Minnesota’s Miracle Case: Van Dusartz v. Hatfield

Glen Dawursk, Jr.

“The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools. The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state.” (State of Minnesota Constitution, Article 13, Sec. 1) The concept of establishing a secure financial base for supporting education has been an issue for years in the state of Minnesota and eventually led to the landmark case Van Dusartz versus Hatfield in 1971. This case helped change the concept of equality in financing education in the US. This report will explain the circumstances that led to this historic case, the similarity to a California case, the court’s ruling, and the impact it had on education finance in Minnesota.

Before 1956, Minnesota’s primary funding for the state’s public education system was through local property taxes. These taxes were inequitable as some homeowners paid a higher amount of actual taxes due to the value of their property and their districts reaped the benefits of plenty of income. Meanwhile, poorer areas of the state (such as depressed rural and inner-city areas) could not collect the similar amounts of tax revenue due to their communities’ decreased property values. To combat this inequality, the Minnesota legislature in 1957 created Foundation Aid whereby the state took on the major cost of educating elementary and secondary students. This shifted the “majority of school funding from local taxes to the state.” (Thorson, 2006, p.28)

Foundation Aid’s intent was to alleviate the significant tax inequity of local governments by subsidizing all elementary and secondary public schools through state taxes. The formula used covered the greater share of the cost of the per-pupil requirements. The percentage of state participation was as much as 84% at the time. (Thorson, 2006) Unfortunately the formula was never modified and the program lacked an inflation index. Predominately due to rising costs, the percentage of state participation lowered to just 43% by 1970. (Melcher, 2004) This meant that districts again had to tap local property taxes to cover the majority difference. Again, this meant a significant difference in revenues between the richer suburban communities and the depressed property values of the farm and urban areas. For example, “Anoka was forced to levy a tax of $581 on a $20,000 home to spend $536 per pupil, while Golden Valley had to levy only $369 on a similar home to spend $837 per pupil.” (Melcher, 2004, p. 4)

While the state did toy with concepts, modifications and new ideas for funding education, the process continued to be bogged down by the bureaucratic polices of state government and the desire of politicians not to raise state income taxes in order to subsidize the dramatic increase in local property taxes. (Melcher 2004; Thorson, 2002, 2000; Knowles, 2005) Their hesitation came to an abrupt stop when a group of parents and students from White Bear Lake sued the State of Minnesota. This lawsuit along with a similar law suit in California became the foundation for a legal change in how states fund education.

In late 1970, a group of parents and students representing the White Bear Lake schools sued the State of Minnesota over the inequitable system and distribution of funds for education. Their suit, Van Dusartz v. Hatfield, 334 F. Supp. 870, contended that “the system denied their children substantially equal educational opportunity and required them to pay higher tax rates than those in wealthy districts to receive the same or lesser expenditure level.” (Melcher, 2004, p. 4) They stated that the current state system of relying upon local property values violated the equal protection clause of the 14th amendment to the US Constitution (“nor shall any state...deny to any person within its jurisdiction the equal protection of the laws”). The suit sought “fiscal neutrality.”

Fiscal neutrality is “that the quality of a child’s education, measured by the amount expended for that education, cannot be permitted to vary according to the property wealth of his or her parents and their neighbors.” (Strom, 2006, p. 2) Basically, it stated that it was illegal to require taxpayers in a poor district to pay more than taxpayers in a rich district and that fiscal neutrality was a right under the 14th amendment. Therefore, the State of Minnesota was violating each citizen’s rights by allowing the enforcement of inequitable property taxes for the purpose of subsidizing public education.

While this case was in process, a similar case was being decided in California. Parallel to Minnesota, communities were being forced to pay different rates of property tax due to the inequality of property values. For example, “a tax rate in 1976 of $1.00 per $100 in a poor community like Baldwin Hill would generate $170 per child. In Beverly Hills, this same rate would generate $1,340 per child.” (Schrag, 1999) The concept of fiscal neutrality became an issue as it came to the California Supreme Court in the case Serrano versus Priest. The case argued two specific points: “education in the public schools is a fundamental interest or right” and “the wealth of a school district -- meaning its real-property tax base -- is a suspect classification.” (Coon, 1999) The case started as a class action suit in Los Angeles County Superior Court. Public-interest attorneys represented all California public-school pupils and argued about “the fundamentality of public education, the struggle of haves vs. have-nots and the battle against discrimination.” (Coon, 1999) The court ruled that based upon the 14th amendment, “that the school funding system violated the Equal Protection Clause of the United States Constitution and of the California Constitution, that education is a fundamental interest, and that wealth is a suspect class.” (Hirji, 1999, p. 583) These August 1971 rulings lead the way for a similar supposition in Minnesota’s Van Dusartz v. Hatfield case.

On October 12, 1971, Federal District Judge Miles Lord finalized the Circuit 8 law suit by concluding that “the Minnesota school finance system made spending per pupil a function of school district wealth and violated the equal protection clause of the 14^th amendment to the US Constitution.” (Melcher, 2004, p.4) He stated that "rather than reposing in each school district the economic power to fix its own level of per pupil expenditure, the State has so arranged the structure as to guarantee that some districts will spend low with high taxes while others will spend high with low taxes.” He further stated that “the level of spending for a child’s education may not be a function of wealth other than the wealth of the state as a whole.” (Van Dusartz v. Hatfield)

The case brought an immediate reaction from the Minnesota legislature. Through a special session on October 30, 1971, the state leaders passed the Omnibus Tax Bill often referred to as the ‘Minnesota Miracle.’ “This bill shifted the main source of education funding in the state from local taxes to statewide income and sales taxes.” (Thorson, 2006, p. 28) The states’ 43% investment in school districts now was mandated at 93%. (Melcher, 2005, p. 5) Because of this dramatic change, the White Bear Lake parents and students dismissed their complaint.

While Minnesota was not finished with litigation (Skeen v State of Minnesota, 12/91), the Van Dusartz versus Hatfield case marked a historical marker in school financing in the United States. Through this case, the rights of an individual student were increased and the obligations of the state toward that student were also clarified. It is an example of how our complicated system of justice works in the US, of how our desire to maintain equality continues, and how our interest in educating our future generations perseveres.

Resources Consulted

Coon, Arthur F. (1999, December 1). “Separate And Unequal: Serrano Played an Important Role in Development of School-District Policy.” Miller Starr Regalia. Retrieved on July 3, 2007 from http://library.findlaw.com/1999/Dec/1/129939.html

Hirji, Hanif S. P. (1999, January). Inequalities in California’s Public School System: The Undermining of Serrano v. Priest and the Need for a Minimum Standards System of Education. Loyola of Los Angeles Law Review [Vol. 32:583]. Retrieved on July 3, 2007 from http://llr.lls.edu/volumes/v32-issue2/hirji.pdf

Knowles, Glen & Elizabeth. (2005). Equity Issues in the State of Minnesota School Finance. Midwest Economics Association.

Knowles, Glenn & Elizabeth Knowles. (2005, March). Equity Issues in the State of Minnesota School Finance. (Paper presented at the Midwest Economics Association Meetings, Milwaukee, Wisconsin). Retrieved June 28, 2007 from http://www.uwlax.edu/faculty/knowles/Equity%20Issues%20in%20the%20State%20of%20Minnesota%20School%20Finance.doc

Melcher, Tim. (2005, September 3). Minnesota School Finance History: 1849 – 2005. Minnesota Department of Education. Retrieved July 2, 2007 from http://education.state.mn.us/mdeprod/groups/Finance/documents/Publication/004107.pdf

Minnesota Department of Education. (2004, January). Options for General Education Formula Changes to Limit Revenue Disparities. (Report to the Legislature). Retrieved June 29, 2007 from http://education.state.mn.us/mdeprod/groups/Communications/documents/Report/002350.pdf

Schrag, Peter. (1999). Paradise Lost: California's Experience, America's Future. Berkly, CA: University of California Press. (Quoted on PBS website). Retrieved July 3, 2007 from http://www.pbs.org/merrow/tv/ftw/schrag.html

Serrano v. Priest, 5 Cal.3d 584 (1971).

State of Minnesota. (1974, November 5). Minnesota Constitution. Retrieved July 1, 2007, from http://www.house.leg.state.mn.us/cco/rules/mncon/mncon.htm

Strom, Tom. (2006, November). Minnesota School Finance: A Guide for Legislators. State of Minnesota House Research. Retrieved July 2, 2007 from http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf

Thorson, Gregory R. & Jacqueline Edmondson. (2000). Making Difficult Times Worse: The Impact of Per Pupil Funding Formulas on Rural Minnesota Schools. Mankato, MN: Center for Rural Policy and Development, University of Minnesota. Retrieved June 28, 2007 from http://www.mrs.umn.edu/~gthorson/crp.pdf

Thorson, Gregory R. & Nicholas J. Maxwell. (2002). Small Schools under Siege: Evidence of Resource Inequality in Minnesota Schools. Mankato, MN: Center for Rural Policy and Development, University of Minnesota. Retrieved June 28, 2007 from http://www.mnsu.edu/ruralmn/pages/Publications/reports/smallschools.pdf

Thorson, Gregory R & Jessica L. Anderson. (2006, September 6). “The Minnesota Miracle Abandoned? Changes in Minnesota School Funding, 2001-2007.” Rural Minnesota Journal. (RMJ: Volume 1, Issue 2, September 2006). Saint Peter, Minnesota: Center for Rural Policy and Development. Retrieved June 28, 2007 from http://www.mnsu.edu/ruralmn/pages/Publications/rmj/RMJ2-06/rmj2-06thorson.pdf

Van Dusartz v. Hatfield. 334 F. Supp. 870 (U.S. Dist. Minn., 1971)