Class Struggle

Of the 55 districts in Maricopa County, Ariz., Isaac School District No. 5 in Phoenix had the dubious honor of taxing its property owners at the highest rate. But Isaac's steep levy didn't come close to generating enough revenue for a district in a mostly low-income residential area with a struggling tax base. Despite booming enrollment, the K-8 district didn't have the wherewithal to build the new schools it needed.

Student population climbed past 8,000, and unless it added classroom space, Isaac was going to have to cram 1,800 students into one of its overloaded elementary schools. Class sizes in some cases crept above 40 students. But relief arrived last summer when the new Morris K. Udall School opened its doors.

"The building is a dream school for the neighborhood," says Jose Leyba, Isaac superintendent. "It has improved the kids' self-esteem. They just love it. It's like bringing a Cadillac into a depressed neighborhood."

More help is on the way. Two more elementary buildings have been approved and should open in two years, and another middle school is in the works.

How is the low-income district able to afford such an ambitious building schedule?

It can't. But the state of Arizona has found a way to pay for the new buildings-after the Arizona Supreme Court forced the legislature to revamp the state's system of paying for school construction.

Arizona, like most states, historically has placed the burden on local districts to pay for construction of their facilities, usually with revenue from bond issues approved by voters. But as educators and government officials have pointed a spotlight on the woeful conditions of so many of America's schools and communities are demanding better facilities, more money for school construction is becoming available, especially for low-income districts that haven't been able to carry the financial load themselves.

"A lot of progress has been made," says Leyba. "Prior to the lawsuit, we couldn't have done this."

Paying the price For a long time, it has been clear to school officials that thousands of buildings across the United States were in dire condition and in desperate need of repairs. But when the General Accounting Office issued its report on the condition of U.S. school facilities in 1995, administrators could finally put a number to the need. And what a number it was-a budget-busting $112 billion.

Since capital spending for school construction in the United States traditionally has been the province of local school districts, the ability of a school system to repair or replace facilities was heavily dependent on its specific economic status.

Those with a wealthy tax base to tap could ask local constituents to approve a bond issue to pay for improvements, while those without access to such resources were forced to do without improvements and defer repairs.

In the last 30 years, school districts that have felt they were on the short end of the funding stick have sought relief from the courts. Most of those school finance cases have focused on money for operations, but several have sought more equitable funding for facility improvements as well.

In some cases, like Arizona, courts have mandated changes in how districts get funding for construction. In other cases, states have established construction-assistance programs without a judicial threat looming over them (see sidebar, page 19).

In addition, the overwhelming needs in every part of the nation have led to action on the federal level. President Clinton has highlighted school construction and renovation as one of his budget priorities (see sidebar, page 18).

Desperately seeking equity School districts are not created equal. Some may have lucrative shopping centers or industrial plants within their borders to bolster their tax bases; others may have to rely only on low-income homeowners for support. Some may be in states that provide a significant portion of funding to districts; others may be in states that give local districts the lion's share of responsibility for generating revenue.

The National Center for Education Statistics found that in 1996-97, the average district received 45 percent of its revenue locally, 48 percent from its state, and 7 percent from federal sources. In New Hampshire, 89 percent came from local sources, while in New Mexico, only 14 percent was generated locally.

In some places, the cost of living and the socio-economic status of a community make it more expensive to educate a child. Then, throw in demographic, political and geographical differences, varying levels of commitment to education and the traditions of local control. You end up with a system in which the quality of education a child receives will vary significantly depending on the arbitrary boundary lines of a school district.

It's well-established that the amount spent on the average student varies widely from community to community. In 1996-97, the average per-pupil expenditure in public schools was $5,923. The figures ranged from $9,588 in New Jersey to $4,039 in Mississippi. Comparing individual district statistics would show even greater spending disparities.

Students, parents and educators unable to persuade their state legislatures to alleviate the inequities frequently have turned to the courts for relief.

Tell it to the judge In the last 30 years, lawsuits challenging school finance systems in states have become commonplace. Those who follow the trends in school finance litigation divide the cases into three "waves."

The first wave dealt with legal challenges based on the federal equal protection clause. In the most noted case, Serrano v. Priest, the California Supreme Court struck down the state's funding system in 1971. It ruled that funding inequalities caused by the differences in districts' taxable wealth deprived citizens of equal protection under the law.

The first wave ended in 1973 when the U.S. Supreme Court handed down a 5-4 decision in San Antonio Independent School District v. Rodriguez. The court ruled that education was not a fundamental right and that the wealth-based inequalities in Texas's school finance formula did not violate the equal protection clause.

Rebuffed by federal courts, litigants began to pursue their cases in individual states. In 1973's Robinson v. Cahill, the New Jersey Supreme Court declared the school financing system there unconstitutional because it violated the mandate to provide a "thorough and efficient" education.

Since states have different constitutional language regarding provisions for education, litigants' success in achieving equity has been mixed.

The third wave of school finance litigation, instead of focusing on issues of equity, emphasize educational adequacy. In Rose v. Council for Better Education, the Kentucky Supreme Court ruled in 1989 that the entire state school system was so inadequate that it violated the constitutional mandate for an "efficient" school system.

Many of the school finance lawsuits have targeted only operating funds and not money for construction. Kentucky's overhaul was so sweeping that when the General Assembly created a new educational system, it included a more equitable way of paying for school construction.

The state is now spending about $300 million a year at the state level to improve school facilities. In providing funds, the state looks at the number of students, the condition of the facility and the financial need of the district.

The money has helped Kentucky reduce its backlog of projects-instead of a third of the schools needing major improvements, only 26 percent do, says Mark Ryles, director of facilities management with the Kentucky Department of Education.

But the job is far from finished. Kentucky's schools still need about $1.7 billion in major upgrades.

"There's a lot of funding, and we have made significant progress, but we need to have a consistent level of funding," says Ryles.

Raising Arizona To the residents of Isaac and other poorer Arizona districts, the way the state handled school construction financing didn't seem equitable. Affluent areas or communities with a strong tax base of business and industry found it much easier to build new facilities. They could propose a bond issue that would bring in enough revenue to pay for modern facilities, yet wouldn't raise taxes too much.

For districts like Isaac to pay for facility improvements, they would have to tax residents beyond their ability to pay. And in Isaac, says Leyba, its modest tax base limited its borrowing capacity to such a degree that it couldn't build the facilities it needed even if voters agreed to assume a heavier tax burden.

It wasn't fair, the poor districts argued, and the Arizona Supreme Court agreed. It ruled more than five years ago that Arizona's system of paying for school construction was unconstitutional. With the weight of the court ruling looming over the state legislature, lawmakers eventually devised a system that allows poor districts such as Isaac to afford new schools.

As a result of the legal efforts, the space crunch in Isaac has begun to ease. With the addition of Udall last summer, instead of having an elementary with 1,800 students, enrollment is a more manageable 1,100. When the two additional elementary schools open, enrollment at district elementary schools will average about 800, says Leyba.

Parents and educators in other states hope their legal efforts get similar results. In Colorado, several districts have filed a class-action suit to overturn that state's method of financing school construction.

The state doesn't assist local districts with construction funds, and attorney Kathy Gebhardt argues that the policy denies districts the money to provide adequate facilities.

"It's obvious that wealthier districts have better facilities," says Gebhardt.

It's obvious, too, to Ron Simpson, superintendent of the Sanford 6J district in one of the poorest areas of Colorado. He presides over a one-school district with about 380 students.

"It's a very old school with a vast array of needs," says Simpson. "We try to keep up and maintain as best we can."

But with a tax base of only about $3 million, the district has no practical way to pay for substantial improvements to the building. If the district somehow persuaded voters to double taxes, the school system would see only $720,000 in additional revenue. The median construction cost of an elementary school is $9.2 million.

Sanford has tried to save a little money each year to build a nest egg for renovations and improvements, but Simpson says that has only hurt the district in the eyes of the state. Sanford has applied for emergency funding for facilities, but because of the reserves it has been putting aside, the state concluded that the district's financial needs are not critical.

"We feel there should be some help," says Simpson. "We're looking for a partner rather than a legal battle." The case is set to go to trial this month in Denver.

Waiting for results Even if the poor districts in Colorado win their lawsuit, it still may be years before Sanford and other districts actually see substantive improvements.

In other cases, judges have ruled that a funding system is unconstitutionally flawed, but have left it to the state's legislature to work out the nuts and bolts of creating a fairer formula. However, it often has been the legislature's unwillingness or inability to face up to the problem in the first place that led to the litigation.

In Arizona, after the Supreme Court's 1994 decision mandated a new funding system for construction, nearly four years passed before the legislature crafted a bill that remedied the problems and passed constitutional muster. Four times the legislature's solution was shot down by the state Supreme Court as inadequate.

"This was not pleasant, even getting to this point," says Tim Hogan, executive director of the Arizona Center for Law in the Public Interest, which represented the poor districts. "It has taken a lot of time, mostly because the legislature dragged its feet."

Finally in 1998, the legislature managed to adopt a plan that satisfied the courts. The Students First program created a School Facilities Board, which has established minimum building standards and is now assessing the condition of all of Arizona's schools.

"The state has basically taken over responsibility for school construction," says Hogan.

In the meantime, Hogan says, they have funded millions of dollars in emergency projects that have accumulated while the court battle dragged on. This year, the state anticipates spending more than $300 million for new construction, building maintenance and upgrading schools to meet state standards.

But the court battle is not over. When 1999's state appropriations for repairs fell short of what districts were owed, Hogan filed another suit.

"The first two years they were $55 million short," says Hogan. "We sued to get that."

In his continuing effort to provide more federal funds for school construction, President Clinton has included in his proposed 2001 budget several initiatives that would spur building and renovation.

A $1.3 billion loan and grant proposal targets high-need districts with little or no way to pay for emergency repairs. The no-interest loans and grants would help pay for $6.7 billion a year in renovation projects.

The administration also has renewed last year's proposal to create a School Modernization Bond initiative. It would provide $24.8 billion in tax-credit bonds over two years to help modernize or construct more than 6,000 schools.

Clinton also seeks to expand the Qualified Zone Academy Bonds program. It has provided $400 million a year in bonding authority since 1998 to assist school renovation in high-poverty areas. The new proposal would allow bonds to be used for new construction. The administration is seeking $2.4 billion in bond authority over two years.

In 1997, the state of Illinois established a multi-billion-dollar effort to help school districts pay for construction. It's the first time in more than 20 years that Illinois has a program to aid local school construction.

Based on a local district's financial situation, the state's assistance will range from 35 percent to 75 percent of a project's cost. Districts must raise their share of project costs before receiving grants. Districts with property wealth at or above the 99th percentile are not eligible.

In distributing the money, the state established priorities. Ranked highest are districts with needs stemming from man-made or natural disasters, followed by overcrowding, district consolidation or annexation, severe and continuing safety hazards, accessibility requirements and other "unique solutions to facility needs."

So far, the program has benefited more than 180 school districts and provided more than $900 million in assistance. Over five years, Illinois will provide $2.5 billion. When matched with local funding, the program will result in about $5 billion in new or improved facilities.

State officials believe that the availability of matching funds for construction has provided voters with added incentive to pass bond issues. From March 1998 to February 1999, voters approved more than 77 percent-117 of 134-of the bond referendums placed on the ballot.

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