Opinion
No. 334663
10-29-2019
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.
ON RECONSIDERATION
Taxpayer-plaintiffs bring this original action against the state of Michigan; the Department of Technology, Management and Budget; and the Office of Auditor General to enforce § 30 of the Headlee Amendment, 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%. They disagree, however, with regard to what categories of state spending may be classified as "state spending 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 monies paid to school districts pursuant to Proposal A, Const. 1963, art. 9, § 11. Count II makes the same assertion as to monies 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 toward the proportion of state funds required by § 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.
Plaintiffs also seek to enforce § 25 of the Headlee Amendment, Const. 1963, art. 9, § 25. However, § 25 of the Headlee Amendment is an introductory paragraph to the amendment that summarizes the revenue and tax limits imposed on the state and local governments by the other provisions of the amendment. Durant v. Michigan , 456 Mich. 175, 182-183, 566 N.W.2d 272 (1997) ; Waterford Sch. Dist. v. State Bd. of Ed. (After Remand) , 130 Mich. App. 614, 620, 344 N.W.2d 19 (1983), aff'd 424 Mich. 364, 381 N.W.2d 662 (1985). The introductory sentences found in § 25 are not intended "to be given the substantive effect of creating specific rights and duties." Waterford Sch. Dist. , 130 Mich. App. at 620, 344 N.W.2d 19.
Plaintiffs also alleged that the state improperly classified as § 30 state spending those funds paid to maintain trunk-line roads. This allegation constituted the gravamen of Count III of plaintiffs' complaint. We dismissed Count III without prejudice upon stipulation of the parties. Taxpayers for Mich. Constitutional Gov't v. Michigan , unpublished order of the Court of Appeals, entered December 4, 2017 (Docket No. 334663).
For the reasons set forth in this opinion, we grant summary disposition in favor of defendants on Counts I and 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 plaintiffs 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.
I. BURDENS OF PROOF
A. CAUSES OF ACTION
Plaintiffs seek declaratory, injunctive, and mandamus relief.
At oral argument, plaintiffs withdrew their request for monetary relief for past shortfalls in the state's payments to local government in satisfaction of its § 30 revenue-sharing obligation.
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 Cnty. Chief Executive v. Governor , 230 Mich. App. 258, 266, 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 Cnty. v. State of Michigan , 456 Mich. 144, 166, 566 N.W.2d 616 (1997). "[T]he 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 486 Mich. 468, 785 N.W.2d 119 (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) (stating that because the plaintiffs met their initial burden of demonstrating a violation of the "prohibition of unfunded mandates" 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. Med. Affiliates, P.C. v. Wayne Co. Executive , 142 Mich. App. 135, 142, 369 N.W.2d 277 (1985). Thus, the issuance of a writ of mandamus is only proper when (1) the party seeking the writ has a clear legal right to performance of the specific duty sought, (2) the defendant has a 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 Props. Owners Ass'n of Kent Cnty. v. Kent Cnty. 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. Med. Affiliates , 142 Mich. App. at 143, 369 N.W.2d 277 (citation omitted); see also Rental Props. Owners Ass'n of Kent Cnty. , 308 Mich. App. at 518-519, 866 N.W.2d 817. "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 Cnty. Senior Servs., Inc. v. Hillsdale Cnty. , 494 Mich. 46, 58 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 833 (1999).
The moving party bears the burden of proving an entitlement to injunctive relief. Detroit Fire Fighters Ass'n v. 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 those four elements, which are:
(1) harm to the public interest if the injunction issues; (2) whether harm to the applicant in the absence of 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, 753 N.W.2d 579.]
B. SUMMARY DISPOSITION
At the direction of the Court, the parties have filed cross-motions for summary disposition. Both plaintiffs and defendants seek summary disposition pursuant to MCR 2.116(C)(10). Summary disposition is appropriate under MCR 2.116(C)(10)
Taxpayers for Mich. Constitutional Gov't v. Michigan , unpublished order of the Court of Appeals, entered May 9, 2017 (Docket No. 334663).
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. The moving party must specifically identify the undisputed factual issues and has the initial burden of supporting its position with documentary evidence. The responding party must then present legally admissible evidence to demonstrate that a genuine issue of material fact remains for trial. [ E. R. Zeiler Excavating, Inc. v. Valenti Trobec Chandler Inc. , 270 Mich. App. 639, 644, 717 N.W.2d 370 (2006) (citations omitted).]
Plaintiffs also seek summary disposition pursuant to MCR 2.116(C)(9). Summary disposition may be granted under MCR 2.116(C)(9) 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 Sch. , 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 subrule is proper. Id. (citation omitted). II. STANDING
Before we can reach the merits of the substantive questions in this case, we must revisit the issue of standing. Defendants challenged plaintiffs' standing to commence this Headlee enforcement action in their answer to plaintiffs' original complaint. We summarily dismissed the standing challenge as it pertained to individual plaintiffs Steve Duchane, Randall Blum, and Sara Kandel, but we reserved our ruling as it pertained 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)(l) (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 Mich. Constitutional Gov't v. Michigan , unpublished order of the Court of Appeals, entered May 9, 2017 (Docket No. 334663).]
After reviewing plaintiffs' documentation, we dismiss the remainder of defendants' standing challenge as without merit.
Lead plaintiff TMCG represents that 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." As we observed in our May 9, 2017 order, "an organization has standing to advocate for the interests of its members if the members themselves have a sufficient interest." LSEA , 487 Mich. at 373 n. 21, 792 N.W.2d 686. Plaintiffs append to their motion for summary disposition the affidavit of individual plaintiff Steve 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," including 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, 792 N.W.2d 686. 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 Cnty. v. Michigan , 456 Mich. 144, 167, 566 N.W.2d 616 (1997) ; Riverview v. 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, 792 N.W.2d 686. Defendants' assertion to the contrary fails for lack of factual and legal support.
Taxpayers for Michigan Constitutional Government, Home Page < http://www.michcongov.org> (accessed May 26, 2020) [https://perma.cc/A2RE-ZVQ2].
Superseded by statute on other grounds as stated in Telford v. Michigan , 327 Mich. App. 195, 933 N.W.2d 347 (2019).
III. 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 Cnty. 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, 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 as § 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 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 antishifting purpose referred to in § 25 of the Headlee Amendment, Schmidt v. Dep't of Ed. , 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." (Emphasis 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. The 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 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 local 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 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 language of § 30. Absent that constitutional foundation, their challenge fails. Defendants are entitled to summary disposition on Count I of plaintiffs' complaint.
C. PSA FUNDING
Plaintiffs argue that state aid to PSAs does not fall within the scope of § 30 funding because it is not a unit of local government. We conclude, however, that state funding of PSAs constitutes funding of a 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. 6,915, p. 204 (September 4, 1996). See also OAG, 2003-2004, No. 7,154, pp. 121-122 (March 31, 2004). 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.
For example, PSAs are not geographically limited, are not governed by an elected board, and cannot levy taxes.
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. 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 Ed. About Parochiaid, Inc. 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, 566 N.W.2d 208, citing Const. 1835, art. 10, § 3.
The Headlee Amendment was ratified in 1978. Citizens Protecting Michigan's Constitution v. Secretary of State , 503 Mich. 42, 103 n. 189, 921 N.W.2d 247 (2018). The Legislature authorized the creation of PSAs in 1993. 1993 PA 362.
Council of Organizations dealt with a parallel question also arising under MCL 380.501(1), i.e., a challenge to the constitutionality of the provision deeming PSAs to be "public schools" for purposes of Article 8, § 2 of the state Constitution. The Supreme Court upheld the Legislature's classification of PSAs as public schools. See Council of Organizations , 455 Mich. at 571-584, 566 N.W.2d 208.
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 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 purpose of receiving state aid. Accordingly, 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 the school districts received.
Because we conclude that PSAs are school districts for purposes of calculating state aid under the Headlee Amendment, we need not address the question whether a PSA constitutes some other "unit of local government."
D. SECTION 29 MANDATES
In Count IV of their complaint, plaintiffs seek, in part, a judgment from this Court declaring that state spending to fund state-mandated local services and activities as required by § 29 of the Headlee Amendment may not be included in the state's calculation of the proportion of total state spending paid to units of local government, taken as a group, under § 30. According to plaintiffs, when §§ 29 and 30 are read together, they require the state to fully fund the necessary implementation costs of any new mandate imposed on a unit of local government and to provide this funding in addition to the funding paid in satisfaction of the state's § 30 revenue-sharing obligation. We agree.
Const. 1963, art. 9, § 29 provides, in pertinent part:
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs.
The first sentence of § 29 speaks only to "existing" activities and so "aimed at existing services or activities already required of[, or otherwise performed by,] local government" at the time the Headlee Amendment became effective. Durant , 424 Mich. at 379, 381 N.W.2d 662. This sentence " ‘prohibits reduction of the state proportion of necessary costs with respect to the continuation of state-mandated activities or services.’ " Judicial Attorneys Ass'n v. Michigan , 460 Mich. 590, 595, 597 N.W.2d 113 (1999) (emphasis added), quoting Mayor of Detroit v. Michigan , 228 Mich. App. 386, 396, 579 N.W.2d 378 (1998).
The second sentence of § 29 refers only to "[a] new activity or service ... beyond that required by existing law ...." Unlike the first sentence, it does not refer to mandates that were in existence prior to the Headlee Amendment, i.e., it "addresses future services or activities." Durant , 424 Mich. at 379, 381 N.W.2d 662.
In sum, § 29 "prohibits the state from reducing its proportion of the necessary costs of existing activities while it requires the state to pay the increased necessary costs in full when it mandates new activities or mandates activities at an increased level ." Judicial Attorneys Ass'n , 460 Mich. at 597-598, 597 N.W.2d 113. In Schmidt , 441 Mich. at 257 n. 24, 490 N.W.2d 584, our Supreme Court observed:
A short time after the Headlee Amendment was ratified by the voters, its drafters prepared notes reflecting their view of the amendment's intent. Although the drafters' notes are not authoritative, Durant , [424 Mich. at 382 n. 12, 381 N.W.2d 662 ], they are one piece of evidence concerning the common understanding of the voters' intent. [See also Durant , 456 Mich. at 196, 566 N.W.2d 272 ; Macomb Cnty. Taxpayers Ass'n v. L'Anse Creuse Pub. Sch. , 455 Mich. 1, 8-9, 564 N.W.2d 457 (1997).]
The drafters' notes with regard to § 30 provide:
The primary intent of this section was to prevent a shift in tax burden, either directly or indirectly from state to
local responsibility. The phrase "taken as a group" permits the legislature to reallocate funds to local units of government, i.e., geographically or from one unit to another. It was the drafters' intent to rely on the political process to effect such allocations and not to limit the legislature's ability to create more effective and efficient governmental entities or to eliminate those local units which no longer serve any utilitarian purpose.
Additional or expanded activities mandated by the state, as described in Section 29 would tend to increase the proportion of total state spending paid to local government above that level in effect when this section becomes effective. [Plaintiffs' Brief in Support of Motion for Summary Disposition (December 6, 2017) at Exhibit 1, Taxpayers United Research Institute, Drafters' Notes – Tax Limitation Amendment (Proposal E, approved by the electors on November 7, 1978, as an Amendment to the Michigan Constitution of 1963), § 30, pp. 10-11.]
This note weighs in favor of plaintiffs' position because it evinces an intent that state-funding obligations arising from new § 29 obligations are to be paid in addition to § 30 revenue sharing. Likewise, the differing purposes of these sections support plaintiffs' position. State funding under the second sentence of § 29 is intended to offset the necessary costs of new burdens placed on units of local government, whereas § 30 state funding is intended to preserve the 1978 level of state funding to units of local government to be used for then-extant services or activities. If state spending to fund new state mandates under § 29 may be included in the state's calculation of the proportion of total state spending paid to units of local government, taken as a group, under § 30, then § 29 state funding for new mandates would supplant state spending intended for local use and, thereby, allow funding for new mandates to serve two conflicting purposes, i.e., to fund new state mandates as well as to preserve the 1978-1979 level of state funding to local governments. This double duty would force units of local government to choose between cutting services or raising taxes to make up for the funds lost to pay for the necessary costs of new mandates. Such a result is at odds with the proper balancing of the "dual goals of a) preserving the Legislature's ability to enact necessary and desirable legislation in response to changing times and conditions and b) guaranteeing a predictable level of minimum funding" because this result accords more discretion to the Legislature than envisioned by the Headlee Amendment. Judicial Attorneys Ass'n , 460 Mich. at 605, 597 N.W.2d 113. That result is also at odds with the principles of constitutional construction, which provide that each provision is of equal dignity and none may be construed so as to nullify or substantially impair another. Durant v. Dep't of Ed. (On Second Remand) , 186 Mich. App. 83, 115, 463 N.W.2d 461 (1990), remanded on other grounds 441 Mich. 930, 498 N.W.2d 736 (1993). Accordingly, plaintiffs are entitled to summary disposition on Count IV of their complaint.
Judge Borrello points out that not counting the costs of new services or activities toward the state's funding obligation could result in the state's having to provide funds to local governments in excess of 48.97% of total spending. However, § 30 sets 48.97% as the floor, not the ceiling, of total state spending to be provided to local governments. Moreover, the Headlee Amendment does not define any mechanism by which a reduction of required local services or activities could be offset against the cost of new mandates. And there is no evidence in the record that the state has ever defined or employed such a mechanism.
E. MANDAMUS RELIEF
Shortly after the Headlee Amendment was enacted, our Legislature passed 1979 PA 101, codified at MCL 21.231 et seq. , to implement the provisions of the Headlee Amendment. Const. 1963, art. 9, § 34 ; Adair , 497 Mich. at 103 n. 31, 860 N.W.2d 93. Section 5 of the act contains the following pertinent provision:
The governor shall include in a report which is to accompany the annual budget recommendation to the legislature, those amounts which the governor determines are required to make disbursements to each local unit of government for the necessary cost of each state requirement for that fiscal year and the total amount of state disbursements required for all local units of government. [ MCL 21.235(3).]
Section 11 of the act provides:
(1) Within 6 months after the effective date of this act the department shall collect and tabulate relative information as to the following:
(a) The state financed proportion of the necessary cost of an existing activity or service required of local units of government by existing law.
(b) The nature and scope of each state requirement which shall require a disbursement under section 5.
(c) The nature and scope of each action imposing a potential cost on a local unit of government which is not a state requirement and does not require a disbursement under this act.
(2) The information shall include:
(a) The identity or type of local unit and local unit agency or official to whom the state requirement or required existing activity or service is directed.
(b) The determination of whether or not an identifiable local direct cost is necessitated by state requirement or the required existing activity or service.
(c) The amount of state financial participation, meeting the identifiable local direct cost.
(d) The state agency charged with supervising the state requirement or the required existing activity or service.
(e) A brief description of the purpose of the state requirement or the required existing activity or service, and a citation of its origin in statute, rule, or court order.
(3) The resulting information shall be published in a report submitted to the legislature not later than January 31, 1980. A concurrent resolution shall be adopted by both houses of the legislature certifying the state financed proportion of the necessary cost of an existing activity or service required of local units of government by existing law. This report shall be annually updated by adding new state requirements which require disbursements under section 5 and each action imposing a cost on a local unit of government which does not require a disbursement under this act. [ MCL 21.241.]
Plaintiffs seek a writ of mandamus to force the state and its officers and departments to honor the annual disclosure and reporting duties set forth in both MCL 21.235(3) and MCL 21.241. We grant mandamus as requested.
It is clear that MCL 21.241 establishes a legislatively mandated duty that the state, through its officers and departments, collect, report, and place on the public record certain information regarding the state's compliance with the Headlee Amendment. The state has breached this duty. It is equally clear that the acts required by these statutory provisions are ministerial and that the failure of the state to undertake such acts undermines the right and role of taxpayer oversight and enforcement conferred by Const. 1963, art. 9, § 32. As noted by plaintiffs, the failure of the state to comply with the dictates of MCL 21.235(3) and MCL 21.241 "prevents taxpayers from knowing what mandated activity is funded and what is unfunded" and "prevents taxpayers from specifically identifying mandated activity that is included within art. 9, § 30 calculations and what, if any, mandated activity is not included." For these reasons, we deem mandamus to be an appropriate remedy and hereby direct the state through its officers and departments to hereafter comply with the annual reporting requirements of MCL 21.235(3) and MCL 21.241.
IV. COSTS AND ATTORNEY FEES
Summary disposition and a declaratory judgment are granted, in part, to defendants on Counts I and II of plaintiffs' complaint and to plaintiffs on Count IV of plaintiffs' complaint consistent with this opinion. Mandamus relief pursuant to Count IV is prospective only because plaintiffs have waived their claim to compensation for the state's past practice of counting funding for new or increased mandates for purposes of § 30. Plaintiffs may recover costs and a reasonable attorney fee as allowed by Const. 1963, art. 9, § 32 and Adair , 486 Mich. at 494, 785 N.W.2d 119, limited to the costs and fees incurred during the litigation related to Count IV of their complaint.
Meter, J. (concurring in part and dissenting in part).
I concur with most of the lead opinion's well-reasoned analysis. I dissent, however, from the lead opinion's analysis of Count II of plaintiffs' complaint. As noted in the lead opinion, Const. 1963, art. 9, § 30 provides that 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." The term "Local Government" is defined by Const. 1963, art. 9, § 33 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." I would hold that a Public School Academy (PSA) is neither a "political subdivision of the state," generally, nor a "school district," specifically, within the meaning of § 33 and, thus, is not a unit of local government for purposes of § 30. Because a PSA is not a unit of local government, state spending paid to a PSA is not state spending paid to a unit of local government and § 33 bars the state from classifying it as such.
I. POLITICAL SUBDIVISION OF THE STATE
Plaintiffs argue that state funds disbursed to PSAs may not be included in the state's calculation of the proportion of total state spending paid to units of local government, taken as a group, under § 30. According to plaintiffs, funds disbursed to PSAs may not be classified as spending paid to local government because a PSA is not a political subdivision of the state as that term was commonly understood by the ratifiers of the Headlee Amendment in 1978. I agree.
A. PREVIOUS INTERPRETATIONS
Preceding the adoption of the Headlee Amendment, in OAG, 1963-1964, No. 4,037, p. 1 (January 2, 1963), our attorney general analyzed whether a county drainage district constituted a political subdivision of the state for purposes of determining whether the state was obligated to provide social security coverage for employees of such a district. The attorney general described the "distinctive marks" of a political subdivision of the state as follows:
The political divisions of the state are those which are formed for the more effectual or convenient exercise of political power within the particular localities. Originally, counties and townships, in which a uniform state policy is
observable, composed this class almost or quite exclusively. Then, as population became denser in certain places, and there was added to this common design a special necessity for local government different from that proper to more rural districts, villages, towns and cities were constituted, and, as these were separated by their charters of incorporation from the townships of which they had before been part, and absorbed their functions, they also became political divisions. In these institutions, therefore, must be discovered the essential characteristics of their class, and they will be such common and prominent features as have co-existed with these organizations throughout their history, and are not possessed by other bodies of legislative creation which stand outside of the same category. These distinctive marks are, I think, that they embrace a certain territory and its inhabitants, organized for the public advantage, and not in the interest of particular individuals or classes; that their chief design is the exercise of governmental functions, and that to the electors residing within each is, to some extent, committed the power of local government, to be wielded either mediately or immediately, within their territory, for the peculiar benefit of the people there residing. Bodies so constituted are not merely creatures of the state, but parts of it, exerting the powers with which it is vested for the promotion of those leading purposes which it was intended to accomplish, and according to the spirit which actuates our republican system. They are themselves commonwealths and therefore are properly entrusted with the sovereign power of taxation to meet their own necessities. [ Id . at 3 (quotation marks and citation omitted).]
The attorney general then opined that a county drainage district was not a political subdivision of the state because the drainage district could not operate as a body corporate when it had no independent officers or its own drainage board; because its chief end was not the government of persons and things within its territory but mere land improvement at the expense of the land, either through general taxation or special assessment; and because the electors of the district had no voice in the corporate affairs of the district. Id . at 6-8.
Shortly after the adoption of the Headlee Amendment, this Court analyzed whether Delta College, a community-college district organized under state law, was a political subdivision of the state. People v. Egleston , 114 Mich. App. 436, 319 N.W.2d 563 (1982). This Court began its analysis by summarizing the defining attributes of a political subdivision of the state as follows:
The attributes which are generally regarded as distinguishing a political subdivision are its existence for the purpose of discharging some function of local government, its prescribed area and its authority for self-government through officers selected by it. The term "political subdivision" is both broad and comprehensive and denotes any division of a state made by the proper authorities for the purpose of carrying out a portion of those functions of the state which by long usage and the inherent necessities of government have always been regarded as public. It is not necessary that a political subdivision exercise all the functions of the state, but is sufficient if it is authorized to exercise a portion of them. [ Id . at 440, 319 N.W.2d 563 (citation omitted).]
With regard to the nature, structure, and authority of a community-college district, this Court observed:
Const. 1963, art. 8, § 7 requires the Legislature to provide by law for the establishment and financial support of public community colleges to be supervised and controlled by locally elected boards. The governing body of the district is elected at large by the voters of the district. The district is a body corporate which may sue and be sued and may take, condemn, use, hold, sell, lease and convey real property without restriction as to location. MCL 389.103 ; MSA 15.615(1103). The governing board has the power to make plans for, promote, acquire, construct, own, develop, maintain and operate a community college and a vocational-technical education program. The board may
borrow, subject to the provisions of 1943 PA 202, as amended, such sums of money on such terms as it deems desirable. It is authorized to borrow money and issue bonds for the obligation incurred, pursuant to MCL 389.122 ; MSA 15.615(1122) and MCL 389.126 ; MSA 15.615(1126). The district is specifically granted authority to adopt "bylaws, rules and regulations for its own government and for the control and government of the community college district." MCL 389.125 ; MSA 15.615(1125). The district is also empowered to do all other things in its judgment necessary for the proper establishment, maintenance, management and carrying on of the community college. MCL 389.125(f) ; MSA 15.615(1125)(f). [ Egleston , 114 Mich. App. at 440-441, 319 N.W.2d 563.]
This Court then concluded that a community-college district constituted a political subdivision within the plain meaning of the term. The Court elaborated:
We view three factors as most important in leading to the conclusion that a community college district is a "political subdivision" of the state for purposes of MCL 750.255 ; MSA 28.452. First, the governing body of the district is responsible only to its own electorate for its management of the district. No other political subdivision of the state exercises authority over the community college board. Second, the Legislature explicitly granted the board authority to adopt rules and regulations for its own government and for the control and government of the district. Third, the district's borrowing power is broad and similar to that of other political subdivisions of the state. We think that a community college district comes clearly within the plain meaning of the term "political subdivision." [ Egleston , 114 Mich. App. at 441, 319 N.W.2d 563.]
B. CHARACTERISTICS OF A PSA
The Legislature authorized the creation of PSAs in 1993 PA 362 (Act 362), which is commonly referred to as the charter schools act. Council of Organizations & Others for Ed. About Parochiaid, Inc. v. Governor , 455 Mich. 557, 560-561, 566 N.W.2d 208 (1997) ; MCL 380.501 et seq. In keeping with our precedent, this Court must analyze Act 362 to ascertain whether the Legislature imprinted PSAs with the "distinctive marks" of a political subdivision of the state as identified in OAG, 1963-1964, No. 4,037, at 3 and Egleston .
Act 362 conferred on PSAs the status of "limited purpose" school districts. OAG, 1995-1996, No. 6,915, p. 204 (September 4, 1996); see also OAG, 2003-2004, No. 7,154, pp. 121-122 (March 31, 2004). Our Legislature considers PSAs to be school districts for the limited purpose of receiving state aid to schools from the State School Aid Fund. MCL 380.501(1). Our Legislature also conferred on PSAs the designations of "public school," "body corporate," and "governmental agency." MCL 380.501(1). "The powers granted to a public school academy ... constitute the performance of essential public purposes and governmental functions of this state." MCL 380.501(1). These powers serve a local-government purpose, which is to implement "the actual intricacies of the delivery of specific educational services" to the students served by each respective PSA. LM v. Michigan , 307 Mich. App. 685, 697, 862 N.W.2d 246 (2014). The students served by each authorized PSA are primarily those students who reside within the geographical boundaries of the body authorizing the PSA. MCL 380.504(3). PSAs may be authorized only by the board of a school district, the board of an intermediate school district, the board of a community college, or the governing board of a state public university. MCL 380.501(2)(a)(i ) through (iv ).
A PSA is organized as a nonprofit corporation under the Nonprofit Corporation Act, MCL 450.2101 et seq. MCL 380.501(1) ; Council of Organizations , 455 Mich. at 565, 566 N.W.2d 208. The governing body of a PSA is not elected at large by the voters of the geographic district of the authorizing body; rather, the governing body of a PSA is a board of directors composed of privately selected members, upon whom the Legislature has conferred the status of public officers who must "take the constitutional oath of office for public officers under section 1 of article XI of the state constitution of 1963." MCL 380.503(11). The authorizing body establishes by resolution "the method of selection, length of term, and number of [board] members ... of each public school academy subject to its jurisdiction." MCL 380.503(5). Additionally, a PSA may employ an education-management corporation, with the approval of the PSA's authorizing body, to manage or operate the PSA or provide administrative, managerial, or instructive staff to the PSA. MCL 380.503c ; MCL 380.503(6)(k) and (n). A PSA, its incorporators, board members, officers, employees, and volunteers are covered by governmental immunity. MCL 380.503(8).
A PSA may not levy ad valorem property taxes or another tax for any purpose, MCL 380.503(9), or charge tuition, MCL 380.504(2). However, a PSA may enter into an "agreement, mortgage, loan, or other instrument of indebtedness" with a third party. MCL 380.503b(1). It may borrow money and issue bonds. MCL 380.504a(g). It may also "solicit and accept any grants or gifts for educational purposes and to establish or permit to be established on its behalf 1 or more nonprofit corporations the purpose of which is to assist the public school academy in the furtherance of its public purposes." MCL 380.504a(f). A PSA may enter into binding legal agreements with persons or entities as necessary for the operation, management, financing, and maintenance of the PSA and sue and be sued in its name. MCL 380.504a(a) and (d). Additionally, a PSA may "acquire, hold, and own in its own name real and personal property, or interests in real or personal property, for educational purposes by purchase, gift, grant, devise, bequest, lease, sublease, installment purchase agreement, land contract, option, or condemnation, and subject to mortgages, security interests, or other liens; and to sell or convey the property as the interests of the public school academy require." MCL 380.504a(b). A PSA, "with the approval of the authorizing body, may employ or contract with personnel as necessary for the operation of the public school academy, prescribe their duties, and fix their compensation." MCL 380.506.
Despite the powers and authority conferred by the Legislature on PSAs, PSAs are under the ultimate and immediate control of the authorizing bodies. Council of Organizations , 455 Mich. at 573, 566 N.W.2d 208. The authorizing bodies serve as the fiscal agent for each PSA and are invested with the power of oversight and the ability to revoke a charter any time an authorizing body has a reasonable belief that grounds for revocation exist. MCL 380.502(2)(a) ; MCL 380.507(1)(d) through (h) ; MCL 380.507(3) ; Council of Organizations , 455 Mich. at 573, 566 N.W.2d 208.
Finally, the board of each of the authorizing bodies is either publically elected or appointed by public bodies. The public maintains control of the PSAs through the authorizing bodies. Council of Organizations , 455 Mich. at 575-576, 566 N.W.2d 208.
C. A PSA IS NOT A POLITICAL SUBDIVISION OF THE STATE
Given the foregoing review of the structure, operations, and powers of a PSA as set forth in Act 362, I would hold that a PSA lacks the distinctive "marks" of a "political subdivision of the state" for purposes of § 33 and is therefore not a "local government" for purposes of § 30. First, a PSA has no direct electorate. A PSA is responsible to its authorizing body for its management and the provision of educational services. In turn, the authorizing body is responsible to its electorate for the degree of oversight the body exercises or fails to exercise over the PSA to ensure that the PSA operates within the terms of its charter and under the law. Thus, the electorate within the authorizing body's geographical boundaries plays a less direct role in the management of the body corporate of a PSA than does the electorate in the management of the body corporate of a political subdivision of the state.
Second, a PSA possesses a lesser capacity for self-governance than other bodies corporate that are traditionally recognized as political subdivisions. Each PSA is under the ultimate and immediate control of its authorizing body, which our Legislature invested with the powers to charter, to exercise oversight over PSA operations, to revoke a charter when reasonable grounds for revocation exist, and to serve as the fiscal agent for each PSA for purposes of the receipt of school aid funds from the state.
The absence of these two crucial and distinctive "marks" of a political subdivision supports plaintiffs' position that a PSA is not a local government for purposes of § 30. Given the common characteristics of a political subdivision of the state, as understood and recognized both before and after the ratification of the Headlee Amendment and as reflected by OAG, 1963-1964, No. 4,037 and Egleston , I can only conclude that the great mass of the people who ratified the Headlee Amendment would not have understood a PSA to be a political subdivision of the state for purposes of § 33 and, therefore, a local government for purposes of § 30. Adair v. Michigan , 497 Mich. 89, 101, 860 N.W.2d 93 (2014) ; CVS Caremark v. State Tax Comm. , 306 Mich. App. 58, 61, 856 N.W.2d 79 (2014). A PSA may be a component of a local government, but it is not itself a local government.
See also Paquin v. St. Ignace , 504 Mich. 124, 135-136, 934 N.W.2d 650 (2019) (noting, albeit in a decision involving Const. 1963, art. 11, § 8, that it is irrelevant whether an entity performs similar functions to those of a local government; to pass constitutional scrutiny, the relevant question is whether the entity is itself a local government).
II. SCHOOL DISTRICT
Plaintiffs also argue that state funds disbursed to PSAs may not be included in the state's calculation of the proportion of total state spending paid to units of local government under § 30 because a PSA is not a "school district" as the term was commonly understood by the ratifiers of the Headlee Amendment in 1978. Again, I agree.
This Court has long recognized that a school district is a political subdivision of the state. Nalepa v. Plymouth-Canton Community Sch. Dist. , 207 Mich. App. 580, 586-587, 525 N.W.2d 897 (1994). This was the common understanding at the time the Headlee Amendment was ratified. As I have already noted, however, a PSA lacks several crucial and distinctive "marks" of a political subdivision and, therefore, is not a political subdivision of the state. If a PSA is not a political subdivision of the state, then it cannot be a school district for purposes of § 33 or a local government for purposes of § 30. Thus, the question becomes whether, by designating PSAs as "limited purpose" school districts in MCL 380.501(1), the Legislature intended to create a new species of school district for the purpose of subjecting PSAs to an application of the Headlee Amendment. As previously noted, our Legislature conferred upon PSAs the designation of limited-purpose school districts in MCL 380.501(1), which provides, in part, that "[a] public school academy is a public school under section 2 of article VIII of the state constitution of 1963, [and] is a school district for the purposes of section 11 of article IX of the state constitution of 1963 ...." Article 8, § 2 obligates our Legislature to maintain and support a system of free public elementary and secondary schools by providing for and financing a system of free public schools. LM , 307 Mich. App. at 697, 862 N.W.2d 246. Article 9, § 11 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. Article 9, § 11 also embodies the Proposal A amendment and thereby guarantees local schools districts funding at the minimum level it provided in fiscal year 1994-1995, or approximately $5,000 per pupil. Const. 1963, art. 9, § 11 ; Durant v. State of Michigan , 251 Mich. App. 297, 308, 650 N.W.2d 380 (2002). The limited-purpose designation is also conferred in § 3 of the School Aid Act, MCL 388.1601 et seq . MCL 388.1603(7).
In MCL 380.501(1), the Legislature designated a PSA as a "school district" for a single specific constitutional purpose—the receipt of state school aid funding. The Legislature made no reference to the Headlee Amendment in MCL 388.1603(7). The Legislature did make clear, however, that a PSA is a "public school," a "body corporate," and "a governmental agency." MCL 380.501(1). The Legislature also indicated that "[t]he powers granted to a public school academy ... constitute the performance of essential public purposes and governmental functions of this state." MCL 380.501(1). The language employed in MCL 380.501(1) clearly evinces that the Legislature knew how to make PSAs school districts for limited constitutional purposes. The fact that our Legislature did not expressly confer upon PSAs the status of school districts for purposes of the Headlee Amendment, generally, or for purposes of § 30, specifically, is compelling evidence of the legislators' intent not to confer such status. See Johnson v. Recca , 492 Mich. 169, 176 n. 4, 821 N.W.2d 520 (2012). Rather, the language used in MCL 380.501(1) indicates that the Legislature intended to confer school-district status on PSAs for the sole purpose of receiving state aid from the State School Aid Fund. OAG, 1995-1996, No. 6,915, p. 204 (September 4, 1996). The Legislature did not intend to equate PSAs with school districts as a general proposition.
This conclusion is further supported by language within Act 362 that distinguishes PSAs from school districts. For example, MCL 380.503(9) provides, in pertinent part:
A public school academy may not levy ad valorem property taxes or another tax for any purpose. However, operation of 1 or more public school academies by a school district or intermediate school district does not affect the ability of the school district or intermediate school district to levy ad valorem property taxes or another tax.
In a similar vein, MCL 380.503a provides:
If a school district or intermediate school district applies for and obtains a contract to operate 1 or more public school academies under this part, the power of the school district or intermediate school district to levy taxes for any purpose under this act is not affected by the operation of a public school academy by the school district or intermediate school district. Revenue from taxes levied by a school district or intermediate school district under this act or bonds issued by a school district or intermediate school
district under this act may be used to support the operation or facilities of a public school academy operated by the school district or intermediate school district in the same manner as that revenue may be used under this act by the school district or intermediate school district to support school district or intermediate school district operations and facilities. This section does not authorize a school district or intermediate school district to levy taxes or to issue bonds for any purpose that is not otherwise authorized under this act.
Additionally, a school district may authorize the organizing of a PSA, must serve as the fiscal agent for each PSA authorized by the school district, and is invested with the power of oversight and the ability to revoke a charter any time the authorizing school district has a reasonable belief that grounds for revocation exist. MCL 380.502(2)(a) ; MCL 380.507(1)(d) through (h) ; MCL 380.507(3) ; Council of Organizations , 455 Mich. at 573, 566 N.W.2d 208. These statutory provisions reflect the Legislature's clear intent to subordinate a PSA to the PSA's authorizing school district, not to create a new species of school district or a body corporate that is coequal in the hierarchy of local government with school districts.
For these reasons, I would conclude that a PSA is neither a "political subdivision of the state," generally, nor a "school district," specifically, within the meaning of § 33 of the Headlee Amendment and, therefore, is not a unit of local government for purposes of § 30. Accordingly, I would hold that plaintiffs were entitled to summary disposition on Count II of their complaint. In all other respects, I concur with the lead opinion.
Borrello, P.J. (concurring in part and dissenting in part).
I respectfully disagree with my colleagues' analysis of Count IV of plaintiffs' complaint. In my opinion, my colleagues' conclusions regarding the operation of Const. 1963, art. 9, § 29 vis-à-vis Const. 1963, art. 9, § 30 are predicated on faulty logic regarding the interplay between these two provisions. I would hold that state funding provided to units of local government for new or increased state mandates under § 29 may be counted for purposes of § 30 and, thus, that defendants, and not plaintiffs, are entitled to summary disposition on Count IV of the complaint. In all other regards, I concur with the lead opinion.
Section 30 provides that 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." As the lead opinion recognized, § 30 "only requires that state funding of all units of local governments, taken as a group, be maintained at 1978-79 levels." Durant v. State Bd. of Ed. , 424 Mich. 364, 393, 381 N.W.2d 662 (1985). Moreover, the drafters' notes explaining the Headlee Amendment indicated that the primary intent of § 30
was to prevent a shift in tax burden, either directly or indirectly from state to local responsibility. The phrase "taken as a group" permits the legislature to reallocate funds to local units of government, i.e., geographically or from one unit to another. It was the drafter[s'] intent to rely on the political process to effect such allocations and not to limit the legislature's ability to create more effective and efficient governmental entities or to eliminate those local units which no longer serve any utilitarian purpose. [Plaintiffs' Brief in Support of Motion for Summary Disposition (December 6, 2017) at Exhibit 17, Taxpayers United Research Institute, Drafters' Notes – Tax Limitation Amendment (Proposal E, approved by the electors on November 7, 1978, as an Amendment to the Michigan Constitution of 1963), § 30, p. 10.]
Section 29 provides, in relevant part:
The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing
activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs. [ Const. 1963, art. 9, § 29.]
Each sentence in § 29 serves a separate but related function. The first sentence is "aimed at existing services or activities already required of local government," Durant , 424 Mich. at 379, 381 N.W.2d 662, and " ‘prohibits reduction of the state proportion of necessary costs with respect to the continuation of state-mandated activities of services,’ " Judicial Attorneys Ass'n v. Michigan , 460 Mich. 590, 595, 597 N.W.2d 113 (1999) (emphasis added), quoting Mayor of Detroit v. Michigan , 228 Mich. App. 386, 396, 579 N.W.2d 378 (1998). The second sentence "addresses future services or activities," Durant , 424 Mich. at 379, 381 N.W.2d 662, and "requires the state to pay the increased necessary costs in full when it mandates new activities or mandates activities at an increased level ," Judicial Attorneys Ass'n , 460 Mich. at 598, 597 N.W.2d 113. When analyzing the interplay between constitutional provisions, such as these two provisions of the Headlee Amendment, this Court must remain mindful of two basic principles of constitutional construction.
First, every statement contained within a state constitution must be interpreted in light of the whole document. Second, no fundamental constitutional principle shall be construed so as to nullify or substantially impair another, all fundamental constitutional principles being of equal dignity. [ Durant v. Dep't of Ed. (On Second Remand) , 186 Mich. App. 83, 115, 463 N.W.2d 461 (1990), remanded on other grounds 441 Mich. 930, 498 N.W.2d 736 (1993).]
As my colleagues properly pointed out, the parties have agreed that the proportion of total state spending that is required to be paid under § 30 to units of local government, as a whole, is 48.97%. Defendants indicate that this 1978-1979 baseline percentage included the state's provision of both discretionary funding paid to units of local government and funding specifically allocated to reimburse the units of local government for the costs of pre-Headlee state mandates.
As previously noted, § 30 guarantees that the percentage of the total state budget earmarked for local government spending will not decline from the fiscal year 1978-1979 level. Thus, § 30 guarantees nothing more than the provision by the state of a certain base level of funding, i.e., an amount equivalent to the proportion of total state spending paid to all units of local government, taken as a group, in effect in fiscal year 1978-1979. I would conclude that the first sentence of § 29, when read in conjunction with § 30, operates to protect that portion of the overall 48.97% composed of funding to reimburse units of local government for the necessary costs of implementing state mandates that existed in 1978 and that predate the ratification of the Headlee Amendment. The first sentence of § 29 accomplishes this purpose by prohibiting the reduction of state spending with respect to state-mandated activities and services in effect at the time the Headlee Amendment was ratified. Judicial Attorneys Ass'n , 460 Mich. at 595, 603, 597 N.W.2d 113 ; Livingston Cnty. v. Dep't of Mgt. & Budget , 430 Mich. 635, 644, 425 N.W.2d 65 (1988).
The second sentence of § 29 " ‘requires the state to fund any additional necessary costs of newly mandated activities or services and increases in the level of such activities or services from the 1978 base year.’ " Judicial Attorneys Ass'n , 460 Mich. at 595, 597 N.W.2d 113, quoting Mayor of Detroit , 228 Mich. App. at 396, 579 N.W.2d 378. Section 30 contains no language guaranteeing the exact composition of the funding, i.e., that the base level of funding guaranteed by § 30 must contain the same ratio of discretionary funding to restricted funding as existed in the 1978-1979 fiscal year. Simply stated, there is nothing in the language of either § 29 or § 30 that prohibits the state from eliminating a state mandate and then shifting funds formerly allocated to the eliminated mandate to satisfy the state's obligation under the Headlee Amendment to fund a new mandate or an increase in the level of a mandated activity or service from the 1978 base year so long as the total proportion of state spending paid under § 30 is not reduced by the shifting of funds. Furthermore, as acknowledged by our Supreme Court, the provisions of the Headlee Amendment do not prohibit the state's reduction of its financed portion of any existing activity or service provided by a unit of local government not required by state law, i.e., a service or activity provided at the discretion or option of the unit of local government. Livingston Cnty. , 430 Mich. at 644, 648, 425 N.W.2d 65. In the absence of such a prohibition, and to the extent that general and unrestricted revenue sharing composed a portion of the total state spending in fiscal year 1978-1979, the state is free to shift or reallocate that general and unrestricted revenue sharing paid under § 30 to fund the necessary costs incurred by units of local government in providing newly enacted state-mandated activity or service or an increase in an existing mandated activity or service without violating the scheme of the Headlee Amendment.
I believe that such a view of the interplay between §§ 29 and 30, as detailed in this opinion, best honors the voters' intent neither to freeze legislative discretion to enact necessary and desirable legislation in response to changing times and conditions nor to permit state government unrestricted discretion in its allocation of support for mandated activities and services. Judicial Attorneys Ass'n , 460 Mich. at 601, 605, 597 N.W.2d 113.
For these reasons I would conclude that state funding provided to units of local government for new or increased state mandates under § 29 may be counted for purposes of § 30. Accordingly, I would grant summary disposition on Count IV of plaintiffs' complaint in favor of defendants in addition to granting defendants summary disposition on Counts I and II.