Super. Ct. No. 37-2007-00082249-CU-WM-CTL APPEALS from a judgment of the Superior Court of San Diego County, Charles R. Hayes, Judge. Affirmed in part, and reversed in part.
The opinion of the court was delivered by: Haller, J.
CERTIFIED FOR PUBLICATION
When the Legislature enacts a law requiring a local school district to implement a new program or a higher level of service, the California Constitution requires the State of California (State) to pay the cost of the mandate and prohibits the State from transferring the cost to the school district. During the past decade, the Legislature has enacted numerous statutes requiring school districts to implement many new programs and services. However, because of budget difficulties, the State has not paid the full cost of these programs and services. Instead, it has sought to satisfy the constitutional requirement by paying a nominal amount for each mandate and deferring the remaining costs to an indefinite time.
In 2007, the California School Boards Association and several school districts (collectively School Districts) brought a lawsuit against the State and two of its officers, challenging this practice of deferring, rather than paying in full, the cost of the state-imposed mandates.*fn1 The School Districts sought several forms of relief, including: (1) declaratory relief that this practice was unconstitutional; (2) injunctive relief prohibiting the State from engaging in this practice in the future; and (3) an order requiring the State to reimburse the School Districts for more than $900 million in unpaid costs incurred in complying with prior mandates. The State countered that its practice was authorized under the California Constitution and implementing statutes, and the court was barred by the separation of powers doctrine and equitable principles from ordering the requested relief.
After reviewing the parties' documentary evidence and conducting a hearing, the trial court found the State's deferral practice violated the California Constitution and several applicable statutes. (See Cal. Const., art. XIII B, § 6; Gov. Code, §§ 17500 et seq.)*fn2 The court further found the School Districts were entitled to declaratory and injunctive relief and issued a writ commanding the State in the future to fully fund School District mandated programs (as found by the Commission on State Mandates) or to affirmatively excuse the School Districts from these mandates under section 17581.5. However, the court declined to order the State to reimburse the School Districts for costs previously incurred to comply with prior mandates, concluding this order would violate separation of powers principles. Both sets of parties appeal.
On the State's appeal, we conclude the court properly granted declaratory relief interpreting the applicable constitutional and statutory provisions to mean that the State's payment of a nominal amount for a mandate imposed on a local school district, with an intention to pay the remaining cost at an unspecified time, does not comply with article XIII B, section 6 and the implementing statutes. However, we determine the court erred in ordering injunctive relief because: (1) the ordered relief was inconsistent with the statutory scheme; (2) the writ required the performance of a discretionary, rather than a ministerial, duty; and (3) equitable relief was unwarranted because the School Districts have an adequate legal remedy for future violations under section 17612, subdivision (c).
With respect to the School Districts' cross-appeal, we determine the court did not abuse its discretion in refusing to order the State to pay the almost $1 billion in previously deferred costs or to permit the School Districts to conduct further discovery on the reimbursement issue.
SUMMARY OF LAW GOVERNING SCHOOL DISTRICT STATE MANDATES
Before 1978, local governments received a substantial portion of their financing through property taxes. In 1978, the voters adopted Proposition 13, adding article XIII A to the California Constitution, which imposed strict limits on the government's power to impose property taxes. The next year, the voters adopted Proposition 4, adding article XIII B, which imposed corresponding limits on governmental power to spend for public purposes. (See County of San Diego v. State of California (1997) 15 Cal.4th 68, 80-81; County of Los Angeles v. Commission on State Mandates (2007) 150 Cal.App.4th 898, 905.)
One key component of article XIII B's spending limitations is contained in section 6, which states: "Whenever 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 . . . ." (Art. XIII B, § 6, subd. (a).) The intent underlying this section was to "preclude the state from shifting financial responsibility for carrying out governmental functions to local agencies, which are 'ill equipped' to assume increased financial responsibilities because of the taxing and spending limitations that articles XIII A and XIII B impose. [Citations.]" (County of San Diego v. State of California, supra, 15 Cal.4th at p. 81.)
In 1984, the Legislature enacted a comprehensive statutory and administrative scheme for implementing article XIII B, section 6. (§ 17500 et seq.; Kinlaw v. State of California (1991) 54 Cal.3d 326, 331-333; County of San Diego v. State of California (2008) 164 Cal.App.4th 580, 588 (County of San Diego).) In so doing, the Legislature created the Commission on State Mandates (Commission) to resolve questions as to whether a statute imposes "state-mandated costs on a local agency within the meaning of section 6." (County of San Diego v. State of California, supra, 15 Cal.4th at p. 81; §§ 17525, 17533 et seq.) Under this regulatory scheme, when the Legislature enacts a statute imposing obligations on a local agency or a school district without providing additional funding, the local entity may file a test claim with the Commission, which, after a public hearing, must determine whether the statute requires a new program or increased level of service. (County of San Diego v. State of California, supra, 15 Cal.4th at p. 81; §§ 17551, 17555.) If the Commission determines the statute meets this criteria, the Commission must determine the cost of the mandated program or service and then notify specified legislative entities and executive officers of this decision. (§§ 17557, 17555.) A local agency or school district may challenge the Commission's findings by administrative mandate proceedings. (§ 17559; Code Civ. Proc., § 1094.5.)
Once this administrative/judicial process is exhausted and a statute is determined to impose state-mandated costs, the Legislature is required to appropriate funds to reimburse the local entity for these costs. (§§ 17561, subd. (a), 17612, subd. (a).) "If the Legislature refuses to appropriate money for [the] reimbursable mandate, the local agency [or school district] may file 'an action in declaratory relief to declare the mandate unenforceable and enjoin its enforcement' " under section 17612, subdivision (c). (County of San Diego v. State of California, supra, 15 Cal.4th at p. 82.)
Section 17612, subdivision (c) (formerly subdivision (b)) initially provided the exclusive method for a local entity to seek relief from an unfunded mandate. However, in 1990, the Legislature added section 17581, which provides an alternative to the judicial proceeding under section 17612. It provides that a local agency is relieved of the obligation to implement an unfunded mandate if the Legislature specifically identifies the mandate and declines to fund it in the annual Budget Act. (§ 17581, subd. (a); see Tri-County Special Educ. Local Plan Area v. County of Tuolumne (2004) 123 Cal.App.4th 563, 571-572 (Tri-County).) The Legislature later added section 17581.5, which creates similar (but more limited) relief for certain unfunded mandates imposed on school districts.
Section 17552 declares that these statutory provisions "provide the sole and exclusive procedure by which a local agency or school district may claim reimbursement for costs mandated by the state as required by Section 6 of Article XIIIB . . . ."
FACTUAL AND PROCEDURAL BACKGROUND
In November 2007, the School Districts filed a lawsuit in San Diego County Superior Court alleging the State has refused to comply with its obligation to provide reimbursement under article XIII B, section 6 for costs "mandated by the State" after the Commission has determined the existence and costs of the mandates. The State filed an answer denying these claims. The court set a briefing schedule and a hearing date in May 2008.
In their moving papers, the School Districts presented evidence showing that since 2002, the Legislature has engaged in a routine practice of appropriating $1,000 for each mandate imposed on the School Districts, rather than appropriating the full amount of the program costs. Specifically, for the 2007-2008 fiscal year, the Commission found 38 separate programs or services require reimbursement as unfunded mandates under article XIII B, section 6. In each case, the State did not appeal or the appeal was decided adversely to the State. The State then appropriated $1,000 for each of the 38 programs. These mandates included items such as: annual parent notification, pupil health screening, criminal background checks, AIDS prevention instruction, immunization records, teacher incentive program, and pupil promotion and retention. The School Districts presented evidence that as compared with this $38,000 appropriated funding, the total statewide cost estimates for the programs in the 2007-2008 fiscal year exceeded $160 million. Further, the $1,000 appropriation per program equates to about $1 for each California school district for the entire fiscal year.
The School Districts also presented evidence showing the State refers to this funding method as " 'deferred' " mandate payments or an "Education Credit Card," which the Legislative Analyst's Office states "means that [full] funding will be provided at some unspecified future time." Although the State acknowledges it does not provide full funding for state-mandated programs on an annual basis, the State maintains the deferral practice complied with Article XIII B, section 6, and thus the School Districts are "required to perform the mandated activities." A Legislative Analyst Office report states that the "credit card [method] represents a way the state has maintained [mandated] program[s] while cutting expenditures during slow economic times," and "represents amounts the state owes to K-14 education for costs that were not fully funded during the fiscal year in which services were provided."
The evidence showed the total amount of unpaid school mandate funding is estimated to reach $435 million (without interest) by the end of the 2007-2008 fiscal year. For example, the accumulated deficiency for the "Standardized Testing and Reporting" mandate was more than $200 million. The approximate amount of costs for incurred unreimbursed programs and services include: $30 million for the San Diego Unified School District; $14 million for the Clovis Unified School District, and $12 million for the San Jose Unified School District. The Governor's proposed budget for the 2008-2009 fiscal year continued the deferral practice, allocating only $1,000 for each of 38 mandates instead of the estimated $180 million required to fund these mandates.
The School Districts argued the deferred funding method violates article XIII B, section 6, and the implementing statutory scheme. They requested the court to issue a writ: (1) ordering the State to comply with its statutory obligations to identify each mandate in the annual budget bill "and to either appropriate funds to cover the costs of [the] mandate or to suspend the obligation to provide the mandated service or program"; (2) ordering the State to reimburse the School Districts for all costs previously incurred in providing state-mandated programs and services from existing state accounts; and (3) declaring certain mandate statutes unconstitutional to the extent they do not require the State to pay the full cost of the State's mandated programs and services or impose an undue restriction on the enforcement of the constitutional right to reimbursement.
In opposition, the State acknowledged the existence of its deferral practice, but argued the $1,000 funding was proper because neither the California Constitution nor the applicable statutes require the mandates be paid "immediately," particularly because the State has agreed to pay interest on any delayed payments. According to the State, "[school] districts that have performed under the mandates are guaranteed to receive payment for properly submitted claims." The State additionally argued that writ relief was not appropriate because the allegations do not show the State has failed to perform a ministerial duty and the School Districts have a statutory remedy in section 17612, subdivision (c). The State also argued the separation of powers doctrine prohibited the court from entering a judgment against the State for mandate amounts owed from previous years.
After briefing and the submission of evidence was completed, this court filed its decision in County of San Diego, supra, 164 Cal.App.4th 580, in which we reversed a superior court judgment requiring the State to appropriate funds over a 15-year period to pay San Diego and Orange Counties for amounts owed for their previously incurred mandate costs. (Id. at pp. 592, 593-597.) We held the court's order compelling the appropriation violated the separation of powers doctrine, and the order was unnecessary because the Legislature had enacted a specific statute pertaining to outstanding mandate debt owed to counties. (Id. at pp. 594, 595-596.) We additionally held the court did not abuse its discretion in refusing to order the State to pay this debt from existing fund accounts. (Id. at pp. 597-603.)
The trial court then permitted the parties to file supplemental briefs on the impact of County of San Diego on the issues before the court. After the additional briefing and a hearing, the trial court issued a written decision, finding the State's practice of deferring payment to the School Districts violated the language and intent of Article XIII B, section 6, and the statutory scheme enacted to implement the constitutional provision. The trial court found the evidence showed "virtually all" school districts had suffered "adverse effects" from the State's failure to timely provide mandate funding, and quoted from a 2006-2007 Governor's Budget Analysis showing the State estimated it owes the school districts " 'approximately $1.2 billion for unpaid mandate costs through 2005-2006.' "
The trial court additionally concluded the legal remedy contained in section 17612, subdivision (c) was not available to the School Districts to challenge the nominal funding practice because this statutory remedy applies only if the Legislature completely "deletes" the mandate funding from the Budget Act. The court found that by providing a nominal amount for each mandate, "the Legislature has effectively circumvented [School Districts] from exercising their statutory remedy" under section 17612, subdivision (c), and thus the School Districts "have no adequate available legal remedy but for this writ of mandate."
However, relying on County of San Diego, supra, 164 Cal.App.4th 580, the trial court refused to order the State to pay amounts owed to the School Districts for prior mandates. As detailed below, the court found it was barred by the separation of powers doctrine from issuing this order, and that the exception for ordering payment from existing funds was inapplicable. The court also denied the School Districts' request to conduct further discovery on this issue.
The court then issued a lengthy judgment and a writ of mandate. With respect to the ordered declaratory relief, Paragraph 7 of the judgment reads: "The Court finds that an actual controversy exists between petitioners and respondents as to the nature of the requirement imposed upon the State by article XIII B, section 6 of the California Constitution and the statutory scheme set forth at Gov. Code §§ 17500 et seq. that makes declaratory relief under Code of Civil Procedure § 1060 appropriate. The Court hereby finds and declares that the State's failure to include the full costs of all mandates as determined by the [Commission] in the Budget Act, and its practice of appropriating $1,000 and deferring the balance of the costs of those mandates, constitutes a failure to provide a subvention of funds for the mandates as required by article XIIIB, section 6 and violates the constitutional rights conferred by that provision and the specific procedures set forth at Gov. Code §§ 17500 et seq."
The writ of mandate states in relevant part: "[T]he [State and its officers] are commanded to: [¶] 1. Ensure that the costs of each mandate determined to be reimbursable by the Commission on State Mandates, including interest, shall be included in the Governor's proposed budget as required by Government Code sections 17500 et seq. and in particular sections 17561 and 17612 unless specifically identified and suspended pursuant to Government Code [section] 17581.5. [¶] 2. [The State and its officers] are enjoined from appropriating an amount for any mandate to [the School Districts] less than the amount determined to be reimbursable by the Commission on State Mandates. Said [parties] shall not defer any balance of any mandated program and shall include the full amount determined to be reimbursable in the Governor's proposed budget unless suspended pursuant to Government Code section 17581.5." (Italics added.) The court ordered the State to file a return in the superior court certifying its compliance with the writ.
Both sets of parties appeal.
I. Deferred Mandate Payment Is Not Equivalent to a Funded Mandate
Before addressing the parties' specific contentions raised on appeal and cross-appeal, it is necessary to resolve the fundamental legal dispute underlying each of the parties' contentions: whether the State complies with its constitutional and statutory obligations to fund a mandate imposed on the School Districts by appropriating a nominal ($1,000) amount for the mandated program, with the intention to pay the remainder with interest at an unspecified time. As explained below, we agree with the trial court's determination that a deferred appropriation is not a funded mandate within the meaning of article XIII B, section 6, and the implementing statutory provisions.
Article XIII B, section 6 provides: "Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government [defined to include school districts], the State shall provide a subvention of funds to reimburse that local government for the costs of the program or increased level of service [with exceptions not applicable here] . . . ." (Art. XIII B, § 6, subd. (a).) Subvention means " 'a grant ...