The Michigan Supreme Court will hear oral argument in Adair v. State, Nos. 137424 and 137453 tomorrow. In Adair, school districts from across the state sued the State of Michigan because the State imposed increased reporting requirements on the school districts without providing the additional funding necessary to pay for the increased requirements. The case was tried as an original action in the Court of Appeals. The Court granted leave to address two issues: (1) whether the prohibition of unfunded mandates set forth in the Michigan Constitution of 1963, in Article IX, Section 29, the “POUM Clause” or the Headlee Amendment, requires the school districts to prove specific costs, either through the reallocation of funds or out-of-pocket expenses; and (2) whether the school districts are entitled to recover the costs incurred in maintaining this suit under Const. 1963, art. IX, ' 32. This is the third time that Adair has come before the Court. The Court’s order granting leave may be found here. The Michigan Court of Appeals’ opinion may be found here.
The POUM Clause provides that the legislature may not mandate a new activity or increased level of activity of any unit of local government (such as a school district) unless the State pays the unit of local government for any associated increased costs. In 2000, the State mandated that school districts report various information on a student-by-student, employee-by-employee, and building-by-building basis, rather than in aggregate form. The new reporting requirements were far more labor intensive and led to a substantial increase in costs for the school districts. The State argues that the school districts must prove that implementation of the mandates required them to incur specific out-of-pocket expenses. The Court of Appeals held that such a showing is unnecessary. Because the school districts are not seeking money damages, and because the Court lacks authority to order the legislature to appropriate funds, the goal of a declaratory judgment in a POUM Clause action is simply to provide sufficient notice so that the State will be aware of the financial adjustment it needs to make for future compliance. The court held that school districts do not need to show specific out-of-pocket expenses for such notice to be given to the State. In declaratory judgment suits, the plaintiff bears the burden of showing that it has been injured or a threat of imminent injury exists. The Court of Appeals held that, to meet this burden, the school districts need only prove that (1) the State mandated an increased level of activity; and (2) the State failed to provide funding to offset the necessary costs that would be incurred in carrying out the mandate. Because the school districts did so, the Court of Appeals granted them declaratory judgment.
The Court of Appeals denied the school districts’ claim for attorney fees because, although plaintiffs bringing successful POUM Clause actions are entitled to costs under Mich. Const. of 1963, art. IX, ' 32 (1978), the POUM Clause cause of action was brought alongside many other claims, all of which were rejected by the Court of Appeals. Consequently, the Court of Appeals held that the school districts’ suit had not been sustained and declined their request for attorney fees. The Supreme Court will have to decide whether, by virtue of bringing a successful POUM Clause action among many unsuccessful causes of action, the school districts’ suit was sustained.