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NewsDecember 10, 1991

A Cape Girardeau attorney said Monday that a recent ruling by the U.S. 8th Circuit Court of Appeals should halt state budget cuts planned in January to fund desegregation costs in Kansas City public schools. Meanwhile, a Missouri assistant attorney general said the budget cuts planned for January may or may not take place, regardless of the ruling...

A Cape Girardeau attorney said Monday that a recent ruling by the U.S. 8th Circuit Court of Appeals should halt state budget cuts planned in January to fund desegregation costs in Kansas City public schools.

Meanwhile, a Missouri assistant attorney general said the budget cuts planned for January may or may not take place, regardless of the ruling.

The Cape Girardeau attorney, Diane Howard, said state budget cuts are not needed for the state to pay additional desegregation costs this fiscal year. Under the appeals court ruling, the state does not have to make these payments until July 1, 1992.

Howard is representing at least 98 school districts in a state lawsuit challenging the Missouri's authority to withhold money from public schools. A hearing is scheduled Dec. 18 in Cole County before state Circuit Judge Byron Kinder on the school districts' legal action.

"My argument is that this order does prohibit the cuts," Howard said. "We interpret that (ruling) to say the state should not be withholding funds before (the Kansas City School District) has an opportunity to attempt to get interim financing.

"Should efforts to obtain interim financing prove unsuccessful, the burden falls on the state to pay," she said.

The recent appeals court ruling orders the Kansas City School District to try to get a loan to pay for court-ordered desegregation costs. The state of Missouri has not been ordered to get such a loan, as was erroneously reported by the Associated Press in a story published in the Southeast Missourian Nov. 28.

The ruling orders the Kansas City School District to "apply for interim financing with banks or other financing institutions."

The court has ordered the state to "provide a written commitment to (the Kansas City School District) and appropriate banks or financing institutions that on or after July 1, 1992, it will pay 50 percent of those amounts ordered and incurred... . The interest for said loan will be paid by the state."

The state is to pay half the costs and the school district to pay the other half.

The ruling also states: "The interim financing procedures that we order here will eliminate the need for the drastic budget cuts the state has argued that it will otherwise be compelled to make. We must again express our strongest thought that the state has the ability to consider alternative funding sources for (Kansas City School District), including utilizing the bonding capacity under the Missouri Health and Education Facilities Act."

The assistant attorney general for Missouri, Michael Fields, said, "The cuts may or may not occur in January."

He said the state is looking at several alternatives to financing desegregation costs, including helping the Kansas City School District get a loan and making the budget cuts.

"If (budget cuts) don't occur this year, they might occur next year," he said. "As I understand it, the budgetary picture for this year is no less bleak than for next year," he said. "We may be able to save the cuts this year. The benefit would be that cuts next year would be made as a result of more careful planning.

"All of these decisions are yet to be made, but they will be made before Jan. 1," Fields said.

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In the summer, the state announced $71 million in cuts in this year's budget after a federal judge in Kansas City ordered the state to pay more money to build schools in Kansas City. One round of cuts has already occurred; a second round is scheduled to take effect in January.

The state agreed to pay the money but questioned whether it had to pay it in the current budget year, which ends June 30, 1992, or in the following fiscal year.

"The ruling is somewhat convoluted," said Fields.

The court ordered the school district to try to find alternative financing and ordered the state to help the school district.

Fields said: "The fact is the district has to go out and attempt to get the loan. We have to go along with them and cooperate with the financial institution by assuring them in writing our obligation to pay the capital obligations as of July 1, 1992."

However, Fields said he believes the state doesn't have to provide that assurance if the terms of the loan are not satisfactory to the state. In that case, the state would have to find another way to fund the desegregation costs.

"If the Kansas City School District can arrange a loan; but, if it was at prime plus 2, it would be cheaper for the state to do it through budget cuts," he said.

"We are looking at other options as well."

One option mentioned in the ruling is the Missouri Health and Education Facilities Act, which gives the state bonding capacity.

"We're still examining that," Fields said, "But there has been a significant amount of resistance to that within the state legislature, which makes it problematic. Could we get the legislature to pass the funding for payment of the bonds? And we are still looking at other avenues."

Howard said the primary issue before the federal court on the appeal was not how to finance the money, but rather whether the state could defer payments until after July 1, 1992. The state argued it had exceeded the $150 million limit referred to in an earlier court opinion.

Of the 13-page ruling by the federal appeals court, the first eight pages are devoted to discussion of whether the court had set a $150 million limit on state spending for fiscal year 1991.

The court said the dollar amount was an approximation, and the state is responsible for costs of subsequent federal court orders, including $61 million for land acquisition, $10 million for furniture, and $9 million toward a new Kansas City Central High School and asbestos abatement.

"The state of Missouri wanted to say we have spent our $150 million," Howard explained. "The court of appeals said that (dollar amount) was an estimate."

But Fields said that the court ruling allows the state to make payments after July 1, 1992, which is what the state wanted in the beginning.

Fields said the state has never said it should not pay the money. "It has always been a question of timing, not of liability," he said. "We never contested the idea that we had an obligation; we said only that we had met our obligation until (July 1, 1992)."

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