News: CJ Exclusives

Appeals Court Limits Jurors’ Ability To Set School Funding

Union County jury awarded schools extra $91 million it didn't seek

In an April decision, the N.C. Court of Appeals overturned a jury ruling that Union County public schools had not been provided enough money by the county commission, saying that the judge had offered jurors an incorrect interpretation of the landmark Leandro decision that governs state and local school funding policies.

School funding can be a divisive issue, as local school boards often ask for more money than county commissioners ultimately approve. The outlays for Union County Schools in fiscal year 2013-2014 wound up in Superior Court, where a jury awarded school system over $90 million more than it originally had requested from the county.

In April, the state’s second highest court overturned the jury, holding that state law limits the amount school systems are entitled to receive from a trial award.

On April 15, 2013, the Union County Board of Education asked the Union County Board of Commissioners for $86,180,152 in operating funds plus $8,357,859 for capital expenses for the fiscal year that was to begin on July 1. The county commission ultimately approved $82,260,408 for current expenses and $3,000,000 for capital outlays — $3,919,744 in operating funds and $5,357,859 for capital outlays less than the school board had requested.

After attempts at mediation failed, the school board sued the county, contending it was underfunding the schools, thus depriving children in the district of a “sound basic education” affirmed in the 1997 ruling by the state Supreme Court in Leandro v. N.C.

At trial, the school board hit the jackpot, with a jury determining that the County Commission should have provided an additional $4,973,134 in current expense funding for the 2014-15 year beyond what it had approved — plus an additional $86,184,005 for capital expenditures.

The county commission appealed the jury verdict.

Scope of evidence allowed

Before the N.C. Court of Appeals, the county claimed that the school board simply asked the jury to award it too much money. The appeals court agreed.

“[We] hold the trial court erred in allowing evidence outside the scope of the proposed budget for the 2013-2014 fiscal year into evidence and remand for a new trial,” wrote Judge Douglas McCullough for the Court of Appeals.

McCullough explained that state law limits the sorts of needs that a school board can claim are unmet during trial, and that the amount of funding the school board actually asked for that year serves as a cap.

“N.C. Gen. Stat. § 115C-521(b) makes clear that plaintiff must assess the capital needs of the school system and present those needs to defendant ‘each year.’ Each year is then treated individually in the budget process. By implication, if plaintiff does not initiate the dispute resolution process in N.C. Gen. Stat. § 115C-431, it has accepted that the appropriations by defendant were sufficient for that year. Unfunded requests from prior year’s proposed budgets are not automatically carried forward and considered in subsequent years. If plaintiff wants those previously unfunded amounts considered, it must include them in the proposed budget for the 2013-2014 fiscal year,” McCullough wrote.

“Moreover, plaintiff’s argument that limiting the evidence to those amounts requested in its proposed budget would authorize legally insufficient funding presumes that plaintiff requested an amount of funds below the amount legally necessary to maintain a system of free public schools. We do not accept this presumption. While plaintiff’s proposed budget may be an estimate, it is not a blind guess and we do not accept plaintiff’s suggestion that it underestimated the capital outlay needs of the school system by over $80 million,” he added.

The appeals court also found that the jury had received incorrect instructions from the bench on the meaning of a “sound basic education” that the state constitution says every child is entitled to receive.

Superior Court Judge Erwin Spainhour had told the jury that, “A student who is performing below grade level … is not obtaining a sound basic education in the subject matter being tested.” From this, jurors could have inferred that the Union County schools were underfunded if any students were performing below grade level.

McCullough stated this was an incorrect conclusion of the holding in Leandro.

“School funding cannot guarantee student performance; but only the opportunity for students to receive a sound basic education,” McCullough noted.

N.C. Court of Appeals opinions are binding interpretations of state law unless overruled by the N.C. Supreme Court. Because the decision by the three-judge panel of the appeals court was unanimous, the high court is not required to hear the case should the school board further appeal.

The case is Union County Board Of Education v Union County Board of Commissioners (14-633).

Michael Lowrey is an associate editor of Carolina Journal.