The opinion
[Cite as Toledo City School Dist. Bd. of Edn. v. State Bd. of Edn., 2014-Ohio-3741.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Toledo City School District :
Board of Education et al.,
:
Plaintiffs-Appellees/
[Cross-Appellants], :
v. No. 14AP-93
: (C.P.C. No. 11CV-14120)
State Board of Education et al.,
: (REGULAR CALENDAR)
Defendants-Appellants/
[Cross-Appellees]. :
:
Dayton City School District
Board of Education et al., :
Plaintiffs-Appellees/ :
[Cross-Appellants],
:
v. No. 14AP-94
: (C.P.C. No. 11CV-11809)
State Board of Education et al.,
: (REGULAR CALENDAR)
Defendants-Appellants/
[Cross-Appellees]. :
:
Cleveland Metropolitan School District
Board of Education et al., :
Plaintiffs-Appellees/ :
[Cross-Appellants],
:
v. No. 14AP-95
: (C.P.C. No. 11CV-13689)
State Board of Education et al.,
: (REGULAR CALENDAR)
Defendants-Appellants/
[Cross-Appellees]. :
Nos. 14AP-93, 14AP-94 and 14AP-95 2
D E C I S I O N
Rendered on
Bricker & Eckler LLP, Nicholas A. Pittner, James J. Hughes,
III, Susan B. Greenberger and Jennifer A. Flint; Marshall &
Melhorn, LLC, Keith Wilkowski and Amy M. Natyshak, for
appellees [cross-appellants] Toledo City School District Board
of Education.
Jyllian R. Guerriero, for appellees [cross-appellants] Dayton
City School District Board of Education.
Wayne J. Belock, for appellees [cross-appellants] Cleveland
Metropolitan School District Board of Education.
Michael DeWine, Attorney General, and Todd R. Marti, for
appellants [cross-appellees].
APPEALS from the Franklin County Court of Common Pleas
CONNOR, J.
{¶ 1} In this consolidated appeal, defendants-appellants, State Board of
Education of Ohio, State Superintendent of Public Instruction, and Ohio Department of
Education (collectively "ODE"), appeal from a judgment entry of the Franklin County
Court of Common Pleas in favor of plaintiffs-appellees, denying in part ODE's motion for
judgment on the pleadings as to the claims asserted by Toledo City School District Board
of Education, Dayton City School District Board of Education, and Cleveland
Metropolitan School District Board of Education ("Districts"). Plaintiffs-appellees/cross-
appellants, Bonnie Jo Herman, Christine Varwig, Keith Crosby, Ann Marie Snyder, Dessie
M. and Christopher Saunders, Edith C. Britt and Angela Barnett (collectively "Individual
Plaintiffs"), have filed a cross-appeal from the judgment entry granting in part ODE's
motion for judgment on the pleadings as to the claims asserted by Individual Plaintiffs.
For the reasons that follow, we affirm the judgment of the trial court.
Nos. 14AP-93, 14AP-94 and 14AP-95 3
A. Facts and Procedural History
{¶ 2} The three cases involved in this appeal arise out of a school funding dispute
between the parties that began in fiscal year ("FY") 2005.1 The statutory school funding
system in place from FY 2005 through FY 2007, required ODE to provide public school
districts with funding from the School Foundation based upon the Average Daily
Membership ("ADM"). Simply stated, ADM is the number of full-time equivalent ("FTE")
students receiving educational services from the school district plus the number of
students within the district who chose to receive educational services from other sources,
including community schools. In the first full week of October in each fiscal year, the
school districts determine their ADM by making a single count of every student eligible to
receive educational services in the district ("October Count"). R.C. 3317.03(A) requires
the superintendent for each public school district to certify the October Count. Public
school districts in this state receive School Foundation funding based exclusively on a
formula utilizing the ADM ("Formula ADM").
{¶ 3} In contrast to the single-count employed by the public school districts in
calculating ADM, community schools count and report their community school average
daily membership ("CSADM") on a monthly basis. The CSADM is the number of students
attending a particular community school each month, as reported by the community
school. The community school receives funding at a predetermined rate per student for
each student attending the school. ODE deducts community school funding from the
public school funding in the district in which the community school is located.
{¶ 4} In Cincinnati City School Dist. Bd. of Edn. v. State Bd. of Edn. of Ohio, 176
Ohio App.3d 157, 2008-Ohio-1434 (1st Dist.),2 the First District Court of Appeals
explained the difference between statutory funding for public schools and community
schools as follows:
There is an important distinction between the "snapshot"
concept that public schools use to count pupils at one time
early in the year and the monthly CSADM report. For school
districts, once the Formula ADM has been certified, school-
district funding is neither increased nor decreased by the
enrollment or withdrawal of pupils after the October count.
(The sole exception is the enrollment of a district student in a
1 Under R.C. 9.34, a school district fiscal year begins on July 1 and ends on June 30 of the following year.
2 We shall refer to this case as Cincinnati or Cincinnati decision.
Nos. 14AP-93, 14AP-94 and 14AP-95 4
community school after the October count, when such a
student has not been included in the Formula ADM.) In
contrast, funding for community schools is adjusted monthly
based on the number of students reported in the CSADM
report. Thus, funding may increase or decrease with the
enrollment or withdrawal of a pupil in a community school.
So, unlike public schools, community schools are paid for
students upon enrollment, but public schools must absorb
new students without commensurate additional funding.
Id. at ¶ 7, citing R.C. 3317.03(F)(3).
{¶ 5} ODE acknowledges that midway through FY 2005, it discovered that many
districts had reported higher numbers of charter school students in their ADM than the
charter schools had reported in the CSADM. ODE assumed the CSADM was a more
accurate estimate of the number of students attending community schools in a particular
district. Accordingly, ODE recalculated the districts' Formula ADM by substituting the
CSADM's figures for those reported by the districts in their October Count. As a result of
the recalculation, some districts realized a lower ADM for FY 2005 and a corresponding
reduction in School Foundation funding.
{¶ 6} Because the public school districts had already received some FY 2005
funding based on the higher ADM, ODE determined that those districts had been
overpaid. ODE then decided to recoup the claimed overpayment by reducing future
payments to the affected districts. As a consequence of its recalculation of the districts' FY
202005 ADM, ODE reduced Dayton's FY 2005 ADM by approximately 688 FTE,
Cleveland's by 575, and Toledo's by 561. After reducing the districts' FY 2005 ADM, ODE
determined that Dayton's overpayment was approximately $4,792,304.80, Cleveland's
overpayment was approximately $1,857,311, and Toledo's overpayment was
approximately $3,576,948. ODE began recouping these funds from Toledo in May 2006
and from Dayton and Cleveland in August 2006. The Districts allege that ODE's action
was contrary to law.
{¶ 7} Additionally, the Districts contend that ODE is required to make an upward
adjustment to a public school district's Formula ADM to account for community school
students who are entitled to attend school in the public school district but who were not
included in the District's ADM certified in October, regardless of whether such students
were enrolled in a community school when the Districts made the October Count.
Nos. 14AP-93, 14AP-94 and 14AP-95 5
According to the Districts, ODE failed to adjust the Districts' Formula ADM in FY 2005 to
account for these "add-in students."
{¶ 8} The Districts also allege that they are entitled to a number of "guarantee"
funds in the event that an unanticipated loss of funding occurs due to certain specified
circumstances beyond the Districts' control. The Districts now claim that they were
entitled to receive additional School Foundation funding pursuant to one or more of the
guarantee provisions, but that ODE did not provide such additional funding in FY 2005
through FY 2007.
{¶ 9} In 2008, the Cincinnati School District Board of Education ("CSD") filed an
action against ODE in Hamilton County Court of Common Pleas disputing ODE's method
of calculating funding to public school districts and seeking the return of the sums
wrongfully recouped or withheld by ODE in FY 2005 through FY 2007. See Cincinnati
City School Dist. Bd. of Edn. v. State Bd. of Edn. of Ohio, Hamilton C.P. No. A0603908
(Jan. 5, 2007).3 CSD alleged that the controlling school funding statutes required ODE to
use a public school districts' October Count as the sole basis for determining Formula
ADM, and that ODE violated law by employing the CSADM in recalculating the districts'
FY 2005 ADM. The trial court granted relief to CSD, and ODE appealed to the Hamilton
County Court of Appeals.
{¶ 10} In Cincinnati, the question for the court of appeals was whether the trial
court erred when it found that ODE utilized the wrong data in calculating the number of
students attending community schools in CSD during FY 2005 and in subsequent years,
resulting in reduced funding for CSD during FY 2006 and FY 2007. Id. at ¶ 1. The court of
appeals held that the ADM certified by the CSD Superintendent as a result of the October
Count was the only method by which ODE could calculate the amount of general public
education funding to which a district was entitled, and that Ohio law did not permit ODE
to adjust ADM in order to reflect the numbers in the monthly CSADM. The court further
determined that ODE could employ the CSADM only when making the appropriate
deductions from public school funding and when making payment to community schools.
Id., citing R.C. 3317.022(A) and 3317.03(A).
3 Appellee Dayton City School District was also a party to that litigation.
Nos. 14AP-93, 14AP-94 and 14AP-95 6
{¶ 11} After the Supreme Court of Ohio agreed to review the case in Cincinnati
School Dist. Bd. of Edn. v. State Bd. of Edn., 119 Ohio St.3d 1498, 2008-Ohio-5500, the
parties settled their dispute and dismissed the appeal. See Cincinnati School Dist. Bd. of
Edn. v. State Bd. of Edn., 122 Ohio St.3d 557, 2009-Ohio-3628, ¶ 3. According to each of
the complaints in this consolidated action, ODE paid CSD a total of $5.9 million in
settlement of the CSD litigation, and it paid Dayton City School District more than $7.1
million in partial settlement of their claims in that case.
{¶ 12} In 2009, the General Assembly responded to the Cincinnati decision by
enacting the following law as part of the biennial budget:
Except as expressly required under a court judgment not
subject to further appeals, or a settlement agreement with a
school district executed on or before June 1, 2009, in the
case of a school district for which the formula ADM for fiscal
year 2005, as reported for that fiscal year under division (A)
of section 3317.03 of the Revised Code, was reduced based
on enrollment reports for community schools, made under
section 3314.08 of the Revised Code, regarding students
entitled to attend school in the district, which reduction of
formula ADM resulted in a reduction of foundation funding
or transitional aid funding for fiscal year 2005, 2006, or
2007, no school district, except a district named in the
court's judgment or the settlement agreement, shall have a
legal claim for reimbursement of the amount of such
reduction in foundation funding or transitional aid funding,
and the state shall not have liability for reimbursement of the
amount of such reduction in foundation funding or
transitional aid funding.
Am.Sub.H.B. No. 1, Section 265.60.70.4
{¶ 13} In 2011, the Districts brought suit against ODE seeking a writ of mandamus
ordering ODE to calculate and pay the Districts' School Foundation funds for FY 2005, FY
2006, and FY 2007 in accordance with law.5 In the alternative, the Districts sought a
declaration that Ohio law requires ODE to calculate and pay the Districts' School
Foundation payments for FY 2005, FY 2006, and FY 2007 on the basis of FY 2005 ADM
4 The General Assembly enacted identical language in the State Budget Provisions for 2011-2012 and 2013-
2014. See Am.Sub.H.B. No. 153, Section 267.50.60; Am.Sub.H.B. No. 59, Section 263.410.
5 Each of the three Districts separately filed a petition in the common pleas court for their respective county.
Each of the three cases were subsequently transferred to the Franklin County Court of Common Pleas and
then consolidated into case No. 11 CV-11809 by order dated January 31, 2012.
Nos. 14AP-93, 14AP-94 and 14AP-95 7
as certified by the Districts' superintendents, and to calculate and pay for add-in students
as required by law. The Districts further seek equitable restitution of the funds wrongfully
recouped or withheld by ODE. In total, the complaint estimates the loss of funding to the
Districts in FY 2006 and FY 2007 at $23,630,000, not including losses due to the add-in
claims.
{¶ 14} On April 27, 2012, ODE filed a motion for judgment on the pleadings
pursuant to Civ.R. 12(C), arguing that the relevant provisions of the 2009 Budget Bill bar
any claim for relief the Districts may have had against ODE. ODE set forth the additional
grounds for judgment in its favor as to the claims of Individual Plaintiffs, arguing that
they did not have standing to assert claims against ODE. On January 16, 2014, the trial
court issued a judgment entry granting ODE's motion, in part, as to the claims of the
Individual Plaintiffs. The trial court held that the Individual Plaintiffs did not have
standing to assert a claim against ODE. However, the trial court denied ODE's motion as
it relates to the 2009 Budget Bill. The trial court held that the relevant provision of the
2009 Budget Bill is void and unenforceable inasmuch as it retroactively abolished vested
rights of the Districts in violation of the Ohio Constitution, Article II, Section 28.
{¶ 15} Although the trial court's decision did not dispose of all of the claims of the
parties, the trial court expressly certified that there was "no just cause for delay."
Accordingly, ODE sought an immediate review of the trial court's judgment by filing a
notice of appeal to this court on February 7, 2014. The Individual Plaintiffs filed a cross-
appeal.6
B. Assignments of Error on Appeal
{¶ 16} Defendants-appellants assign the following as error:
The Trial Court erred in holding that Sub. H. B. 1 (128th G.A)
§ 265.60.70; Am. Sub. H. B. 153 (129th G.A.) §267.50.60;
and Am. Sub. H.B. No. 59 (130th G.A.)§263.410 violate Art.
II, § 28 of Ohio's Constitution. Doc. No. 141. pp. 16-23.
{¶ 17} For their cross-appeal, cross-appellants assign the following as error:
The trial court erred in dismissing the Individual Plaintiffs, on
a motion for judgment on the pleadings, for lack of standing
6 On February 19, 2014, we sua sponte consolidated case Nos. 14AP-93, 14AP-94 and 14AP-95.
Nos. 14AP-93, 14AP-94 and 14AP-95 8
as the Complaint(s) allege that the Individual Plaintiffs
suffered injuries resulting from ODE's unlawful actions.
C. Standard of Review
{¶ 18} A party may file a motion for judgment on the pleadings under Civ.R. 12(C),
"[a]fter the pleadings are closed but within such time as not to delay the trial." Franks v.
Ohio Dept. of Rehab. & Corr., 95 Ohio App.3d 114, 2011-Ohio-2048, ¶ 5. In ruling on a
motion for judgment on the pleadings, the court is permitted to consider both the
complaint and answer. State ex rel. Midwest Pride IV, Inc. v. Pontious, 75 Ohio St.3d 565,
570 (1996). When presented with such a motion, a trial court must construe all the
material allegations of the complaint as true, and must draw all reasonable inferences in
favor of the nonmoving party. Id., citing Peterson v. Teodosio, 34 Ohio St.2d 161, 165
(1973); Whaley v. Franklin Cty. Bd. of Commrs., 92 Ohio St.3d 574, 581 (2001). The court
will grant the motion if it finds, beyond doubt, that the plaintiff can prove no set of facts in
support of the claim(s) that would entitle him or her to relief. Pontious at 570. A judgment
on the pleadings dismissing an action is subject to a de novo standard of review in the
court of appeals. RotoSolutions, Inc. v. Crane Plastics Siding, L.L.C., 10th Dist. No.
13AP-1, 2013-Ohio-4343, ¶ 13, citing Franks at ¶ 5.
{¶ 19} With respect to the appeal, we note that an appellate court reviewing a
declaratory judgment matter should apply a de novo standard of review in regard to the
trial court's determination of legal issues in the case. Nelson v. Mohr, 10th Dist. No. 13AP-
130, 2013-Ohio-4506, ¶ 9, citing Arnott v. Arnott, 132 Ohio St.3d 401, 2012-Ohio-3208,
¶ 1. An appellate court must also apply the de novo standard of review when examining
the constitutionality of a statute. Crigger v. Crigger, 10th Dist. No. 04AP-288, 2005-
Ohio-519, citing Liposchak v. Admr., Bur. of Workers' Comp., 138 Ohio App.3d 368, 385
(10th Dist.2000), citing Ohio Historical Soc. v. State Emp. Relations Bd., 66 Ohio St.3d
466, 471 (1993).
{¶ 20} As for the cross-appeal, we note that "[s]tanding is a threshold test that, if
satisfied, permits the court to go on to decide whether the plaintiff has a good cause of
action, and whether the relief sought can or should be granted to plaintiff." Tiemann v.
Univ. of Cincinnati, 127 Ohio App.3d 312, 325 (10th Dist.1998) (abrogated in part on
other grounds). Lack of standing challenges the capacity of a party to bring an action, not
Nos. 14AP-93, 14AP-94 and 14AP-95 9
the subject-matter jurisdiction of the court. State ex rel. Ralkers, Inc. v. Liquor Control
Comm., 10th Dist. No. 04AP-779, 2004-Ohio-6606, ¶ 35. When an appellate court is
presented with a standing issue, it is generally a question of law, and we apply a de novo
standard of review. See Cleveland Elec. Illuminating Co. v. Pub. Util. Comm., 76 Ohio
St.3d 521, 523 (1996).
D. Legal Analysis
1. Final Appealable Order
{¶ 21} Ordinarily a decision denying a motion for judgment on the pleadings is not
a final appealable order. Ohio Bur. of Workers' Comp. v. Shaffer, 10th Dist. No. 13AP-67,
2013-Ohio-4570, ¶ 10. Thus, the first question for this court is whether the trial court's
decision denying ODE's motion for judgment on the pleadings constitutes a final
appealable order. In this regard, "[a] trial court's order is final and appealable only if it
meets the requirements of R.C. 2505.02 and, if applicable, Civ.R. 54(B)." Kopp v.
Associated Estates Realty Corp., 10th Dist. No. 08AP-819, 2009-Ohio-2595, ¶ 6; Denham
v. New Carlisle, 86 Ohio St.3d 594, 596 (1999), citing Chef Italiano Corp. v. Kent State
Univ., 44 Ohio St.3d 86, 87 (1989). Pursuant to R.C. 2505.02(B)(1) "[a]n order is a final
order that may be reviewed, affirmed, modified, or reversed, with or without retrial, when
it is * * * [a]n order that affects a substantial right in an action that in effect determines
the action and prevents a judgment." A " '[s]ubstantial right' means a right that the United
States Constitution, the Ohio Constitution, a statute, the common law, or a rule of
procedure entitles a person to enforce or protect." R.C. 2505.02(A)(1). In denying ODE's
motion for judgment on the pleadings, the trial court ruled that the retroactive application
of Am.Sub.H.B. No. 1, Section 265.60.70, violates Ohio Constitution, Article II, Section
28. Accordingly, even though the trial court denied ODE's motion for judgment on the
pleadings, the trial court's ruling affects a substantial right.
{¶ 22} The requirements of Civ.R. 54(B), are as follows: "[w]hen more than one
claim for relief is presented in an action * * * or when multiple parties are involved, the
court may enter final judgment as to one or more but fewer than all of the claims or
parties only upon an express determination that there is no just reason for delay."
Although the trial court's judgment entry did not dispose of the Districts' claims for
monetary and equitable relief, Civ.R. 54(B) permitted the trial court to enter a final
Nos. 14AP-93, 14AP-94 and 14AP-95 10
judgment "upon an express determination that there is no just reason for delay." As noted
above, the trial court expressly made that determination.
{¶ 23} For the foregoing reasons, we find that the judgment of the trial court is a
final appealable order and that we have jurisdiction of this appeal.
2. Retroactive Application of 2009 Budget Bill
{¶ 24} In ODE's sole assignment of error, ODE contends that the relevant
provisions of the 2009 Budget Bill legislatively nullify the Cincinnati decision and that the
Districts are legally barred from asserting any legal claims against the State for
reimbursement of School Foundation funds for FY 2005 through FY 2007. The Districts
argue that the relevant provisions of the 2009 Budget Bill are void and unenforceable
because they violate the constitutional prohibition against retroactive laws.
{¶ 25} Ohio Constitution, Article II, Section 28, states that "[t]he General
Assembly shall have no power to pass retroactive laws." The trial court, relying on the first
district decision in Cincinnati, determined that the Districts had a vested right to School
Foundation funding pursuant to the Formula ADM as determined by the October Count,
and that the provision in the 2009 Budget Bill that would abrogate the Districts' right to
such funding, violated the constitutional prohibition against retroactive laws.
{¶ 26} In making the determination whether retroactive application of a statute
violates the Retroactivity Clause of State Constitution, a court is required to engage in a
two-step analysis. State v. White, 132 Ohio St.3d 344, 2012-Ohio-2583, ¶ 27,
reconsideration denied, 132 Ohio St.3d 1535, 2012-Ohio-4381, cert. denied, White v.
Ohio, 133 S.Ct. 1495. "First, the court must determine whether the General Assembly
intended that the statute apply retroactively." Id. Second, "[i]f the General Assembly has
expressly indicated its intention that the statute apply retroactively, the court must
determine whether the statute is remedial, in which case retroactive application is
permitted, or substantive, in which case retroactive application is forbidden." Id. There is
no question in this case that the General Assembly intended retroactive application of the
relevant provisions of the 2009 Budget Bill inasmuch as the statute expressly applies to
school funding for FY 2005 through FY 2007. Thus, the question for this court is whether
the nature of the statute is remedial or substantive.
Nos. 14AP-93, 14AP-94 and 14AP-95 11
{¶ 27} A statute is "substantive," for purposes of retroactivity analysis, when it
impairs or takes away vested rights; affects an accrued substantive right; imposes new or
additional burdens, duties, obligations, or liabilities as to a past transaction; creates a new
right out of an act that gave no right and imposed no obligation when it occurred; creates
a new right; or, gives rise to or takes away the right to sue or defend actions at law. Id. at
¶ 35. In contrast, "[r]emedial laws are those that substitute a new or different remedy for
the enforcement of an accrued right, as compared to the right itself, * * * and generally
come in the form of 'rules of practice, courses of procedure, or methods of review.' " State
ex rel. Kilbane v. Indus. Comm., 91 Ohio St.3d 258, 260 (2001). A purely remedial law
"does not violate Section 28, Article II of the Ohio Constitution, even when it is applied
retroactively." Beilat v. Beilat, 87 Ohio St.3d 350, 2000-Ohio-451.
a. Vested right analysis
{¶ 28} A vested right is "a completed, consummated right for present or future
enjoyment; not contingent; unconditional; absolute." Black's Law Dictionary 1557 (9th
Ed.2011). The Supreme Court of Ohio provided further insight into what it means for
someone to have a "vested" right in State ex rel. Jordan v. Indus. Comm., 120 Ohio
St.3d 412, 2008-Ohio-6137, ¶ 9:
A "vested right" can "be created by common law or statute
and is generally understood to be the power to lawfully do
certain actions or possess certain things; in essence, it is a
property right." Washington Cty. Taxpayers Assn. v. Peppel
(1992), 78 Ohio App.3d 146, 155, 604 N.E.2d 181. It has been
described as a right "which it is proper for the state to
recognize and protect, and which an individual cannot be
deprived of arbitrarily without injustice." State v. Muqdady
(2000), 110 Ohio Misc.2d 51, 55, 744 N.E.2d 278. A vested
right is one that " 'so completely and definitely belongs to a
person that it cannot be impaired or taken away without the
person's consent.' " Harden v. Ohio Atty. Gen., 101 Ohio
St.3d 137, 2004-Ohio-382, 802 N.E.2d 1112, ¶ 9, quoting
Black's Law Dictionary (7th Ed.1999) 1324. A right also
cannot be characterized as vested "unless it constitutes more
than a 'mere expectation or interest based upon an
anticipated continuance of existing laws." Roberts v.
Treasurer (2001), 147 Ohio App.3d 403, 411, 770 N.E.2d
1085, quoting In re Emery (1978), 59 Ohio App.2d 7, 11, 13
O.O.3d 44, 391 N.E.2d 746.
Nos. 14AP-93, 14AP-94 and 14AP-95 12
{¶ 29} ODE contends that the 1938 opinion of the court in State ex rel. Outcalt v.
Guckenberger, 134 Ohio St. 457 (1938) requires us to find that the Districts' rights to
School Foundation funding at the statutory rate is contingent or conditional in nature.
We disagree.
{¶ 30} In Outcalt, the General Assembly had passed the Whittemore Acts under
which a delinquent taxpayer, by paying all current taxes and agreeing to discharge the
delinquent taxes in installments, would be relieved of the payment of past penalties and
interest. The Hamilton County Prosecutor brought an action against the County Auditor,
seeking a court order compelling the County Auditor to charge and collect penalties and
interest under the prior law. The Supreme Court of Ohio held that the provisions of the
Acts, which authorize the remission of the penalties, interest and other charges on unpaid
delinquent taxes, do not violate the retroactivity clause. Id. at 461. ODE argues that,
employing the logic of the Outcalt case, the retroactivity clause does not prevent the
General Assembly from enacting legislation which diverts unpaid School Foundation
funds.
{¶ 31} However, as the Districts have pointed out, the court in Outcalt also held
that penalties previously paid in discharging tax obligations cannot be refunded through
legislative enactment because, after payment into the public treasury, they become a part
of the taxes collected and distributed to the subdivisions of the state. Id. at 459. Here, the
School Foundation funds at issue are part of ODE's general revenue fund; a fund
comprised of property taxes previously levied and collected along with lottery commission
profits. All that remains for ODE to do is to distribute the funds to the Districts pursuant
to the statutory formula. In short, School Foundation funds awaiting distribution are not
the legal equivalent of uncollected taxes, penalties and interest. Consequently, to the
extent that the Outcalt decision applies to the facts of this case, it arguably supports the
position taken by the Districts.
{¶ 32} ODE also relies on the 1933 opinion of the Supreme Court of Ohio in
Cleveland v. Zangerle, 127 Ohio St. 91 (1933), in support of its contention that the
Districts' right to School Foundation funds is not a vested right. In Zangerle, the city of
Cleveland sought an order enjoining Cuyahoga County from distributing Intangible Tax
Act revenues to public libraries and township park districts pursuant to newly enacted
Am.Sub.S.B. No. 239. The General Assembly had enacted the Intangible Tax Law in
Nos. 14AP-93, 14AP-94 and 14AP-95 13
January 1, 1933, but the Supreme Court of Ohio ruled that certain "distributive features"
of the Act were unconstitutional. Id at 92, citing Friedlander, County Treas., v. Gorman
Pros. Atty., 126 Ohio St. 163 (1933). The General Assembly responded by enacting new
legislation requiring the distribution of Intangible Tax Act revenue to libraries and parks.
After much of the Intangible Tax revenue had been collected, but before any of the
revenue was distributed, the city of Cleveland sought a court order compelling Cuyahoga
County to distribute the revenue according to prior law. The city of Cleveland alleged that
Am.Sub.S.B. No. 239 violated Ohio Constitution, Article II, Section 28. The Supreme
Court of Ohio concluded that the enactment was not unconstitutionally retroactive for the
following reason:
No governmental subdivision of the state has any vested
right, at least until distribution is made, in any taxes levied
and in the process of collection. Until such distribution is
made, the Legislature of Ohio is fully competent to divert the
proceeds among those local subdivisions as it deems best to
meet the emergencies which it finds to exist. So far as any
political subdivision of the state is concerned, there can be
no vested right, although a case might arise where private
interests might intervene and be so affected as to give rise to
a vested interest. The provisions of Amended Senate Bill No.
239, so far as they relate to the future distribution of the
proceeds of the taxes, are not retroactive, but prospective, in
character, and it is not violative of section 28 of article II of
the Constitution; nor can it be said that the city had any
contractual obligation with the state which was impaired by
the passage of Amended Senate Bill No. 239.
(Emphasis added.) Id. at 92-93.
{¶ 33} ODE seizes upon the highlighted language in the Zangerle opinion in
arguing that the Districts' right to School Foundation funding at the level dictated by
Formula ADM never "vested," because ODE chose to distribute School Foundation funds
pursuant to a different formula in FY 2005 through FY 2007. The Districts argue that
their right to School Foundation funding at the level dictated by the General Assembly
vested when ODE paid some of the Districts' FY 2005 School Foundation funding
pursuant to the Formula ADM, before making the decision to recoup the alleged
overpayment.
Nos. 14AP-93, 14AP-94 and 14AP-95 14
{¶ 34} ODE acknowledges that it initially paid a portion of the Districts' FY 2005
School Foundation funding pursuant to the Formula ADM as determined by the October
Count. There is no question that ODE subsequently determined that there had been an
overpayment to the Districts and that ODE recouped those funds out of future payments
beginning in FY 2006. The Cincinnati case holds that such recoupment is unlawful.
{¶ 35} The Districts argue that under the rule of law in Zangerle, their right to the
alleged overpayment of School Foundation funds vested when the funds were initially
paid. The Districts argue that the 2009 Budget Bill, which absolves the State of Ohio from
any liability to the Districts for the sums unlawfully recouped by ODE, effectively
abolished a vested right. According to the Districts, it follows that the 2009 legislation
violates the retroactivity clause of the Ohio Constitution. We disagree.
{¶ 36} The problem with the Districts' argument is that a statutory right cannot be
characterized as vested "unless it constitutes more than a 'mere expectation or interest
based upon an anticipated continuance of existing laws.' " Roberts v. Treasurer, 147 Ohio
App.3d 403, 411 (2001), quoting In re Emery, 59 Ohio App.2d 7, 11 (1st Dist.1978).
Indeed, the Supreme Court of Ohio has stated "that there is no vested right in an existing
statute that will preclude the General Assembly from changing it." State ex rel. Kenton
City School Dist. v. State Bd. of Edn., 174 Ohio St. 257 (1963). In our view, the fact that
ODE had the statutory right to control all distributions of School Foundation payments to
the Districts in a given fiscal year, including the authority to recoup overpayments out of
future distributions, requires us to conclude that the Districts' statutory right to School
Foundation funds is conditional or contingent rather than absolute or vested.
{¶ 37} Moreover, even if we were to hold that the 2009 Budget Bill is
unconstitutionally retroactive as it pertains to the funds that were paid to the Districts but
unlawfully recouped, the Districts also seek to recover School Foundation funds that
remained unpaid by ODE in FY 2005 through FY 2007. As noted above, the Districts
contend that the recalculation of their ADM in FY 2005 resulted in an additional loss of
School Foundation funds in the remainder of FY 2005 and over the next two fiscal years.
{¶ 38} In short, we cannot agree with the Districts' contention that the 2009
Budget Bill is unconstitutionally retroactive because it impairs or takes away a vested
right.
b. Substantive Right analysis
Nos. 14AP-93, 14AP-94 and 14AP-95 15
{¶ 39} Even though we agree with ODE that the Districts' right to the disputed
School Foundation funds was not a vested right, a statute may still be "substantive" in
nature, for purposes of a constitutional retroactivity, if it affects an accrued substantive
right. Cook at ¶ 35. Indeed, the Districts have cited to the decision of the Supreme Court of
Ohio in Kenton, in support of their contention that the right to School Foundation
funding at the statutory level is a substantive right that accrued under existing law. The
Districts argue that the 2009 Budget Bill is unconstitutionally retroactive because it
impairs an accrued substantive right. We agree.
{¶ 40} The Kenton case addressed a public school district's rights under the version
of R.C. 3317.02, in effect in 1960, which guaranteed a school district certain minimum
payments for three years in the event of a consolidation with another school district. In
1960, the Kenton City School District qualified for such guarantees by virtue of its
consolidation with another district. However, in 1961, the General Assembly amended the
statute in a manner that disqualified Kenton from receiving future guarantees.
{¶ 41} In Kenton, the court reiterated the general rule: "[t]hat there is no vested
right in an existing statute which will preclude the General Assembly from changing it."
Id. at 260. However, having made that statement, the court went on to determine the true
nature of the district's "right" to guaranteed funding under the 1960 law. In so doing, the
court stated:
To be guaranteed a minimum amount of money would be a
substantive right, whether the guarantee is to a political
subdivision or to an individual.
Here we have a statute which guaranteed a school district
that in the event of a consolidation with another school
district there would be a certain minimum payment to the
consolidated district for a period of three years. Inasmuch as
the statute was in force at the time of the consolidation in the
present case, a right accrued to the consolidated district
which, if the statute had not been amended, could have
beyond question been enforced by a writ of mandamus.
There was nothing discretionary about such provision.
Id. at 261-62.
{¶ 42} Applying the logic of the Kenton case herein, we find that the Districts had
a substantive right to School Foundation funds that accrued under the statutory law in
Nos. 14AP-93, 14AP-94 and 14AP-95 16
place for FY 2005 through FY 2007. The Districts seek to enforce their accrued statutory
right in this litigation. The Cincinnati decision holds that ODE does not have discretion to
deviate from the Formula ADM in determining public school funding and that the right of
a public school district to such funding is enforceable by a writ of mandamus.
Accordingly, to the extent that the 2009 Budget Bill nullifies the Districts' statutory right
to School Foundation funding in FY 2005 through FY 2007, the Budget Bill affects a
substantive right belonging to the Districts. As such, the relevant portion of the 2009
Budget Bill is unconstitutionally retroactive in violation of the Ohio Constitution, Article
II, Section 28.
{¶ 43} ODE attempts to distinguish Kenton on the basis that it addressed the
amendment of a statute whereas the General Assembly, in this case, enacted separate
legislation without amending or repealing prior law. In terms of the retroactivity clause of
the Ohio Constitution, this is a distinction without a difference.
{¶ 44} In the context of statutory rights, the retroactivity analysis under R.C.
1.58(A)(2) mirrors the constitutional retroactivity analysis under Ohio Constitution,
Article II, Section 28. Zempter v. Ohio State Grange Mut. Ins. Co., 4th Dist. No. 95-CA-
2326 (Sept. 6, 1995). Indeed, R.C. 1.58(A)(2) prohibits the General Assembly from
amending a statute in such a way as to affect substantive rights accrued under the prior
version of the law. Id.7 Although R.C. 1.58(A)(2) does not apply in this case because the
2009 Budget Bill did not expressly amend the relevant school funding laws, the 2009
Budget Bill is unconstitutionally retroactive, nonetheless, because it affects a substantive
right of the Districts that accrued under statutory law. As noted above, the Kenton case is
instructive because it establishes that a public school district's right to School Foundation
funding under existing law is a substantive right. Because the statutory right is
substantive in nature, the retroactivity clause in the Ohio Constitution, Article II, Section
28 prohibits the General Assembly from enacting a law that reaches back in time to take
away that right.
7R.C 1.58 provides in relevant part as follows:
"(A) The reenactment, amendment, or repeal of a statute does not, except as provided in division (B) of this
section: (1) Affect the prior operation of the statute or any prior action taken thereunder; (2) Affect any
validation, cure, right, privilege, obligation, or liability previously acquired, accrued, accorded, or incurred
thereunder * * *"
Nos. 14AP-93, 14AP-94 and 14AP-95 17
{¶ 45} ODE next contends that the Retroactivity Clause of the Ohio Constitution
does not apply in this case because the Districts are political subdivisions of this State and,
consequently, the General Assembly is empowered to retroactively waive or impair their
rights without violating the Ohio Consitution, Article II, Section 28. In making this
argument, ODE relies, in large part, on a decision of the Supreme Court of Missouri in
Savannah R–III School Dist. v. Public School Retirement Sys. of Missouri, 950 S.W.2d
854 (Mo.1997).
{¶ 46} In Savannah R–III, a group of retired school teachers sought to block
application of an amendment to the statute governing contributions to state teachers'
retirement system. Id. at 857. The amended law nullified a prior decision in a class action
brought by school districts against the retirement system that required the retirement
system to refund certain past contributions. Id. In ruling that the amendment was
constitutional, the Supreme Court of Missouri reasoned that Missouri's constitutional ban
on retroactive laws was intended to protect citizens not political subdivisions, and that the
Missouri legislature may pass laws waiving the rights of the state or its political
subdivisions. Id. at 858, citing Missouri Constitution, Article I, Section 13. Therein, the
court stated:
Because the retrospective law prohibition was intended to
protect citizens and not the state, the legislature may
constitutionally pass retrospective laws that waive the rights
of the state. All of the representative plaintiffs are school
districts. "School districts are bodies corporate,
instrumentalities of the state established by statute to
facilitate effectual discharge of the General Assembly's
constitutional mandate to establish and maintain free public
schools * * *" As "creatures of the legislature," the rights and
responsibilities of school districts are created and governed
by the legislature. Id. Hence, the legislature may waive or
impair the vested rights of school districts without violating
the retrospective law prohibition. The analysis of this
constitutional claim would be different had any one of the
named parties been a teacher.
(Citations omitted.)(Emphasis added.)
{¶ 47} ODE argues that we should adopt the reasoning of the Supreme Court of
Missouri in Savannah R–III in ruling on the retroactivity issue in this case. However, the
pertinent case law in Ohio, including Zangerle and Outcalt, holds that the retroactivity
Nos. 14AP-93, 14AP-94 and 14AP-95 18
clause prohibits the General Assembly from enacting laws that retroactively impair vested
rights of political subdivisions. See Hamilton Cty. Commrs. v. Rosche, 50 Ohio St. 103
(1893); State ex rel. Crotty v. Zangerle, Aud., 133 Ohio St. 532 (1938). Thus, Ohio law is
directly at odds with Missouri law on this issue. Similarly, as the Supreme Court stated in
Kenton, a public school district's guaranteed statutory right to School Foundation funding
is an accrued substantive right "whether the guarantee is to political subdivision or an
individual." Id. at 262. Thus, to the extent that Savannah R–III exemplifies Missouri's
approach to the issue of constitutional retroactivity, Ohio has not adopted that approach
in reviewing similar issues under Ohio Constitution, Article II, Section 28.8
{¶ 48} Finally, we disagree with ODE's contention that a victory by the Districts in
this litigation comes at the expense of Ohio Constitution, Article VI, Section 2, which
provides that "the General Assembly shall make such provisions * * * [to] secure a
thorough and efficient system of common schools." Contrary to ODE's assertion, the
question whether it is more thorough and efficient to use the CSADM in determining
public school funding is not a question raised in this litigation.9 Moreover, the Cincinnati
decision represents Ohio law on the statutory school funding issue in this case.
{¶ 49} In the Cincinnati decision, the first district held that ODE's conduct in
using the CSADM to adjust Formula ADM violated the only methodology authorized by
the General Assembly for determining School Foundation funding for public school
districts in Ohio. Id. at ¶ 23-29. The clear purpose of the 2009 Budget Bill is to
legislatively nullify the Districts cause of action against the State for reimbursement of
School Foundation funds either wrongfully recouped or withheld by ODE in FY 2005
through FY 2007. Because the legislation purports to take away the Districts accrued
substantive right to School Foundation payments in FY 2005 through FY 2007, the
relevant provision in the 2009 Budget Bill violates Ohio Constitution, Article II, Section
28.
8 We note that at least one appellate district in Missouri has declined to extend Savannah R–III to a public
school district's claim against the State Legal Expense Fund. P.L.S. ex rel. Shelton v. Koster, 360 S.W.3d
82005, 813, (Mo.App.2011) "[A] school district is not an 'agency of the state' in the same way that we
understand a department or a division of the machinery of state government to be." Id. at 819-20.
9As the first district noted in the Cincinnati decision, when the General Assembly amended the relevant
sections of the Revised Code in 2007, it chose "not to amend the definition of Formula ADM or to alter the
two different reporting and payment systems for Formula ADM and CSADM." Id. at ¶ 28.
Nos. 14AP-93, 14AP-94 and 14AP-95 19
{¶ 50} Based upon the foregoing, we hold that the trial court did not err when it
denied ODE's motion for judgment on the pleadings, and we overrule ODE's sole
assignment of error.
E. Cross-appeal
{¶ 51} The trial court granted judgment on the pleadings in favor of ODE as to the
claims asserted by the Individual Plaintiffs in this case based upon its determination that
the Individual Plaintiffs did not have standing to assert the claims alleged in the
complaint. We agree with the trial court.
{¶ 52} In League of United Latin Am. Citizens v. Kasich, 10th Dist. No. 10AP-639,
2012-Ohio-947, we set forth the general standing rules as follows:
Under the doctrine of standing, a litigant must have a
personal stake in the matter he or she wishes to litigate.
Tiemann at 325. Standing requires a litigant to have " 'such a
personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation
of issues upon which the court so largely depends for the
illumination of difficult * * * questions.' " Id. at 325, quoting
Baker v. Carr, 369 U.S. 186, 204 (1962). In order to have
standing, a plaintiff must demonstrate some injury caused by
the defendant that has a remedy in law or equity. Id. The
injury is not required to be large or economic, but it must be
palpable. Id. Furthermore, the injury cannot be merely
speculative, and it must also be an injury to the plaintiff
himself or to a class. Id. An injury that is borne by the
population in general, and which does not affect the
plaintiff in particular, is not sufficient to confer standing.
Id., citing Allen v. Wright, 468 U.S. 737 (1984). See also
State ex rel. Masterson v. Ohio State Racing Comm., 162
Ohio St. 366, 368 (1954) ("private citizens may not restrain
official acts when they fail to allege and prove damage to
themselves different in character from that sustained by the
public generally."). (Citation omitted.)
(Emphasis added.) Id. at ¶ 21.10
{¶ 53} At the outset, we note that the primary argument made by Individual
Plaintiffs in this case is that they have standing to bring this action on their own behalf,
rather than as representatives of the Districts. In this regard, we note that "a litigant must
10Tiemann v. Univ. of Cincinnati, 127 Ohio App.3d 312, 325 (10th Dist.1998) (abrogated in part on other
grounds).
Nos. 14AP-93, 14AP-94 and 14AP-95 20
assert its own rights instead of the claims of third parties, and third-party standing is not
favored." Settlers Bank v. Burton, 4th Dist. No. 12CA36, 2014-Ohio-335, citing State v.
Sturbois, 4th Dist. No. 10CA48, 2011-Ohio-2728, ¶ 33. "Third-party standing may,
however, be granted when a claimant (1) suffers its own injury in fact, (2) possesses a
sufficiently close relationship with the person who possesses the right, and (3) shows
some hindrance to seeking relief that stands in the way of the person possessing the
right." Id.
{¶ 54} Even if we were to find that the Individual Plaintiffs have alleged facts which
permit an inference of an injury in fact and, even though the allegations of the petition
establish a close relationship between the Individual Plaintiffs and the Districts in which
they live and work, we have previously determined that the 2009 Budget Bill does not
hinder the Districts' right to seek relief. Consequently, in order for the Individual
Plaintiffs to have standing in this case, they must allege sufficient facts which, if taken as
true, establish a personal stake in the outcome of this litigation.
{¶ 55} In our view, the facts alleged in the petition fail to establish damage to the
Individual Plaintiffs that is different in character from that sustained by others living in
the school district. In each of the three cases consolidated herein, the Individual Plaintiffs
allege that: they are Ohio taxpayers; that they live in one of the districts, that they own
real property within that district; and that they are parents of children who attend public
schools within that district. The Individual Plaintiffs in the Dayton City School District
additionally allege that the district employs them as public school teachers. Finally,
Christopher Sanders, one of the Individual Plaintiffs in the Cleveland City School District,
alleges that he is a "certified physical education teacher who is currently employed by
Cleveland as an instructional aid and not as a physical education teacher due to reduction
in force and school closings in the district." (R. 53.)
{¶ 56} In Brown v. Columbus City School Dist. Bd. of Edn., 10th Dist. No. 08AP-
1067, 2009-Ohio-3230, taxpayers and residents of the City brought suit against ODE
seeking a declaration that the current per-pupil school funding system was
unconstitutional. In affirming the trial court's determination that the taxpayers did not
have standing to assert claims against ODE we stated:
As for private standing, appellants clearly have no private
standing in this matter. Appellants have no direct personal
Nos. 14AP-93, 14AP-94 and 14AP-95 21
stake in the outcome of the controversy. Appellants have not
suffered and are not threatened with any direct and concrete
injury in a manner or degree different from that suffered by
the public in general. Appellants alleged only that they were
taxpayers in the city of Columbus. Appellants do not allege
they are students in the Columbus City Schools system or are
parents of students in the school system. If the merits of
their action were to be unsuccessful, they could show no
personal harm or damage that would result as separate from
any harm suffered by the general taxpaying public.
Id. at ¶ 13.
{¶ 57} Under the Brown decision, it is clear that the Individual Plaintiffs do not
have standing based solely upon their status as taxpayers who own real property within
the Districts. The Individual Plaintiffs argue that the Brown decision stands for the
proposition that taxpayers in a public school district have standing to sue ODE if they
allege that they are parents of public school students in the District. While we agree that a
taxpayer who has a child attending school in the District may have a greater interest in
public school funding issues than the general public, this fact alone does not tip the scales
in favor of the Individual Plaintiffs.
{¶ 58} While the Individual Plaintiffs in this case have alleged that there have been
budget cuts and school closings in their respective Districts, as the trial court noted, none
of the Individual Plaintiffs have alleged that their children have been denied specific
educational opportunities due to ODE's failure to fund their district at the statutory rate
or that they lost their jobs as a result of ODE's conduct as alleged in the complaint.
Although Individual Plaintiff Christopher Sanders claims that he is "not as a physical
education teacher due to reduction in force and school closings in the district," Sanders
does not allege that he lost a position as a physical education teacher due to a reduction in
force and school closings in the district, nor does he state that the district offered him
such a position but did not hire him due to a reduction in force and school closings in the
district.
{¶ 59} Without additional operative facts which would support a reasonable
inference that ODE's conduct as alleged in the complaint caused or threatened the
Individual Plaintiff's with a specific harm different than that suffered by the public in
general, the allegations are nothing more than unsupported legal conclusions. As noted
Nos. 14AP-93, 14AP-94 and 14AP-95 22
above, an injury in fact "cannot be merely speculative." League of United Latin Am.
Citizens at ¶ 21, citing Allen v. Wright, 468 U.S. 737 (1984).
{¶ 60} Unsupported legal conclusions are not admitted when determining a
motion for judgment on the pleadings. See JP Morgan Chase Bank v. Belden Oak
Furniture Outlet, Inc., 5th Dist. No. 2010 CA 00049, 2010-Ohio-4444; Amrhein v. Telb,
6th Dist. No. L-06-1170, 2006-Ohio-5107. Accordingly, we hold that the trial court did
not err when it granted judgment on the pleadings in favor of ODE as to the claims
asserted by the Individual Plaintiffs. Accordingly, we overrule the sole assignment of error
set forth in the cross-appeal.
E. Conclusion
{¶ 61} Having overruled appellants' sole assignment of error and having overruled
cross-appellants' sole assignment of error, we affirm the judgment of the Franklin County
Court of Common Pleas.
Judgment affirmed.
TYACK and BROWN, JJ., concur.
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