# Serrano v. Priest

> California Supreme Court · December 30, 1976 · 18 Cal. 3d 728

URL: https://www.frixlaw.com/law-library/cases/9538148

## Case

- **Full name:** JOHN SERRANO, JR., Et Al., Plaintiffs and Respondents, v. IVY BAKER PRIEST, as State Treasurer, Etc., Et Al., Defendants and Appellants; CALIFORNIA FEDERATION OF TEACHERS, AFL-CIO, Intervener and Respondent; BEVERLY HILLS UNIFIED SCHOOL DISTRICT Et Al., Interveners and Appellants
- **Court:** California Supreme Court
- **Decided:** December 30, 1976
- **Citations:** 18 Cal. 3d 728; 135 Cal. Rptr. 345; 557 P.2d 929
- **Precedential status:** Published
- **Opinion:** Dissent by Clark
- **Judges:** Sullivan, Richardson, Clark
- **Cited by:** 226 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/9538148

## How later opinions describe it (automated extraction)

- holding California violated the California Constitution in its manner of financing public schools
- holding that courts may not order a legislature "to enact or not to enact ... specific legislation"
- recognizing education as a “fundamental interest” under state equal protection analysis
- holding education under California equal protection clause is a fundamental right

## Opinion text

CLARK, J.
I dissent.
Our schools serve nearly 5 million students, spending over $5 billion. (1973-1974, Cal. Public Schs. Selected Stats., pp. 84-85, tables IV-1 B, IV-2 B.) 1 The educational system works amazingly well, considering its huge size, the complexity of its support, and the great diversity of geography, population and commerce within our state. The system provides a high and relatively uniform level of educational opportunity.
Approximately half our schools’ budget of $5 billion comes from local real property tax. Eliminating this resource would be unfair to our youth, jeopardizing the quality of their education. It is questionable whether raising an additional $2 Vi billion through other taxes is politically feasible. The answer lies with the legislative and executive branches of state government. While neither urging abolition of local property tax nor invalidating article XIII, section 21, of our Constitution providing for local property taxes and local control of the spending level, the majority’s requirement for absolute equality in the opportunity for school finances 2 will have this effect.
Our present system of school financing has three abilities or goals: (a) to provide a high level of equality in access to resources; 3 (b) to maintain *786 a high level of local control over the nature and amount of expenditure; and (c) to require a substantial level of fiscal responsibility. In a system where one branch of government finances in whole or in part another branch which is given control over the expenditure, the three goals are frequently in conflict. The majority’s goal of absolute equitable opportunity for school financing means sacrificing either local control or fiscal responsibility. Our legislative and executive branches, no doubt based on their experience with numerous federal-state financing programs, have established a system in which the level of equal opportunity cannot be significantly increased without major sacrifice of local fiscal or administrative control.
The present system of school finance assures that every school district shall have access to certain funds per student at a fair local tax rate regardless of district wealth. The combination of the guaranteed amount and categorical aid not challenged in this action is equal to roughly 90 percent of the school budget in California—the equalized portion—leaving only about 10 percent which is affected by our current source of concern—district wealth. The potential 10 percent disparity in tax support among districts is small when viewed in light of the total educational commitment, and is fully justified by the traditional governmental interest in preserving local decision-making with local fiscal responsibility. The majority’s attempt to abolish this small disparity, and *787 in offering no substitute, will create greater inequality, frustrate local decision-making, or eliminate local fiscal responsibility.
This litigation has travelled through our courts for many years, having been before this court more than five years ago. (Serrano v. Priest (1971) 5 Cal.3d 584 [ 96 Cal.Rptr. 601 , 487 P.2d 1241 , 41 A.L.R.3d 1187 ].) If the absolute equality demanded by the majority (see, ante, fn. 2) can be achieved without sacrificing local fiscal responsibility or local control and taxation required by article XIII, section 21, the majority have a duty to tell us how. They have not because they cannot.
Secondly, by repeatedly referring to “poor” districts and “rich” districts within the 10 percent disparity, and by holding there must be absolute equalization among districts, the majority assume the popular role of Robin Hood, appearing to take from the rich to give to the poor. However, the question whether a governmental entity’s assets should be adjusted is not the province of Robin Hood, of our state or federal Constitutions, or of this court. Rather, we must look beyond the governmental entity to the citizemy that government is designed to serve. When we do so, Robin Hood loses his disguise, and we find the Sheriff of Nottingham, taking from the poor to give to those more fortunate. Such reverse welfare is hardly compelled by the equal protection clause of any constitution.
Equality, Local Control, and Fiscal Responsibility
A. The Conflict in Goals
The conflict in goals can best be illustrated by looking at the outlines of various methods of school financing and their effect on the three goals.
(1) The simplest method would appear to be total state financing of the district with the district given full control of the level of expenditure. Absolute equality of financial resources is assured because each district need only ask for funds and the state will comply. Local control is assured by definition. However, fiscal responsibility fails and the result is bankruptcy. A local district, being able to transfer all but insignificant costs to the state, will be unrestricted in spending for the benefit of its citizens on any school-related activity. Conceivably, every school district will have a performing arts center rivaling Los Angeles’, resulting in insolvency.
*788 (2) Of course total state financing might avoid bankruptcy by establishing spending limits, by apportioning the entire school expenditure on a per pupil basis, or by a combination of the two. While such system might meet the goals of equality in funding resources and fiscal responsibility, it eliminates local control of spending levels. 4
(3) At the other end of the spectrum would be purely local financing. This system satisfies the requirement of fiscal responsibility—requiring the community that spends the money to tax itself for the full amount. However, the system would be less equitable than that reviewed in Serrano I. 5
(4) While the majority do not specify which system should be adopted, “power equalizing” appears to be their choice because it appears to be the one the majority measure against the existing system in order to arrive at invalidity. The system “ ‘has ás its essential ingredient the concept that school districts could choose to spend at different levels but for each level of expenditure chosen the tax effort would be the same for each school district choosing such level whether it be a high-wealth or a low-wealth district.’ ” (Ante, p. 747.)
The latter system is easily illustrated using hypothetical figures. If the tax rate is $2 it must produce the same amount of income per pupil in every district in the state, let us assume $800. If the tax rate in any district is $3, the district must receive the same amount per pupil, let us assume $1,200. These amounts must be received regardless of the wealth of the school district. Obviously, in poor districts, those with low assessed valuation per pupil, the tax will not produce sufficient revenue, and the state will have to provide the difference. In rich districts, the given tax rates will produce excessive revenue, with the state obtaining the excess.
To illustrate the impact of the system on the districts, let us look at the effect on three kinds of districts, one having assessed valuation producing *789 the exact amount of money set forth above, the second having half that assessed valuation (a poor district), and the third having double the assessed valuation (a rich district). In the first district fiscal responsibility is assured because school board members, considering expenditures, will have to tax their constituency for all expenditures. In the second or poor district an element of fiscal irresponsibility is introduced. For there, every dollar the school board members decide to spend, only a half dollar need be raised from the constituency, the state paying the other half. The poor district is encouraged to raise its tax rate to obtain state funding for the community, purchasing educational opportunity at the half-price sale. Because the higher the tax rate, the more state money and the greater bargain, the poor district is encouraged to adopt a high tax rate, funding programs the first district would not undertake. This, of course, is the basic spending incentive involved in partial federal support for state programs.
The third or rich district, on the other hand, will be penalized for any expenditure. For every dollar it seeks to spend for its students it must raise $2 by tax, sending one to Sacramento. Faced with punishing their constituency for each expenditure, the school board members will restrain expenditure by eliminating programs the first and second districts would undertake.
Viewed from the standpoint of dollar cost to the district, rather than tax rate, illustration number 4 presents a mirror image of illustration number 3, not equalizing but presenting an inverse relationship between district wealth and opportunity to fund schools. The rich district will become poor by its disincentive to spend, and the poor will become rich by its substantial incentive to spend. The fact that at any given tax rate, expenditure may be equal in each district does not eliminate either the troublesome disincentive or the incentive. Both render the opportunity for school funding unequal. The opportunity varies with the assessed valuation per student within districts—inversely it is true—but by varying with district wealth, it necessarily violates the majority’s basic requirement that no such variation be permitted. 6 (See, e.g., ante, p. 747.)
*790 (5) The four school support systems illustrated above are the basic systems, given that financing depends upon property tax. Although other systems have been suggested (see, ante, fns. 5, 6), they involve either great waste of resources or lack assurance they will result in significantly greater equality than the existing system. However, before looking at the existing system, a few observations are warranted. Only the first two systems (total statewide financing) can produce the majority’s requirement of absolute financial equality. The first, as we have seen, involves a substantial risk, if not a certainty, of insolvency. The second avoids bankruptcy but totally eliminates local control of expenditure levels. The third and fourth systems (local financing) necessarily involve a relationship between district wealth and the opportunity for educational funding, direct or inverse, in violation of the majority’s rule prohibiting any such wealth relationship.
Further, to the extent the third and fourth systems are used significantly, some wealth relationship in the opportunity for educational funding will occur. This results because local school board members—properly concerned with their constituency—will always look to the local effect of their action. In a democracy we can expect no less. Considering expenditures on the fundamental issue of whether to hire more teachers, reducing class size, or to hire fewer teachers, increasing class size, local school board members must ask what burdens in dollars and tax rates are being placed on district residents. In other words, unless state funding covers substantially all costs, the marginal expenditure is going to be based on local funding considerations. Local financing systems three and four, as we have seen, necessarily involve wealth relationships—direct or inverse—and to any extent that they are used, school funding will be based on wealth relationships.
The rational approach to the three conflicting goals of equality, fiscal responsibility and local control, requires rejecting the majority’s demandfor absolute equality and accepting a combined system to accommodate each. Minor departure from the ideal of absolute equality must be allowed in order to accommodate the two other compelling interests. The existing system does no more.
*791 I have delayed evaluating our existing school finance system because it must be viewed in the light of alternate systems. The present system is the legislative and executive response to this court’s first Serrano decision within the confines of our Constitution’s requirements of a mixed system of state and local financing and control. (Art. IX, § 6; art. XII, §§ 20, 21.) The system starts with system number 4, power equalizing, giving the poorer school districts an incentive to tax at the computational rate, $2.23 at the elementary level, and to receive the foundation level, $765 per student. An assessed valuation of $28,700 per student at a tax rate of $2.23 will produce $640 per student which when added to the $125 required to be paid for all students 7 will produce the $765 figure. A district having an assessed valuation below $28,700 will not receive the $765 per student from its local taxes and the $125 allowance, and the state will make up the balance. More than 85 percent of the students in this state are in districts having an assessed valuation of less than $28,700 per student. (Table III-8, p. 28.) These districts are called the equalization aid districts.
The principal criticism level against this part of the financial program is the limitation to $765, which means that for financing above that level the inequities of system 3 come into play. Why shouldn’t the program of state aid extend on indefinitely to levels above $765? The answer should be apparent by now. The equalization factor produces inverse wealth relationships because the poor districts are encouraged to spend to bring state money to the community. Thus, some limitation must be placed on this type of financing, and as will appear, the $765 level is eminently reasonable.
The power equalizing approach is not carried forward to those districts having assessed valuation of more than $28,700 per student. (Nearly 15 percent of the students are in those districts.) The Legislature determined not to apply the penalizing factor discussed above. This means that a district having, for example, double the $28,700 per student assessed valuation could provide $765 per student at a tax rate of little over half the computational rate of $2.23. About 2Vi percent of the elementary students are in school districts having double assessed valuation or more. (Table III-8, p. 28.)
*792 The principal criticism levelled against this factor of the system is that a few rich districts may have relatively low tax rates while still providing $765 per student. Although the factor gives rise to some inequality, the alternative of penalizing the rich district by giving part of its local funds to the state will impose new inequities in the opportunity for school funding—inequities much greater in practical effect than existing ones. 8
The real question is how great is the inequality—not in abstract legal terms—but under the system as it really works. Our concern should not be that there may exist a district possessing $1 million assessed valuation per student, but possessing only 38 students. To use the example of this district and a few more like it to invalidate the statewide system is unfair, if not folly. Rather, to measure the existing system we must attempt to weigh inequality against the total system.
At trial, prior to the Senate Bill No. 90. and Assembly Bill No. 1267 results becoming available, attempt was made to quantify the inequalities arising under the new law in terms of total school fund revenues to be produced. The prediction was that 76 percent of the revenues would arise under the foundation program, the equalized revenues, 15 percent of the revenues would be categorical funds assumed to be equalized in this proceeding, and only 9 percent unequalized. Subsequently, records of the Los Angeles unified school districts, comprising 28 percent of the state’s students, showed that only 10 percent of the budget constituted unequalized funds. In addition, the basic statewide figure showing an average current expenditure per elementary student of $985.48 (table IV-1A, p. 84) when compared with the $765 equalization aid figure, roughly indicates the correctness of the testimony. 9
By setting the equalization aid figure at such a high number, resulting in aid to more than 85 percent of our students, the present system insures a high degree of equality. Ninety percent of the funding is distributed on an equitable basis with only 10 percent distributed inequitably. Further, even as to the 10 percent, poor school districts may and do obtain part by merely raising their tax rate above $2.23.
*793 As we have seen, attempting to eliminate all inequality—the majority’s perfection requirement—will result in insolvency, loss of local control, or in new and greater inequity. Substantial reduction in the 10 percent revenue inequality similarly appears to involve substantial risks of insolvency, loss of local control, or the new inequity.
The majority attack the 90-10 ratio on three levels. First, they say it does not meet the requirement of absolute equality. (Ante, p. 755.) However, as pointed out above, the requirement should not be imposed. Second, the majority state that the 90-10 ratio, based on the 1973-1974 year, does not take into account inflation and declining future enrollment. (Ante, pp. 755-756.) However, the Legislature has provided for increases in foundational programs based in part on increases in assessed valuation, an indicator of inflation. (Ed. Code, § 17669.) The declining enrollment argument is that aid will decrease under the foundation program because there will be fewer students but that costs will decrease at a slower rate. But by looking at an historical cost relationship, the majority depart from their own equality test, introducing a new one. Third, the majority state that the ratio of 90 percent equalized to 10 percent unequalized is false, urging that foundation funds are unequalized. (Ante, p. 757.) But the basic purpose of equalization aid has been to offset inequities in the foundation. Although the punishment factor has been omitted, it would apply only to districts having less than 15 percent of all our students, and would significantly apply to a much smaller percentage. For this reason any adjustment in quantifying the inequalities would be minimal.
Rich and Poor
The impact of today’s decision will require transferring school funding resources from the rich districts to the poor districts—there being little effect on the many districts which are neither rich nor poor. In our urban-suburban complexes where most students live, a rich district does not mean a district of rich people but is ordinarily one of poor residents, while a poor district is ordinarily one of more fortunate people. The impact of today’s opinion appears to be a transfer of resources from poor people to those more fortunate.
The determination whether a district is rich or poor depends upon its assessed valuation per student. Thus, the presence of large tracts of property not occupied by children attending local public schools tends to *794 make a district rich. Absence of such property tends to make a district poor. Bearing this in mind, we can in general identify the so-called rich and poor districts.
Rich districts will include extensive commercial or industrial property or both, while the poorer ones will possess little of such property, either having zoned it out or having not attracted it. Rich districts will possess a low ratio of public school students to the total population—poor ones a high ratio.
With these considerations, we can further identify the rich and poor districts. Although exceptions exist, 10 rich districts comprise the older commercial-industrial areas. Because of the transition of relatively affluent families to the suburbs to raise families, the parents in rich districts tend to be poorer than the average. 11 The poor districts on the other hand are those having substantial new housing subdivisions but lacking commercial-industrial bases. They have a high ratio of students to total population. Parents who can afford to purchase new homes to raise their families are ordinarily more affluent than those residing in the older commercial-industrial areas.
This analysis of poor and rich districts is confirmed by numerous studies (see Zelinsky, Educational Equalization and Suburban Sprawl: Subsidizing The Suburbs Through School Finance Reform (1976) 71 Nw.U.L.Rev. 161, 162, 182-184, and authorities collected) and by my study of the poor and rich districts in the 1973-1974 school year. (Table IV-11, pp. 93-123.) Further, the trial record discloses a number of illustrations where the mature industrial-commercial community has a much higher assessed valuation per pupil than the nearby new suburban area (in some cases more than double). But the latter has a much higher per capita income than the former (again sometimes a two-to-one relationship).
The rich districts being primarily poor people districts, and the poor ones composed of people more fortunate economically, I cannot believe *795 that equal protection requires us to take from the poor to give to the more fortunate.
Conclusion
I conclude that we cannot have absolute equality of opportunity in school funding—and perhaps not in any other sector of governmental activity. The absolute equality demanded by today’s majority opinion is particularly unobtainable if fiscal responsibility and local control—both compelling interests—shall be preserved. While Califomiá’s present system for school financing may be less than perfect and although it departs from total equality, the minor departure is justified and the system should be upheld. Furthermore, invalidation takes from the poor and gives to those more fortunate—hardly the goal of equal protection.
I would reverse the judgment.
McComb, J., concurred.
Appellants’ petition for a rehearing was denied January 27, 1977. Clark, J., and Richardson, J., were of the opinion that the petition should be granted. On February 1, 1977, the judgment was modified to read as printed above.
The Selected Statistics is an official publication and all page and table references are to it unless otherwise indicated. The 1973-1974 school year is the first analyzed under Senate Bill No. 90 and Assembly Bill No. 1267.
The majority state in a variety of ways that we may not allow the availability of educational opportunity to vary as a function of the assessed valuation per pupil. (E.g., ante, pp. 755-756, 768.)
Equal educational opportunity is an important goal of government. However, the majority do not concern themselves directly with equal educational opportunity. Rather,
*786 they are concerned with whether there is equal opportunity for school funding, a test at least one step removed from the basic goal.
Because there are such great variations in our state, there is little reason to believe that district opportunity to equal funding will produce equal educational opportunity. For instance, there is great variation in heating costs between our Sierra schools and our San Diego schools. Likewise, air conditioning is no doubt a major expense in Imperial Valley but will be relatively minor in coastside areas. School site costs in the center of San Francisco will be many times greater than the cost of an equal amount of land in Paso Robles. And, of course, the cost of living varies greatly throughout the state, indicating a need for salary differentials. There is no reason to assume that the numerous cost differentials faced by school districts offset each other and that somehow equal funding will result in equal educational opportunity.
More importantly, there is the additional question whether funding is directly related to educational opportunity or whether a more direct relationship exists between opportunity and other matters such as the ability and interests of one’s classmates/ Even with equal opportunity to funding, there will be disparate raising of funds because voters have vastly different ideas concerning facilities and priorities.
At trial expert testimony revealed there is no substantial correlation between the rich district-poor district assessed valuation on the one hand, and the level of student performance in statewide achievement tests on the other. Measured on a scale from one to ten, the correlation varied between positive two and negative one.
Nevertheless, for purposes of this opinion, the majority’s thesis is assumed, that the equality which the courts should enforce is of funding rather than of educational opportunity.
For the above reasons, the first system of school support suggested by the trial court, full state funding (ante, p. 747), should be rejected. Moreover, total state funding would violate the requirements of partial local financing and control imposed by article XIII, section 21 of our Constitution.
Theoretically, we could achieve all three goals by redrawing the district lines to have substantial equality of assessed value per student in every district. However, because the number of students and assessed valuations change each year, the boundary lines would have to be redrawn every year or two. A single, successful wildcat oil well might require a statewide redistricting with the consequent reassignment of students and teachers. Each large new subdivision would also require redistricting. Obviously, the system would involve huge waste and the second system suggested by the trial court (ante, p. 747) must be rejected.
The trial court also suggests that commercial and industrial property be removed from local school tax rolls, taxing such property at the state level. (Ante, pp. 755-756, 768.) Apparently, the suggestion is based on the trial court’s finding that the principal cause of inequality in the assessed valuation per student is due to the presence in some districts of industrial and commercial property. However, this would still leave inequalities due to the great differences in residential property values and in the ratio of public school students to the total population of a district. There is no indication that the resulting *790 inequalities would be less than under the present system. Baldwin Park and Beverly Hills, the two school districts used in Serrano I to illustrate great inequality, are both primarily residential districts.
A system of vouchers was also suggested (id.) but that system is closely related to family wealth.
The $125 per student is not strictly speaking power equalizing. However, $120 of the $125 allotted on a per student basis is required by article IX, section 6, of our Constitution, the same Constitution imposing equal protection requirements involved here. To the extent this $120 produces inequality it is an exception to the equal protection requirement. It was improper for the trial court (ante, p. 744) to posit its determination of invalidity on this factor.
In addition, the existing system places spending limitations on the rich district. The trial court and the majority discuss at length whether the limitations are real or illusory. The spending limitation is a further equalizing factor if anything, and because I believe the basic factors do not deny equal protection, it is unnecessary to discuss the spending limitations and their exceptions.
When the approximately 15 percent of.categorical aid is eliminated from the average of $985.48, the average payment becomes $837.67 which should be compared with the $765 equalization aid figure to roughly measure the inequality of opportunity.
The exceptions are the mature, very wealthy residential areas of Beverly Hills and Hillsborough, and the second home vacation areas of Lake Tahoe and Palm Springs.
San Francisco Unified School District is one of the richest in the state. Besides its large amount of commercial and industrial property, the ratio of school children to general population is smaller than the statewide average, and the percentage of students attending private schools is higher than the statewide average. Per capita income is lower than the statewide average and the surrounding counties.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/9538148. Public record. Not legal advice.