School Funding Cases in Tennessee

in Tennessee Litigation

Historical Background

In 1993, the Supreme Court of Tennessee ruled, in Tennessee Small School Systems v. McWherter, 851 S.W.2d 139 (Small Schools I), that the state’s education finance system violated the Tennessee constitution’s equal protection clause. The court rejected the argument that local control provides a “rational basis” for vastly unequal school quality: “even without deciding whether the right to a public education is fundamental, we can find no constitutional basis for the present system, as it has no rational bearing on the educational needs of the districts.” Having found the school system unconstitutional on equal protection grounds, the court did not analyze the adequacy of the system under the state’s education clause.

After the legislature revised the funding system, plaintiffs argued that the new scheme violated the state’s equal protection clause because of the slow timetable for reform and the failure to equalize teacher salaries. In 1995, the state supreme court upheld the incremental approach in Tennessee Small School Systems v. McWherter, 894 S.W. 2d 734 (Small Schools II). However, the court also ruled that “the exclusion of teachers’ salary increases from the equalization formula is of such magnitude that it would substantially impair the objectives of the plan.” As a result, the legislature passed the Teachers’ Salary Equity Plan in 1995.

In 1998, plaintiffs returned to court seeking equalization of teacher salaries across the state. In October 2002, the Supreme Court held, Tennessee Small School Systems v. McWherter, 91 S.W.3d 232 (Small Schools III) that the 1995 teachers’ salary equity plan failed to provide substantially equal educational opportunity and found no rational basis for excluding the largest and most important component of that opportunity (i.e. providing teachers) from the cost-driven BEP. The court also held that the cost determination and annual cost review are indispensable parts of the Basic Education Plan.

Finally, in 2005, the legislature amended the funding formula to include teacher salaries, and in 2006 the trial court closed the case, ruling that no compliance issues remained.

In 2007, the governor and legislature agreed to increase funding of the Basic Education Program (BEP), the primary conduit of state education funds, by $517 million over three years. Fueled in part by a 42-cent per pack increase in the tax on cigarettes, the BEP was expanded by $290 million in 2007. However, with the economic downturn, the full funding increase may now take longer to implement, The Tennessean reported.

Recent Events

After meeting to discuss budget concerns with representatives from four of the state’s largest school districts the day before, on March 24, 2015, Tennessee Governor Bill Haslam found himself, and the state legislature, the commissioner of education and board of education, named as defendants in a suit attacking the state’s failure to adequately and equitably fund its school system.  The case, Hamilton County Board of Education v. Haslam, is the fourth such suit against the state in almost 25 years.

The latest litigation was initiated by seven Tennessee school districts that allege that the state has abdicated its constitutional duty to fund the state’s system of public education, and has impermissibly shifted that responsibility onto local communities.  They allege that the state has failed to fully fund the Basic Education Program (the “BEP”), an approach that the legislature enacted in 1992 while the first school funding litigation was still proceeding.  A BEP Review Committee periodically determines the actual costs of operating the public school system, and is expected to ensure the equitable distribution of funds to meet these costs across the state based on school districts’ relative funding needs.  Plaintiffs had returned to court in 1995 and 2002 because of the state’s failure to ensure that the BEP fulfilled the state’s obligation to equitably fund the school system and, specifically, because adequate state funding to cover teachers’ salaries was not being provided. In 2007, the state made upward cost revisions to the BEP to account for teachers’ salaries, but, according to the current complaint, it has failed to fully fund the BEP to cover these costs in the years since.

The complaint alleges that the BEP’s current funding formula underestimates the costs of teachers’ salaries by roughly $532 million, teachers’ insurance by approximately $64 million, and classroom costs by roughly $134 million.  The plaintiff-districts allege that the state has continued to underfund education despite the numerous recommendations from the legislatively created BEP Review Committee “to fund the true costs of operating Tennessee’s system of public education.”  The districts further contend that their situation is made more dire by the state’s continuing imposition of higher academic standards.  In wealthier districts, the complaint alleges, parents are asked to pay fees and support fundraisers to offset increasing educational costs, while in poorer districts, school officials lacking the means to raise sufficient funds, are forced to cut even the most basic educational services.

In September 2015, the Shelby County Board of Education filed a related complaint alleging that Governor William Haslam, legislative leaders and the State Board of Education have denied students in the predominantly low income, minority school district their rights to an adequate “free public education” and to an equal educational opportunity. Shelby Co. Bd of Educ. v Haslam

The recently-filed Shelby County case differs from the earlier Hamilton County  litigation in its extensive evidence on the state’s failure to provide adequate funding to meet the needs of the large numbers of students in Memphis who are immigrants, students with disabilities and students from poverty backgrounds who have extensive needs for additional services. The complaint states that the district was forced to eliminate 367 positions for the current school year. It also alleges that the district lacks funds to provide necessary interventions for its many students who are performing below state proficiency levels, to offer pre-kindergarten services to all students who need them and to adequately fund CTE programs, extra- curricular programs, music, art, mandatory foreign language instruction. Plaintiffs further claim that the state has imposed a “pay to play” statute that requires students to pay fees to take part in extracurricular activities, and for supplies for CTE and other programs. Such fees, they say, violate the right to a “free public education” and equal protection of the laws.

The Kansas-based firm of Lewis Brisbois  Bisgaard & Smith, which has handled an extensive series of education funding cases in Kansas, is representing the Shelby County Board of Education in this case.

Costing Out

While the 1993 decision was pending before the supreme court, the Tennessee legislature enacted the Educational Improvement Act of 1992. The bill adopted the Basic Education Program (BEP), which appropriates and distributes school funds based on a formula for 42 components (including special education, textbooks, and capital expenditures). While a costing-out study was not performed, the state indicated that the initial BEP funding amount was intended to cover the costs of an adequate education, and the costs are reviewed annually. The State’s share of the cost of classroom-related components is 75%.

In 2003-04, a coalition of Tennessee’s professional education groups hired education finance experts to conduct a costing-out study, which estimated the additional cost of funding an adequate education statewide as $1.1 billion in 2002-2003.

Last updated: October 2016

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