LAWRENCE COUNTY v. LEAD-DEADWOOD SCHOOL DIST.
Legal provision: Article 6, Section 2: Supremacy Clause
ORAL ARGUMENT OF ALAN RAYWID, ESQ. ON BEHALF OF APPELLANTS
Chief Justice Warren E. Burger: Mr. Raywid, I think you may proceed whenever you're ready.
Alan Raywid: Mr. Chief Justice, and may it please the Court, this appeal challenges the validity of a state statute which would alter and redirect the distribution of federal funds payable to local units of government paid for the presence of non-taxable federal land which are located within the jurisdiction of these local units of government.
The federal statute known as Payment in Lieu of Taxes, or its acronym, PILT, is perhaps a new concept of awarding federal funds for the non-taxable lands by conferring upon local communities, local units of government, the discretion of how these funds may be best spent to offset the impact caused by the presence of federal lands within their particular communities.
It is the result of years of careful study as to how most effectively to offset this adverse impact of federal lands.
And it substitutes prior programs of designated use, such as designation for school districts or designation of roads, to allow the discretionary use by these governmental units and with the only caveat that they be for any governmental purpose.
The program is rather broad.
It goes to 49 states.
Unidentified Justice: You described the second sentence in the statute, Mr. Raywid, as a caveat; a unit, and they use the payment for any governmental purpose.
You see that as a restriction on what the governmental unit may use it for.
Alan Raywid: I'm glad you called me on that, Justice Rehnquist, because no, I do not see that as a limitation at all.
And "caveat" is the wrong word.
"Any governmental purpose" is perhaps redundant.
I think the purpose that that was placed in the statute, to show that it could go for the whole panoply of government services that a local unit of government could make expenditures.
Of course it couldn't... no unit of government can make unauthorized or discriminatory payments.
Unidentified Justice: They didn't need Congress to tell them that.
Alan Raywid: They did not need Congress to tell them that.
I believe those words... and I'm glad you asked the question, because I think that merely underscores the breadth of discretion allowable to a local unit of government.
Unidentified Justice: Mr. Raywid, the counties are creatures of state government, in a sense.
They are created by the state legislature to serve state governmental purposes.
Do you think that the state legislature in South Dakota could have passed a law that just told its counties they may not accept any federal aid, period?
Alan Raywid: Perhaps the legislature could have declined altogether the federal aid.
This particular state statute, of course, is tiered upon and built upon the federal aid.
The federal aid precedes it by three years.
But in following your question, the state, of course, is sovereign.
The state created the counties, and conferred upon the counties particular authority.
It allows for elected officials; it allows for them to devise a budget; it allows them to make allocations between particular governmental responsibilities acting within that county.
Now, once having created such an entity under the state constitution of South Dakota, it cannot destroy that entity, except with popular vote.
But perhaps the state need not have created this county.
Having done so, and having conferred on it governmental powers, the state is obliged to respect those powers the same as anyone else.
Unidentified Justice: Obliged by what law?
Alan Raywid: Well, obliged by the precedent of this Court.
This Court has instructed federal agencies, for instance, that they need not promulgate regulations, but when they do promulgate regulations, they are obliged to observe them the same as private parties.
Unidentified Justice: You are now deducing a principle of federal law that requires the State of South Dakota to adhere to its own statutes?
Alan Raywid: Well, the State of South Dakota, like any other entity, must observe its own laws.
Unidentified Justice: But isn't the... usually, the final authority as to whether a state has observed its own laws is found in the determination of the highest court of that state, is it not?
Alan Raywid: It is indeed.
Unidentified Justice: And here, we have a determination of the Supreme Court of South Dakota that what the state has done has consisted with South Dakota law.
Alan Raywid: Well, the State of South Dakota went much further than that.
The State of South Dakota interpreted the constitution of the United States and interpreted the statute of Congress in seeking an accommodation, not only between its statutes and its constitution, but with the Constitution of the United States and the congressional statute--
Unidentified Justice: It's one thing to say that Congress has mandated these funds to the counties and notwithstanding the relationship between the counties and the state, the Congress wanted the counties to have the final authority to say that.
That is certainly an understandable argument based on federal law.
But I understood you to make an argument that federal law also somehow requires South Dakota, the legislature to observe the county status because there are provisions in the South Dakota statute... the South Dakota constitution that require it.
Alan Raywid: --Well, I think that what the federal statute attempted to do was to confer authority, discretionary authority for the expenditure of funds on the local unit of government.
It then, of course, looked to the state government as to what units of local government had been created.
In South Dakota, there is no question but that the State of South Dakota had created counties and conferred upon them general governmental authority.
Also, the statute, the federal statute, the PILT statute, distinguished between specific purpose districts, such as school districts or water districts or fire districts that did not have general governmental authority, even though they may not have been placed with authority by the state, and even though they might be governed by elected officials.
But, yes, the federal statute does look to the state to say which governmental unit has the local authority and which governmental unit has general governmental authority.
Unidentified Justice: Well, you concede, I gather, that the state could have prohibited the counties from accepting any federal aid altogether.
Do you think the state could have said that it would readjust any state aid that it supplies the counties to deduct the amount that a county is receiving from the Federal Government under this In Lieu Payment Act?
Alan Raywid: No, Justice O'Connor.
I believe very definitely it could not.
If it wished to accept the federal aid... it would have to accept the federal aid subject to the conditions imposed by Congress.
It is obliged to carry out the purpose and intent of Congress; that is the fundamental precept of the supremacy clause.
And this Court has held again and again, in both majority and dissenting opinions, that the purpose and intent of Congress, of course acting within its constitutional authority, is paramount and that the state may not interfere with that purpose and intent.
And the fundamental purpose and intent of this act, both by its language and certainly by its legislative history, is to confer upon the counties, to confer upon the unit of local government that allocate funds for a variety of purposes, to decide how that government land has impacted by its presence, and to decide how those funds may best be used.
Unidentified Justice: May I ask this question?
You say that they created this general government authority of the county.
But as I understand the state laws, the county doesn't have general government authority.
It has authority with respect to disbursement of funds, according to a formula set by the state.
Isn't that right?
Alan Raywid: No, Justice Stevens,--
Unidentified Justice: With respect to tax revenues anyhow.
Alan Raywid: --I don't understand that to be the--
Unidentified Justice: Well, aren't they required to expend their tax revenues in certain prorated shares?
Alan Raywid: --Well, the county does have limited authority, and it does not have general legislative authority.
Unidentified Justice: But it doesn't have any general authority to disburse funds any way it wants, apart from these funds, does it?
Alan Raywid: There are certain units of government, such as primarily the schools--
Unidentified Justice: Well, we're talking about the county right now.
The county must allocate its tax revenues according to a state-set formula; is that not true?
Alan Raywid: --No, Justice Stevens.
I believe that is not true.
As I understand the process, each of the various recipients, respective recipients of funds, submit to the county their budgets for the year.
The county then has some discretion as to what budgets it will accept or whether those budgets have to be altered and adjusted.
Then it goes out and raised the money, and then it makes the distribution.
But it is not simply a cashier for the various districts.
It does exercise some discretion.
Unidentified Justice: Some discretion, but isn't that discretion, in some respect at least, limited by state law?
Alan Raywid: Well, indeed it is.
Unidentified Justice: What do they want to use the money for in this case?
I can't quite figure it out.
What does the county want to use the money for that it's being disabled from using it?
Alan Raywid: Well, I believe that the county has, with great reserve, not made any determination as to the use of the funds until it determines the outcome of this litigation.
Unidentified Justice: So it's entirely possible the county may decide to distribute the money exactly in accordance with the state law, isn't it?
Alan Raywid: Well, again I differ with you.
You mean this particular state law?
That is conceivable.
It may also--
Unidentified Justice: And you must acknowledge, I assume... say there's a state law against spending money on liquor licenses or something like that.
You couldn't do it for that purpose.
Alan Raywid: --No.
It would be within the governmental purposes as defined by state law.
We would concede that.
Unidentified Justice: Should the state pass a statute that says you should spend no more than $10 million on roads in any one county?
Alan Raywid: I do not think that they could place a limitation on the federal funds which had been given to that particular county, and could not do by indirection what they could not do by direction.
The purpose of the federal funds... in that instance, they might have to refund to the Federal Government those funds which the state attempted to proscribe its spending.
Unidentified Justice: Even though they were used for a valid governmental purpose of some other kind, such as school?
Alan Raywid: Well, the fundamental purpose of the Act is for this county to decide how these federal lands have impacted upon it, and to spend accordingly.
It is in furtherance--
Unidentified Justice: Without interference from the state legislature.
Alan Raywid: --Without interference by the state legislature.
Unidentified Justice: Can you find that in this statutory language?
Alan Raywid: This statutory language would make the county auditor a mere cashier, just to receive the funds and then to disburse them according to a formula.
And that would--
Unidentified Justice: Are you saying a state does not have the power to say that the county auditor shall be a mere cashier and shall spend the money the way we tell him to?
The state has no such power.
Alan Raywid: --The state has no such power when the exercise of that power would entirely gut the purpose and intent of Congress in conferring jurisdiction and discretion on the local unit of government to make such a decision.
Unidentified Justice: These payments are in lieu of what would be real property taxes that the government would pay for government-owned land in the county?
Alan Raywid: That is correct in this particular instance.
It applies... the total land acreage is some 450 million acres.
In Lawrence County, it comprises over half the county, are federal lands.
And they are, of course, removed from the tax base.
Unidentified Justice: And there is no question, I take, it, that under South Dakota law, if these lands had been in private hands and taxes had been paid on them, the state legislature could have told Lawrence County how to spend the taxes.
Alan Raywid: No, Your Honor.
I believe under the creation of the county system, the county does exercise discretion as to how much taxes it is going to raise.
It has a provision in its operating mandate that it cannot spend more than it takes in.
It takes... it receives budgets, as I was explaining previously.
It receives budgets.
It then allocates what it feels appropriate for each particular governmental service.
And then it raises the money.
Unidentified Justice: I didn't mean necessarily that the state legislature had adopted such a regimen.
But no one questions that it has the power to do so if it isn't granted by federal law.
Alan Raywid: Well, I suppose the State of South Dakota could eliminate its local government altogether and also remove its taxing authority.
Unidentified Justice: Or it could tell its counties that out of each dollar of real property tax that you collect at the county level, you assign 60 percent of that to the schools, could it not?
Alan Raywid: It could.
It could mandate that.
Then it would be up to the Federal Government to decide at that juncture whether this was a general governmental unit with power to exercise such discretion.
But clearly, in accommodating, it seems to me, the state statute with the federal statute, which was to give discretion... and it specifically states in its legislative history and in its implementing regulations that this is not to go to special districts or not for special units of service such as school districts, and it is not to go to states.
It is to go to the smallest unit of local government in which that land is located.
As I... this is a program that was some 20 years in the study, and by a creature of Congress, a commission created back in 1964, with its report in 1970 saying that we should do away with all of the federal land programs that in place that designate the use, that try to determine for particular communities how they can best spend the money, and let those communities decide how they must use the aid.
The legislative history and the testimony show such a variance of conditions, disaster, court trials, all kinds of different impact.
And more often, the benefits such as from a national park, which receives a number of visitors, which receives a number of expenditures because of the presence of the national park, go not to the local community in sales tax or in corporate income tax, but they go to the state.
This was an attempt to direct those fund to where that land was located and because--
Unidentified Justice: Can I ask you in this example... I think it's in the government brief... a very costly trial because a crime occurs in the county.
And then you talk about well, maybe they want to use the money for that purpose.
Do you think the state could provide that the costs of exceptionally expensive trials of the character described there shall always be handled with state funds and the trial shall be handled by the state attorney general and no local funds shall be used for such purposes?
First I'd ask you could they do that with tax remedies and, secondly, could they do it with these funds?
Alan Raywid: --Well, depending upon the state constitution and depending upon the jurisdictional authority, I suppose that the state could assume those funds.
Unidentified Justice: They could prohibit the county from spending money for that particular purpose without violating the federal statute.
Alan Raywid: --Or could supplement--
Unidentified Justice: Just say we will pay for this out of state funds in this county, as we do throughout the state.
Alan Raywid: --Yes, but as the Congress observed and as the Congress noted, states don't do that.
Unidentified Justice: Well, but isn't the state the best entity to decide whether it shall be done within its borders or not?
Not Congress tell them you have to let the county make this decision?
Alan Raywid: Perhaps the state is the best entity, generally, to make such decisions.
But this, mind, you is... concerns government-owned land.
And the management of government-owned land is exclusively within the constitutional power of--
Unidentified Justice: Yes, but the statute clearly says the Federal Government shall not say how the money shall be spent.
Isn't that clear?
Alan Raywid: --The statute clearly confers to the local unit of government, yes.
Unidentified Justice: And it clearly disables the Federal Government itself from allocating the funds.
Isn't that clear?
Alan Raywid: In that particular section.
In that particular section, it wants to pass the discretion to the individual.
Chief Justice Warren E. Burger: Mr. Claiborne.
ORAL ARGUMENT OF LOUIS F. CLAIBORNE, ESQ. ON BEHALF OF THE UNITED STATES AS AMICUS CURIAE
Louis F. Claiborne: Mr. Chief Justice, may it please the Court, perhaps I could most usefully begin by descending to particulars.
This statute, that is, the federal statute, very pointedly directs that the payments be made made to the local government units, the general government units of the locality and not to the state.
It would have been much simpler for the federal payment to be made to the state and to leave the state free to make the distribution as it saw fit.
Congress chose to do otherwise, and the legislative history tells us why.
There had been an experience of making payments to the state with a view to the state's redistributing the funds to the affected locality, and all too often the state had failed to redistribute in the way Congress had expected.
Accordingly, on this occasion, Congress very clearly said we distrust the state.
We will pay directly to the affected county.
It is our intention that they be reimbursed for the burdens our land management imposes on them, and that the money remain there.
Unidentified Justice: Mr. Claiborne, what were the consequences of the state statute here as to these particular funds?
What was the result when the state statute was applied--
Louis F. Claiborne: It is true that in this instance, Justice Rehnquist, the state statute did not require the funds to be expended outside the geographic area of the county, but it did require that 60 percent of those funds be allocated to a school district, a school district whose needs were in no way increased by the presence of federal land.
On the contrary, the federal land is forest land, for the most part, which is--
Unidentified Justice: --But the school district is, nonetheless, in the county.
Louis F. Claiborne: --Yes.
But had that land been taxed, had it been sold to individual, had it been subject to taxation, presumably families would have lived on it and the school burden would have been increased accordingly.
Therefore, it would have been appropriate to increase the allocation to the school district.
Here, it is wholly inappropriate to allocate 60 percent of these federal funds which do not merely stand in lieu of the taxes, but which were intended to compensate for quite different burdens which federal ownership of the land imposes, as distinguished from private ownership of that same land.
Now, the point of having the payments go to the county and not to the state is importantly injured, if not destroyed, when the state is free to seize those monies as soon as they reach the country treasury, and redistribute them as it sees fit.
We might as well have given the money directly to the state.
Unidentified Justice: Mr. Clairborne, I don't understand.
They haven't seized any money.
They're just saying how it shall be spent within the county.
Maybe it's a wasteful to spend, but I just don't understand the analogy to diverting the money out of the county which led to the enactment of the statute.
Louis F. Claiborne: One aspect: If the state had power to allocate the money, it is difficult to see why that power was limited geographically.
If you read the statute as requiring the payment to the county so that the county will have discretion as to how to spend it, that is one thing.
If we say that state law can supplant the county's discretion, then why is the state law limited to redistribution within a geographic area?
Nothing in the statute would lead us to that intermediate conclusion.
Either the state is ousted, as the dissenting justices of North Dakota Supreme Court put it, but Congress was very clear that their noses were not to be intruded into this arrangement involving only supplemental federal funds as between the federal and local governments.
There is a... I'm sorry.
Unidentified Justice: Go ahead.
Louis F. Claiborne: There is another aspect of this statute which leads us in the same direction, which is the second part.
Justice Rehnquist quoted the provision of the federal statute which says the unit of local government may use the payment for any governmental purpose.
Now that, too, was no accident.
Previous federal statutes had earmarked the funds.
Congress decided this time we will not do that.
We will not do that because we recognize that the needs vary from county to county, from year to year, and depending on the kind of federal ownership involved.
Unidentified Justice: But it's one thing for Congress to say that we're not going to try to supervise the expenditure of these funds.
And it's another thing to say that the statute goes further and sets the counties up against the state.
Louis F. Claiborne: Indeed, Your Honor.
But it would be strange for Congress to have withheld its hand, contrary to prior practice, with a few to accommodating the flexibility that is needed from place to place, from time to time, depending on the kind of ownership, only to permit the state's heavy hand to come down with a uniform rule that destroys that flexibility which Congress was anxious to create and preserve.
Unidentified Justice: Let me try and hypothetically... it may clear it up for me; it may not.
Suppose, instead of the Federal Government making this grant, it was the Ford Foundation or the Rockefeller Foundation said we're going to give you six million dollars a year for these purposes.
There's no federal supremacy issue there.
But wouldn't that condition be enforceable?
Louis F. Claiborne: If that condition had been announced in advance and the state had accepted--
Unidentified Justice: Well, aren't you suggesting that there's a condition announced in this statute?
Louis F. Claiborne: --Indeed.
And Your Honor's analogy seems to me sound; that is, that if the money is accepted on those conditions, those conditions are enforceable no matter who the grantor may be.
Now, finally, as an indication that this state statute does offend the federal purpose, one looks to Section 3 of the Act.
This case concerns Section 1 which involves the bulk of the funds, but Section 3 is a special provision which says in the event a national park or a wilderness is created out of land which was taxed just before and which is now removed from the tax roles, for five years there shall be a payment which will substitute for the taxes which have been lost.
And there, Congress directs that the allocation be as the taxes were the previous year, partly to the school district and so forth.
Now, what South Dakota has done is said we will impose the Section 3 formula on Section 1 funds, thereby destroying the whole point of Congress's making the difference.
Now, that is a plain indication of how hostile these two provisions are.
Now, one might wonder why the Federal Government cares, whether we're not simply intruding ourselves in a family argument between a county and a school board.
The government cares, first, because Congress had in mind benefitting a locality and not whatever agency of government the state might choose to benefit.
The least populous counties probably have the least voice in the state legislature and therefore they are not likely to failure.
The government was concerned that those who suffered the burden from our presence be the ones who benefitted from our funds.
The government also, since these funds were meant to recompense for burdens imposed by us, felt some degree of duty to see to it that the funds were available and used for providing the services that our lands required.
And, duty aside, our self-interest was that the counties have the funds available and that they not be deflected to the school board or elsewhere, but that they be available to furnish the services to our lands which otherwise we would have to contract and pay for elsewhere.
Unidentified Justice: Yes, but the county could choose not to furnish any services to your lands, the way the statute is written, could it not?
Louis F. Claiborne: It is so.
And Congress had to choose whether flexibility or trust with respect to the county was most appropriate.
Congress took it that the county could be trusted in its special relationship with the federal managers to expend at least a measurable portion of those funds on providing the services to the federal lands.
And let me say in the day-to-day management of the federal lands, there is a relationship between the federal managers and the county officials.
That relationship is indispensable to the success of the federal land program.
It is one which is measurably aided by the presence of federal funds to compensate for the burdens the government imposes, but it is only useful if the county is assured that those funds are not deflected or confiscated or otherwise directed by the state to be used elsewhere.
Chief Justice Warren E. Burger: Mr. Fuller.
ORAL ARGUMENT OF A. P. FULLER, ESQ. ON BEHALF OF THE APPELLEE
A. P. Fuller: Mr. Chief Justice, and may it please the Court, this case doesn't deal with a whole lot of things.
It doesn't deal with a sovereignty; we're dealing with a county government.
We are not dealing with where the "in lieu of" money is to be paid.
The money is paid to Lawrence County, and that's where it should be paid.
We're not asking the Secretary of Interior to make "in lieu of" payments to the school district.
We are not asking that these payments be used for anything but governmental purposes.
We're not dealing with the Secretary of Interior putting restrictions on the use of this money from the federal level.
That's not in here.
We're not dealing with any other statute because the State of South Dakota is the only state that has a statute like this.
The Arkansas statute dealt with all school monies in the Denning case; all school monies that come to the state shall be distributed to the schools.
Well, in the Denning case, it specifically pointed out in the decision that, assuming arguendo, that the monies are for school.
We are not even claiming that they're school monies.
We are not dealing with a statute nor a regulation which prohibits the county from distributing these monies to the school districts.
What we are dealing with is a statute that gives the counties, as well as many state statutes under Title VII of the South Dakota Code, direction and guidance and powers and responsibilities.
Unidentified Justice: Well, isn't the purpose of South Dakota's statute in this instance to assure that school districts get a share of the federal payments in lieu of taxes?
A. P. Fuller: I think that's the practical effect.
Unidentified Justice: Well, is that the purpose of the statute, do you suppose?
A. P. Fuller: I don't... I was not present when the statute... when 511--
Unidentified Justice: Can you think of some other purpose that the statute might have?
A. P. Fuller: --There are other governmental entities that the county distributes money to, like water conservance of the subdistricts, or water districts, conservance of subdistricts, fire districts, and other governmental entities that gather the money.
But as to the reason that the legislature passed this, I think you must recall, in the section, the section deals with "in lieu of" monies.
In other words, the state also pays in lieu of tax monies.
And the amendment added the word "federal".
So that all federal and state "in lieu of" monies would be distributed by the auditor as all tax revenues were then distributed, which is the counties--
Unidentified Justice: Which would assure a portion of it going to school districts.
A. P. Fuller: --Yes.
Practically speaking, yes.
It does assure that.
It's not 60 percent, so that we understand that.
Unidentified Justice: Does that purpose conflict with the congressional intent, do you suppose?
A. P. Fuller: Well, now I don't think so.
I don't think... the statute says the county may use the money for any governmental purpose.
It does... the school district is not saying that the county is to use the money for school purposes or fire protection purposes or police protection or road building.
It's any purpose, any purpose that to the county seems fit and appropriate is the way they, under Title VII of our code, can handle the money.
I have to agree, though.
The practical effect is that the monies do... some of the monies, not necessarily 60 percent... it's whatever the budgetary amount of money that a school district needs for the next year.
Unidentified Justice: Why doesn't your view, then, amount to a windfall from the school district?
You already have 60 percent, and presumably that's all the school district needs.
Now, if additional federal funds have to go to the school districts, it's 60 percent plus.
A. P. Fuller: Well, there's nothing magic about the 60 percent.
You know, it varies, depending on--
Unidentified Justice: Well, sure.
But whatever figure it is, the schools in your county are being maintained without this federal infusion of funds, are they not?
A. P. Fuller: --Correct.
Unidentified Justice: Well, then anything that goes to the school district from the federal funds is a windfall to is.
A. P. Fuller: That would be true--
Unidentified Justice: Perhaps an unneeded one.
A. P. Fuller: --Well, that I can't answer.
Unidentified Justice: Well, that's what you want.
A. P. Fuller: Your Honor--
Unidentified Justice: You're here representing the school district.
A. P. Fuller: --That's correct, Your honor.
Unidentified Justice: Isn't that true of all government services, that they are budgeted for them, and whatever the federal windfall is, it's prorated for all these services?
A. P. Fuller: --That's what I was going to say.
But thank you.
You see, the county can give that windfall, if you want to call it a windfall, to the school district now; but let's say the statute's not there, they could.
The statute is there; they get a proportion share of that.
The county can get the windfall.
You know, there are many governmental services, any governmental service, many things that would then receive this governmental windfall.
It also, when the money goes to the school district, it's in lieu of real estate taxes, and real estate taxes are where the revenues are generated to support the school districts, support the counties, support the municipalities, and all these other local governmental entities.
Unidentified Justice: That's what I say.
This is not an ordinary windfall; this is in lieu of taxes.
A. P. Fuller: That's right.
It's in lieu--
Unidentified Justice: Well, that's not an ordinary windfall.
Windfall is where they give you something you're not entitled to.
A. P. Fuller: --Well, but Congress... I have to agree with what he's saying if the definition is proper, because Congress is giving the counties that money.
Unidentified Justice: In lieu of taxes.
A. P. Fuller: Right.
But Congress did not have to pass that act because the county or the school district cannot tax those federal lands.
Unidentified Justice: Another thing: Doesn't the legislative history suggest at least that Congress was somewhat concerned about what states did sometimes with these kinds of grants, in lieu of taxes and other types of grants, and they wanted to vest the control entirely in the county.
Isn't that what Congress said?
A. P. Fuller: Congress was concerned about all the things you mention.
And that's why they gave the money to the county government, okay?
The county is merely distributing, as the statute says, as they distribute other tax money.
Now, it seems to me that if the distribution of other tax money is fair, reasonable, and equitable under situations of budgets and other matters, that this money is also being distributed in the same manner.
Unidentified Justice: Mr. Fuller, you raised the question about the 60 percent a couple of times in your... who determines, what governmental body determines the percentage of tax revenues that shall be given to the school district?
A. P. Fuller: No governmental entity, because it's through the budgetary process.
You have a county or a school--
Unidentified Justice: Is it a county budget or a state budget?
A. P. Fuller: --It's a school budget and a county budget.
Unidentified Justice: So that the county has a voice in determining the allocation of tax revenues.
Is that correct?
A. P. Fuller: It's very limited, because our South Dakota Supreme Court has ruled that when a school district comes before the County Board of Equalization and they need X number of dollars, the county cannot arbitrarily reduce the assessed valuation so that the school district will not have the monies to function.
Unidentified Justice: Yes, but what I mean is, the decision as to what percentage... is the percentage the same in every county throughout the state?
A. P. Fuller: Oh, no.
Unidentified Justice: So that the percentage that's in effect in the county in dispute here is really largely governed by what happens in that county.
A. P. Fuller: Oh, absolutely.
Unidentified Justice: And all the state has said is, you've got to follow the same percentage for other funds in that county.
A. P. Fuller: That's right.
Anything that's paid to you in lieu of real estate taxes, you just flip the percentages in and apply the same proportions.
Unidentified Justice: Yes, but the 60 percent, the 60 percent results from the fact that the school district makes up its own budget, and in a sense is a taxing authority itself.
And it goes to the county and says here's what we need and here's what the assessment should be.
A. P. Fuller: That's correct.
Unidentified Justice: And the county, as you say, has very little to say about it.
I mean the county... what is it... Board of Commissioners or--
A. P. Fuller: --No... yes, the Board of Commissioners.
Unidentified Justice: --The Board of Commissioners has very little to say about it.
A. P. Fuller: They have very little to say about--
Unidentified Justice: They can't cut the school district back.
A. P. Fuller: --They cannot cut the school district back.
The mill levies are set by state statute.
Assessed valuations are set by counties.
Unidentified Justice: I take it, if you prevail... if you prevail, you can predict that the counties are going to get certain money and that you won't have to assess as high as you would have if you weren't going to get the federal money.
A. P. Fuller: That's correct.
Unidentified Justice: So you'll be saving all of the people in the school district money.
A. P. Fuller: Correct.
That's the bare bones practical effect of the money.
And the county, you see... that's why it's a political deal.
The county receiving the windfall can then also lower their mill levies, so that then the taxpayers in the county--
Unidentified Justice: Is the entire county covered by one school district or another?
A. P. Fuller: --There are three school... excuse me... there are two complete school districts within Lawrence County and a portion of another school district.
So there are a two and a fraction.
Unidentified Justice: Every piece of non-government land is covered by a school district?
A. P. Fuller: In Lawrence County?
Unidentified Justice: Yes.
A. P. Fuller: Yes.
There's governmental land in every school district in Lawrence County.
Unidentified Justice: So if the government wins... if the government wins this case, it's just that what everybody in the county would have had to be assessed to pay the county expenses, they won't have to be assessed as much.
A. P. Fuller: That's right.
Unidentified Justice: So how much difference will it make as to who... in terms of taxpayers... what taxpayer group shall benefit and what not?
A. P. Fuller: Well--
Unidentified Justice: I know that the taxpayers in the school district will be taxed less if you win.
A. P. Fuller: --Correct.
And no one knows whether the people in the county... you see, not... I would say that the county will receive... they won't lose anything either.
They won't lose anything and the school district won't lose anything, except for... there's political considerations here.
And they're serious at our local level, and that is who's taxing us?
Is it the county taxing us or is it the school district taxing us?
And that has political significance at the local level.
So yes, it is important for all... for distribution of this money to be equitably distributed as the county does it now, so that it's spread; it's spread the same as all other tax dollars, and there's no harm to anyone.
Unidentified Justice: Mr. Fuller, where do the schools in your state derive their money from anyway?
A. P. Fuller: From real estate taxes.
Unidentified Justice: From real estate taxes in the school district or in the county, or both?
A. P. Fuller: In the school district.
Unidentified Justice: And you have a general sales tax in South Dakota, state sales tax?
A. P. Fuller: Yes.
Unidentified Justice: And does the state appropriate any of their sales tax fund either to the county or to the school districts?
A. P. Fuller: Not specifically.
We do have state aid to the local school districts, yes, based upon numbers of pupils in classrooms, classroom size.
Unidentified Justice: That state aid comes from the sales tax and the state income tax?
A. P. Fuller: It comes from all state revenues.
We don't have a state income tax.
We do have a state sales tax, and we have other taxes.
Unidentified Justice: Now, does your state legislature specifically appropriate money for the public schools?
A. P. Fuller: Yes.
Unidentified Justice: That money goes directly to the school districts?
A. P. Fuller: Yes.
Unidentified Justice: But it goes by... they make up the amount that goes to each particular school district.
A. P. Fuller: Correct.
Unidentified Justice: Based on some formula?
A. P. Fuller: Formula.
Unidentified Justice: Well, what if some district is getting money from the Federal Government?
Do they reduce it?
A. P. Fuller: No, sir.
They do not.
That has absolutely... it's totally independent from any federal aid.
Unidentified Justice: But the school district would reduce its own taxes.
A. P. Fuller: And so will the county.
Unidentified Justice: Yes.
Does the school district have authority to levy taxes itself?
A. P. Fuller: Yes.
Unidentified Justice: Real estate taxes?
A. P. Fuller: Yes.
Unidentified Justice: And, in addition, the county levies a real estate tax also?
A. P. Fuller: Correct.
Unidentified Justice: It's not unlimited.
A. P. Fuller: No, no.
It's not unlimited.
It's based upon assessed valuation which can be no greater than 60 percent of the full and true value, as determined by the county, times a certain mill that we... certain different governmental entities have different mill levies, which is a formula.
Unidentified Justice: Back to that one.
Just who is losing on this?
A. P. Fuller: Well, if we don't get the money, we will.
Unidentified Justice: Does the taxpayer lose?
A. P. Fuller: Does the taxpayer lose?
Unidentified Justice: Yeah.
Will he have to pay more taxes?
A. P. Fuller: He may.
Unidentified Justice: How?
A. P. Fuller: Again, depending upon the governmental needs of the specific time, if the county needs a great deal of money, then yes.
If they don't have the windfall--
Unidentified Justice: This is political.
Is there anything in there, other than politics?
I may be asking the same question differently.
Who's going to get the money if you don't?
I still don't understand.
A. P. Fuller: --Pardon me?
Unidentified Justice: Who is going to get the money if you don't?
Your opponent doesn't seem to know.
He seems to acknowledge it's possible they'll divvy it up exactly as the statute proposes.
A. P. Fuller: Well, I don't think so, because the school district has gone to the county on numerous occasions, asking them to please do what the state statute says, and they continue to say we don't have to.
We can do anything we want with the money.
Unidentified Justice: Did they ever tell you what they're going to do?
Are they going to just raise their salaries?
What have they been doing with it?
A. P. Fuller: The money has been held in escrow, gathering interest--
Unidentified Justice: They certainly wouldn't spend it on the school district, I take it.
A. P. Fuller: --One never knows.
Maybe we could change our lobbying techniques and get it.
But they have told me they will not give us the interest, Your Honor.
Unidentified Justice: Is there any way they could send it back to the other U.S. taxpayers?
I mean you interest me on that.
A. P. Fuller: Well, we'd like to keep it in Lawrence County and we'd like to keep it at our school district, where it should be, and it should be distributed at the same.
I frankly think that Lawrence County is making much to do about nothing.
If they'd just do what the statute says, we could go on about our business.
And it doesn't conflict--
Unidentified Justice: Which statute?
A. P. Fuller: --The state statute.
It doesn't conflict.
There's no conflict in the statute.
It's not an obstruction to the federal scheme of things.
The money is going to be distributed for governmental purposes.
Unidentified Justice: But you said when the county... when they come to the school board, the school board refuses... or is it the county that you said... the county refused to do what the state statute purports to compel them to do.
A. P. Fuller: Correct.
Unidentified Justice: That's the political aspect that you are talking about.
A. P. Fuller: Correct.
Maybe they want to build a bridge or a road.
Unidentified Justice: Well, it's also their position that they're not only free, but obligated, to refuse to do that, if they're going to take the federal money.
That's their position, as I understand it.
It's not just a political position.
They claim they have not only a legal right, but an obligation not to live up to the federal... to the state statute, if they to spend it for something else.
A. P. Fuller: I'm going to disagree with that.
Unidentified Justice: You don't think that's their position?
A. P. Fuller: No.
I think the county believes that they could give all this money to the school district if they wanted to.
Unidentified Justice: Yes, but I just said one of their positions is that they have a legal right not to spend it that way.
A. P. Fuller: That's correct.
Unidentified Justice: So it just isn't a political position.
They claim they have a legal right under the federal statute.
A. P. Fuller: Correct.
And they're claiming that the federal statute is supreme and is in conflict with the state statute, and that's where I and the school district can't necessarily see the conflict.
Unidentified Justice: Well, that's why you're here, I guess.
A. P. Fuller: That's correct.
The county is governed by the constitution of the State of South Dakota.
They are not a sovereignty unto themselves.
Article IX of our constitution creates counties... excuse me, it does not create counties, it allows the legislature to create counties.
And the legislature has created Lawrence County and 60-some odd other counties in South Dakota.
They are creatures of state government, and under Title VII of our statutes, they have been given the powers that our legislature has allowed them to have.
And this is a statute similar to all other statutes.
It gives counties guidance, instruction as to what they should do, and that's all the statute does.
It just seems that if counties, in their process, distribute monies in a fair, reasonable, and prudent way on an annual basis, that a statute that directs them to continue that proposition with federal in lieu of tax monies is not in conflict with the federal statute that is presently before this Court.
Unidentified Justice: Except that the county has different ideas from the state; isn't that so?
A. P. Fuller: The county... well, the state is not telling them how to spend the money.
The county decides that at the local level.
They are just saying do it the way you do it.
Unidentified Justice: Are you suggesting that the state statute doesn't put any constraints on them?
A. P. Fuller: You're talking about... yes, it tells them about vouchering and bonding and bonds of indebtedness and all that.
Sure, there are constraints.
But these are expenditures.
These are tax monies in and these are disbursements out, Your Honor.
And counties have pretty much general latitude as long as they're paying the bills that are authorized by law.
The restrictions aren't that great.
Chief Justice Warren E. Burger: Very well.
You have about three minutes remaining Mr. Raywid.
ORAL ARGUMENT OF ALAN RAYWID, ESQ. ON BEHALF OF APPELLANTS -- REBUTTAL
Alan Raywid: This is the only statute in the country that seems... or the only state in the country that seems it is necessary to make some reallocation.
Mr. Justice White asked whether this will be a windfall for the taxpayers of that county.
That certainly was not the purpose.
The purpose in granting discretion for the presence of these lands was that the benefits would redound to the landholder, the United States of America.
And the funds are those from the taxpayers of the United States of America.
No other state has felt it necessary to take away this local discretion.
Arkansas attempted, in a somewhat different manner, and Arkansas failed.
So there is no necessity to instruct the county.
And this Court, in an unbroken line of decision since Chief Justice Marshall, has held that the purpose and intent of intent of Congress in trying to accommodate both state and federal statutes, must look to the intent and purpose of Congress.
There is no doubt in this question that Congress is acting in a field in which it has authority.
This is land management, given to it by the Constitution, and it also involves the spending power of Congress under what conditions Congress would impose.
Certainly, the legislative history and, we would submit, the Act itself says that its main purpose and intent is to confer upon counties discretion.
The South Dakota statute... and indeed if it is upheld, other states would follow... removes that discretion, supplants the local community where the lands are located--
Unidentified Justice: Would you agree that it doesn't entirely remove the discretion, because the basic allocation is at least partially determined by the county itself?
Alan Raywid: --Well, first of all, the county in the year before receipt of these funds tries to budget its needs.
Unidentified Justice: And it probably in doing that can anticipate it will be getting some federal funds in the following year.
Alan Raywid: Well, not necessarily.
And probably Lawrence County certainly did not.
It allocates the funds to meet the budgets for the coming year.
Then, following that--
Unidentified Justice: But it does participate in the decision whether the school district will get 60 or 39 or 59 percent of the tax revenues.
Alan Raywid: --Indeed, it's instrumental in--
Unidentified Justice: So it does have a part in the allocation of these funds, too, then.
Alan Raywid: --Well, it would have to be using a crystal ball or some kind of a mathematical formula, of which I'm not aware, in order to find out what the Secretary of Interior is going to allocate for this particular county, and find out how that works in the equation... which is totally apart from the purpose and intent of Congress.
Chief Justice Warren E. Burger: Very well.
Thank you, gentlemen.
The case is submitted.
Unidentified Justice: The Honorable Court is now adjourned until tomorrow at 10 o'clock.