TAXPAYERS FOR MICHIGAN CONSTITUTIONAL GOVERNMENT, STEVE DUCHANE, RANDALL BLUM, and SARA KANDEL, Plaintiffs,
v.
STATE OF MICHIGAN, DEPARTMENT OF TECHNOLOGY, MANAGEMENT AND BUDGET and OFFICE OF AUDITOR GENERAL, Defendants.
Original
Action
Before: Borrello, P.J., and Meter and Shapiro, JJ.
ON
RECONSIDERATION
Douglas B. Shapiro Judge.
Taxpayer-plaintiffs
bring this original action to enforce § 30 of the
Headlee Amendment[1], which prohibits the State from reducing
the total of state spending paid to all units of local
government, taken as a whole, below that proportion in effect
in fiscal year 1978-1979. Const 1963, art 9, § 30. The
parties agree that the proportion of state spending to be
paid to all units of local government taken collectively
under § 30 is 48.97 percent. They disagree, however,
with regard to what categories of state spending may be
classified as "state spending to be paid to all units of
local government" for purposes of § 30. Plaintiffs
allege that accounting practices employed by the State have
resulted in a persistent and growing underfunding of its
§ 30 revenue-sharing obligation. Count I of their
complaint asserts that the State has violated § 30 by
its practice of classifying as state spending paid to local
government those moneys paid to school districts pursuant to
Proposal A, Const 1963, art 9, § 11. Count II makes the
same assertion as to moneys paid to public school academies
["PSAs"], colloquially known as charter schools,
pursuant to Proposal A and MCL 380.501(1). Count IV seeks a
determination that state funds directed to local governments
for new state mandates may not be counted towards the
proportion of state funds required by Section 30. According
to plaintiffs, the improper inclusion of these expenditures
in its calculations has enabled the State to displace state
payments to local governments previously made for existing
programs and services and, as a consequence, to force local
governments to choose between increasing taxes and fees to
fund programs and services previously funded by
revenue-sharing payments from the State and reducing the
scope of or eliminating altogether those programs and
services.[2]
For the
reasons set forth in this opinion we grant summary
disposition in favor of the State on Count I and Count II and
declare that the State did not violate § 30 by
classifying Proposal A funding paid to school districts and
PSA funding as state funds paid to local government. However,
we grant summary disposition to plaintiff's on Count IV
and declare that pursuant to §29, funding for new or
increased state mandates may not be counted for purposes of
§30. Finally, we grant mandamus relief and direct the
State, and its officers and departments, to comply with the
reporting and disclosure requirements of MCL 21.235(3) and
MCL 21.241.
BURDENS
OF PROOF
A.
Causes of Action
Plaintiffs
seek declaratory, injunctive and mandamus
relief.[3]
It is a
well-recognized proposition that the remedy required in an
action to enforce a provision of the Headlee Amendment
"comprises a resolution of the parties' prospective
rights and obligations by declaratory judgment."
Wayne Co Chief Executive v Governor, 230 Mich.App.
258, 264; 583 N.W.2d 512 (1998); see also Adair v
Michigan, 470 Mich. 105, 112; 680 N.W.2d 386 (2004);
Durant v Michigan, 456 Mich. 175, 204-206; 566
N.W.2d 272 (1997); Oakland Co v Michigan, 456 Mich.
144, 166; 566 N.W.2d 616 (1997). "The plaintiff in a
declaratory-judgment action bears 'the burden of
establishing the existence of an actual controversy, as well
as the burden of showing that . . . it has actually been
injured or that the threat of imminent injury
exists.'" Adair v Michigan (On Second
Remand), 279 Mich.App. 507, 514; 760 N.W.2d 544 (2008),
aff'd in part and rev'd in part on other grounds
Adair v Michigan, 486 Mich. 468 (2010), quoting 22A
Am Jur 2d, Declaratory Judgments, § 239, p 788; see also
Adair v Michigan, 486 Mich. 468, 482-483; 785 N.W.2d
119 (2010) (because the plaintiffs met their initial burden
of demonstrating a violation of the "prohibition of
unfunded mandates" or "POUM" clause of §
29 of the Headlee Amendment, they were entitled to a
declaratory judgment unless the State demonstrated that the
plaintiff school districts' costs were not increased as a
result of the requirements or that the costs incurred were
not necessary).
Mandamus
is an extraordinary remedy. Univ Medical Affiliates, PC v
Wayne County Executive, 142 Mich.App. 135, 142; 369
N.W.2d 277 (1985). Thus, the issuance of a writ of mandamus
is only proper where (1) the party seeking the writ has a
clear legal right to performance of the specific duty sought,
(2) the defendant has the clear legal duty to perform the act
requested, (3) the act is ministerial, and (4) no other
remedy exists, legal or equitable, that might achieve the
same result. Rental Properties Owners Ass'n of Kent
Co v Kent Co Treasurer, 308 Mich.App. 498, 518; 866
N.W.2d 817 (2014). "Within the meaning of the rule of
mandamus, a 'clear, legal right' is one 'clearly
founded in, or granted by, law; a right which is inferable as
a matter of law from uncontroverted facts regardless of the
difficulty of the legal question to be decided."
Univ Medical Affiliates, 142 Mich.App. at 143; see
also Rental Properties Owners Ass'n of Kent Co,
308 Mich.App. at 518-519. "A ministerial act is one in
which the law prescribes and defines the duty to be performed
with such precision and certainty as to leave nothing to the
exercise of discretion or judgment." Hillsdale Co
Senior Services, Inc v Hillsdale Co, 494 Mich. 46, 63 n
11; 832 N.W.2d 728 (2013) (quotation marks and citation
omitted); see also Berry v Garrett, 316 Mich.App.
37, 42; 890 N.W.2d 882 (2016). "The burden of showing
entitlement to the extraordinary remedy of a writ of mandamus
is on the plaintiff." White-Bey v Dep't of
Corrections, 239 Mich.App. 221, 223; 608 N.W.2d 883
(1999).
The
moving party bears the burden of proving an entitlement to
injunctive relief. Detroit Fire Fighters Ass'n v City
of Detroit, 482 Mich. 18, 34; 753 N.W.2d 579 (2008). The
moving party carries this burden by proving that the four
traditional elements favor the issuance of a preliminary
injunction by a preponderance of the evidence. Id.;
Dutch Cookie Machine Co v Vande Vrede, 289 Mich.
272, 280; 286 N.W. 612 (1939). In determining whether to
issue a preliminary injunction, a trial judge must consider
the following factors:
(1) harm to the public interest if the injunction issues; (2)
whether harm to the applicant in the absence if temporary
relief outweighs the harm to the opposing party if relief is
granted; (3) the likelihood that the applicant will prevail
on the merits; and (4) a demonstration that the applicant
will suffer irreparable injury if the relief is not granted.
[Thermatool Corp v Borzym, 227 Mich.App. 366, 376;
575 N.W.2d 334 (1998); see also Detroit Fire Fighters
Ass'n, 482 Mich. at 34.]
B.
Summary Disposition
At the
direction of the Court, the parties have filed cross-motions
for summary disposition.[4] Both plaintiffs and the State seek
summary disposition pursuant to MCR 2.116(C)(10). Summary
disposition is appropriate under (C)(10)
when there is no genuine issue of material fact and the
movant is entitled to judgment as a matter of law. The court
considers the pleadings, affidavits, depositions, admissions,
and other documentary evidence in the light most favorable to
the nonmoving party. Smith v Globe Life Ins Co, 460
Mich. 446, 454; 597 N.W.2d 28 (1999). The moving party must
specifically identify the undisputed factual issues and has
the initial burden of supporting its position with
documentary evidence. Id. at 455; [Maiden v
Rozwood, 461 Mich. 109, 120; 597 N.W.2d 817 (1999)]. The
responding party must then present legally admissible
evidence to demonstrate that a genuine issue of material fact
remains for trial. Id.; Smith, supra at 455
and n 2. [E R Zeiler Excavating, Inc v Valenti Trobec
Chandler Inc, 270 Mich.App. 639, 644; 717 N.W.2d 370
(2006).]
Plaintiffs
also seek summary disposition pursuant to MCR 2.116(C)(9).
Summary disposition may be granted under this subrule when
"[t]he opposing party has failed to state a valid
defense to the claim asserted against him or her." A
motion under this subrule tests the sufficiency of a
defendant's pleadings by accepting all well-pleaded
allegations as true. Lepp v Cheboygan Area Schools,
190 Mich.App. 726, 730; 476 N.W.2d 506 (1991). If the
defenses are so clearly untenable as a matter of law that no
factual development could possibly deny plaintiff's right
to recovery, then summary disposition under this rule is
proper. Id. (internal punctuation and citation
omitted).
STANDING
Before
we can reach the merits of the substantive questions posed by
plaintiffs' suit, we must revisit the issue of standing.
The State challenged plaintiffs' standing to commence
this Headlee enforcement action in its answer to
plaintiffs' original complaint. We summarily dismissed
the standing challenge as pertains to individual plaintiffs
Steve Duchane, Randall Blum and Sara Kandel, but reserved our
ruling as pertains to lead plaintiff, Taxpayers for Michigan
Constitutional Government ["TMCG"]. We explained:
[T]he Court dismisses defendants' standing challenge, but
only as to the individual taxpayer plaintiffs, i.e., Duchane,
Blum, and Kandel. Under § 32, "[a]ny taxpayer of
the state has standing to bring suit to enforce the
provisions of the Headlee Amendment." Mahaffey v
Attorney General, 222 Mich.App. 325, 340 (1997). Because
all of plaintiffs' claims and requested forms of relief
are part of an action seeking to enforce Headlee, the
individual taxpayer plaintiffs have § 32 standing.
However, vis-à-vis the lead plaintiff, Taxpayers for
Michigan Constitutional Government (TMCG), the Court reserves
its standing determination. "[A]n organization has
standing to advocate for the interests of its members if the
members themselves have a sufficient interest."
Lansing Sch Ed Ass 'n v Lansing Bd of Ed, 487
Mich. 349, 373 n 21 (2010) (LSEA). However, TMCG bears the
burden of demonstrating that it has standing, see, e.g.,
Moses Inc v Southeast Mich. Council of Gov'ts,
270 Mich.App. 401, 414 (2006), and TMCG is, with regard to
plaintiffs' request for a declaratory judgment, required
to "plead and prove facts which indicate an adverse
interest," LSEA, 487 Mich. at 372 n 20
(quotation marks and citation omitted; emphasis added). See
also MCR 2.605(A)(1) (stating the "actual
controversy" requirement for declaratory judgments).
Because TMCG has failed to plead or prove the facts necessary
to carry its burden of demonstrating that it has standing -
specifically, to demonstrate whether its membership has a
sufficient interest in this matter to afford organizational
standing - the Court holds in abeyance its decision on this
issue. The parties may further address the question of
TMCG's standing in their respective motions for summary
disposition and in any related filings. [Taxpayers for
Michigan Constitutional Government v State of Michigan,
unpublished order of the Court of Appeals, issued May 9, 2017
(Docket No. 334663).]
We now
return to the question of standing and, after a review of the
documentation supplied by plaintiffs, we dismiss the
remainder of the State's standing challenge as without
merit.
Lead
plaintiff TMCG represents it is "a non-partisan,
non-profit, tax exempt organization founded by taxpayers,
municipal leaders, educators and lawyers dedicated to
ensuring the State of Michigan follows the word of law as
written in the state Constitution and fulfills the revenue
sharing requirements guaranteed by the Headlee
Amendment."[5] As we observed in our May 9, 2017 order,
"an organization has standing to advocate for the
interest of its members if the members themselves have a
sufficient interest." LSEA, 487 Mich. at 373 n
21. Plaintiffs append to their motion for summary disposition
as Plaintiffs' Exhibit 10 the affidavit of individual
plaintiff Steven Duchane, who attests to being one of the
founding members and the Treasurer of TMCG. Duchane also
attests that each of TMCG's 20 individual members is a
Michigan resident and taxpayer. He further attests that TMCG
has 20 "municipal members," composed of cities,
villages and townships. Because the individual members, as
taxpayers, have standing under Const 1963, art 9, § 32
to bring this Headlee enforcement action, TMCG has standing
to bring suit in its representative capacity as to these
members. LSEA, 487 Mich. at 373 n 21. Likewise,
because units of local government, including cities, villages
and townships, are considered "taxpayers" under
§ 32 for purposes of vindicating the rights of their
respective constituents, see Oakland Co v State of
Michigan, 456 Mich. 144, 167; 566 N.W.2d 616 (1997);
City of Riverview v State of Michigan, 292 Mich.App.
516, 520 n 1; 808 N.W.2d 532 (2011), TMCG has standing to
bring suit in its representative capacity as to its municipal
members, LSEA, 487 Mich. at 373 n 21. The
State's assertion to the contrary fails for lack of
factual and legal support.
STATE
SPENDING AND § 30
A.
Const 1963, art 9, § 30
At its
core, plaintiffs' suit seeks to answer a single legal
question, which is whether certain categories of state
spending, i.e., payments to school districts guaranteed by
Const 1963, art 9, § 11, payments to PSAs guaranteed by
Const 1963, art 9, § 11 and MCL 380.501, and payments
for state-mandated activities and services under Const 1963,
art 9, § 29, constitute state spending to local
governments under § 30 of the Headlee Amendment. The
question posed by this suit is a novel one. In seeking its
answer, we are guided in our application of § 30 by the
principles governing the construction of constitutional
provisions.
"The
goal of the judiciary when construing Michigan's
Constitution is to identify the original meaning that its
ratifiers attributed to the words used in a constitutional
provision." CVS Caremark v State Tax Comm, 306
Mich.App. 58, 61; 856 N.W.2d 79 (2014). "In performing
this task, we employ the rule of common understanding."
Id. "Under the rule of common understanding, we
must apply the meaning that, at the time of ratification, was
the most obvious common understanding of the provision, the
one that reasonable minds and the great mass of the people
themselves would give it." Id. "Words
should be given their common and most obvious meaning . . .
." In re Burnett Estate, 300 Mich.App. 489,
497-498; 834 N.W.2d 93 (2013). "Further, every provision
must be interpreted in the light of the document as a whole,
and no provision should be construed to nullify or impair
another." Lapeer Co Clerk v Lapeer Circuit
Court, 469 Mich. 146, 156; 665 N.W.2d 452 (2003). The
interpretation of a constitutional provision takes account of
the purpose sought to be accomplished by the provision.
Adair v Michigan, 497 Mich. 89, 102; 860 N.W.2d 93
(2014).
Section
30 provides:
The proportion of total state spending paid to all units of
Local Government, taken as a group, shall not be reduced
below that proportion in effect in fiscal year 1978-79.
[Const 1963, art 9, § 30.]
For
purposes of the Headlee Amendment, the term "Local
Government" is defined in § 33 of that Amendment as
"any political subdivision of the state, including, but
not restricted to, school districts, cities, villages,
townships, charter townships, counties, charter counties,
authorities created by the state, and authorities created by
other units of local government." Const 1963, art 9,
§ 33.
B.
Proposal A Payments to School Districts
State
funding disbursed to local school districts through Proposal
A and the State School Aid Act of 1979, MCL 388.1601 et
seq., constitutes voter-sanctioned payments of state
funding to a specific unit of local government, i.e., public
school districts. Nevertheless, plaintiffs argue that
Proposal A spending is a category of state funding that may
not be classified § 30 revenue sharing. They argue that
classifying Proposal A funding as § 30 revenue sharing
effectively shifts the State's tax burden to local
government units. A shifting of the tax burden occurs,
according to plaintiffs, because the Proposal A payments
supplant "other State spending previously paid to Local
Governments, placing a tax burden on Local Governments to
further raise local taxes in order to offset lost State
revenue." We find no support in the plain language of
§ 30 to sustain such a claim.
Although
§ 30 embodies and effectuates the anti-shifting purpose
referenced in § 25 of the Headlee Amendment, Schmidt
v Dep't of Education, 441 Mich. 236, 254; 490 N.W.2d
584 (1992), the State's inclusion of Proposal A funds
paid to school districts does not trigger a forbidden tax
shift. Section 30 plainly provides that "[t]he
proportion of total state spending paid to all units of Local
Government, taken as a group, shall not be reduced
below that proportion in effect in fiscal year 1978-79."
(Italics added.) The inclusion of the phrase "taken as a
group" in § 30 "clearly requires that the
overall percentage allotment of the state budget for local
units of government must remain at 1978 levels."
Durant v State Bd of Ed, 424 Mich. 364, 393; 381
N.W.2d 662 (1985). In other words, "§ 30 only
requires that state funding of all units of local
governments, taken as a group, be maintained at 1978-79
levels." Id. Our Supreme Court expressly
rejected, as a "strained interpretation of an
unambiguous statement of intent by the voters," the
proposition that § 30 mandated that each individual unit
of government must receive in perpetuity the same proportion
of the allotment for local government as it received in 1978.
Id. Thus, § 30 "does not guarantee any
individual local unit of government, or indeed any type of
unit (all cities, for example), that it will always either
get the same dollars as the year before or even the same
share of state dollars." Fino, A Cure Worse Than the
Disease? Taxation and Finance Provisions in State
Constitutions, 34 Rutgers L J 959, 1003 (2003). Rather,
the voters intended, as revealed in the plain language of
§ 30, that the State be free from time to time to
rebalance how § 30 revenue sharing is distributed among
"all units of Local Government, taken as a group"
so long as the overall proportion of funding remains at the
constitutionally-mandated level. The inclusion of Proposal A
funding in § 30 spending reflects a
constitutionally-sanctioned rebalancing of the distribution
of that revenue sharing. Plaintiffs' argument to the
contrary is an argument without foundation in the plain
language of § 30. Absent that constitutional foundation,
their challenge falls. The State is entitled to summary
disposition on Count I of plaintiffs' complaint.
C.
Public School Academy Funding
Plaintiffs
argue that state aid to PSAs does not fall within the scope
of § 30 funding because it is not a "local unit of
government." We conclude, however, that state funding of
PSAs constitutes funding of a local unit of local government
for the purpose of calculating state aid under the Headlee
Amendment.
It is
undisputed that "school districts" constitute a
"unit of local government" as defined in § 33
of the Amendment. Const 1963, art 9, § 33. The question
then is whether PSAs are "school districts" for
purposes of calculating state funding of education. We answer
that question affirmatively in light of the Revised School
Code, MCL 380.1 et seq., which provides that
"[a] public school academy . . . is a school district
for purposes of section 11 of article IX of the state
constitution of 1963 . . . ." MCL 380.501(1). The
constitutional provision referred to mandates that
"[t]here 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." Const 1963, art 9, §
11. In addition, the School Aid Act, MCL 388.1601 et
seq., includes PSAs in the definition of
"district." MCL 388.1603(7). To receive state
funding, PSAs must receive a "district code" from
the Department of Education. MCL 388.1608b(1). Pursuant to
these provisions, PSAs receive state funding earmarked for
school districts.
Plaintiffs
argue that state funds directed to PSAs should not be counted
as state funds directed to school districts for purposes of
the Headlee Amendment because PSAs do not resemble school
districts in many other ways. Indeed, PSAs are school
districts for a "limited purpose." OAG 1995-1996,
No. 6915, p204 (September 4, 1996). See also OAG 2003-2004,
No. 7154, p121-122 (March 31, 2004).[6] Nevertheless, PSAs are
school districts for the purpose at issue in this case, i.e.,
the receipt of state school aid. Because state funding for
PSAs is considered aid to a school district by law, we see no
basis to not count those monies when calculating state
spending paid to local government.
Plaintiffs'
other argument is that PSAs could not have been understood as
"school districts" when the Headlee Amendment was
ratified. It is unlikely that the Headlee voters specifically
intended that aid to PSAs would count as state aid to local
governments considering that PSAs did not yet
exist.[7] For the same reason, however, there is no
reason to conclude that the voters specifically intended to
exclude PSA funding from that calculation. What is clear is
that the voters almost certainly understood that the state
has discretion in how it chooses to "maintain and
support a system of free public elementary and secondary
schools . . . ." Const 1963, art 8, § 2. As the
Supreme Court stated in Council of Organizations &
Others for Educ About Parochiaid v Governor, 455 Mich.
557; 566 N.W.2d 208 (1997), "[t]he Legislature has had
the task of defining the form and the institutional structure
through which public education is delivered in Michigan since
the time Michigan became a state." Id. at 571,
citing Const 1835, art 10, § 3.[8]
Significantly,
there is no language in the Headlee Amendment showing an
intent to limit this ongoing authority of the state to define
and fund school districts. Thus, the text does not compel the
conclusion sought by plaintiffs. We have also reviewed the
record presented to us by the parties and find no evidence
that would demonstrate an intent either to limit the
state's authority to define and fund school districts or
to specifically bar the state from later defining the term
"school district" to include PSAs.
The
Legislature lawfully defined PSAs as school districts for the
purposes of receiving state aid. Given that, we see no reason
to overrule the state's decision to count those funds as
payments to local government under the Headlee Amendment. Put
simply, we decline to hold that PSAs are school districts for
purposes of receiving state aid, but not school districts for
purposes of determining how much state aid was received by
school districts.[9]
D.
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