Sunday, March 25, 2012

McCleary v State: Embedding Cost Correlation in the Budgetary Process

This is the fifth in a series of posts on the recent Washington Supreme Court decision,  McCleary v. State, enforcing the State's constitutional requirement to assure appropriate funding for public education.  You can jump to prior posts in the series using links below.  McCleary v. State deals with a number of important issues in education finance jurisprudence.  But I've been posting on one aspect of the decision, the part that holds that the State does not meet its constitutional obligation to public education, when it sets funding based on politics rather than a data based costing system.  Unless the state legislature bases funding on credible efforts to determine the cost of required programs, it is acting irrationally and irresponsibly.

This common sense articulation of  one component of the constitutional test for education funding says that a legislature does not perform its constitutional duty unless education funding formulas "correlate to the real cost of amply providing students with the constitutionally required education.  The McCleary court explained:

The evidence at trial showed that the State’s now-abandoned basic education funding formulas did not correlate to the real cost of amply providing students with the constitutionally required “education.” As a result, the State has consistently failed to provide adequate funding for the program of basic education,
In the last post, I explained that courts usually take an extremely permissive, hands-off, approach to reviewing  state legislation when a constitutional right is not impaired.  When applying this relaxed hands-off standard, the Court simply asks if there is any possible rationale that could support the decision that the legislature made.  Under this relaxed standard, the legislature need not actually go through the motions of acquiring data to support its decision.  The defenders of the State law can actually supply a rationale that the legislature didn't even consider.   Courts like Minnesota (Skeen) and Washington (McCleary), however, have held that this hands-off review of education funding does not apply when the right to an adequate education are implicated.

How then should the Courts fashion a principled approach to judicial review of whether the education funding formulas "correlate to the real cost of amply providing students with the constitutionally required education?"   The purpose of this post is to begin an exploration of a couple of approaches to the correlation process. .

De Novo Costing Out Approach:    One approach to evaluating whether funding is correlated to the real cost of education would be to conduct a "de novo" trial in which the trial court takes testimony from superintendents, state officials, and professional education costing experts.   There are a number of such experts.   University of Wisconsin professors Odden and Picus,  Augenblich  Palaich and Associates often testify for the plaintiffs, and Eric Hanushek of Stanford often testifies for the State defendant.  The result is a lengthy and costly battle of experts resulting in a trial court decision as to what it really does cost.

Under this de novo costing out approach, the Court determines the amount of shortfall in legislative funding and then orders the legislature to come up with a solution to the funding shortfall in a reasonable time.   The resulting court order typically leads to a complex litany of subsequent litigation in which the parties contest whether legislative changes in funding do, or do not, comply with the letter and spirit of the Court's order, and we could easily spend ten blog posts on the complexities posed by the de novo costing out approach and still not cover the topic adequately.

Legislative and Executive Cost-Out Approach   Another alternative would be to require both the governor and the legislature to follow their own business like costing out approach as they prepare the biennial education budget.   Under this alternative, the courts would require both governor and legislature to engage in certain minimum good faith data-based efforts to correlate the real cost of the education required by state law.    How would that work?   What would prevent the legislature from double crossing the court's mandate by making up phony numbers.  What would prevent the Governor to present a bogus budget that dramatically understates the cost of education under current law?      If a legislature can pretend that science doesn't support climate change, then what is to stop the legislature from adopting a completely bogus correlation between its funding formula and the real cost of amply providing students with the constitutionally required education?  

Let us begin to answer this question by acknowledging that our current legislature and governor make absolutely no pretense of conducting this correlation process, and neither did Governor Pawlenty and the DFL legislature which proceeded the current incumbents.  A system under which the governor submitted a cost-correlated budget and the legislature adopted a cost-correlated budget would be vastly superior to the current system in which everyone involved proceeds on the common understanding that they will not even attempt to cover the true cost.   A requirement that the legislature and governor actually go through the motions of covering the full cost of state required education would force the State Department of Education to engage in a costing out approach using actual data, something that simply is not done today in the budgetary process.  How can we possibly solve a problem as weighty as education funding when we begin our work agreeing not to determine the true correlated cost?

Once the executive and legislature actually began to attempt to build an education budget based on the correlated cost of state mandated education, a number of positive changes might well result.  First, the legislature and governor would have to begin to develop a modicum of expertise in the actual cost of education, and that expertise would give new meaning to the legislative process.   Many of the key legislators in both parties show remarkable, even appalling, ignorance of even fundamental costing issues.   This ignorance results, I believe, from a process in which the actual cost of educational programs is deemed irrelevant to the ultimate result. Why learn something that doesn't matter?   In today's process, the key knowledge for legislators is to understand the "runs" produced at funding time that explain how much their own district is going to receive as compared to other legislator's districts, so that the legislator can explain to the home folks that our district is in just as bad financial shape as other legislators' districts.

Second, when mandates are imposed, the legislature's new-found interest in the actual cost of those mandates might create a far more cautious approach to imposing mandates in the first place.  The current practice which disregards cost correlation tends to breed irresponsibility in the legislative process. 

Once we actually began to use costing information in the budget building process, there are a variety of safeguards that could be imposed in the budget building process to assure a modicum of integrity in the process.  I'm trying to keep these posts to a manageable length.  In subsequent posts, I'll suggest some further approaches to the correlation process that might preserve a proper relationship between the legislature, executive, and judiciary.

McCleary v State, Washington's Groundbreaking School Finance Decision
 McCleary v. State, Part I  
McCleary v State Requires Legislature to Base Funding on Actual Cost
Jvonkorff on Education McCleary v. State, Part II
McCleary v State and Determining the Cost of Education
Jvonkorff on Education McCleary v. State, Part III
 McCleary v. State: what level of scrutiny is appropriate for legislative funding decisions
Jvonkorff on Education McCleary v. State, Part IV
Correlating the cost of education: fund the child.
Jvonkorff on Education  McCleary V. State Part V
Summary of Decision Network for Excellence
Washington Supreme Court Blog  
JvonKorff on Education, The Rose Decision 
Minnesota's School Finance System is Unconstitutional, Part I
Minnesota's School Finance System is Unconstitutional, Part II
Minnesota's School Finance System is Unconstitutional, Part III
Minnesota's School Finance System is Unconstitutional, Part IV

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