School Finance Litigation

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

Over the past several decades, a series of lawsuits have challenged funding disparities that exist
among school districts within the states. Spurred by concerns that such disparities discriminated
against students in poor school districts or resulted in an inadequate education, school finance
plaintiffs began filing lawsuits in federal and state courts based on theories involving educational
equity or adequacy. This report provides an analysis of litigation regarding school financing,
including an overview of the legal issues involved in such litigation and a description of the
leading school finance cases at both the federal and state level.

Federal Court and the Rodriguez Case............................................................................................1
State Courts.....................................................................................................................................2
Equity Cases..............................................................................................................................2
Adequacy Cases........................................................................................................................3
Author Contact Information............................................................................................................4

n the 1970s, a series of lawsuits began challenging the funding disparities among school ¹
districts within the states. Schools in the U.S., which typically receive some federal and state
financial assistance, generally derive a substantial percentage of their funding from local I

property taxes, which, at least in the early days of education finance litigation, generated
significantly different levels of funding depending on how much the property in a given district
was worth. Spurred by concerns that such disparities discriminated against students in poor
school districts or resulted in an inadequate education, school finance plaintiffs began filing ²
lawsuits in federal and state courts based on theories involving educational equity or adequacy.
In the most prominent federal case on school financing, San Antonio Independent School District ³
v. Rodriguez, the Supreme Court rejected a legal challenge to Texas’s system of public financing
for its elementary and secondary schools, holding that the state finance system did not violate
equal protection or interfere with a fundamental right. Ultimately, the Rodriguez case, which
clarified that school funding disparities were not a federal issue, foreclosed school finance claims
based on the U.S. Constitution and prompted plaintiffs to file lawsuits based on state
constitutional claims, thereby transforming education finance litigation into an issue of state law.
This memorandum discusses the Rodriguez case and the resulting flurry of state education
finance litigation, including the dominant legal theories of equity and adequacy and the leading
cases in each of these areas.

In Rodriguez, the original plaintiffs in the case challenged the Texas state system of public
financing for elementary and secondary schools, which they claimed to be a violation of the ⁴
Equal Protection Clause of the Fourteenth Amendment because funding under the system, which
was based on local property taxes, discriminated against students in less affluent school districts
and interfered with the students’ fundamental right to education. The Supreme Court rejected both
of these arguments, holding that the state finance system did not violate equal protection or ⁵
interfere with a fundamental right.
Under the Supreme Court’s equal protection jurisprudence, “the general rule is that legislation is
presumed to be valid and will be sustained if the classification drawn by the statute is rationally

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related to a legitimate state interest,”⁶ although laws that are based on suspect classifications such
as race or gender or that interfere with a fundamental right typically receive heightened scrutiny
and require a stronger, if not compelling, state interest to justify the classification or infringement.
The Rodriguez Court, however, concluded that the Texas financing system did not discriminate
against any definable category of poor people or result in the absolute deprivation of education
and therefore held that there was no impermissible classification based on wealth and no ⁷
discrimination against a suspect class. Likewise, the Court found that the Constitution did not
explicitly or implicitly guarantee a right to education and that there was no evidence that the
Texas financing system resulted in an education so inadequate that it interfered with the ability to ⁸
exercise other fundamental constitutional rights.
The Court’s holding that there was no discrimination against a suspect class and no interference
with a fundamental right was important because it determined the degree of judicial scrutiny that
the Texas financing system received. Had the Court found a violation of equal protection or
infringement of a fundamental right, then the Texas school funding system would have been
subject to strict scrutiny and the state would have been required to offer a compelling state
interest as justification for the system. In the absence of such a finding, however, the Texas
financing system was subject to rational basis review. Under that standard, the Court upheld the
state funding system as rationally related to the legitimate state interest of maintaining local ⁹
control over matters involving education and taxation.

As noted above, the Rodriguez case foreclosed school finance claims based on the federal
constitution and prompted plaintiffs to file lawsuits based on state constitutional claims instead,
thereby transforming education finance litigation into an issue of state law. This section discusses
the two major legal theories involved in state education finance litigation—equity and
adequacy—as well as leading cases in these areas.
Initially, litigants in school finance cases focused on the issue of equity. Arguing that the funding
disparities among school districts were inequitable, the plaintiffs in these cases contended that
such inequities were unconstitutional and should be remedied by equalizing funding among all
school districts. Although the U.S. Supreme Court had rejected arguments based on the Equal
Protection Clause of the U.S. Constitution, advocates for school financing reform typically based
their new legal claims on equal protection provisions found within the constitutions of individual
states. For example, in Serrano v. Priest, which is the most prominent example of an equity-based
education finance claim, the Supreme Court of California held that the state finance system for
public schools violated the equal protection provisions in the California constitution because

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“discrimination in educational opportunity on the basis of district wealth involves a suspect ¹⁰
classification, and ... education is a fundamental interest.”
Although an equity-based litigation strategy was effective in some of the early cases:
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In part, this shift may have occurred because state courts and legislatures experienced
implementation difficulties when attempting to equalize funding among school districts and
because court decisions that required equal resources did not necessarily ensure equal or adequate ¹²
educational opportunities. As a result of this diminished success with equity-based claims,
plaintiffs in school financing cases began bringing school finance claims based on adequacy
theories instead.
Although state courts continued to analyze education finance cases in terms of equal protection,
the courts gradually began to examine other considerations, notably arguments regarding
educational adequacy. Specifically, rather than rely on the argument that school funding
disparities were a violation of equal protection, some plaintiffs began arguing that inadequate
funding levels resulted in a violation of state constitutional provisions that guaranteed an
adequate education. Most of these claims were based on provisions found in virtually all state
constitutions that require states to establish a system of free public schools and provide students ¹³
with a “thorough,” “efficient,” or “adequate” education.
For example, in the early case Robinson v. Cahill, the Supreme Court of New Jersey interpreted a
state constitutional provision that required the legislature to provide for “a thorough and efficient
system of free public schools,” and the court concluded that “we do not doubt than an equal
educational opportunity for children was precisely in mind” and “the obligation is the State’s to ¹⁴
rectify.” As a result, the court ruled that the New Jersey school finance system was
unconstitutional but left it to the legislature to devise a solution that would compel localities to
provide equal educational opportunities to their students. In another significant adequacy case,
Rose v. Council for Better Education, the Supreme Court of Kentucky evaluated the claim that the
state education financing scheme was inadequate and therefore a violation of a state constitutional ¹⁵
provision that requires the legislature to “provide for an efficient system of common schools.”

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The court not only found such a violation, but held that “Kentucky’s entire system of common ¹⁶
schools is unconstitutional” because the entire system is “underfunded and inadequate” and ¹⁷
“fraught with inequalities and inequities.” The court then held that every child “must be
provided with an equal opportunity to have an adequate education” and set forth educational ¹⁸
standards to define what constitutes an adequate education.
Currently, state education finance litigation typically involves adequacy-based claims. As one
commentator notes, “Adequacy has become the predominant theme of the recent wave of state
court decisions because the adequacy approach resolves many of the legal problems that had
arisen in the early fiscal equity cases and because it provides the courts judicially manageable ¹⁹
standards for implementing effective remedies.” Regardless of whether such lawsuits involve
equity or adequacy theories, education finance litigation has thus far been brought in 45 out of 50 ²⁰
states.
^Jody^F^e^der
^L^e^gⁱ^s^l^at^iv^{e A}^t^torn^e^y
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