This dispute arose from a disagreement concerning the funding
obligations of the state of Michigan under the Headlee Amendment to the
Michigan Constitution, Const 1963, art 9, §§ 25-34. The Headlee Amendment provides, in part, that
the legislature may not impose
new or increased activities or services on local government without making an
appropriation to pay for such activities or services. Const 1963, art 9, § 29. This provision is referred to as a
prohibition on unfunded mandates (POUM).
In 2010, the Michigan Supreme Court held that the state violated the
POUM provision when it required the plaintiff school districts to collect,
maintain, and report to the Center for Educational Performance and Information
(CEPI) certain types of data for use by the state, without providing funds to
reimburse the school districts for the necessary increased costs they would
incur in order to comply with those recordkeeping mandates. In making this
ruling, the Supreme Court held that, in situations where the Legislature has
made no appropriation to cover a new or additional mandate, the plaintiffs did
not have to prove the amount of the increased costs. Adair v
Michigan, 486 Mich 468, 480 (2010).
In a footnote, the Supreme Court further explained that “. . . if the
state did appropriate funds for the new or increased activity or service, the
plaintiff would likely have a higher burden in order to show a POUM violation.
Under those circumstances, the state would not have violated the POUM provision
per se by failing to provide funding. Because those circumstances are not
presented in the instant case, we need not address this issue.”
In response to the ruling that the Legislature had imposed an unfunded
mandate, the Legislature appropriated almost $60,000,000 to reimburse the school
districts for the compliance costs incurred during the 2010-2011 and 2011-2012 school
years. The plaintiffs - more than 400 school districts and a representative
taxpayer from each district – filed an original action in the Court of Appeals
to challenge the constitutionality of the method by which the Legislature
funded these appropriations. They also challenged the adequacy of the amount of
each appropriation. Finally, the plaintiffs alleged that the Legislature
violated the POUM provision by imposing new or an increased level of activities
on the districts through amendments to several provisions of the Revised School
Code, the teacher tenure act, and the public employment relations act without
appropriating any funding to reimburse the school districts for the necessary
costs associated with satisfying the new mandates.
The Court of Appeals referred
the matter to a special master. In
proceedings before the special master, the plaintiffs conceded that they could
not establish the dollar amount of the alleged underfunding, although they
stated that they would offer expert testimony to establish serious flaws in the
methodology used by the Legislature to determine the appropriation. The plaintiffs argued that this was
sufficient to satisfy their burden under the 2010 Adair decision. The special
master did not agree, and ruled that Adair
required the plaintiffs to establish a specific amount of
underfunding. He granted the defendants’
motion to dismiss this claim, and issued his final report to the Court of
Appeals.
Both sides objected to aspects
of the special master’s report. In a
published opinion, the Court of Appeals adopted the findings of fact and
conclusions of law of the special master, with the exception of the special
master’s characterization of the plaintiffs’ burden of proof. The Court of Appeals ruled that the
plaintiffs’ burden must involve something less than proving the dollar cost of
the alleged underfunding. The
plaintiffs’ burden, concluded the appeals court, was to present evidence of a
sufficient nature to allow the trier of fact to conclude that the methodology
employed by the Legislature to determine the amount of the appropriation was so
flawed that it failed to reflect the “actual cost to the state if the state
were to provide the activity or service mandated as a state requirement . . .
.” MCL 21.233(6). The Court of Appeals further ruled that the plaintiffs’
expert testimony, if accepted by the trier of fact, would have satisfied their
burden. The case was remanded to the
special master for trial, although the Court of Appeals then issued a stay to
permit further appellate review.
The
state appealed. In an order dated February 5, 2014, the Supreme Court granted
leave to appeal.