Volume I, No. 7

December 18, 2008

San Diego County Trial Court Finds Mandate Deferrals Unconstitutional

California School Boards Association v. State of California decided a claim by CSBA on behalf of school districts against the State challenging the State’s practice of deferring mandate reimbursement by appropriating just $1,000 for each mandate.  While the Court said all of the right things in supporting the school claims, the Court’s remedy may not put money in district coffers.

CSBA v. State of California held that Proposition 13’s Article XIII B Section 6 requires the Legislature to fund all mandates identified by the Government Code process for the Commission on State Mandates.  Importantly, the CSBA case distinguishes unfunded school district mandates from other local government mandates.  For all other local agencies, the remedy for failure to reimburse is “self-executing.”  The local agency can simply stop providing the mandated service if they are not funded by the state..  However, school districts are governed by Government Code 17581.5, which does not allow school districts to stop performing the mandated service without Court approval.  School districts may only stop service if they are granted relief by the Superior Court of the County of Sacramento and the Legislature has specifically deleted funding for the mandate in the Budget Act.  The Court recognized that, instead of deleting funding, the Legislature commonly provides a nominal amount for each mandate and then defers payment until a future budget.  The Court went so far as to recognize that such legislative action amounts to “about $1 per district for the entire fiscal year for each mandated program … .”  The Court recognized that the school district’s unfunded mandate bill, including interest, amounts to over $1 billion. 

The Court recognized that Constitutional enactment by the voters is the highest expression of the people and that statutes may only reasonably regulate but not abrogate or deny a Constitutional right.  Further, the Court found cases to establish that the Constitutional right to mandate reimbursement could not be impaired by “inaction or indirection.”  The Court concluded that deferring payment “is an unreasonable and unconstitutional restriction … under article XIII B, Section 6 … .”  The Court then directed the Legislature to fully fund state mandated programs and, thereby, forego the practice of deferring payment to school districts. 

The Court stopped short of prescribing specifics of what the Legislature must do, where the funds come from, or what the Court’s next step would be if the Legislature ignored the Superior Court ruling.  In fact, CSBA’s efforts to use discovery to uncover funds and to force reimbursement for the past $1 billion were denied.  In essence, the Court felt school district’s pain but could not see its way to intervene in the Legislature’s prerogative sufficiently to assure school districts that nonreimbursement of mandates would be rectified by specific funding.

What are the implications of CSBA v. State of California? 

• The Governor’s budget could not include full funding for the mandates in the 2009-10 budget, forcing CSBA to return to Court for a tougher remedy
• The Governor’s budget could include full funding and the Legislature could then expressly delete the mandate reimbursement.  The Legislature could choose to do so if it prefers to use the funds for other programs.  Such an action shifts the pressure from individual districts to the Legislature for cuts to mandated program. 
• The 2009-10 State Budget could fully fund all current mandates.  In today’s tight budget environment, that amount would likely come from discretionary funds above the Proposition 98 minimum. 
• The Legislature could create a mechanism for review of all education mandates with an eye to repealing some as a cost savings.
• Revenue limits could be increased by a flat rate with a finding that the amount is “sufficient” to cover mandates.
• The Legislature could avoid introducing new education mandates to reduce the reimbursement pressure.  Well, it’s theoretically possible.  
• The Legislature could continue to shift discretionary funds to cover new mandates. 
• The Governor or the Legislature could seek to battle the mandate issue out in an Appellate Court or the Supreme Court. 

A final implication that the opinion seems to anticipate is that the Legislature could act to amend or eliminate the Section 17581.5 reimbursement procedures.  The San Diego Court opined that the Legislature should not use statute to undo the Constitutional right to mandate reimbursement.  The reimbursement issue remains particularly critical in difficult budget years.  We have not heard the end of CSBA v. State of California.

~Ernest Silva

esilva@m-w-h.com