Metropolitan Government of Nashville and Davidson County v. Tennessee Department of Education - Concurring in Part & Dissenting in Part

05/18/2022

IN THE SUPREME COURT OF TENNESSEE

AT NASHVILLE

February 24, 2022 Session1

METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON

COUNTY ET AL. v. TENNESSEE DEPARTMENT OF EDUCATION ET AL.

Appeal by Permission from the Court of Appeals

Chancery Court for Davidson County

No. 20-0143-II Anne C. Martin, Chancellor

___________________________________

No. M2020-00683-SC-R11-CV

___________________________________

SHARON G. LEE, J., with whom HOLLY KIRBY, J., joins, concurring in part and dissenting

in part.

In this interlocutory appeal, the issues we address are whether the Plaintiffs,

Metropolitan Government of Nashville and Davidson County (“Metro”) and Shelby

County, have standing to challenge the constitutionality of the Tennessee Education

Savings Account Pilot Program,2 (“the ESA Act”), and, if so, whether the ESA Act violates

the Home Rule Amendment.

I agree with the Court that the Plaintiffs have standing to bring this action. The ESA

Act causes a distinct and palpable injury to the Plaintiffs’ sovereignty—their right to

control their local affairs—as guaranteed by the Home Rule Amendment. As we have held,

the Home Rule Amendment was adopted “to strengthen local self-government” and “to

fundamentally change” the relationship with the General Assembly. Civil Serv. Merit Bd.

of Knoxville v. Burson, 816 S.W.2d 725, 728 (Tenn. 1991); S. Constructors, Inc. v. Loudon

Cnty. Bd. of Educ., 58 S.W.3d 706, 714 (Tenn. 2001). Based on the Home Rule

Amendment, Tennessee’s counties and home-rule municipalities “derive their power from

sources other than the prerogative of the legislature,” and they enjoy constitutional

protection against local legislation enacted without their consent. S. Constructors, 58

1

This case was originally heard on June 3, 2021. In light of the untimely death of Justice Cornelia

A. Clark, this case was re-argued on February 24, 2022.

2

Tenn. Code Ann. §§ 49-6-2601 to -2612 (2020 & Supp. 2021).

S.W.3d at 714; Tenn. Const. art. XI, § 9, cl. 2. Thus, the Plaintiffs’ standing is based on the

ESA Act’s impairment of their ability to self-govern regarding school funding.

I disagree with the Court that the ESA Act does not implicate the Home Rule

Amendment. The Court’s decision ignores the acknowledged harm to the Plaintiffs’

sovereignty caused by the ESA Act.3 It is this established injury to the Plaintiffs’ ability to

self-govern that the Home Rule Amendment was intended to protect. While the ESA Act

facially refers only to a Local Education Agency (“LEA”),4 the Act substantially affects

the Plaintiffs’ ability to decide issues of local concern. That is enough under our previous

decisions to implicate the Home Rule Amendment. Without a provision of local approval

as required by the Amendment, the ESA Act is unconstitutional.

The Home Rule Amendment

The Home Rule Amendment was adopted by the 1953 Limited Constitutional

Convention and was ratified by Tennessee voters in November 1953. One area of concern

for convention delegates was legislation that removed governmental functions from certain

cities and counties without local approval.5 By approving the Home Rule Amendment, the

Convention sought to protect the rights of counties and municipalities by requiring that any

local bill affecting them had to provide for one of two forms of local approval.6

The Home Rule Amendment to the Tennessee Constitution prohibited direct

interference with local officeholders and required local approval for legislation affecting

particular counties and municipalities:

[A]ny act of the General Assembly private or local in form or effect

applicable to a particular county or municipality either in its governmental

or its proprietary capacity shall be void and of no effect unless the act by its

terms either requires the approval of a two-thirds vote of the local legislative

body of the municipality or county, or requires approval in an election by a

3

The Court limits its analysis to whether the ESA Act applies to the Plaintiffs. I also limit my

analysis to this point. In my view, the remaining requirements of the Home Rule Amendment are also met:

that the ESA Act is local in form or effect and is applicable to the Plaintiffs in their governmental or

proprietary capacities.

4

LEAs include any county or city school system or special school district. See Tenn. Code Ann.

§ 49-1-103 (2020).

5

Journal and Proceedings of the Limited Constitutional Convention of Tennessee 937 (1953).

6

Id. at 1113.

2

majority of those voting in said election in the municipality or county

affected.

Tenn. Const. art. XI, § 9, cl. 2 (emphasis added).

The ESA Act

Under the ESA Act, “eligible students” in Metro and Shelby County—beginning

with 5,000 students and increasing to 15,000 students in five years—may deposit their

individual portion of state and local education funding into personalized savings accounts.7

This transfer satisfies the state’s funding obligations for those students, and the state need

not provide any more funding for the LEA. See Tenn. Code Ann. § 49-6-2605(b)(1) (2020

& Supp. 2021). Students can withdraw from public schools and use their account funds as

vouchers to pay private school tuition and related expenses. See Tenn. Code Ann.

§§ 49-6-2602(9) (2020 & Supp. 2021); 49-6-3001(c)(3)(A)(iii) (2020 & Supp. 2021)

(defining “private school” as a subset of “nonpublic school[s]”). The Plaintiffs have to

appropriate the same level of per-pupil funding to an LEA as the year before, regardless of

any decrease in state funding.8

7

Under the ESA Act, “eligible students” are students zoned to attend any school in an LEA, other

than the Achievement School District, with at least ten schools

(a) Identified as priority schools in 2015, as defined by the state’s accountability

system pursuant to § 49-1-602;

(b) Among the bottom ten percent (10%) of schools, as identified by the department

in 2017 in accordance with § 49-1-602(b)(3); and

(c) Identified as priority schools in 2018, as defined by the state’s accountability

system pursuant to § 49-1-602[.]

Tenn. Code Ann. § 49-6-2602(3)(C)(i). “Priority schools” are designated by the Commissioner of the

Department of Education and include schools in the bottom five percent of schools in performance, schools

failing to graduate one-third or more of their students, and “schools with chronically low-performing

subgroups that have not improved after receiving additional targeted support.” Tenn. Code Ann.

§ 49-1-602(b)(2) (2020 & Supp. 2021). Students need not be zoned for one of the schools meeting all three

of the ESA Act’s criteria to be eligible for a voucher account. As long as a school district contains ten such

schools, all of its students may be eligible, no matter the school they are zoned to attend. Students zoned to

attend a school in the Achievement School District as of May 24, 2019, are also eligible for an account. Id.

§ 49-6-2602(3)(C)(ii). The Achievement School District is an LEA within the Tennessee Department of

Education, consisting of low-performing schools run by the District or certain charter management

organizations. Achievement Sch. Dist., About Us, http://achievementschooldistrict.org/index.php/aboutus/

(last visited May 3, 2022). All the schools in the Achievement School District are in Metro and Shelby

County.

8

See Tenn. Code Ann. §§ 49-3-314; 49-6-2605(b)(1) (requiring the county school districts to

“count[]” each student with a voucher account, “[f]or the purpose of funding calculations,” in their

3

As background, the ESA Act was first proposed to apply to Tennessee’s five largest

counties: Metro (Davidson County), Shelby, Knox, Hamilton and Madison.9 When the

ESA Act met with opposition in the House, the scope of the Act was limited to Metro and

Shelby, Hamilton, and Knox Counties by changing the definition of “eligible students.”10

The ESA Act narrowly passed the House by a vote of fifty to forty-eight after the Speaker

of the House promised that the Senate version of the Act would exclude Knox County. In

the Senate, the final version of the ESA Act applied only to Metro and Shelby County

based on a narrow definition of “eligible students” that included students zoned to attend

school in districts with ten or more priority schools in 2015 and 2018 and that were among

the bottom ten percent of schools in 2017.11 This definition anchored the criteria to

particular years, meaning that the ESA Act could only ever apply to Metro and Shelby

County without further legislation. The ESA Act passed by a margin of fifty-one to

forty-six votes in the House and nineteen to fourteen votes in the Senate. Applying only to

Metro and Shelby County, the ESA Act had no provision for approval by a two-thirds vote

of the local legislative body or a majority vote in a local election in either county.

The ESA Act’s Application to the Plaintiffs

The central issue here is whether the ESA Act is “applicable to” the Plaintiffs to

implicate the Home Rule Amendment. The phrase “applicable to” comes from the Home

Rule Amendment, which provides that the Amendment applies to a statute (here, the ESA

Act) that is “local in form or effect applicable to a particular county . . . in its governmental

. . . capacity.” Tenn. Const. art. XI, § 9, cl. 2 (emphasis added). The Court holds that the

phrase “applicable to” in the Home Rule Amendment means that a statute must “regulate”

or “govern” a county or municipality to implicate the Home Rule Amendment. According

to the Court, the ESA Act only regulates or governs the LEAs, not the Plaintiffs. Yet this

holding conflicts with our previous decisions interpreting the Home Rule Amendment and

with the Court’s own analysis on standing, which recognizes and depends to a large degree

on the fundamental intent, purpose, and effect of the Home Rule Amendment.

The fact that the ESA Act names the LEAs and not the Plaintiffs should not be the

end of our review. We cannot elevate form over substance and stop short with our analysis.

“enrollment figures”); see also Tenn. Code Ann. § 49-3-356(a) (requiring that “[e]very local government

shall appropriate funds sufficient to fund the local share” of the statewide funding levels).

9

H.B. 0939, Amend. No. 1, 111th Gen. Assemb., Reg. Sess. (Tenn. 2019) (H. Amend. 0188)

(withdrawn Apr. 23, 2019).

10

See id. amend. No. 2 (H. Amend. 0445) (as adopted by the House Apr. 23, 2019).

11

S.B. 0795, Amend. No. 5, 111th Gen. Assemb., Reg. Sess. (Tenn. 2019) (S. Amend. 0417) (as

adopted by the Senate Apr. 25, 2019).

4

This Court has long disfavored such a formalistic analytical approach to the Home Rule

Amendment. As we explained over forty years ago:

Since 19 November 1953, it has been firmly established that any and

all legislation “private and local in form [o]r effect” affecting Tennessee

counties or municipalities, in any capacity, is absolutely and utterly void

unless the Act requires approval of the appropriate governing body or of the

affected citizenry.

The test is not the outward, visible or facial indices, nor the

designation, description or nomenclature employed by the Legislature. Such

a criterion would emasculate the purpose of the amendment. The whole

purpose of the Home Rule Amendment was to vest control of local affairs in

local governments, or in the people, to the maximum permissible extent. The

sole constitutional test must be whether the legislative enactment,

irrespective of its form, is local in effect and application.

Farris v. Blanton, 528 S.W.2d 549, 551 (Tenn. 1975). Thus, we should see whether,

although not expressly named in the ESA Act, the Plaintiffs are in fact governed or

regulated by the Act. We do this by seeing if the Act substantially affects the Plaintiffs in

a material way.

In Chattanooga-Hamilton County Hospital Authority v. City of Chattanooga, 580

S.W.2d 322 (Tenn. 1979), we held that the Home Rule Amendment was implicated as to a

county when two private acts expressly named and so governed or regulated a newly

created hospital authority and, in addition, substantially affected the county.12 We also held

that the Home Rule Amendment was not implicated as to a city because the private acts

did not “substantially affect[]” the city. Id. at 328. The lesson from Chattanooga-Hamilton

County Hospital Authority is that a statute that is facially directed at another entity, but

which substantially affects a county, may be found to govern or regulate the county, be

“applicable to” it, and thus implicate the Home Rule Amendment.

Consistent with Chattanooga-Hamilton County Hospital Authority is an official

opinion from the Tennessee Attorney General finding “a strong argument” in favor of the

correctness of the Secretary of State’s determination that a private act was invalid because

it did not provide for local approval under the Home Rule Amendment. Tenn. Att’y Gen.

Op. No. 00-149, Memphis School District, Validity of 1970 Private Acts, Ch. 30 [sic], at 2

(2000). The private act in question amended the Memphis City School System’s charter

12

We held that the private acts were valid because they provided for local approval by the county’s

electorate and legislative body. See Chattanooga-Hamilton Cnty. Hosp. Auth., 580 S.W.2d at 328.

5

and, among other things, required candidates for the Memphis City School Board to file a

nominating petition and deposit $100 with the Shelby County Election Commission

secretary. If a candidate was elected or received ten percent of the votes cast, the Election

Commission secretary had to refund the deposit to the candidate; otherwise, the secretary

had to pay the deposit to the Comptroller of the City of Memphis to be paid to the School

Board and earmarked for education.13 The Attorney General concluded that the Private Act

affected Shelby County and the City of Memphis, as well as the Memphis City School

System. The Private Act did this by placing duties on officials of the County and the City

and by directing how they would use certain funds. Thus, the Attorney General concluded

the Home Rule Amendment required a referendum, which was not provided for in the

Private Act. See id. In short, the Private Act was facially directed at the Memphis City

School System but also affected Shelby County and the City of Memphis. It thus implicated

the Home Rule Amendment.

Like the private act amending the Memphis City School System’s charter, the ESA

Act is facially directed at the LEAs but regulates or governs the Plaintiffs by substantially

affecting them in a material way. The ESA Act does this by imposing certain duties and

obligations on officials in Metro and Shelby County regarding school funding. Although

an LEA prepares and submits to the county a proposed budget for school spending, the

LEA cannot assess, levy or collect taxes to fund the budget. Meanwhile, the county must

approve a budget for the LEA, set a tax rate, and levy and collect taxes to fund the budget.

See State ex rel. Weaver v. Ayers, 756 S.W.2d 217, 221–25 (Tenn. 1988). LEAs are funded

by both state and local governments, with the local portion varying according to local taxes

collected by the counties. See id.; Tenn. Code Ann. § 49-3-307(a)(10) (2020). Overall

funding levels are determined according to the state’s Basic Education Program (“BEP”).14

Only in Metro and Shelby County are state and local education funds deposited in eligible

students’ savings accounts to pay for private education. See Tenn. Code Ann. § 49-6-

2605(a). This transfer to the students’ savings accounts satisfies the state’s obligations

under the BEP, and the state need not provide any further funding to the LEA. See id. § 49-

6-2605(b)(1) (“The ESA funds for participating students must be subtracted from the state

BEP funds otherwise payable to the LEA.”). Yet the LEAs must continue to “count[]” each

student with a voucher account, “[f]or the purpose of funding calculations,” in their

“enrollment figures”—even though the student no longer attends public schools. Id. Metro

and Shelby County have to appropriate the same level of per-pupil funding as in the prior

13

Act of March 2, 1970, ch. 340, § 7, 1970 Tenn. Priv. Acts 1271, 1274, 1277. But cf. Tenn. Att’y

Gen. Op. No. 00-149, at 1 n.2 (noting the act never took effect based on the Secretary of State’s certification

that it was “rejected or disapproved or not concurred in by the proper authorities”).

14

“‘Basic Education Program’ or ‘BEP’ is the funding formula for the calculation of kindergarten

through grade twelve (K-12) education funding necessary for our schools to succeed[.]” Tenn. Code Ann.

§ 49-3-302(3) (2020).

6

year, regardless of any change in the state’s funding for the later year. See Tenn. Code Ann.

§ 49-3-314(c)(2) (2020) (“No LEA shall use state funds to supplant total local current

operating funds . . . .”); see also Tenn. Code Ann. § 49-3-356(a) (2020) (“Every local

government shall appropriate funds sufficient to fund the local share of the BEP.”). Only

in Metro and Shelby County may “eligible” students leave the public school system for

private schools while still being counted as public school students for funding purposes.

This means that Metro and Shelby County have to continue to fund the local share of the

BEP for ESA students attending private schools but not for non-ESA students who attend

private schools.

In short, the ESA Act harms the Plaintiffs in their sovereign capacity. It does this

by removing from the Plaintiffs the discretion to apply school funds to any public need

they may deem appropriate—including education—or to adjust their tax rates depending

on public school enrollment. The ESA Act, thus, substantially affects the Plaintiffs in a

material way and so governs or regulates them, thereby implicating the Home Rule

Amendment. That is why under the Home Rule Amendment, the Plaintiffs have a

constitutional right to locally approve any statute that affects them in their sovereign

capacity.

Our early Home Rule Amendment decision in Fountain City Sanitary District v.

Knox County Election Commission, 308 S.W.2d 482 (Tenn. 1957), does not undercut this

analysis or conclusion. Indeed, it has no real bearing. This decision suggests that certain

local governmental or quasi-governmental entities, such as sanitary districts, are not

themselves municipalities for purposes of the Home Rule Amendment. See also Perritt v.

Carter, 325 S.W.2d 233 (Tenn. 1959) (holding that special school districts are not

municipalities under the Home Rule Amendment). I agree. And if a statute only governs

or regulates these types of entities, the statute may not implicate the Home Rule

Amendment. But that misses the point. Fountain City Sanitary District did not consider

whether a statute that facially governs or regulates an entity but also substantially affects a

county or municipality in a material way also governs or regulates, and so is applicable to,

the county or municipality—thereby implicating the Home Rule Amendment. Here, the

ESA Act, while facially directed at the LEAs, substantially affects the Plaintiffs in a

material way. That the LEAs themselves are not counties or municipalities is irrelevant to

this analysis and conclusion.

Under the Home Rule Amendment, it is “firmly established that any and all

legislation ‘private and local in form [o]r effect’ affecting Tennessee counties or

municipalities, in any capacity, is absolutely and utterly void unless the Act requires

approval of the appropriate governing body or of the affected citizenry.” Farris, 528

S.W.2d at 551 (quoting Tenn. Const. art. XI, § 9, cl. 2). “The whole purpose of the Home

Rule Amendment was to vest control of local affairs in local governments, or in the people,

7

to the maximum permissible extent.” Id. To this end, “[t]he sole constitutional test must be

whether the legislative enactment, irrespective of its form, is local in effect and

application.” Id. To adopt the Court’s formalistic construction of the Home Rule

Amendment and the ESA Act is to ignore this purpose and to elevate form over substance.

Cf. id. (“The test is not the outward, visible or facial indices, nor the designation,

description or nomenclature employed by the Legislature. Such a criterion would

emasculate the purpose of the amendment.”)

For these reasons, I agree the Plaintiffs have standing because of the ESA Act’s

harm to their sovereignty. But I respectfully dissent from the Court’s decision on the

constitutionality of the Tennessee Education Savings Account Pilot Program under the

Home Rule Amendment. I would find the ESA Act unconstitutional.

___________________________

SHARON G. LEE, JUSTICE

8