Judge: Red Clay broke election rules on tax vote; funding system broken

A Chancery Court judge has ruled that the Red Clay Consolidated School District broke election rules when it successfully passed a voter referendum to raise property taxes last year, but he refused to invalidate the result, citing "dysfunction" in the state's school funding system.

"In this case, without a favorable vote, Red Clay faced a looming deficit. Prevailing in the Special Election was therefore crucial, and the Red Clay administrators were under a great deal of pressure to achieve that result," wrote Vice Chancellor J. Travis Laster in an opinion issued Wednesday. "Unfortunately, their understandable desire to obtain adequate funding to fulfill their mission led them to undermine the electoral process."

The Delaware chapter of the American Civil Liberties union sued Red Clay after a referendum in February 2015 on behalf of residents who said they were not able to make it to the polls.

DETAILS:Read more about the lawsuit

BACKGROUND:Why property taxes haven't been reassessed

The plaintiffs argued Red Clay held "parent engagement events" on the day of the vote to encourage turnout among parents who had a vested stake in voting for the increase. They also said that those events crammed parking lots, making it hard for elderly voters to make it into the schools that serve as polling places.

The lawsuit accused Red Clay of "one-sided" get-out-the-vote efforts, going to great lengths to reach out to parents and district supporters but avoiding broader methods of communicating with those who don't have children in the district and might vote against the referendum.

Laster agreed with the plaintiffs, finding that the district violated a clause in the state constitution requiring "free and fair elections."

However, Laster refused to invalidate the results of the referendum, as the plaintiffs had sought. He argued districts have been placed in an untenable position because of the lack of property tax reassessments.

By law, counties are supposed to regularly reassess properties to make sure their value is up-to-date. But no Delaware county has done a reassessment in decades — New Castle County last did so in 1983.

"When the value of the tax base is fixed, the only way to raise revenue is to increase the tax rate," he wrote. 

Laster noted school districts' costs are constantly increasing "because of inflation and because society regularly asks the public schools to take on greater burdens." So the lack of reassessments has made districts desperate to pass referendums for fear of painful budget cuts.

Some officials think school boards should be allowed to raise taxes by small amounts without a referendum to account for growing costs. A bill that would grant that power is circulating among legislators but has not been filed yet. 

A draft version of that bill obtained by The News Journal would allow school boards to raise taxes unilaterally every two years. Those increases could be only 3 percent or a percentage change in the Consumer Price Index kept by the Bureau of Labor Statistics.

School boards could vote to increase those taxes to account for growing operation costs only. School boards would still have to go to referendum for capital requests, like building new schools or renovating old ones or for any major new projects. 

Changing the referendum process would not tackle the problem of reassessments, which has been a huge cause of frustration for school and civic leaders for decades. Groups such as the Delaware Economic and Financial Advisory Council  and the Wilmington Education Improvement Commission have called for systemic reassessments.

Both sides claimed victory after the Chancery Court ruling.

“In these already challenging times, it would have been catastrophic for the district to have returned nearly $26 million, so we are frankly relieved that Judge Laster recognized that Red Clay acted in good faith in its public campaign asking our community for additional funding,” Red Clay Superintendent Merv Daugherty said in a statement. “It’s my hope that this lawsuit opens the door to a conversation about school funding in Delaware. As Judge Laster said, the system is broken and the solution to these issues is a reform of the school funding mechanism, which should be carried out by the General Assembly.”

Kathleen MacRae, executive director of the American Civil Liberties Union of Delaware, called the ruling a "victory for democracy and free and fair elections in Delaware."

Though the ACLU had asked for the referendum to be overturned, the group said it understood the decision.

"Ultimately, this lawsuit was never about depriving school districts of the funding they need," MacRae said. "We agree with the Chancery Court that there is dysfunction in Delaware’s system for funding public schools. We believe that Delaware’s system of school financing is badly broken."

Rep. Deborah Hudson, R-Fairthorne, supported the lawsuit, and she hopes Red Clay and other districts have learned not to tip the scales on referendum votes.

"Red Clay is an excellent school district, but they manipulated this election," said Hudson, whose district is in Red Clay. "What I saw when I went to vote was so different than what I normally see during these referendums. I'm a little surprised that the chancellor didn't overturn the results."

Over the past few years, many districts have struggled to win voter approval to increase taxes to cover growing operational costs. In some cases, those failed votes have led to teacher layoffs and program cuts. 

Even as the judge's ruling went public Wednesday, members of the Joint Finance Committee bemoaned the fact that reassessments were making their job of writing the state budget harder. 

This is a statewide issue. Sussex and Kent counties have not updated their assessments since 1974 and 1987.

Political leaders have been reluctant to implement reassessments because, while some residents would see property taxes reduced, some could see huge increases in their tax bills. And there is is a significant administrative cost to reassessing, particularly after years of inaction.

Hudson said "it's probably time" to do a reassessment.

"[The judge] is one more person that emphasizes that our school financing is completely tarnished," Hudson said. "But it's very complicated, and it needs to be done right. I certainly think it's time we have that discussion, though."  

The reassessment issue is particularly important to school districts because property taxes fund most of the "local share" of education funding, roughly 30 percent of each district's budget.

DOCUMENTS:View the opinion

Contact Matthew Albright at malbright@delawareonline.com, (302) 324-2428 or on Twitter @TNJ_malbright.