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September 07, 2005

Classroom Bullies: New York's Abusive School-Finance Litigation

By Thomas C. O'Brien

Around the country in recent years, activist litigators have persuaded state judiciaries to step in and seize control of school finance, ordering state lawmakers to institute new spending for the purpose of equalizing spending among local districts, rectifying alleged funding inadequacies, or both. The resulting court decisions have been vastly controversial, stirring (well-justified) charges that the courts are stifling voters' control of the schools, usurping the historic appropriations role of the legislature, and sinking the states with mandated-but-ineffective spending. If the experience of New York is any indication, the decisions are subject to another, distinct critique: namely, they are obtained by way of abusive litigation. In particular, their proponents are allowed to evade classic prerequisites of standing and adversarialness, aimed at ensuring that courts are presented with a genuine "case or controversy", with the result that litigation becomes a puppet play aimed at justifying a preordained conclusion.

On February 14, 2005, a New York City Supreme Court judge, the Honorable Leland DeGrasse, ordered the state of New York to send an additional $5.6 billion per year and $9.2 billion in capital funds over the next five years to New York City.(1) The ruling, which is currently under appeal, was based on Judge DeGrasse's determination that the state has violated the rights of NYC students to a sound basic education under the New York constitution by under-funding education in the city. If upheld, the court-ordered additional funding when fully implemented will amount to a sum in excess of 60% of the state's annual sales tax revenues.(2)

The lawsuit was brought by the Campaign for Fiscal Equity, Inc., a "charitable" corporation that was incorporated in 1993—just three months before the case was filed. The corporation's members and governing officials include local politicians, representatives of local NYC school boards, teachers unions and political organizations—the same entities that run the NYC schools.(3) As it happens, these same entities had backed Judge DeGrasse and his wife in their successful bids for NYC judgeships.(4) The person who incorporated CFE is the lead counsel for the plaintiffs, Michael Rebell, a lawyer who has made a successful career out of suing New York's public institutions and manipulating the City's educational establishment.(5)

Although the CFE case is about the alleged deprivation of NYC students' constitutional rights to a sound basic education, and copious breast-beating went on concerning suffering students and what causes them to fail in school, no student ever appeared or testified in the case about those problems; and no one was ever certified to act as a representative of any class of students.(6) About two dozen students lent their names to the case for cosmetic purposes only. The role of the aggrieved plaintiff was instead played by the charitable corporation, CFE. This was significant in part because it limited the ways in which the state might defend the case. Who were the aggrieved students? If they were failing students, what other factors besides school funding might have contributed to their failure? Had they ever skipped classes? Did they spend much time on homework and studying for tests? If they were students who passed, in what ways had their need for a sound basic education fallen short? Was the problem that bad teachers couldn't explain the materials, or that books were too old or tattered to be read, or that there was no room in the classroom to sit, or some other reason? Educationalists and "expert" witnesses testified at length about those concerns. However, because actual students did not participate in the case, there was no way for the defense to disprove their theories. The key "facts" of the case were simply arguments by interested but non-involved third parties that the judge found useful or persuasive.

Moreover, it was not clear who was on which side of the case. Officially, the named defendants in the case were the state of New York and various of its top officials, represented by the state's attorney general. Curiously, however, forty two of CFE's fifty eight witnesses, supporting the effort to sue the state, worked for some branch of the state government, eight of them for the State Education Department (SED).(7) Originally, the Commissioner of Education, who has overall responsibility for operation of the State Education Department, had also been named as a defendant. But with the consent of the N.Y. Attorney General (then, Mr. G. Oliver Koppell), he was dismissed as a defendant from the case pursuant to an agreement that, in effect, made him and the State Education Department allies of CFE(8); and he himself served as a witness for CFE. Equally remarkable, SED's in-house counsel and Deputy Commissioner for Legal Affairs is authorized by the agreement to meet in private with the plaintiff's attorney—for who knows what purpose.

Even with professional witnesses filling in for actual students, it was hard to accept at face value the charge that the state had under-funded education in NYC. That is because the state already sends more money to NYC per student than the average for all other districts in the state; the state already spends more on education per student than any other state in the nation(9); New York City spends a lower percentage of its own resources on education than do other districts in the state of comparable wealth(10); and New York City actually reduced its local contributions for education in proportion to contributions it received from the state or federal government.(11) The state pointed out that NYC did not even manage to spend all the money it received from the state in some years, as evidenced by a letter from plaintiff's counsel to a NYC official that stated: "How do we defend these… surpluses… and plead poverty?"(12)

Worse yet, as even Judge DeGrasse was obliged to acknowledge, the practices of local school boards and teachers unions—the very groups that were backing the suit—are often what prevent the city from making the most of its ample resources.(13) Specifically, community school boards hire unqualified supporters and relatives, thereby demoralizing school staffs, and even sometimes pocket illegal kickbacks. Union contracts protect thousands of teachers who do not teach, prevent the removal of poor teachers even as better and more experienced teachers depart in droves, and limit the hours that teachers teach to fewer than 3 3/4 hours per day.(14) NYC also places a needlessly high number of students in extremely expensive special-ed programs which altogether consume over 25% of its education budget.(15)

It is, of course, impossible to ascertain the extent to which those factors affected anyone's academic performance, any more than it is possible to ascertain the extent to which supposed "under-funding" by the state contributed to the same problem—especially since there were no actual students to ask. Judge DeGrasse resolved the question, however, by simply dismissing from consideration all causes of poor academic performance other than under-funding by the state. In particular, even if NYC did help cause its own under-funding problems by contributing less to education than other districts of comparable wealth or by reducing its local contributions when it received contributions from the state or federal governments, Judge DeGrasse ruled it was the state's fault—because NYC is a branch of the state and theoretically could have changed the rules. Likewise, to the extent that NYC education is sabotaged by waste, fraud,. corruption and teachers union power, that too is the state's fault—because the state theoretically could have stepped in to prevent all those things from happening. As Judge DeGrasse explained, "the blame must lie with the state for perpetuating a form of school governance that generated corruption and waste."(16)

Beyond what lawyers might call the plaintiffs' "clean hands" problem—i.e., why should they be allowed to employ their own bad conduct as a springboard for a legal victory entitling them to yet more money?—Judge DeGrasse's analysis suffers from a further logical flaw. Even though the court blames the state for the woeful conditions of governance of city schools, those conditions are nonetheless causes distinct from the under-funding issue, and as such weaken any case for fixing on a funding remedy alone. If the constitutional bottom line is students' right to an adequate education, then the issue must remain open whether the better route to that outcome would consist of improved state governance of the city schools (whether ordered by the court or adopted voluntarily by Albany), higher funding, or both. Of course, most "governance remedies" would have been highly unwelcome to CFE's constituent groups, which much preferred for more money to flow in with a minimum of interference on how they were to spend it. Perhaps to get around that problem, Judge DeGrasse pulled a rabbit out of his hat in the form of joint and several liability. He ruled that even though it might be impossible to know how much under-funding by the state causes NYC's education problem, so long as money could have some effect, the state is liable to pay as though increased funding were the only cause and the only remedy.(17) Governance reforms? Judge DeGrasse ordered none—after all, the plaintiffs had not asked for any.(18)

A runaway judge? That would be simplifying matters too much. Over the ten-year saga of the case thus far, the state's highest court, the Court of Appeals, has had a chance to pronounce on some of the issues it raises. And not only has it supported Judge DeGrasse's most outrageous rulings, it has added a few outrages of its own.(19) When the case began, the plaintiffs faced a seemingly insuperable roadblock in the form of the Court of Appeals' own squarely opposed precedents. In a 1982 case called Levittown vs. Nyquist(20), substantially similar to the later CFE case, the Court did embrace the concept that the state has a Constitutional duty to provide a "sound basic education"(21); but that duty would be implicated only in the case of "gross or glaring inadequacy."(22) The court specifically found that such condition did not exist "in consequence of the present school financing system"(23) and the fact that the average per-pupil expenditure exceeded that in all other states but two—a circumstance since changed, with New York now being first in the nation in per-pupil education spending.(24) Further, the court specifically recognized that the state's aid payments to the local districts (amounting to about $1,885 per student at the time) assured "that a basic education will be provided"(25) to students (to be supplemented by each district's local contributions); and found that the "provisions for state aid…[were] constitutional under the… education article."(26) Finally, the state Constitution specifically assigns the role of providing for education to the legislature in its so-called Education Article, which provides: "The legislature [emphasis added] shall provide for the maintenance and support of a system of free common schools, wherein all the children of this state may be educated." The Levittown Court emphasized that: "[the] ultimate issue before us is a disciplined perception of the proper role of the courts in the resolution of our State's educational problems…. [The inadequacies of the system] … are properly to be addressed to the Legislature."(27)

The premise of CFE's lawsuit was that the Court might prove willing to reconsider and effectively overrule its Levittown decision. Alas, that premise proved well-founded. In the case's first trip up on appeal in 1995, the Court took an eraser to much of its earlier ruling, denying that in Levittown it had ever considered whether the state was meeting the constitutional standard.(28) And it proceeded to flesh out a new and useful meaning for the term "sound basic education", which omitted the requirement of "gross and glaring inadequacy" and gathered power into its own hands. The Court reasoned that the measure of soundness could not be derived from, say, students' ability to display the accomplishments embodied in the Regents Standards, or those expected of any particular grade level—because "so to enshrine the Learning Standards [or a particular grade level] would be to cede to a state agency the power to define a constitutional right."(29) Ultimately, the Court clarified its interpretation of a "sound basic education" in a companion case to CFE (on its second trip to the Court of Appeals) in 2003 (Paynter vs. State of New York)(30) as follows: "if the State truly puts adequate resources into the classroom, it satisfies its constitutional promise."(31) And, of course, only the courts can define what is "adequate." The result is effectively to amend the constitution's Educational Article(32)—"The legislature shall provide..."—to mean that the courts will rule on what resources are needed by the public schools, and the legislature will then provide that amount. The Court thus buried at once both legislative prerogative and the state's 200-year tradition and legal history of local control.(33)

Just as troubling was the Court's ratification of the methods employed by Judge DeGrasse for keeping the suit in court in the first place. Under previously accepted rules of standing and capacity to sue, it took a genuinely aggrieved single person, who could demonstrate an injury to his legal interests, to get into court.(34) Mere ideological interest in challenging state policy was not enough, nor could interested third parties (such as teachers' unions) make themselves parties by claiming an interest in student outcomes. Much less could subdivisions of the state itself sue the government of which they were part. But from now on, based on the Court's ruling in CFE, it will be enough for any of these groups simply to form a "charitable" corporation and sue on behalf of those for whom the corporation claims to be concerned.

The Court likewise endorsed Judge DeGrasse's approach of conjuring away the multi-factored origins of educational failure, by minimizing the requirement of a causal link between alleged underfunding and poor academic performance: "[the] requirement was for plaintiffs to 'establish a causal link between the present funding system and any proven failure', not to eliminate any possibility that other causes contribute to that failure"(35) ; by shifting the burden of proof to the state: "[the] Appellate Division did nothing to undermine… the trial court's syllogism… that better funded schools would hire and retain more certified teachers, and that students with such teachers would score better"(36); and by disallowing evidence of actual causes of failure, such as dysfunctional families, poverty, crime, inability to speak English or low intelligence: "we cannot accept the premise that children come to the New York City schools ineducable, unfit to learn."(37) It might be noted that the U.S. Supreme Court, in a 1975 case (Warth vs. Seldin) involving the alleged violation of Rochester, NY, residents' U.S. Constitutional rights by a local municipality's zoning laws, took precisely the opposite position, ruling that it was not enough for the state's conduct to have played some role in plaintiffs' injuries; rather, it must be proved that the injuries would not have occurred "but for" the state's action.(38) And the Court similarly affirmed Judge DeGrasse's imposition of liability even though the entities demanding payment might themselves have sabotaged the state's efforts to educate their children. In a somewhat condescending (but prescient) bow toward the historic separation of powers, the Court declined to prescribe where the money should come from, declaring that: "[other] questions about the process—such as… how the burden is distributed between State and City—are matters for the Legislature desiring to enact good laws."(39)

Since the court refused to recognize anything other than lack of money as a cause for NYC's education problems, it is not surprising that the remedy ordered by the court is simply more money. The order makes no attempt to correct the corruption, waste and mismanagement that "sabotage" the state's efforts to educate NYC children. But even focusing solely on funding, the remedy still does not fit the problem. In the seven years since the 1997-1998 school year (the last year included in the trial court record), NYC has enjoyed a more than 60% increase in funding available to improve educational services to NYC students—more than three times the rate of inflation and an increase of approximately $5 billion in funding for 2003-2004 over funding for 1997-1998.(40) Should some or all of the increase be deducted from the $5.6 billion per year and $9.2 billion capital increases ordered by the court? In light of continued poor academic performance by NYC students during the same period, the court said no: "[all] of these initiatives promise, but await demonstrable outcomes."(41) The problem with the court's rationale, of course, is that the lack of student improvement is a "demonstrable outcome." The increased funding has had virtually no positive effect(42); and the court's order gives no reason to expect that more of the same will produce a different result.

The courts' attempts to impose specific numbers and deadlines have resulted in a series of showdowns with Albany lawmakers. In June of 2003 the Court of Appeals gave the legislature until July 30, 2004 to "ascertain the actual cost of providing a sound basic education" and make changes to ensure that schools in NYC will receive those resources. July 30, 2004 passed and nothing happened. On August 3, 2004, Judge DeGrasse (on remand of the case) appointed three referees and gave them until November 30, 2004 to determine the actual cost of a sound basic education—since the legislature would not do it. Armed with the referees' findings, Judge DeGrasse then ordered the state to provide $5.6 billion annually and $9.2 billion for facilities to NYC in an order dated February 14, 2005. Again, nothing happened, except that the state appealed on April 18, 2005. On May 3, 2005, the Appellate Division rejected a motion by CFE to lift the automatic stay while the state appeals; and scheduled the state's appeal for October, 2005.

Obviously, many in the legislature are not prepared to pump virtually limitless state funds into NYC schools in a vain attempt to overcome failings they had no hand in creating. State Senator George Winner from Elmira, NY, in a public meeting on February 10, 2005, stated it clearly: "I'll go to jail before I'll send that money to New York City."(43) Even among less resistant legislators, there is no consensus between the state Senate (more attuned to upstate interests) and the Assembly (more swayed by the city) on how to distribute the costs; and there probably never will be a consensus. As for Mayor Bloomberg of NYC, he wants the CFE windfall, but he won't take it if NYC is required to spend any more of its own money on education—it must all come from upstate.(44) Can the Court of Appeals make the legislature appropriate the money? Legally, probably not; practically, no.

Anticipating such an impasse, CFE and its supporters have pushed to enlist upstate school districts as allies, urging them to bring their own "son-of-CFE" cases as a way to grab for their own pot of riches (and, not incidentally, undermine upstate legislators' unwillingness to go along with the program).(45) Carl Hayden, former Chancellor of the Board of Regents and a witness for CFE, wrote on February 15, 2004: "more money for children attending school in New York City portends more money for children attending schools in [upstate New York]."(46) Robert Biggerstaff, a lobbyist and lawyer for the New York State Association of Small City School Districts and an upstate advocate for "son-of- CFE" cases, wrote in his November 2004 newsletter that a lawsuit by the Association "could insure that the principles of CFE are applied to …[all other school districts] throughout the state."(47) With a touch of unintended irony, he reported in the same newsletter that he had met with the State Education Department's top lawyer to see if she might get the Attorney General to consent to dropping SED as a defendant in a pending "son-of- CFE" suit involving the Utica, NY, school district, since: "if dropped, SED would be freer to provide financial and statistical information in the case." But even supposing the courts allow the upstate districts to join in the "adequacy litigation" feast, most upstate residents at some level grasp that in the end they will be feasting on themselves. If the state can't afford an additional $5.6 billion per year and $9.2 billion for facilities for NYC, what happens when it is told to pay for twice that amount? In short, CFE's game plan is politically, legally and constitutionally unworkable.

The Court would not face the embarrassment of seeing its orders go ignored with impunity had it shown the sense to hold fast to its own former rules of "justiciability", "standing" and "capacity".(48) Rules placing limits on the "justiciability" of controversies, such as that laid out in Levittown (and then later ignored in CFE), are designed to keep courts from venturing into political areas beyond their competence and expertise. A Judge DeGrasse may decide (based on the opinions of the experts paraded before him by the litigants) that 30 billion-odd dollars of increased funding over four years looks like adequate funding. But can the state afford that sum? At the margin, would it be worth the inevitable cutbacks in other state services? Legislatures would know; but courts probably would not. Rules requiring proper "standing" and "capacity" to sue recognize that staged trials at the behest of parties with no real interest in the matter at issue—or worse yet, between parties that do not stand in an entirely adversarial relationship to each other—undermine the integrity of the judicial system and the public's respect for it.

The real losers in the CFE affair are the Court of Appeals. By ignoring the wisdom of their own rules and precedents, they have blundered into a morass well over their heads. It would be better for them to back out with all deliberate speed, rather than to sink ever deeper, drawing the state ever further into constitutional crisis.

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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.