The
Murphy

Commission
An Arkansas Policy Foundation Initiative

JUDGE KILGORE'S RULING AND THE MURPHY COMMISSION

Does a legal ruling by Pulaski County Chancery Court Judge Collins Kilgore mandate tax increases to fund Arkansas public education as some media observers suggest? Or was Judge Kilgore's ruling the latest finding that Arkansas public schools would benefit from better accounting methods?

Introduction

This case before Judge Kilgore dates to 1992. Its long history is recounted in Lake View School District No. 25 of Phillips County, Arkansas, et al v. Mike Huckabee, Governor of the State of Arkansas, et al, 340 Ark. 481, 10 S.W.3d 892 (Ark. 2000). In 1994, Judge Annabelle Imber found the Arkansas School Funding System inequitable under Article 2, 2, 3, and 18 and Article 14, 1 of the Arkansas Constitution. The 1994 Order is important and will be referred to in this analysis. After the Plaintiffs pursued their case it was dismissed by Judge Kilgore in 1998, as moot because of constitutional and statutory changes since the 1994 order. The order was appealed to the Arkansas Supreme Court which returned Lake View  to Judge Kilgore.

The Arkansas Supreme Court wrote "Surely Amendment 74, which allows funding variances among school districts due to local taxes, does not by itself resolve disparities in per pupil expenditures and opportunities under the State Constitution's equal protection clauses...We believe that a compliance trial and decision by the chancery court on whether the disparities in treatment noted in the 1994 order have been corrected so as to pass constitutional muster is the best way to achieve those goals...." The Court directed that "trial should take place as soon as possible". The trial took place in Fall 2000 before Judge Kilgore in Pulaski County Court.

Arkansas' System Of Funding Public Education

Legislation was enacted after the 1994 order along with a 1997 constitutional amendment that changed the school funding formula. (Act 916 of 1995 [later held unconstitutional, see Barclay v. Melton, 339 Ark. 362 (1999)]; Act 917 of 1995; Act 1194 of 1995; Amendment 74 to Article 14, 1 of the Arkansas Constitution; Act 1307 of 1997 and Act 1361 of 1997).

Arkansas schools are funded through three major sources of revenue: federal funds targeted to specific categories of students with specific needs; state monies distributed through the state funding formula; and local monies raised primarily through property taxes.

Local revenues for school districts depend on local property taxes levied according to the value of property.  The amount of revenues available to school districts differs because the value of property varies from district to district.

Amendment 74 establishes "...a uniform rate of ad valorem property tax of twenty-five (25) mills to be levied on the assessed value of all taxable real, personal, and utility property in the state to be used solely for maintenance and operation of the schools."  Excess debt millages may be used for maintenance and operation, and thereby, school districts are allowed to obtain the uniform rate of 25 mills using debt service millages rather than millages set aside strictly for maintenance and operations. A.C.A. 26-80-201et seq.

The state has determined the constitution requires it to equalize wealth among the school districts. This is accomplished with state equalization aid.  In addition to equalization money, "additional base funding" is used as a guarantee program that all school districts will have a minimum State and local revenue per average daily membership that is at least eighty percent of the State and local revenue of the school district at the ninety-fifth percentile (i.e.; ranking all school districts from the richest to the poorest, one eliminates the five richest and finds the district at the ninety-fifth percentile.)

The school funding formula has three methods to provide districts with money for capital expenditures, including construction of new buildings. They are Growth Facilities Funding, General Facilities Funding, and the Debt Service Funding Supplement. Growth Facilities Funding, which is in its last year, is to assist districts with growing student populations in building new facilities and acquiring new equipment. "Even with these three programs," Judge Kilgore found, "some districts cannot afford to build new buildings, complete necessary repairs or buy buses."

A Tax Increase To Fund Schools?

The 1994 order directed the defendant, state of Arkansas, to eliminate disparities in the funding of public education. The order did not mandate a tax increase to achieve this goal nor does Judge Kilgore's order, which states, "The school funding system now in place in the State of Arkansas is inequitable and inadequate under Article 14, 1, and Article 2, 2, 3 and 18 of the Arkansas Constitution."

The legal standard adopted by Judge Kilgore included the requirement that "the system must be properly managed."

A legal finding of fact is a factual determination made by the trier of fact based upon the evidence. If a case is presented to a jury, the jury makes the finding. Otherwise the finding of fact is made by the judge.

Judge Kilgore issued the following finding of fact:

"3. Making an accurate determination as to how much of the revenues distributed by the State actually reach the classroom is more difficult than measuring how much revenue the State provides the schools and school districts. However, under the Constitution the State is solely responsible for the education of its citizens. Its duty does not end upon disbursement of revenues to the school districts. Moreover, the best measure of whether available funds are being efficiently applied to the education of the State's children is by an accurate accounting of expenditures."

Judge Kilgore's finding of fact echoes recommendations made years ago by the Murphy Commission that Arkansas public education would benefit from better accounting methods.

The September 1998 report, "Streamlining And Cost-Saving Opportunities in Arkansas' K-12 Public Education System," quoted a group of Northwest Arkansas school board member interviewees who stated:

"Because of our accounting system, our district is data rich, but information poor. There is an old management adage with which the Department of Education should become familiar. We cannot manage successfully what we cannot measure. And we cannot improve what we cannot manage. Board members and superintendents alike know exactly where every district dollar originates, but not a single one can tell you how many of those dollars reaches a classroom in our district." (p.8)

The Murphy Commission report made the following recommendation:

"Each year, Arkansas school districts receive a torrent of federal, state and local funds. Exactly where and how this is expended, however, is often something of a mystery, embedded most often in unfathomable school district budgets that may as well have been written in Sanskrit."

Judge Kilgore And Other Problems Identified By The Murphy Commission

The Murphy Commission identified other problems with Arkansas' public education system, and made recommendations to solve them. "Arkansas' academic achievement is well below national averages and lags most of the world's industrialized countries," the commission concluded. In a 1997summary of Arkansas' K-12 system, the Murphy Commission found:

* 87 percent of Arkansas' 8th graders are not proficient in math (National Assessment of Educational Progress).

* 87 percent of 11th graders failed the math section of the state's exit exam.

* 80 percent of Arkansas' 4th graders are not proficient in reading (NAEP).

* Arkansas' average ACT (American College Test) college entrance score (20.2) remains consistently below the national average (20.9).

* Arkansas' college remediation rate for entering students is 59.2 percent. Forty eight percent of these students entered college in the year after high school; the others are older students.

Judge Kilgore made the following findings of fact regarding remediation:

"100. The most recent statistics available indicate that the remediation rate for high school students entering college was 58 percent in either English or mathematics.

"103.  It is a logical conclusion that those who graduate but do not go on to college may have an even greater deficiency in either math or English."

Other findings of fact issued by Judge Kilgore paint a troubling portrait of the state of Arkansas' K-12 public education system:

"57. One must look to more than the question of how much money is spent on the education system in determining whether it is adequate. The determination of whether a state's funding system is adequate is only part of the adequacy effort.

"58. A measure of adequacy is performance. The following statistics were put into evidence and are found to be accurate: 2) Arkansas students scored several tenths below the national average on the ACT from 1990 to 1999; 3) Arkansas ranks lower than the national average for percentage of adults ages 25 years and older who have graduated from high school; 4) Arkansas ranks 49th in the nation in percentage of the population age 25 years or older with a bachelor's degree or higher; 5) Arkansas ties for last place in the nation in percentage of adults with graduate degrees; and 6) Arkansas' fourth and eighth grade students do not rank at or above the national average for proficiency in math, reading, science or writing as measured by the Southern Regional Education Board's State Analysis of the NAEP test scores.

Analysis

Judge Kilgore did not order a remedy, leaving a final solution to the branch of government closest to the people: the state legislature:

"We should resort to the courts in forming a remedy for the many problems noted here only when all else has failed. They are not equipped to undertake the task. And, speaking for this court, it would only be with utter and profound reluctance that it would attempt such an endeavor. However, it is difficult to overstate the urgency and magnitude of these issues which are, for now, left to the legislature."

Additional funding for public education does not translate into tax increases. Some may find accounting and finance dry subjects to contemplate and study. Yet accounting and financial reforms that lead to restructuring and cost containment within the public school system can lead to resolution of the case. It is more likely that Democratic state Sen. Mike Beebe and a bipartisan coalition of legislators will explore this possibility than the executive branch. In legal filings, the defendants argue "disparities and shortcomings among individual districts may be accounted for by mismanagement at the local level."  But they cannot have it both ways, citing "mismanagement" while stalling, blaming others and avoiding constructive policy solutions proposed by the Murphy Commission such as accounting reforms.

The most important reform of Arkansas state government in the 2001 session was adoption of performance-based budgeting, championed by Sen. Beebe. As a member of the Bar we trust Sen. Beebe has read Judge Kilgore's ruling and will provide the necessary leadership on this matter of crucial importance to Arkansas' future and the education of its greatest resource: young adults and children.