, but one that the strict language of the constitutional amendment, divorced from the
common understanding of the voters who approved it, allows. Therefore, I reluctantly concur
with my colleagues that a strict legal analysis supports the legislative scheme of 2000 PA 297.
/s/ Janet T. Neff
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