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Matanuska-Susuitna Borough School District v. State of Alaska (1/31/97), 931 P 2d 391
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Notice: This opinion is subject to formal correction before
publication in the Pacific Reporter. Readers are requested to bring
errors to the attention of the Clerk of the Appellate Courts, 303 K
Street, Anchorage, Alaska 99501, phone (907) 264-0607, fax (907)
264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
MATANUSKA-SUSITNA BOROUGH )
SCHOOL DISTRICT, MATANUSKA- ) Supreme Court No. S-5513
SUSITNA BOROUGH, a Municipal )
Corporation, JUNE TULL, ) Superior Court No.
KENNETH P. FALLON, DONALD L. ) 3PA-86-2022 CIV
MOORE, and ROY S. CARLSON, )
JR., individually as taxpayers)
of the Matanuska-Susitna )
Borough, DONALD L. MOORE, as )
parent and next friend for )
Tyler J. Moore and Isaac D. )
Moore, minor school students, ) O P I N I O N
and ROY S. CARLSON, JR., )
as parent and next friend ) [No. 4470 - January 31, 1997]
of Reave C. Carlson and Amber )
L. Carlson, minor school )
students, )
)
Appellants, )
)
v. )
)
STATE OF ALASKA, STEVE COWPER,)
Governor of the State of )
Alaska, WILLIAM G. DEMMERT, )
Commissioner, Alaska )
Department of Education, and )
the STATE OF ALASKA )
DEPARTMENT OF EDUCATION, )
)
Appellees. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, Third Judicial District, Palmer,
Beverly W. Cutler and James A. Hanson, Judges.
Appearances: Thomas F. Klinkner, Wohlforth,
Argetsinger, Johnson & Brecht, Anchorage, for
Appellants. LuAnn E.B. Weyhrauch, Special
Assistant Attorney General, and Bruce M.
Botelho, Attorney General, Juneau, for
Appellees.
Before: Rabinowitz, Matthews, Compton, and
Eastaugh, Justices. [Moore, Chief Justice,
not participating.]
COMPTON, Justice.
MATTHEWS, Justice, with whom RABINOWITZ,
Justice, joins, concurring.
I. INTRODUCTION
The Matanuska-Susitna Borough (Borough), the Matanuska-
Susitna School District (District), and several individual
plaintiffs challenged Alaska public school funding laws, arguing
that differences in treatment between regional educational
attendance area (REAA) school districts (EN1) and city and borough
school districts, and among the non-REAA districts, violated their
right to equal protection of the law under the state constitution.
The superior court dismissed the equal protection claims on summary
judgment, awarded attorney's fees against the Borough and the
District, and assessed costs against the Borough, the District, and
the individual plaintiffs. We reverse the assessment of costs
against the individual plaintiffs, but affirm the judgment in all
other respects.
II. FACTS AND PROCEEDINGS
The Borough, the District, and the individual plaintiffs
filed suit against the State in late 1986, alleging, inter alia,
that the state system of school funding violated their right to
equal protection of the law under article I, section 1 of the
Alaska Constitution. Ruling on partial cross-summary judgment
motions, the superior court dismissed the equal protection claims
of all plaintiffs. The court held that the Borough and the
District had no equal protection rights. (EN2) The court found
that the challenged laws, AS 14.11.100 and 14.17.025(a) & (d), did
not deprive the individual plaintiffs of equal protection.
The parties stipulated to dismissal of the rest of the
claims, and final judgment was entered. The superior court awarded
attorney's fees of $20,000 against the Borough and the District,
rejecting their claims of public interest litigant status. The
court also awarded partial costs of $6,557.28 against the Borough,
the District, and the individual plaintiffs.
The individual plaintiffs appeal the denial of their
equal protection claims. The Borough and the District appeal the
award of attorney's fees. All plaintiffs appeal the cost award.
III. DISCUSSION
A. Equal Protection
The individual plaintiffs claim that their interests as
taxpayers and their children's interests in education are impaired
by the state school funding laws, and that an insufficient nexus
exists between the state interests that justify these laws and the
disparate treatment the plaintiffs claim to receive under them.
1. The challenged funding laws
The individual plaintiffs challenge two school funding
laws: AS 14.11.100(a), (EN3) concerning state aid for costs of
school construction debt, and AS 14.17.025(a) & (d), (EN4)
concerning the local contribution required when districts receive
state aid for operating costs.
AS 14.11.100(a) provides for state reimbursement of
payments made by boroughs and cities to retire the indebtedness
they incur for school construction. Through this section, borough
and city school districts recover a significant portion of their
costs of school construction. REAAs are not eligible for this
program.
On its face, section 100(a) would appear to benefit
borough school districts, such as the plaintiffs' district, while
denying REAAs a comparable benefit. The individual plaintiffs
argue, however, that this section actually works to disadvantage
them. For debts authorized after March 31, 1990, the section
provides that the State will reimburse only seventy percent of the
annual debt service costs incurred during the fiscal year of
reimbursement. AS 14.11.100(a)(6), (7). (EN5) The individual
plaintiffs find that this section disadvantages them by comparing
it to a section of Title 14 that provides for aid through
construction grants. Under AS 14.11.008(c), REAAs are only
required to contribute two percent of project costs in order to
receive state school construction grants. (EN6) The individual
plaintiffs argue that AS 14.11.100(a) effectively creates two
classes of students and taxpayers: (a) those in "municipal school
districts, which receive 70% state funding for school construction
under AS 14.11.100"; and (b) those in "REAAs, which receive 98%
state funding for school construction under AS 14.11.005 -
14.11.019."
In addition to school construction aid in the form of
grants and debt reimbursement, school districts also receive state
aid to help cover their operating costs. AS 14.17.010-.056. A
district receives its "basic need"less a "required local
contribution"less ninety percent of "federal impact aid." AS
14.17.021(a). Basic need is computed by totalling the amount or
"units"of teaching required and multiplying this figure by the
dollar value per unit, which is adjusted for cost differences among
districts. AS 14.17.021(b), .031, .051, .056. In a city or
borough school district, the local contribution is the lesser of
(1) the equivalent of a four mill tax - a tax of four-tenths of one
percent - on all real and personal property, or (2) thirty-five
percent of last year's basic need. AS 14.17.025(a). REAAs are not
required to make a local contribution. AS 14.17.025(d).
The individual plaintiffs argue that the local
contribution requirement establishes three classes of students and
taxpayers: (a) those in districts contributing the four mill
equivalent; (b) those in districts contributing thirty-five
percent; and (c) those in REAA districts, which make no local
contribution. They argue that AS 14.17.025(a) and (d) combine to
deprive them of equal protection of law because subsection (a)
requires contribution from their district, while subsection (d)
does not require any contribution from REAAs. They also argue that
subsection (a) itself disadvantages them relative to students and
taxpayers in other city or borough districts. Districts with a
high assessed property value per student will pay thirty-five
percent of basic need and thereby avoid having to tax at the four
mill rate, while districts like their own will be forced to tax at
the four mill rate. The individual plaintiffs contend that this
creates a situation in which the districts with "the greatest
ability to provide local support to education"are precisely those
of which "a lesser tax effort is required . . . than of any other
municipal school district."
2. Equal protection analysis under the Alaska
Constitution
Article I, section 1 of the Alaska Constitution provides
that all persons are "entitled to equal rights, opportunities, and
protection under the law." In giving effect to our equal
protection clause, we have employed a sliding scale approach to
determine the level of scrutiny that is required in reviewing a
challenged statute. State v. Enserch Alaska Constr., Inc., 787
P.2d 624, 631 (Alaska 1989); State v. Ostrosky, 667 P.2d 1184,
1192-93 (Alaska 1983) appeal dismissed, 467 U.S. 1201 (1984). This
approach involves a three-step process:
First, it must be determined at the outset
what weight should be afforded the
constitutional interest impaired by the
challenged enactment. The nature of this
interest is the most important variable in
fixing the appropriate level of review. . . .
Depending upon the primacy of the interest
involved, the state will have a greater or
lesser burden in justifying its legislation.
Second, an examination must be undertaken of
the purposes served by a challenged statute.
Depending on the level of review determined,
the state may be required to show only that
its objectives were legitimate, at the low end
of the continuum, or, at the high end of the
scale, that the legislation was motivated by a
compelling state interest.
Third, an evaluation of the state's interest
in the particular means employed to further
its goals must be undertaken. Once again, the
state's burden will differ in accordance with
the determination of the level of scrutiny
under the first stage of analysis. At the low
end of the sliding scale, we have held that a
substantial relationship between means and
ends is constitutionally adequate. At the
higher end of the scale, the fit between means
and ends must be much closer. If the purpose
can be accomplished by a less restrictive
alternative, the classification will be
invalidated.
Alaska Pacific Assur. Co. v. Brown, 687 P.2d 264, 269-70 (Alaska
1984).
This court exercises its independent judgment in deciding
equal protection claims. State v. Anthony, 810 P.2d 155, 157
(Alaska 1991); Sonneman v. Knight, 790 P.2d 702, 704 (Alaska 1990).
3. The individual plaintiffs have failed to establish
a foundation for an equal protection claim based on
educational opportunity.
The individual plaintiffs claim that the educational
interests of their children are adversely affected by the local
contribution to operating costs required of the Borough by AS
14.17.025(a). They assert that invalidating the statute would
result in more funding for their children's schools, leading to a
better education. They also assert that educational interests
require the highest scrutiny.
Where there is no unequal treatment, there can be no
violation of the right to equal protection of law. In the absence
of any evidence of disparate treatment, there is no basis for an
equal protection claim, (EN7) and we need not subject the
challenged laws to sliding scale scrutiny.
The individual plaintiffs have failed to present any
evidence arguably showing that the educational interests of their
children have been disparately affected by the local contribution
to operating costs required of the Borough by AS 14.17.025(a). As
discussed above, the total money available to a district is set by
a statutory formula: basic need less the required local
contribution less ninety percent of federal impact aid. AS
14.17.021(a). Basic need itself is determined by a statutory
formula. AS 14.17.021(b), .031, .051, .056. No evidence indicates
that altering the amount a district contributes to basic need will
alter the overall amount of funding available. As noted by the
State, "[t]he funding level remains constant regardless of the
source of the revenue."(EN8) Because the individual plaintiffs
have failed to arguably show that disparities in the local
contribution required of districts translate into disparities in
the educational opportunities available to students, their
education-based equal protection challenge to AS 14.17.025(a) was
properly dismissed. 4. The individual plaintiffs have
failed to establish a
foundation for an equal
protection claim based on
school construction aid.
The individual plaintiffs also have failed to present any
evidence suggesting that there actually is an overall disparity in
state aid for school construction. While REAAs are only required
to contribute two percent of the costs of school construction to
receive a grant under AS 14.11.008(c), they do not enjoy the
following advantages enjoyed by borough and city districts.
Borough and city districts not only receive construction
grants, but also enjoy the benefit of having their school
construction debt reimbursed under AS 14.11.100(a), a benefit of
which REAAs are unable to avail themselves. Debt reimbursement is
not a discretionary obligation on the part of the state, but is
mandatory. AS 14.11.100(a). Thus, while borough and city
districts can take advantage of both grants and debt reimbursement,
REAAs can only take advantage of the former. Further, while
borough and city districts can force school construction by issuing
bonds, REAAs must await the pleasure of the legislature, for they
cannot tax or exercise other local governmental powers. Alaska
Const. art. X, sec. 2. (EN9) Finally, the law does not require
borough and city districts to pursue debt financing. The Borough
could opt to rely solely on grants instead, thereby avoiding AS
14.11.100(a) completely.
The individual plaintiffs have failed to show that the
various laws providing state assistance for school construction
arguably interact in such a way that the students and taxpayers of
the Borough have been disadvantaged somehow relative to those
residing in REAAs. (EN10) In the absence of any evidence arguably
showing an overall disparity in benefits and burdens, we are left
with little more than a challenge to a debt reimbursement program
that is available to the individual plaintiffs' district, but
unavailable to the REAAs themselves. We cannot see how the
individual plaintiffs' district is disadvantaged relative to REAAs
by having the option of participating in this program. The equal
protection challenge to AS 14.11.100(a) therefore fails.
5. The individual plaintiffs' taxation-based equal
protection challenge to the required local
contribution to operating costs fails because the
State has established a substantial relationship
between means and ends.
The only equal protection argument left to be addressed
is the individual plaintiffs' contention that the local
contribution to operating costs required by AS 14.17.025(a)
disparately affects their interests as taxpayers, relative both to
taxpayers in REAAs, where no local contribution is required, and to
taxpayers in the thirty-five percent districts.
The individual plaintiffs have not shown that they pay
higher taxes as a result of the required local contribution, or
that invalidating AS 14.17.025(a) would result in savings to them
as taxpayers. AS 14.17.025(a) requires boroughs like the one in
which the plaintiffs reside to contribute to operating costs at the
four mill rate; it does not require them to actually meet their
contribution through property taxes. The individual plaintiffs
have presented evidence, however, that their borough's local
contribution was the equivalent of a 5.69 mill tax levy. (EN11)
Given this level of local contribution, it is arguable that the
individual plaintiffs' interests as taxpayers are being impaired by
the contribution requirement. Because of this, we will proceed
with an equal protection analysis of this claim.
First, we must weigh the importance of the interests
affected. Assuming that the individual plaintiffs' interests as
taxpayers actually are impaired by the school funding laws, these
interests are not interests afforded much weight under our equal
protection analysis. "The interest involved here, freedom from
disparate taxation, lies at the low end of the continuum of
interests protected by the equal protection clause." Atlantic
Richfield Co. v. State, 705 P.2d 418, 437 (Alaska 1985) (footnote
omitted), appeal dismissed, 474 U.S. 1043 (1986). (EN12)
Second, we must examine the purposes served by the
challenged statute. Because the individual plaintiffs' interests
affected lie "at the low end of the continuum,"we need only
examine whether the state's objectives were legitimate. Id.;
Alaska Pacific, 687 P.2d at 269. The stated purpose of the public
school foundation program that provides for operating cost aid is
"to assure an equitable level of educational opportunities for
those in attendance in the public schools of the state."
AS 14.17.220. This purpose easily meets the required standard of
legitimacy. Article VII, section 1 of the Alaska Constitution
provides that "[t]he legislature shall by general law establish and
maintain a system of public schools open to all children of the
State . . . ." In discussing this section, we have observed:
This constitutional mandate for pervasive
state authority in the field of education
could not be more clear. First, the language
is mandatory, not permissive. Second, the
section not only requires that the legislature
"establish"a school system, but also gives to
that body the continuing obligation to
"maintain"the system. Finally, the provision
is unqualified; no other unit of government
shares responsibility or authority. That the
legislature has seen fit to delegate certain
educational functions to local school boards
in order that Alaska schools might be adapted
to meet the varying conditions of different
localities does not diminish this
constitutionally mandated state control over
education.
Macauley v. Hildebrand, 491 P.2d 120, 122 (Alaska 1971) (footnotes
omitted). By enacting a law to ensure equitable educational
opportunities across the state, the legislature acted in
furtherance of this constitutional mandate.
In the third and final step of our equal protection
analysis, we must evaluate the State's interest in the particular
means employed to further its goals. Because the individual
interests affected lie "at the low end of the sliding scale,"we
need only find a "fair and substantial relationship"between means
and ends. Anthony, 810 P.2d at 159; Alaska Pacific, 687 P.2d at
269-70; see Coghill v. Coghill, 836 P.2d 921, 929 (Alaska 1992).
As mentioned above, REAAs are constitutionally unable to
tax. Alaska Const. art. X, sec. 2. The State argues that "[t]he
statutory treatment of municipal districts and REAAs is warranted
based on the constitutional differences between these two
entities." The individual plaintiffs argue that the State itself
could tax REAAs for REAA school expenses, since "[t]he legislature
. . . may exercise any power or function in an unorganized borough
which the assembly may exercise in an organized borough." Alaska
Const. art. X, sec. 6. They argue that the availability of this
option of directly taxing REAAs for REAA school purposes undermines
the State's justification for the disparate treatment inherent in
the means chosen.
The plaintiffs demand more of the State than equal
protection requires, however. At the low end of the sliding scale
"a substantial relationship between means and ends is
constitutionally adequate." Alaska Pacific, 687 P.2d at 269-70.
"'[I]f relaxed scrutiny is indicated . . . a greater degree of
over/or underinclusiveness in the means-to-ends fit will be
tolerated.'" State Dep't of Revenue v. Cosio, 858 P.2d 621, 629
(Alaska 1993) (quoting Ostrosky, 667 P.2d at 1193). Even if the
legislature overcompensated for the unique constitutional
limitations on REAAs when it opted to exempt them entirely from the
local contribution requirement, the fit between the means it chose
and the goal of the legislation is close enough to withstand the
relaxed scrutiny applicable to this case.
In order to meet its goal of ensuring equitable
educational opportunity across the state, the legislature had to
find some means of accommodating the fact that REAAs cannot raise
taxes on their own. The means it chose may not have been those
most protective of taxing equality, but they do bear a substantial
relationship to the goals of the legislation. The classifications
relied upon meet the minimal requirement that they "'rest upon some
ground of difference having a fair and substantial relation to the
object of the legislation.'" Ostrosky, 667 P.2d at 1193 (quoting
Isakson v. Rickey, 550 P.2d 359, 362 (Alaska 1976)). (EN13)
Given the differences in constitutional status between
REAAs and borough and city districts, we hold that the legislative
decision to exempt REAAs from the local contribution requirement,
while requiring contributions from borough districts, was
substantially related to the legislature's goal of ensuring an
equitable level of educational opportunity across the state.
Therefore, the REAA exemption did not deprive the individual
plaintiffs of equal protection under law.
The State justifies the thirty-five percent cap on the
required local contribution from borough and city districts by
observing that requiring a contribution equivalent to a four mill
tax from all borough or city districts would force some districts
to contribute an amount that would actually exceed their total
basic need. (EN14) This, it is argued, would increase disparities
in per pupil spending among districts, thereby defeating the goal
of an equitable level of educational opportunity. (EN15) The
individual plaintiffs argue that the thirty-five percent ceiling is
"so overinclusive [that it] cannot bear a 'fair and substantial
relation' to the state interest that it serves." They suggest that
a cap at one hundred percent of basic need would have avoided
requiring a contribution in excess of basic need while bringing the
applicable districts closer to the four mill contribution required
of other districts.
Once again, the individual plaintiffs demand more of the
State than equal protection requires. Under a one hundred percent
cap, some districts would still be forced to contribute at a higher
tax equivalent than others. Certain districts would still be
paying less than the four mill equivalent, since that equivalent
would exceed the cap. The legislature might have set the cap
higher or lower; wherever it had set the cap, some taxpayers would
have ended up residing in four mill districts while others reside
in capped districts. Thus, different "classifications"of
taxpayers would still have resulted. As discussed above, "a
greater degree of over/or underinclusiveness in the means-to-ends
fit will be tolerated"at the lower end of the equal protection
scale. Ostrosky, 667 P.2d at 1193.
The thirty-five percent cap ensures that excessive local
contributions will not be required of districts; it thereby
protects against increased funding inequities among districts and
furthers the statutory purpose of equitable educational opportunity
statewide. Even if a one hundred percent cap might have
accomplished this goal in a manner that would have treated
taxpayers more equitably, the thirty-five percent cap still
furthers the purpose of the statute. It provides the required fit
and bears a substantial relationship to the legislative goals that
underlie the statute. (EN16)
We hold that any disparate impact on taxpayers in four
mill districts that results from the thirty-five percent cap in AS
14.17.025(a) does not rise to the level of an equal protection
violation.
The opinions of courts in other jurisdictions that have
decided equal protection challenges involving the disparate taxing
of seemingly similarly situated people lend further support to our
holding today.
In Nordlinger v. Hahn, 112 S. Ct. 2326 (1992), the
Supreme Court upheld California's Proposition 13, under which
property was assessed at its 1975-76 market value unless adjusted
to current market value due to a change in ownership or a
substantial improvement of the property. Id. at 2329. Over time,
this "acquisition-value"system created large disparities in the
taxes paid by similarly situated property owners. Nordlinger was
paying approximately five times the property tax paid by another
homeowner in her neighborhood on a similar house and lot. Id. at
2330.
The Court found two reasons supporting the California
assessment system. First, "the state had a legitimate interest in
local neighborhood preservation, continuity, and stability." Id.
at 2333. Second, "a new owner at the time of acquiring his
property does not have the same reliance interest warranting
protection against higher taxes as does an existing owner. . . .
[A]n existing owner rationally may be thought to have vested
expectations in his property or home that are more deserving of
protection than the anticipatory expectations of a new owner at the
point of purchase." Id.
In San Antonio Independent School District v. Rodriguez,
411 U.S. 1 (1973), the Court examined Texas's system of school
financing, which relied on local property taxes for a significant
portion of each school's budget. Unlike in Alaska, school budgets
in Texas were not equalized between districts. Using a higher tax
rate, the poorest district generated only a fraction of the local
support that the most affluent district did. Id. at 1285-86. The
Court rejected an equal protection challenge, holding that the
local taxation system rationally furthered the legitimate state
purpose of local control of school districts. Id. at 1305-08.
Fourteen years before Nordlinger, the California Supreme
Court itself upheld Proposition 13 against an equal protection
challenge. Amador Valley Joint Union High Sch. Dist. v. State Bd.
of Equalization, 583 P.2d 1281 (Cal. 1978). The court found that
the "'acquisition value' approach to taxation finds reasonable
support in a theory that the annual taxes which a property owner
must pay should bear some rational relationship to the original
cost of the property." Id. at 1293. The court noted several
provisions of the state constitution that indicated that property
with equal current value need not be taxed equally. (EN17) Id. at
1294. In Savage v. Munn, 856 P.2d 298 (Or. 1993), the
Oregon Supreme Court addressed a challenge to an initiative which
amended the Oregon Constitution to set limits on property taxes.
If various taxing entities subjected a property to total taxes over
these limits, the taxes would be reduced proportionally. Id. at
299-300. Savage challenged this amendment on federal equal
protection grounds, postulating a scenario in which the initiative
would result in different county taxes on identical property,
depending on whether the property was inside or outside a city.
Id. at 300 n.3. The court cited to Nordlinger and held that the
objective of limiting total taxes was a legitimate state interest
and the tax limit chosen had a rational basis. Id. at 304-05.
Each of these cases was decided under the minimal federal
equal protection standard of rational basis review. The minimal
equal protection standard under the Alaska Constitution, the
substantial relationship standard we have applied in this case, is
stricter in its protection of individual rights than its federal
counterpart. Kenai Peninsula Borough v. State, 743 P.2d 1352, 1371
(Alaska 1987); Erickson, 574 P.2d at 11-12; Isakson, 550 P.2d at
362. We do not express any views as to whether these cases would
have been decided the same way if they had been brought as equal
protection challenges under the Alaska Constitution.
These cases from other jurisdictions are informative,
however, insofar as they provide some indication of the latitude
lawmakers are given in furthering public policy objectives even
when the means chosen may happen to have severely disparate impacts
on certain classes of taxpayers. In the case before us, the
legislature was not only pursuing its own sense of public policy,
but also was acting in furtherance of its constitutionally mandated
duty to maintain and control a statewide system of public schools.
Furthermore, the plaintiffs have not shown clearly that they have
been disparately affected, as the plaintiffs in Nordlinger and
Rodriguez did, or that any potentially disparate effect on them
even remotely approaches the same degree of imbalance and severity
of burden found constitutional in those cases.
For the various reasons discussed above, all of the
individual plaintiffs' equal protection claims fail.
B. Attorney's Fees and Costs
1. The superior court did not abuse its discretion in
awarding attorney's fees against the Borough and
the District.
The superior court awarded attorney's fees of $20,000
against the Borough and the District. The court rejected their
claims of public interest status, finding that they brought suit in
order to increase the aid they receive or decrease the required
local contribution. The Borough and District argue the award was
error that should be reversed based on their claim to public
interest litigant status.
This court has established four criteria for identifying
public interest litigants:
(1) whether the case is designed to effectuate
strong public policies; (2) whether, if the
plaintiff succeeds, numerous people will
benefit from the lawsuit; (3) whether only a
private party could be expected to bring the
suit; and (4) whether the litigant claiming
public interest status would lack sufficient
economic incentive to bring the lawsuit if it
did not involve issues of general importance.
Oceanview Homeowners Ass'n, Inc. v. Quadrant Constr. and
Engineering, 680 P.2d 793, 799 (Alaska 1984) (citing Kenai Lumber
Co. v. LeResche, 646 P.2d 215, 222-23 (Alaska 1982)).
The superior court's determination of public interest
litigant status is reviewed for abuse of discretion. Kenai Lumber,
646 P.2d at 223; Carney v. State Bd. of Fisheries, 785 P.2d 544,
547 (Alaska 1990). Furthermore, this court has stated that, "any
party challenging the superior court's decision in this regard has
a heavy burden of persuasion." Anchorage Daily News v. Anchorage
School Dist., 803 P.2d 402, 405 (Alaska 1990).
The Borough and District claim that they meet all of the
criteria. The State mainly disputes economic interest, although it
briefly argues that the Borough and District do not meet the other
criteria. We hold that the economic interest compelling this suit
is substantial enough to defeat the Borough and District claim of
public interest litigant status.
Economic interest need not take the form of damages. In
Seward Chapel, Inc. v. City of Seward, 655 P.2d 1293 (Alaska 1982),
we denied public interest status to a church that sought
declaratory and injunctive relief regarding a zoning restriction.
We upheld the superior court's ruling, stating that: "Seward
Chapel had a sufficient private incentive to challenge the city's
zoning ordinance which removes this case from the purview of the
'public interest' exception to awards of attorney's fees." Id. at
1302.
In the case now before us, the Borough and District also
stood to gain from bringing suit, either by increased state funding
or decreased taxes. They had a substantial economic incentive for
bringing suit against the State.
Both sides to this appeal cite City of Valdez v. Copper
Valley Electric Association, Inc., 740 P.2d 462, 466 (Alaska 1987),
a case in which the Copper Valley Electric Association (CVEA) sued
the City of Valdez, alleging a "wrongful withholding of payments
which CVEA is allegedly entitled to receive directly from the
state, and which should have been credited on the customer's bill,
thus lowering the cost of electricity to the citizens of Valdez."
Id. at 466. We noted "a good deal of self-interest at stake for
CVEA,"but noted as well that CVEA sought to effectuate public
policy and CVEA's customers would have received benefits. Id. We
also noted that "CVEA was probably in the best legal position to
sue, since by statute it was CVEA which was to demonstrate
eligibility and receive direct payments." Id. For these reasons,
we held that CVEA was entitled to public interest litigant status.
Id.
In the instant case, however, the Borough and the
District were not "in the best legal position to sue,"since they
have no equal protection rights. Furthermore, the Borough and
District had a substantial economic interest distinguishable from
CVEA's; unlike the Borough and District, CVEA was required by law
to pass along savings to its customers.
Where the sums at stake in a suit are large enough to
prompt suit regardless of the public interest, public interest
litigant status will be denied. Gold Bondholders Protective
Council v. Atchison, Topeka and Santa Fe Ry. Co., 658 P.2d 776, 778
(Alaska 1983) (half a million dollars substantial economic
motivation); Thomas v. Bailey, 611 P.2d 536, 539 n.9 (Alaska 1980);
Mobil Oil Corp. v. Local Boundary Comm'n, 518 P.2d 92, 103 (Alaska
1974). State construction grants to the Borough totalled over $23
million from 1981-1990. State debt support to the Borough during
this period totalled over $151 million.
The superior court did not abuse its discretion in
denying the Borough and the District public interest litigant
status due to their substantial economic interest in the action.
2. The superior court did not abuse its discretion in
awarding costs against the Borough and District,
but it did abuse its discretion in awarding costs
against the individual plaintiffs.
The superior court awarded the State costs of $6,557.28.
Of this, $5,500.00 was for the cost of preparing charts for use as
summary judgment exhibits. The plaintiffs argue that this part of
the cost award should be reversed, as "[e]xpert preparation costs
are not allowed as costs of producing exhibits,"citing Alaska Rule
of Civil Procedure 79(b) and CTA Architects of Alaska v. Active
Erectors & Installers, Inc., 781 P.2d 1364, 1366 (Alaska 1989).
The superior court read Civil Rule 79(b) and CTA Architects
differently, however, and concluded that the exhibit preparation
costs "probably were necessarily incurred in the action,"and may
therefore be allowed as costs.
In CTA Architects, the respondent argued that "expert
fees incurred in preparing exhibits may be recovered as costs under
Civil Rule 79,"which allows costs for "the necessary expense
of . . . producing exhibits." Id. at 1366. We disagreed, holding
that "produce"did not mean "compose,"but rather produce in the
discovery sense. Id.
In concurrence, Justice Rabinowitz, joined by Justice
Burke, agreed with the court's result, but noted that the "catch-
all"provision of Rule 79(b) (EN18) might allow such costs in the
proper case. Id. at 1367. Justice Rabinowitz suggested "that in
certain cases it will be within the trial court's discretion to
allow full exhibit preparation costs under Civil Rule 79(b). These
costs will be justified to the extent that the court determines
that they were 'necessar[y] . . . to enable a party to secure some
right.' Alaska R.Civ.P. 79(b)." Id. However, he noted that this
route was limited by Alaska Administrative Rule 7, which had been
interpreted to disallow recovery of expert preparation costs in
most cases; only time spent testifying is recoverable. Id. at
1367-68.
The superior court found the concurrence persuasive and
held that the cost issue depended on whether the expert's "services
were more like those of an expert who was retained to prepare for
and testify at trial on a material issue, but never did testify, or
were services similar to sophisticated graphic artistry or other
similar demonstrative skill necessary to help the trier of fact
obtain a clear understanding of complicated issues."
We agree with the reasoning of the superior court, and
hold that this case presents the type of situation foreseen in the
concurrence to CTA Architects, namely, a situation in which it was
within the trial court's discretion to allow full exhibit
preparation costs because these costs were necessary to secure some
right. While case law is clear that a party may not recover fees
for an expert who does not testify, (EN19) these cases are decided
under Administrative Rule 7(c) and Civil Rule 83. These rules
concern the use of experts in the context of testimony. Use of an
"expert"to help prepare necessary exhibits is an entirely
different matter. Such costs fall under Civil Rule 79(b)'s "any
other expenses necessarily incurred"rubric. While this general
language has been held to be preempted by the more specific
language of Administrative Rule 7 and Civil Rule 83, Miller v.
Sears, 636 P.2d 1183, 1195 (Alaska 1981), the preemption is
inapplicable in the case at hand since the "expert"is not being
used in the context of a witness. Finally, the list of costs in
Civil Rule 79(b) is not exclusive.
While we hold that it was within the superior court's
discretion to award full exhibit preparation costs, we conclude
that the award of costs against the individual plaintiffs was an
abuse of discretion. For the reasons discussed above, the Borough
and District were not public interest litigants. These plaintiffs
are therefore liable for costs in addition to attorney's fees. As
to the individual plaintiffs, however, we hold that they have met
the criteria for public interest litigant status, and that the
award of costs against them was therefore inappropriate.
The individual plaintiffs have met the four Oceanview
criteria, discussed above, for identifying public interest
litigants. See Oceanview, 680 P.2d at 799. Of these criteria, it
is particularly significant that the individual plaintiffs, unlike
the Borough and the District, lacked a sufficient economic
incentive to bring this suit. While the Borough and District stood
to gain substantial economic advantages had they prevailed in this
suit, the same cannot be said for the individual plaintiffs. Any
economic benefits that they might have gained as taxpayers would
have been so diffusely spread among the taxpayers of the Borough
that it seems highly unlikely that any individual plaintiff would
have had a sufficient personal incentive to bring suit. Indeed, it
is unclear whether the individual plaintiffs even would have
derived any economic benefit had they prevailed; as discussed
above, the plaintiffs never really showed that they stood to gain
as taxpayers, that they would enjoy lower taxes as a result of a
favorable outcome in court.
Because the individual plaintiffs met the criteria for
public interest litigant status, we reverse the superior court's
award of costs against these plaintiffs, and remand the case for
further proceedings. On remand, the court will need to determine
whether the Borough and District should be liable for the entire
award of costs, or whether the award should be reduced to reflect
the fact that costs cannot be assessed against the individual
plaintiffs.
IV. CONCLUSION
We REVERSE the superior court's assessment of costs
against the individual plaintiffs, and REMAND for a determination
of whether the Borough and District should be liable for the full
award of costs, or whether the award of costs should be reduced.
We AFFIRM the judgment of the superior court in all other respects.
MATTHEWS, Justice, with whom RABINOWITZ, Justice, joins,
concurring.
I concur in the result of today's opinion.
No serious claim is made in this case that substantially
different levels of per pupil expenditures (adjusted for cost of
living differences) exist among the various school districts of
Alaska. Similarly, there is here no claim that funds available to
any Alaska school district are insufficient to pay for a level of
education which meets standards of minimal adequacy. Such claims
have been brought in other states with varying degrees of success.
See, e.g., Shofstall v. Hollins, 515 P.2d 590 (Ariz. 1973); Lujan
v. Colorado State Bd. Of Educ., 649 P.2d 1005 (Colo. 1982);
McDaniel v. Thomas, 285 S.E.2d 156 (Ga. 1981); Thompson v.
Engelking, 537 P.2d 635 (Idaho 1975); Reform Educational Financing
Inequities Today (R.E.F.I.T.) v. Cuomo, 655 N.E.2d 647 (N.Y. 1995);
Leandro v. State, 468 S.E.2d 543 (N.C. App.), rev. allowed, 472
S.E.2d 14 (N.C. 1996); Fair School Finance Council, Inc. v. State,
746 P.2d 1135 (Okla. 1987); Tennessee Small School Systems v.
McWerter, 851 S.W.2d 139 (Tenn. 1993). Nothing in today's opinion,
or in this concurrence, should be read as suggesting that such
claims might not be maintainable, if supported factually, based on
the equal rights (EN1) and public schools (EN2) clauses of the
Alaska Constitution.
Two claims are presented in this case. The first is a
claim of unequal State spending. Individual plaintiffs argue that
the State spends more money on education in other districts than in
their district. Thus plaintiffs' district must rely on local
revenue sources, including taxes paid by plaintiffs, to partially
fund the public schools. The second is a claim of inter-jurisdic-
tional tax inequality. Individual taxpayers in one school district
are complaining because the taxes they pay for their schools are
greater than the taxes paid by other taxpayers in other districts
for schools. For the reasons which I develop below, I do not think
that either claim is cognizable.
Today's opinion treats the individual plaintiffs' claim
of unequal State spending on its merits, holding that plaintiffs
have not proven an overall disparity in benefits and burdens and
thus have not shown a violation of the equal rights clause of the
Alaska Constitution. Slip Op. at 11-12. This may imply that if
the plaintiffs had proven a substantial disparity in State
spending, disadvantaging their school district, a valid equal
rights claim might exist. I do not think that such an argument
would be valid. In my view, no claim of unequal State spending for
public facilities or activities is justiciable. (EN3) For example,
the State may build roads in one area and not in another, may put
a courthouse in one city and not in another, or put a job-training
center in one community without providing a like center in another
community, all without being answerable in court to claims of
unconstitutionally unequal spending. The solution to unequal
spending claims regarding public facilities and activities is
exclusively political and legislative. This is to say, claims of
this character pose a political question. See Malone v. Meekins,
650 P.2d 351, 356-57 (Alaska 1982). Political questions raise
issues which are more properly dealt with by a coordinate branch of
the State's government. Id. They cannot be answered by judges.
Abood v. Gorsuch, 703 P.2d 1158, 1160 (Alaska 1985).
The individual plaintiffs also claim that they pay more
in property taxes than taxpayers in more economically favored
communities and than property owners in REAAs (who pay no property
taxes). Again, I do not think that this is a cognizable equal
rights claim. There is no inter-jurisdictional right to tax
equality. The people of one local government will want certain
levels of fire and police protection and zoning enforcement, while
the people of another local government will want other levels, and
the tax rates will reflect these differences. Likewise, different
municipalities will decide to support their schools at different
levels, and their tax rates will again be different.
The following language from San Antonio Independent
School District v. Rodriguez, 411 U.S. 1, 53-54 (1973), speaks to
this point:
But any scheme of local taxation -- indeed the
very existence of identifiable local
governmental units -- requires the
establishment of jurisdictional boundaries
that are inevitably arbitrary. It is equally
inevitable that some localities are going to
be blessed with more taxable assets than
others.*. . .
Moreover, if local taxation for local
expenditures were an unconstitutional method
of providing for education then it might be an
equally impermissible means of providing other
necessary services customarily financed
largely from local property taxes, including
local police and fire protection, public
health and hospitals, and public utility
facilities of various kinds. . . . It has
simply never been within the constitutional
prerogative of this Court to nullify statewide
measures for financing public services merely
because the burdens or benefits thereof fall
unevenly depending upon the relative wealth of
the political subdivisions in which citizens
live.
__________
* This Court has never doubted the
propriety of maintaining political subdiv-
isions within the States and has never found
in the Equal Protection Clause any per se rule
of "territorial uniformity.". . .
The individual taxpayers' claim that they are being
unfairly treated vis-a-vis property owners in REAAs is subject to
the same observations. The State legislature acts as the local
lawmaking body for unorganized areas such as REAAs. Further, if
the State had a duty to tax property in REAAs, there would be no
particular reason why the tax imposed should be measured by the
rate paid by taxpayers in one particular municipality, rather than
by lower or higher rates imposed by other municipalities. In my
view the legislature can decide whether and how much to tax
property in REAAs free from legally maintainable claims brought by
taxpayers in other taxing jurisdictions that its decision is wrong.
Here, as with State spending decisions, any available remedy must
be pursued through majoritarian processes rather than through the
courts.
ENDNOTES:
1. Areas of the state that lie outside the boundaries of
organized boroughs constitute a single, unorganized borough. AS
29.03.010. The unorganized borough is divided into regional
education attendance areas, or REAAs. AS 14.08.031.
2. Boroughs are not entitled to equal protection under the Alaska
Constitution. Fairbanks N. Star Borough v. State, 753 P.2d 1158,
1160 (Alaska 1988); Kenai Peninsula Borough v. State, Dep't of
Community and Regional Affairs, 751 P.2d 14, 18-19 (Alaska 1988).
As we observed in Kenai Peninsula Borough, "[t]he purpose of
the Alaska due process and equal protection clauses is to protect
people from abuses of government, not to protect political
subdivisions of the state from the actions of other units of state
government." 751 P.2d at 18-19. Under this rationale, the
District also lacks any equal protection rights, since it, like the
Borough, is not a "person"entitled to equal protection. See State
ex rel. Brentwood School Dist. v. State Tax Comm'n, 589 S.W.2d 613,
615 (Mo. 1979) (en banc) (school districts are not "persons"and
may not charge the state with due process violations).
3. Sec. 14.11.100. State aid for costs of school construction
debt.
(a) During each fiscal year, the state shall allocate to a
municipality that is a school district, the following sums:
. . . .
(6) . . . 70 percent of payments made by the municipality
during the fiscal year for the retirement of principal and interest
on outstanding bonds, notes, or other indebtedness authorized by
the qualified voters of the municipality on or after April 30,
1993, to pay costs of school construction, additions to schools,
and major rehabilitation projects that exceed $200,000 . . . .
(7) . . . 70 percent of payments made by the municipality
during the fiscal year for the retirement of principal and interest
on outstanding bonds, notes, or other indebtedness authorized by
the qualified voters of the municipality after March 31, 1990, but
before April 30, 1993, to pay costs of school construction,
additions to schools, and major rehabilitation projects.
4. Sec. 14.17.025. Local contributions.
(a) Local contributions to a city or borough school district
shall include at least the lesser of
(1) the equivalent of a four mill levy on the full and
true value of the taxable real and personal property in the
district as of January 1 of the second preceding fiscal year . . .
or
(2) 35 percent of the district's basic need for the
preceding fiscal year, as determined under AS 14.17.021(b).
. . . .
(d) Local contributions are not required in a regional
educational attendance area. . . .
5. For debts authorized prior to March 31, 1990, the section
provides for varying levels of reimbursement depending on the date
of authorization. The level of reimbursement ranges from a low of
eighty percent of annual debt service costs to a high of one
hundred percent. AS 14.11.100(a)(1) - (5).
6. Borough and city school districts are required to provide from
five to thirty-five percent. AS 14.11.008(b). The individual
plaintiffs do not challenge the difference between the percentage
required of borough and city districts under (b) and of REAAs under
(c).
The required share may be waived by the commissioner if a
district can make a required showing of hardship. AS 14.11.008(d).
7. See United States v. Roberts, 915 F.2d 889, 891 (4th Cir.
1990), cert. denied, 498 U.S. 1122 (1992) (to establish equal
protection violation, plaintiff "must show that similarly situated
persons are subject to disparate treatment"); People in Interest of
C.B., 740 P.2d 11, 17 (Colo. 1987) ("threshold inquiry in any equal
protection claim is whether persons who are in fact similarly
situated are subjected to disparate treatment by governmental
act"); Wellman v. Department of Human Serv's, 574 A.2d 879, 883
(Me. 1990) ("The prohibition against denial of equal protection of
the law to any person is implicated only when action by the state
results in treatment of that person different than that given
similarly situated individuals."); Appeal of Marmac, 534 A.2d 710,
713 (N.H. 1987) ("first question in an equal protection analysis is
whether the State action in question treats similarly situated
persons differently"); Cosro, Inc. v. Liquor Control Bd., 733 P.2d
539, 543 (Wash. 1987) ("To show a violation of the equal protection
clause, a party must first establish that the challenged act treats
unequally two similarly situated classes of people.").
8. Nathaniel H. Cole, a consultant in education finance and
management, affied that, in his professional opinion, spending per
student among districts in Alaska "is as equitable as [in] any
state's program I have examined"except Hawaii's, and that is
because Hawaii "has but one state-operated school district, and
therefore has no disparities between districts."
9. Section 2. Local Government Powers. All local government
powers shall be vested in boroughs and cities. The State may
delegate taxing powers to organized boroughs and cities only.
10. Indeed, the superior court had before it evidence indicating
that, from 1981 to 1990, the State paid the Borough more in school
construction costs per student than it paid the average REAA.
During the same time period, all but three of the REAAs received
less in legislative grants for school construction than the Borough
did.
11. In addition to the local contribution required under AS
14.17.025(a), districts are free to provide limited additional
local support for public education under AS 14.17.025(b).
12. As a general matter, economic interests are not considered
interests of a high order in equal protection analysis. State,
Dep't of Revenue v. Cosio, 858 P.2d 621, 629 (Alaska 1993); Coghill
v. Coghill, 836 P.2d 921, 929 (Alaska 1992); Anthony, 810 P.2d at
158; Sonneman, 790 P.2d at 705; Hilbers v. Municipality of
Anchorage, 611 P.2d 31, 40 (Alaska 1980). But see Enserch, 787
P.2d at 632 ("right to engage in an economic endeavor within a
particular industry is an 'important' right for state equal
protection purposes").
13. Further support for the legislature's decision not to tax
REAAs for school purposes might be found in the unique limitations
on the available tax base in many of the REAAs themselves.
Michael W. Worley, tax assessor for the State, affied that the
available tax base in REAAs is limited by a number of factors: the
tax-exempt status of certain Native-owned lands, the widespread
lack of ownership records, and the fact that property ownership is
often poorly defined in these areas. He also stated that
"[b]orough organization generally occurs when a tax base develops
or is discovered in the area which is adequate to support local
government and to yield, in addition, greater services than are
otherwise provided by the state."
14. In particular, the State points to the North Slope Borough and
the City of Valdez as two local governments that would be forced to
contribute in excess of basic need.
15. The State also argues that paying the remaining sixty-five
percent of basic need in the wealthiest districts furthers the goal
of state authority and control over public education since, "as a
practical matter,"this aid gives the State leverage over
districts, allowing the State to have a greater say in setting
standards. In briefing this asserted purpose, the State does not
refer us to any legislative history or other authority that might
indicate that one of the goals of capping the required local
contribution at thirty-five percent was to maintain state leverage.
Furthermore, this goal does not appear anywhere in the
legislature's statement of purpose. AS 14.17.220.
In State v. Anthony, we refused to consider one of the
legislative purposes asserted by the State because we did not find
any explicit indication in the legislative history that the
asserted purpose was one of the purposes behind the act at issue.
810 P.2d at 159. While a "[c]lose examination of the statutory
scheme will usually yield several concrete legislative purposes
having a substantial basis in reality, even if these purposes are
not specifically identified in a statutory purpose clause,"
Commercial Fisheries Entry Comm'n v. Apokedak, 606 P.2d 1255, 1264-
65 n.39 (Alaska 1980), we see no reason to assume that one of the
legislature's goals in capping the required local contribution was
to ensure continued financial leverage over the districts. Thus,
we will not consider this suggested purpose.
16. Furthermore, it is worth noting that under the thirty-five
percent cap the wealthiest districts still pay for a higher
percentage of basic need than any of the four mill equivalent
districts do. Therefore, the cap does not seem to undermine the
broader equitable purposes of the statute, since the needier
districts still have a greater percentage of their basic need paid
for by the State than do the wealthier capped districts.
17. These included explicit contemplation of a standard other than
fair market value and exemptions for various taxpayer classes such
as veterans. Id. at 1294.
18. The "catch-all"provision of Civil Rule 79(b) provides that
In addition to the items allowed as costs by
law and in these rules, a party shall be
allowed any other expenses necessarily
incurred in order to enable a party to secure
some right accorded the party in the action or
proceeding.
19. CTA Architects, 781 P.2d at 1367-68 (Rabinowitz, J.,
concurring); Atlantic Richfield Co. v. State, 723 P.2d 1249, 1253
(Alaska 1986) ("A party may not recover costs for experts'
preparation time nor any costs associated with the experts if they
do not testify"); Miller v. Sears, 636 P.2d 1183, 1195 (Alaska
1981) ("fees for an expert who does not testify, or fees for
necessary preparation time for an expert who does testify may not
be recovered").
ENDNOTES (Concurrence):
1. Article I, section 1 of the Alaska Constitution provides:
This constitution is dedicated to the
principles that all persons have a natural
right to life, liberty, the pursuit of
happiness, and the enjoyment of the rewards of
their own industry; that all persons are
equal and entitled to equal rights,
opportunities, and protection under the law;
and that all persons have corresponding
obligations to the people and to the State.
2. Article VII, section 1 of the Alaska Constitution provides:
The legislature shall by general law
establish and maintain a system of public
schools open to all children of the State, and
may provide for other public educational
institutions. Schools and institutions so
established shall be free from sectarian
control. No money shall be paid from public
funds for the direct benefit of any religious
or other private educational institution.
3. To be distinguished are spending for individual benefits
such as welfare programs or permanent fund dividends, which are
subject to equal rights scrutiny. Sonneman v. Knight, 790 P.2d
702 (Alaska 1990); Williams v. Zobel, 619 P.2d 448 (Alaska 1980),
rev'd, 457 U.S. 55 (1982).
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