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Grossmont Union High School Dist. v. California Dep't of Education

December 29, 2008

GROSSMONT UNION HIGH SCHOOL DISTRICT, PLAINTIFF AND APPELLANT,
v.
CALIFORNIA DEPARTMENT OF EDUCATION, DEFENDANT AND RESPONDENT.



APPEAL from a judgment of the Superior Court of Sacramento County, Shelleyanne W.L. Chang, Judge. Affirmed. (Sup.Ct.No. 06AS00422).

The opinion of the court was delivered by: Morrison, J.

CERTIFIED FOR PUBLICATION

The County of San Diego (County) and other counties provided mental health services to special education students. When the Legislature slashed the funding for such services to $1,000 statewide, the County sought and obtained a superior court judgment holding that because this was an unfunded state mandate, the County did not have to provide such services. In response, the California Department of Education (Department) required local school districts to absorb the costs of these services.

Grossmont Union High School District (Grossmont) sued the Department, primarily seeking a declaration that it should not have to pay these costs. The Department demurred, asserting Grossmont failed to exhaust available administrative remedies, specifically, that it first had to submit the dispute to the California Commission on State Mandates (Commission). The trial court sustained the demurrer without leave to amend.

Grossmont asserts it would be futile to exhaust administrative remedies because the Commission's authority extends over only State programs or levels of service, but the costs Grossmont complains of result from federal mandates. Grossmont also asserts that its contractual and equal protection theories do not implicate the Commission's authority.

Although a party may be excused from complying with an administrative remedy when it would be futile to do so, that exception is narrow and applies only when the outcome of the administrative proceeding is certain. In this case, Grossmont's complaint alleges facts suggesting the mandate may be a "mixed" mandate for which partial reimbursement would be available: The Commission is the body entrusted to make such determination in the first instance.

Further, if, as Grossmont states, there were no possibility the Commission would rule in its favor, that would mean Grossmont pleaded itself out of court entirely, because the judiciary lacks any general warrant to compel appropriations or to declare a mandate unenforceable, except after the Commission has found an unfunded mandate.

We also reject Grossmont's subsidiary theories. We conclude Grossmont is not an intended beneficiary of the federal-state special education funding laws. We also conclude the requirement that Grossmont provide services to special education students does not deprive regular students of equal protection, although regular education programs will be cut.

Accordingly, we agree with the trial court that Grossmont's complaint fails to state a cause of action. Because Grossmont does not suggest how the complaint might be amended, leave to amend was properly denied. (See Cantu v. Resolution Trust Corp. (1992) 4 Cal.App.4th 857, 890.) We shall affirm.

I. BACKGROUND

We first describe: (A) unfunded state mandates and the Commission's authority; (B) special education; (C) the standard of review over demurrers; (D) Grossmont's complaint; and (E) the demurrer and ruling leading to Grossmont's appeal to this court.

A. Unfunded State Mandates

The "Property Tax Relief Act of 1972," or "SB 90" (see Stats. 1972, ch. 1406 & Stats. 1973, ch. 358), created a mechanism to reimburse local governments for some costs of implementing new programs or increased levels of service.

Then, the so-called "tax revolt" changed the California Constitution: Proposition 13 limited the ability of the State of California (State) to collect property taxes; Proposition 4 (the "Spirit of 13") in part limited spending and in part enshrined new reimbursement provisions in the California Constitution. (See Department of Finance v. Commission on State Mandates (2003) 30 Cal.4th 727, 735; City of Sacramento v. State of California (1990) 50 Cal.3d 51, 57-59; Hayes v. Commission on State Mandates (1992) 11 Cal.App.4th 1564, 1577-1581 (Hayes).)

Section 6 of article XIII B of the California Constitution (hereafter, section 6) provides in part that, "[w]henever the Legislature or any state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse such local government for the costs of such program or increased level of service[.]" The purpose of section 6 is to prevent the State from shifting costs of general government functions to local agencies in the wake of the tax revolt. (See County of San Diego v. State of California (1997) 15 Cal.4th 68, 81 (County of San Diego).)

A state requirement that an entity redirect resources is, however, not a reimbursable mandate, only a new cost is reimbursable. (See County of Los Angeles v. Commission on State Mandates (2003) 110 Cal.App.4th 1176, 1194-1195; County of Sonoma v. Commission on State Mandates (2000) 84 Cal.App.4th 1264, 1283-1285 (Sonoma).) And shifting costs from one local entity to another is not a reimbursable mandate. (City of El Monte v. Commission on State Mandates (2000) 83 Cal.App.4th 266, 279-280 (El Monte); City of San Jose v. State of California (1996) 45 Cal.App.4th 1802, 1815 (San Jose).)

But even some "new" costs are not reimbursable: "The commission shall not find costs mandated by the state . . . if, after a hearing, the commission finds any one of the following: [¶] . . . [¶] (c) The statute or executive order imposes a requirement that is mandated by a federal law or regulation and results in costs mandated by the federal government, unless the statute or executive order mandates costs that exceed the mandate in that federal law or regulation." (Gov. Code, § 17556, subd. (c); see also Gov. Code, § 17513 [federal mandate also includes a state mandate where lack of state mandate "would result in substantial monetary penalties or loss of funds"].)

The Legislature enacted procedures to determine if reimbursable state-mandated costs have been imposed: The local agency files a test claim. If the Commission approves it, it determines the amount to be reimbursed; if the Commission denies it, the agency can seek review by means of a petition for writ of administrative mandate. (County of San Diego, supra, 15 Cal.4th at pp. 81-82.) Generally, test claims must be filed within a year of the effective date of the mandate or of the incursion of costs. (Gov. Code, § 17551, subd. (c); see Cal. Code Regs., tit. 2, § 1183, subd. (c); but see Gov. Code, § 17573 [tolled while procedure for referring the issue to the Legislature is employed].) The failure to exhaust these administrative remedies bars a party from seeking court relief. (Central Delta Water Agency v. State Water Resources Control Bd. (1993) 17 Cal.App.4th 621, 639-640 (Central Delta).)

A Commission determination that a cost results from an unfunded state mandate does not necessarily mean the Legislature will pay for it. If the Legislature does not pay, with a favorable Commission determination in hand, an entity may seek a court order that it no longer has to obey the mandate: "If the Legislature refuses to appropriate money to satisfy a mandate found to be reimbursable by the commission, a claimant may bring an action for declaratory relief to enjoin enforcement of the mandate. ([Gov. Code], § 17612, subd. (b).)" (Lucia Mar Unified School Dist. v. Honig (1988) 44 Cal.3d 830, 833-834 (Lucia Mar); see 9 Witkin, Summary of Cal. Law (10th ed. 2005) Taxation, § 122, pp. 179-180; see also Gov. Code, § 17581 [entity may decline to obey such mandate when Legislature identifies it in a budget bill as a mandate for which reimbursement will not be made].)

In 2004 and 2007, other mandate mechanisms were adopted, but they do not apply here. (Cal. Const., art. XIII B, § 6, subds. (b) & (c), added by Prop. 1A, eff. Nov. 3, 2004 & Gov. Code, § 17572, et seq.; Stats. 2007, ch. 329, § 11.)

B. Special Education

The general contours of the special education laws are not disputed in this case and have been summarized as follows:

"Enacted by Congress in 1975 as the Education of the Handicapped Act, the Individuals With Disabilities Education Act ("IDEA") 20 U.S.C. § 1400, was renamed in 1990. Its primary objective is 'to assure that all children with disabilities have available to them . . . a free appropriate public education which emphasizes special education and related services designed to meet their unique needs. . . .' [Citation.] To accomplish this goal, the statute 'provides federal funds to assist state and local agencies in educating children with disabilities, but conditions such funding on compliance with certain goals and procedures.' [Citation.]

"Among the substantive procedures is the development of an individualized education program ('IEP') for each child with a disability. . . .

"California state law also has a regulatory scheme for special education with the express intent of assuring that all individuals with exceptional needs receive their rights to appropriate programs and services under the IDEA. Cal. Educ. Code § 56000. . . .

"The IDEA also contains numerous procedural safeguards. Parents or guardians of a disabled child must be notified of any proposed change in the identification, evaluation, or educational placement of the child. [Citation.] Parents must also be provided an opportunity to present a complaint 'with respect to any matter' relating to the proposed change. . . .

"Any party aggrieved by the findings and a final decision has the right to bring a civil action in state or federal court." (County of San Diego v. Cal. Special Educ. Hearing (9th Cir. 1996) 93 F.3d 1458, 1461-1462; see generally County of Los Angeles v. Smith (1999) 74 Cal.App.4th 500, 507-514 (Smith).)

C. Standard of Review

It is well settled that on demurrer "The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law." (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967 (Aubry).)

As we will describe shortly, Grossmont's complaint pleads the effect of state and federal laws, an unnamed Superior Court decision, and an implementing directive by the Department. However, as just stated, we do not assume the truth of pleaded "conclusions of law." (Aubry, supra, 2 Cal.4th at p. 967; Berry v. State of California (1992) 2 Cal.App.4th 688, 691.)

In determining whether a complaint states a cause of action an appellate court may consider matters judicially noticeable. (County of Lassen v. State of California (1992) 4 Cal.App.4th 1151, 1153 (County of Lassen).) This may include a court decision in another case referred to in the complaint and an official act of government (Evid. Code, § 452, subds. (c) & (d)), and such facts will negate contrary facts alleged in the complaint. (Colvig v. RKO General, Inc. (1965) 232 Cal.App.2d 56, 63-64 [court decision]; Pratt v. Coast Trucking, Inc. (1964) 228 Cal.App.2d 139, 143-144 [official acts of government].) We considered taking judicial notice of the Superior Court case and executive directive described in the complaint, but concluded it was not necessary to do so in this case.

D. The Complaint

On February 1, 2006, Grossmont, a public school district in the County, filed its complaint seeking declaratory and injunctive relief and specific performance. Although the Department is the only named defendant, the complaint refers to the claimed liability of the State itself. We do the same.

The complaint alleges that the State owed Grossmont the ever-increasing costs of educating special education students.

"Special Education" refers to "an individualized education" for each disabled student, but also includes related medical and other services. The State receives federal funds for such services. "[I]n order to qualify for federal funds, states must mandate their LEAs [local educational agencies] provide disabled students with an individualized free and appropriate education (FAPE) and related services. If a state qualifies, and accepts federal funds, ...


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