School districts suing ADE for funds not paid

Tuesday, November 15, 2011

EUREKA SPRINGS -- Attorneys for the Eureka Springs and Fountain Lake school districts filed a contempt of court suit Nov. 8 against the Arkansas Department of Education (ADE).

The suit has been filed following the ADE's refusal to release 2010-11 federal and state categorical funds in the amount of $503,000 to the school districts by order of Judge Timothy Fox in September.

Of that total, $138,000 is due Eureka Springs and $365,000 is due Fountain Lake.

A joint lawsuit against the ADE and the state treasurer on behalf of both school districts was filed May 6 in Pulaski County by Hatfield & Sayre of Little Rock.

The suit asked for declaratory judgment and injunctive relief from the state's demand that these school districts remit what it considers to be "excess" revenues from a 25-mill property tax that exceed the state's foundation funding per student of $6,023 for the 2010-2011 school year.

For Eureka Springs, that amount was $824,916 and for Fountain Lake, $1,387,567.

The ADE withheld state and federal funds in what Eureka Springs Superintendent Wayne Carr termed a "punitive measure" for the school board's refusal to amend its budget to show $824,000 less in income.

Although Judge Fox agreed with the ADE that the required 25 mills for education are state and not local revenues, he ruled the ADE does not have the right to withhold funds and ordered their release.

He further ordered the ADE to refrain from taking any action against the school districts until the millage issue can be decided by the state legislature.

In October the school districts filed an appeal of Fox's ruling on the 25 mills, and the ADE filed an appeal of his ruling on withholding funds, stating they would place the funds in escrow until the appeal is heard.

Carr said the withheld monies have nothing to do with millage revenues.

"It's money they're not going to keep anyway," he said. "It's categorical money."

On the state trying to grab revenues generated by the 25 mills, he said, "Unless the legislature gives them authority to collect that money, they still can't do it. The law says all money collected in the local school district is sent right back to that district."

He added the legislature may not decide the issue until 2013, as it is in interim meetings this year.

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