Lobato lawsuit could have major ramifications for K-12 school finance

The Colorado Statesman

The Colorado Supreme Court last week heard oral arguments on a lawsuit that could dramatically change the system of K-12 school finance in Colorado.

The case is Lobato v. State of Colorado. The lawsuit was filed in 2005 by 47 individuals, almost all of them parents representing their minor children, and 14 school districts in the San Luis Valley. After the lawsuit was filed, several more school districts joined in, including Jefferson County, the state’s largest school district, and the Aurora, Colorado Springs and Pueblo school districts. About half of the students represented in the lawsuit were either in middle school or high school at the time of its filing.

Plaintiff Taylor Lobato talks to the media after oral arguments on her school funding case were made to the Colorado Supreme Court on March 7.
Photo courtesy of the Colorado Education Association

In 2005, the state, represented by Attorney General John Suthers, asked the courts to dismiss the case, stating that school finance decisions are the purview of the General Assembly. While the district court and court of appeals agreed with the state, in 2009, the Colorado Supreme Court reversed those decisions and ordered the matter to trial. That trial took place in 2011, where Denver District Court Judge Sheila Rappoport ruled for the plaintiffs. The state appealed the decision to the Supreme Court last year.

MALDEF attorney David Hinojosa participates at a Colorado State Supreme Court press conference.
Photo courtesy of the Colorado Education Association

The original complaint challenged the constitutionality of Colorado’s K-12 funding system, noting that education reform efforts, beginning in the 1990s, imposed instructional and other mandates on school districts but without the funding to accomplish those mandates.

CASE Executive Director Bruce Caughey outside the Colorado State Supreme Court.
Photo courtesy of the Colorado Education Association

The lawsuit also claimed the formula for the Public School Finance Act was not based on a valid determination of actual costs, and that it has never been adjusted to account for mandates under state or federal educational reforms. The lawsuit estimated the funding shortfall in the decade previous to its filing that the state was short about $3.4 billion in funding for those mandates. Another $10 billion would be needed to get the state’s K-12 system up to par on capital construction needs, the lawsuit said.

Attorney Terry Miller addresses the media following the judicial procedure on March 7.
Photo courtesy of the Colorado Education Association

The suit targeted unfunded education reforms such as the state’s model-content standards, enacted in 1993; the 2000-01 school accountability system, which grades each school on the results of its students’ performance on the CSAPs and ACTs; the Educational Accreditation Act of 1998; and the federal No Child Left Behind Act of 2002.

Attorney Kathleen Gebhardt comments on the case at a press conference at the Colorado State Supreme Court on March 7.
Photo courtesy of the Colorado Education Association

The lawsuit also took aim at charter schools and public school choice and the impact of those laws on school financing, stating that both laws were enacted without determining how they would impact the school districts. The lawsuit noted that charter schools “serve a disproportionately low percentage of the state’s under-served student populations, including students from low income families, racial and ethnic minorities, students whose dominant language is not English, and students with disabilities” — students who are more expensive to educate, the lawsuit indicated.

The Taxpayer Bill of Rights and the Gallagher Amendment also have created problems for school finance, the lawsuit stated. According to the plaintiffs’ claim, TABOR has reduced school districts’ abilities to increase property taxes. In fact, the lawsuit claims, property taxes have decreased under TABOR, putting more pressure on the state to provide school funding.

Gallagher states that when statewide residential property values increase faster than nonresidential values, the residential assessment rate must be lowered to maintain the proportional balance between residential and nonresidential property taxes. The intention of Gallagher was to stabilize property taxes in both areas; however, the lawsuit claims, it has had the opposite effect of deteriorating local tax bases, including funding for K-12 education.

All of those factors combined to deny students across the state a quality education as guaranteed by the state Constitution, the lawsuit stated. School boards are denied local control by the educational reforms and lack of funding, another constitutional violation. The Constitution also requires uniform funding of school districts, and property tax mill levies and revenue vary “widely and irrationally,” in violation of the uniformity requirement.

In her 2011 decision, Rappoport ordered the state to revise its funding system, but stayed her order, which allows the state to continue its current funding system, until the Colorado Supreme Court reviewed the appeal.

The Supreme Court’s March 7 hearing included a first: a live video broadcast of the proceedings. The hearing took place before six of the Court’s seven judges. The seventh, Justice Monica Marquez, recused herself because she had worked on the Lobato case while an attorney with the attorney general’s office.

Chief Justice Michael Bender noted that the lawsuit had more “friend of the court” briefs filed than any he had seen in his 16 years on the bench.

Assistant Attorney General Jonathan Fero represented the state. He told the Court that the plaintiffs had not proved the system was irrational. The plaintiffs’ case was based on a requirement that the General Assembly cost out the funding system, and provide however much funding would be necessary to make sure every student passed the standardized achievement tests, he said, even if it “means cutting funding to other state services, consuming an entire state budget and even if the legislature lacks the power to raise revenue.” Fero said the state spends 45 cents of every dollar in its budget for K-12 education, but that the plaintiffs believe that is “inadequate and irrelevant.”

The justices queried Fero repeatedly about his definition, or lack thereof, of a “uniform and thorough” system of K-12 education funding, contained in the education clause of the state constitution. Fero said it wasn’t the defendants’ responsibility to define, but pointed out that the terms had never been defined in statute. “Where do you draw the line?” Fero responded. Student performance could be a measure of a constitutional standard, but the standard still has to be defined. “This case forces the Court to precisely [say] what [is the] quality of education and how much money is enough,” he said. A constitutional standard is “an opportunity standard, and that means it cannot be an absolute outcome standard” as reflected by standardized testing. “It doesn’t have to be a standard of mathematical precision. Incremental progress is as much as the court expects.”

Justice Gregory Hobbs noted that many communities in the state, including those with Native Americans, Hispanic students or in rural areas, suffer funding deficiencies in their school districts as they compare to more well-funded districts with strong tax bases. But Fero said that points to an equity case, not about how students perform or how funding exists in one district versus another.

Money is not the only way to establish a thorough and uniform system, Fero insisted. “If it were, wouldn’t our performance be at level 49?” referring to Colorado’s position as 49 out of 50 states in per pupil funding. “We’re doing better than half of the states” on performance, he said.

Hobbs appeared to dispute some of Fero’s arguments on rational funding versus whether the system was unconstitutional. “I’m concerned that the argument is ‘we can’t do it’, becomes an excuse for ‘we won’t do it,’” Hobbs said, his voice rising. There’s evidence that there is disparate treatment, he said, and the trial court reminded the legislature that they set the standards and requirements, and didn’t back it up with a rational investment of funds. Fero disagreed, stating the state is making progress, that such an argument would make it an equity case rather than a case about adequacy. “It’s a constitutional case,” Hobbs thundered, “based on an affirmative right for a thorough and uniform system of schools that our founders wanted in the state, and the question is do we have that system?”

“I believe we do,” responded Fero.

Terry Miller of Davis, Graham and Stubbs addressed the plaintiffs’ arguments regarding the constitution’s education clause. This Court “characterized our claims” that the school system is arbitrary, based on historical compromise rather than a rational determination of the costs of a thorough and uniform system.

The fundamental issue to be addressed by the Court, according to Bender, is the balance between the role of the Court and the legislature. “If we find the system constitutional, how can we provide the General Assembly with guidance, without directing it to pass certain legislation?” asked Bender.

Miller responded that the trial court provided that remedy: to give the legislature a chance to do its job, but with guidance from the Court that the General Assembly has to have some kind of “rational determination of a thorough and uniform system.”

It doesn’t have to happen in one year, Miller told the Court. As long as they’re making reasonable progress toward a fix, they have the discretion to do that.

Rice pointed out that the Court instructed the trial court to give “significant deference to the legislature’s fiscal and policy judgments” on education. Miller responded that there was no fiscal policy judgment to defer to, and that’s the core of the case. School finance has never been funded in a way that estimates the costs for a thorough and uniform system, Miller said.

A thorough and uniform system requires that students become educated citizens and members of the workforce, Miller said. Standards are not fixed, he explained, citing a legal case from Washington state; they could be raised or lowered, but they must be funded.

The finance scheme is not rationally related to the education clause of the constitution, Miller asserted. The legislature, when it first enacted the per pupil financing scheme, decided first how much it wanted to spend on education, and then used that final amount to determine the “base funding” of how much to spend per pupil. The base has been arbitrarily increased since then. “Per pupil funding has always been an afterthought,” Miller said.

David Hinojosa, representing low-income plaintiffs, said the legislature has failed to carry out its duty for vulnerable student populations, including English-language learners or disabled students. In the case of the English-language learning students, funding for programs for those students is limited to two years and isn’t based on evidence, he said. Academic research shows they need those programs for four to seven years, he said.

There’s a connection between the opportunities these at-risk students do not have available and the end results of the system, Hinojosa said. These children need the Court to step in and affirm the trial court decision, Hinojosa said.

If the standard is an opportunity standard, as was stated by Miller (and earlier by Fero), then the state must prevail, Fero said in rebuttal. He pleaded with the Court to allow the state to present evidence regarding other fiscal constraints on the budget, such as TABOR, Gallagher, and other funding needs. Fero claimed the trial court did not allow the state to present that evidence. Hobbs challenged Fero on that argument, stating those factors are already well known.

The Court’s decision is not expected until later this year.

After the hearing concluded, Taylor Lobato, the named plaintiff in the case, spoke to reporters. She is now a junior at the University of Denver but was in middle school when the lawsuit was filed in 2005.

“This has been a long path to get here,” Lobato said. Then a student in the Center school district in the San Luis Valley, Lobato said she didn’t have access to some of the things that students in better-funded schools had, and her school had no way to get them. Lobato said she competed in statewide history competitions, and despite working very hard got beaten badly, which she attributed in part to her school not having access to the tools that other students in other schools had. When she got to college, Lobato said she found she was behind in writing and had to work hard to catch up.

“I had no choice but to be here. It’s not right,” Lobato said. “We’re not here to have the Court say what should be done. We’re here to demand the legislature provide, because that’s what the Constitution says.”