Serrano v. Priest

Opinion

We are called upon to determine whether the California public school financing system, with its substantial dependence on local property taxes and resultant wide disparities in school revenue, violates the equal protection clause of the Fourteenth Amendment. We have determined that this funding scheme invidiously discriminates against the poor because it makes the quality of a child’s education a function of the wealth of his parents and neighbors. Recognizing as we must that the right to an education in our public schools is a fundamental interest which cannot be conditioned on wealth, we can discern no compelling state purpose necessitating the present method of financing. We have concluded, therefore, that such a system cannot withstand constitutional challenge and must fall before the equal protection clause.

Plaintiffs, who are Los Angeles County public school children and their parents, brought this class action for declaratory and injunctive relief against certain state and county officials charged with administering the financing of the California public school system. Plaintiff children claim to represent a class consisting of all public school pupils in California, “except children in that school district, the identity of which is presently unknown, which school district affords the greatest educational opportunity of all school districts within California.” Plaintiff parents purport to represent a class of all parents who have children in the school system and who pay real property taxes in the county of their residence.

Defendants are the Treasurer, the Superintendent of Public Instruction, and the Controller of the State of California, as well as the Tax Collector and Treasurer, and the Superintendent of Schools of the County of Los Angeles. The county officials are sued both in their local capacities and as representatives of a class composed of the school superintendent, tax collector and treasurer of each of the other counties in the state.

The complaint sets forth three causes of action. The first cause alleges in *590substance as follows: Plaintiff children attend public elementary and secondary schools located in specified school districts in Los Angeles County. This public school system is maintained throughout California by a financing plan or scheme which relies heavily on local property taxes and causes substantial disparities among individual school districts in the amount of revenue available per pupil for the districts’ educational programs. Consequently, districts with smaller tax bases are not able to spend as much money per child for education as districts with larger assessed valuations.

It is alleged that “As a direct result of the financing scheme . . . substantial disparities in the quality and extent of availability of educational opportunities exist and are perpetuated among the several school districts of the State. . . . [Par.] The educational opportunities made available to children attending public schools in the Districts, including plaintiff children, are substantially inferior to. the educational opportunities made availablé to children attending public schools in many other districts of the State. ...” The financing scheme thus fails to meet the requirements of the equal protection clause of the Fourteenth Amendment of the United States Constitution and the California Constitution in several specified respects.1

In the second cause of action, plaintiff parents, after incorporating by reference all the allegations of the first cause, allege that as a direct result of the financing scheme they are required to pay a higher tax rate than tax*591payers in many other school districts in order to obtain for their children the same or lesser educational opportunities afforded children in those other districts.

In the third cause of action, after incorporating by reference all the allegations of the first two causes, all plaintiffs allege that an actual controversy has arisen and now exists between the parties as to the validity and constitutionality of the financing scheme under the Fourteenth Amendment of the United States Constitution and under the California Constitution.

Plaintiffs pray for: (1) a declaration that the present financing system is unconstitutional; (2) an order directing defendants to reallocate school funds in order to remedy this invalidity; and (3) an adjudication that the trial court retain jurisdiction of the action so that it may restructure the system if defendants and the state Legislature fail to act within a reasonable time.

All defendants filed general demurrers to the foregoing complaint asserting that none of the three claims stated facts sufficient to- constitute a cause of action. The trial court sustained the demurrers with leave to1 amend. Upon plaintiffs’ failure to amend, defendants’ motion for dismissal was granted. (Code Civ. Proc., § 581, subd. 3.) An order of dismissal was entered (Code Civ. Proc., § 58Id), and this appeal followed.

Preliminarily we observe that in our examination of the instant complaint, we are guided by the long-settled rules for determining its sufficiency against a demurrer. We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713 [63 Cal.Rptr. 724, 433 P.2d 732].) We also consider matters which may be judicially noticed. (Id. at p. 716.) Accordingly, from time to time herein we shall refer to relevant information which has been drawn to our attention either by the parties or by our independent research; in each instance we judicially notice this material since it is contained in publications of state officers or agencies. (Board of Education v. Watson (1966) 63 Cal.2d 829, 836, fn. 3 [48 Cal.Rptr. 481, 409 P.2d 481]; see Evid. Code, § 452, subd. (c).)

I

We begin our task by examining the California public school financing system which is the focal point of the complaint’s allegations. At the threshold we find a fundamental statistic—over 90 percent of our public school funds derive from two basic sources: (a) local district taxes on real property and (b) aid from the State School Fund.2

*592By far the major source of school revenue is the local real property tax. Pursuant to article IX, section 6 of the California Constitution, the Legislature has authorized the governing body of each county, and city and county, to levy taxes on the real property within a school district at a rate necessary to meet the district’s annual education budget. (Ed. Code, § 20701 et seq.)* *3 The amount of revenue which a district can raise in this manner thus depends largely on its tax base—i.e., the assessed valuation of real property within its borders. Tax bases vary widely throughout the state; in 1969-1970, for example," the assessed valuation per unit of average daily attendance of elementary school children4 ranged from a low of $103 to a peak of $952,156—a ratio of nearly 1 to 10,000. (Legislative Analyst, Public School Finance, Part V, Current Issues in Educational Finance (1971) p. 7.)5

The other factor determining local school revenue is the rate of taxation within the district. Although the Legislature has placed ceilings on permissible district tax rates (§ 20751 et seq.), these statutory maxima may be surpassed in a “tax override” election if a majority of the district’s voters approve a higher rate. (§ 20803 et seq.) Nearly all districts have voted to override the statutory limits. Thus the locally raised funds which constitute the largest portion of school revenue are primarily a function of the value of the realty within a particular school district, coupled with the willingness of the district’s residents to tax themselves for education.

Most of the remaining school revenue comes from the State School Fund pursuant to the “foundation program,” through which the state undertakes to supplement local taxes in order to provide a “minimum amount of guaran*593teed support to all districts . . . (§ 17300.) With certain minor exceptions,6 the foundation program ensures that each school district will receive annually, from state or local funds, $355 for each elementary school pupil (§§ 17656, 17660) and $488 for each high school student. (§ 17665.)

The state contribution is supplied in two principal forms. “Basic state aid” consists of a flat grant to each district of $125 per pupil per year, regardless of the relative wealth of the district. (Cal. Const., art. IX, § 6, par. 4; Ed. Code, §§ 17751, 17801.) “Equalization aid” is distributed in inverse proportion to the wealth of the district.

To compute the amount of equalization aid to which a district is entitled, the State Superintendent of Public Instruction first determines how much local property tax revenue would be generated if the district were to levy a hypothetical tax at a rate of $1 on each $100 of assessed valuation in elementary school districts and $.80 per $100 in high school districts.7 (§ 17702.) To that figure, he adds the $125 per pupil basic aid grant. If the sum of those two amounts is less than the foundation program minimum for that district, the state contributes the difference. (§§ 17901, 17902.) Thus, equalization funds guarantee to the poorer districts a basic minimum revenue, while wealthier districts are ineligible for such assistance.

An additional state program tof “supplemental aid” is available to subsidize particularly poor school districts which are willing to make an extra local tax effort. An elementary district with an assessed valuation of $12,500 or less per pupil may obtain up to $125 more for each child if it sets its local tax rate above a certain statutory level. A high school district whose assessed valuation does not exceed $24,500 per pupil is eligible for a supplement of up to $72 per child if its local tax is sufficiently high. (§ § 17920-17926.)8

*594Although equalization aid and supplemental aid temper the disparities which result from the vast variations in real property assessed valuation,, wide differentials remain in the revenue available to individual districts and, consequently, in the level of educational expenditures.9 -For example, in Los Angeles County, where plaintiff children attend school, the Baldwin Park Unified School District expended only $577.49 to educate each of its pupils in 1968-1969; during the same year the Pasadena Unified School District spent $840.19 on every student; and the Beverly Hills Unified School District paid out $1,231.72 per child. (Cal. Dept, of Ed., Cal. Public Schools, Selected Statistics 1968-1969 (1970) Table IV-11, pp. 90-91.) The source of these disparities is unmistakable: in Baldwin Park the assessed valuation per child totaled only $3,706; in Pasadena, assessed valuation was $13,706; while in Beverly Hills, the corresponding figure was $50,885 —a ratio of 1 to 4 to 13. (Id.) Thus, the state grants are inadequate to offset the inequalities inherent in a financing system based on widely varying local tax bases.

Furthermore, basic aid, which constitutes about half of the state educational funds (Legislative Analyst, Public School Finance, Part II, The State School Fund: Its Derivation, Distribution and Apportionment (1970) p. 9), actually widens the gap between rich and poor districts. (See Cal. Senate Fact Finding Committee on Revenue and Taxation, State and Local Fiscal Relationships in Public Education in California (1965) p. 19.) Such aid is *595distributed on a uniform per pupil basis to all districts, irrespective of a district’s wealth. Beverly Hills, as well as Baldwin Park, receives $125 from the state for each of its students.

For Baldwin Park the basic grant is essentially meaningless. Under the foundation program the state must make up the difference between $355 per elementary child and $47.91, the amount of revenue per child which Baldwin Park could raise by levying a tax of $1 per $100 of assessed valuation. Although under present law, that difference is composed partly of basic aid and partly of equalization aid, if the basic aid grant did not exist, the district would still receive the same amount of state aid—all in equalizing funds.

For Beverly Hills, however, the $125 flat grant has real financial significance. Since a tax rate of $1 per $100 there would produce $870 per elementary student, Beverly Hills is far too rich to qualify for equalizing aid. Nevertheless, it still receives $125 per child from the state, thus enlarging the economic chasm between it and Baldwin Park. (See Coons, Clune & Sugar-man, Educational Opportunity: A Workable Constitutional Test of State Financial Structures (1969) 57 Cal.L.Rev. 305, 315.)

II

Having outlined the basic framework of California school financing, we take up plaintiffs’ legal claims. Preliminarily, we reject their contention that the school financing system violates article IX, section 5 of the California Constitution, which states, in pertinent part: “The Legislature shall provide for a system of common schools by which a free_school shall be kept up and supported in each district at least six months in every year . . . .” (Italics added.)10 Plaintiffs’ argument is that the present financing method produces separate and distinct systems, each offering an educational program which varies with the relative wealth of the district’s residents.

We have held that the word “system,” as used in article IX, section 5, implies a “unity of purpose as well as an entirety of operation, and the direction to the legislature to provide ‘a’ system of common schools means one system which shall be applicable to all the common schools within the state.” (Kennedy v. Miller (1893) 97 Cal. 429, 432 [32 P. 558].) However, *596we have never interpreted the constitutional provision to require equal school spending; we have ruled only that the educational system must be uniform in terms of the prescribed course of study and educational progression from grade to grade. (Piper v. Big Pine School Dist. (1924) 193 Cal. 664, 669, 673 [226 P. 926].)

We think it would be erroneous to hold otherwise. While article IX, section 5 makes no reference to school financing, section 6 of that same article specifically authorizes the very element of the fiscal system of which plaintiffs complain. Section 6 states, in part: “The Legislature shall provide for the levying annually by the governing board of each county, and city and county, of such school district taxes, at rates ... as will produce in each fiscal year such revenue for each school district as the governing board thereof shall determine is required . . . .”

Elementary principles of construction dictate that where constitutional provisions can reasonably be construed to avoid a conflict, such an interpretation should be adopted. (People v. Western Airlines, Inc. (1954) 42 Cal.2d 621, 637 [268 P.2d 723], app. dism. (1954) 348 U.S. 859 [99 L.Ed. 677, 75 S.Ct. 87].) This maxim suggests that section 5 should not be construed to ap ply to school financing otherwise it would clash with section 6. If the two provisions were found irreconcilable, section 6 would prevail because it is more specific and was adopted more recently. (Id.; County of Placer v. Aetna Cas. etc. Co. (1958) 50 Cal.2d 182, 189 [323 P.2d 753].) Consequently, we must reject plaintiffs’ argument that the provision in section 5 for a “system of common schools” requires uniform educational expenditures.

III

Having disposed of these prehminary matters, we take up the chief contention underlying plaintiffs’ complaint, namely that the California public school financing scheme violates the equal protection clause of the Fourteenth Amendment to the United States Constitution.* 11

*597As recent decisions of this court have pointed out, the United States Supreme Court has employed a two-level test for measuring legislative classifications against the equal protection clause. “In the area of economic regulation, the high court has exercised restraint, investing legislation with a presumption of constitutionality and requiring merely that distinctions drawn by a challenged statute bear some rational relationship to a conceivable legitimate state purpose. [Citations.]

“On the other hand, in cases involving ‘suspect classifications’ or touching on ‘fundamental interests,’ [fns. omitted] the court has adopted an attitude of active and critical analysis, subjecting the classification to strict scrutiny. [Citations.] Under the strict standard applied in such cases, the state bears the burden of establishing not only that it has a compelling interest which justifies the law but that the distinctions drawn by the law are necessary to further its purpose.” (Westbrook v. Mihaly (1970) 2 Cal.3d 765, 784-785 [87 Cal.Rptr. 839, 471 P.2d 487], vacated on other grounds (1971) 403 U.S. 915 [29 L.Ed.2d 692, 91 S.Ct. 2224]; In re Antazo (1970) 3 Cal.3d 100,110-111 [89 Cal.Rptr. 255, 473 P.2d 999]; see Purdy & Fitzpatrick v. State of California (1969) 71 Cal.2d 566, 578-579 [79 Cal.Rptr. 77, 456 P.2d 645].)

A

Wealth as a Suspect Classification

In recent years, the United States Supreme Court has demonstrated a marked antipathy toward legislative classifications which discriminate on the basis of certain “suspect” personal characteristics. One factor which has repeatedly come under the close scrutiny of the high court is wealth. “Lines drawn on the basis of wealth or property, like those of race [citation], are traditionally disfavored.” (Harper v. Virginia Bd. of Elections (1966) 383 U.S. 663, 668 [16 L.Ed.2d 169, 173, 86 S.Ct. 1079].) Invalidating the Virginia poll tax in Harper, the court stated: “To introduce wealth or payment of a fee as a measure of a voter’s qualifications is to introduce a capricious or irrelevant factor.” (Id.) “[A] careful examination on our part is especially warranted where lines are drawn on the basis of wealth . . . [a] factor which would independently render a classification highly suspect and thereby demand a more exacting judicial scrutiny. |[Citations.]” (McDonald v. Board of Elections (1969) 394 U.S. 802, 807 [22 L.Ed.2d 739, 744, 89 S.Ct. 1404]. See also Tate v. Short (1971) 401 U.S. 395 [28 L.Ed. 2d 130, 91 S.Ct. 668]; Williams v. Illinois (1970) 399 U.S. 235 [26 L.Ed.2d 586, 90 S.Ct. 2018]; Roberts v. La Vallee (1967) 389 U.S. 40 [19 L.Ed. 2d 41, 88 S.Ct. 194]; Anders v. California (1967) 386 U.S. 738 [18 L.Ed. 2d 493, 87 S.Ct. 1396]; Douglas v. California (1963) 372 U.S. 353 [9 L.Ed. *5982d 811, 83 S.Ct. 814]; Smith v. Bennett (1961) 365 U.S. 708 [6 L.Ed.2d 39, 81 S.Ct. 895]; Burns v. Ohio (1959) 360 U.S. 252 [3 L.Ed.2d 1209, 79 S.Ct. 1164]; Griffin v. Illinois (1956) 351 U.S. 12 [100 L.Ed. 891, 76 S.Ct. 585, 55 A.L.R.2d 1055]; In re Antazo, supra, 3 Cal.3d 100; see generally Michelman, The Supreme Court, 1968 Term, Foreword: On Protecting the Poor Through the Fourteenth Amendment (1969) 83 Harv.L.Rev. 7,19-33.)

Plaintiffs contend that the school financing system classifies on the basis of wealth. We find this proposition irrefutable. As we have already discussed, over half of all educational revenue is raised locally by levying taxes on real property in the individual school districts. Above the foundation program minimum ($355 per elementary student and $488 per high school student), the wealth of a school district, as measured by its assessed valuation, is the major determinant of educational expenditures. Although the amount of money raised locally is also a function of the rate at which the residents of a district are willing to tax themselves, as a practical matter districts, with small tax bases simply cannot levy taxes at a rate sufficient to produce the revenue that more affluent districts reap with minimal tax efforts. (See fn. 15, infra, and accompanying text.) For example, Baldwin Park citizens, who paid a school tax of $5.48 per $100 of assessed valuation in 1968-1969, were able to spend less than half as much on education as Beverly Hills residents, who were taxed only $2.38 per $100. (Cal. Dept. of Ed., op. cit. supra, Table III-16, p. 43).

Defendants vigorously dispute the proposition that the financing scheme discriminates on the. basis of wealth. Their first argument is essentially this: through basic aid, the state distributes school funds equally to all pupils; through equalization aid, it distributes funds in a manner beneficial to the poor districts. However, state funds constitute only one part of the entire school fiscal system.12 The foundation program partially alleviates the great disparities in local sources of revenue, but the system as a whole generates school revenue in proportion to the. wealth of the individual district.13

*599Defendants also argue that neither assessed valuation per pupil nor expenditure per pupil is a reliable index of the wealth of a district or of its residents. The former figure is untrustworthy, they assert, because a district with a low total assessed valuation but a minuscule number of students will have a high per pupil tax base and thus appear “wealthy.” Defendants imply that the proper index of a district’s wealth is the total assessed valuation of its property. We think defendants’ contention misses the point. The only meaningful measure of a district’s wealth in the present context is not the absolute value of its property, but the ratio of its resources to pupils, because it is the latter figure which determines how much the district can devote to educating each of its students.14

But, say defendants, the expenditure per child does not accurately reflect a district’s wealth because that expenditure is partly determined by the district’s tax rate. Thus, a district with á high total assessed valuation might levy a low school tax, and end up spending the same amount per pupil as a poorer district whose residents opt to pay higher taxes. This argument is also meritless. Obviously, the richer district is favored when it can provide the same educational quality for its children with less tax effort. Furthermore, as a statistical matter, the poorer districts are financially unable to raise their taxes high enough to match the educational *600offerings of wealthier districts. (Legislative Analyst, Part V, supra, pp. 8-9.) Thus, affluent districts can have their cake and eat it too: they can provide a high quality education for their children while paying lower taxes.15 Poor districts, by contrast, have no cake at all.

Finally, defendants suggest that the wealth of a school district does not necessarily reflect the wealth of the families who live there. The simple answer to this argument is that plaintiffs have alleged that there is a *601correlation between a district’s per pupil assessed valuation and the wealth of its residents and we treat these material facts as admitted by the demurrers.

More basically, however, we reject defendants’ underlying thesis that classification by wealth is constitutional so long as the wealth is that of the district, not the individual. We think that discrimination on the basis of district wealth is equally invalid. The commercial and industrial property which augments a district’s tax base is distributed unevenly throughout the state. To allot more educational dollars to the children of one district than to those of another merely because of the fortuitous presence of such property is to make the quality of a child’s education dependent upon the location of private commercial and industrial establishments.16 **************16 Surely, this is to rely on the most irrelevant of factors as the basis for educational financing.

Defendants, assuming for the sake of argument that the financing system does classify by wealth, nevertheless claim that no constitutional infirmity is involved because the complaint contains no allegation of purposeful or intentional discrimination. (Cf. Gomillion v. Lightfoot (1960) 364 U.S. 339 [5 L.Ed.2d 110, 81 S.Ct. 125].) Thus, defendants contend, any unequal treatment is only de facto, not de jure. Since the United States *602Supreme Court has not held de facto school segregation on the basis of race to be unconstitutional, so the argument goes, de facto classifications on the basis of wealth are presumptively valid.

We think that the whole structure of this argument must fall for want of a solid foundation in law and logic. First, none of the wealth classifications previously invalidated by the United States Supreme Court or this court has been the product of purposeful discrimination. Instead, these prior decisions have involved “unintentional” classifications whose impact simply fell more heavily on the poof.

For example, several cases have held that where important rights are at stake, the state has an affirmative obligation to relieve an indigent of the burden of his own poverty by supplying without charge certain goods or services for which others must pay. In Griffin v. Illinois, supra, 351 U.S. 12, the high court ruled that Illinois was required to provide a pooi defendant with a free transcript on appeal.17 Douglas v. California, supra, 372 U.S. 353 held that an indigent person has a right to court-appointed counsel on appeal.

Other cases dealing with the factor of wealth have held that a state may not impose on an indigent certain payments which, although neutral on their face, may have a discriminatory effect. In Harper v. Virginia Bd. of Elections, supra, 383 U.S. 663, the high court struck down a $1.50 poll tax, not because its purpose was to deter indigents from voting, but because its result might be such. (Id. at p. 666, fn. 3 [16 L.Ed.2d at p. 172].) We held in In re Antazo, supra, 3 Cal.3d 100 that a poor defendant was denied equal protection of the law if he was imprisoned simply because he could not afford to pay a fine. (Accord, Tate v. Short, supra, 401 U.S. 395; Williams v. Illinois, supra, 399 U.S. 235;18 see Boddie v. Connecticut *603(1971) 401 U.S. 371 [28 L.Ed.2d 113, 91 S.Ct.780], discussed fn. 21 infra.) In summary, prior decisions have invalidated classifications based on wealth even in the absence of a discriminatory motivation.

We turn now to defendants’ related contention that the instant case involves at most de facto discrimination. We disagree. Indeed, we find the case unusual in the extent to which governmental action is the cause of the wealth classifications. The school funding scheme is mandated in every detail by the California Constitution and statutes. Although private residential • and commercial patterns may be partly responsible for the distribution of assessed valuation throughout the state, such patterns are shaped and hardened by zoning ordinances and other governmental land-use controls which promote economic exclusivity. (Cf. San Francisco Unified School Dist. v. Johnson (1971) 3 Cal.3d 937, 956 [92 Cal.Rptr. 309, 479 P.2d 669].) Governmental action drew the school district boundary lines, thus determining how much local wealth each district would contain. (Cal. Const., art. IX, § 14; Ed. Code, § 1601 et seq.; Worthington S. Dist. v. Eureka S. Dist. (1916) 173 Cal. 154, 156 [159 P. 437]; Hughes v. Ewing (1892) 93 Cal. 414, 417 [28 P. 1067]; Mountain View Sch. Dist. v. City Council (1959) 168 Cal.App.2d 89, 97 [335 P.2d 957].) Compared with Griffin and Douglas, for example, official activity has played a significant role in establishing the economic classifications challenged in this action.19

Finally, even assuming arguendo that defendants are correct in their contention that the instant discrimination based on wealth is merely de facto, and not de jure,20 such discrimination cannot be justified by analogy *604to de facto racial segregation. Although the United States Supreme Court has not yet ruled on the constitutionality of de facto racial segregation, this court eight years ago held such segregation invalid, and declared that school boards, should take affirmative steps to alleviate racial imbalance, however created. (Jackson v. Pasadena City School Dist. (1963) 59 Cal.2d 876, 881 [31 Cal.Rptr. 606, 382 P.2d 878]; San Francisco Unified School Dist. v. Johnson, supra, 3 Cal.3d 937.) Consequently, any discrimination based on wealth can hardly be vindicated by reference to de facto racial segregation, which we have already condemned. In sum, we are of the view that the school financing system discriminates on the basis of the wealth of a district and its residents.

B

Education as a Fundamental Interest

But plaintiffs’ equal protection attack on the fiscal system has an additional dimension. They assert that the system not only draws lines on the basis of wealth but that it'“touches upon,” indeed has a direct and significant impact upon, a “fundamental interest,” namely education. It is urged that these two grounds, particularly in combination, establish a demonstrable denial of equal protection of the laws. To this phase of the argument we now turn our attention.

Until the present time wealth classifications have been invalidated only in conjunction with a limited number of fundamental interests—rights of defendants in criminal cases (Griffin; Douglas; Williams; Tate; Antazo) and voting rights (Harper; Cipriano v. City of Houma (1969) 395 U.S. 701 [23 L.Ed.2d 647, 89 S.Ct. 1897]; Kramer v. Union School District (1969) 395 U.S. 621 [23 L.Ed.2d 583, 89 S.Ct. 1886]; cf. McDonald v. Board of Elections, supra, 394 U.S. 802).21 Plaintiffs’ contention—that education is a fundamental inte