JOHN SERRANO, JR., et al., Plaintiffs and Respondents, v. IVY BAKER PRIEST, as State Treasurer, etc., et al., Defendants and Appellants; CALIFORNIA FEDERATION OF TEACHERS, AFL-CIO, Intervener and Respondent; BEVERLY HILLS UNIFIED SCHOOL DISTRICT et al., Interveners and Appellants, 18 Cal. 3d 728

Opinion SULLIVAN, J. The instant proceeding, which involves a constitutional challenge to the California public school financing system, is before us for the second time. In 1971, we reversed a judgment of dismissal entered upon orders sustaining general demurrers and remanded the cause with directions that it proceed to trial. (Serrano v.

Priest (1971) 5 Cal.3d 584 [96 Cal.Rptr. 601, 487 P.2d 1241], hereafter cited as Serrano I.) In so doing we held that the facts alleged in plaintiffs’ complaint were sufficient to constitute the three causes of action there set forth, and that if such allegations were sustained at trial, the state public school financing system must be declared invalid as in violation of state and federal constitutional provisions guaranteeing the equal protection of the laws.

Upon remand answers to the complaint were filed by all existing defendants and certain school districts of the County of Los Angeles were allowed to intervene as defendants, adopting as their own the answers previously filed by the other county defendants. The California Federation of Teachers, AFL-CIO, was permitted to intervene as a plaintiff on condition that its complaint adopt the essential allegations of the original complaint. The trial court declined to accept defendants’ suggestion that the Legislature and the Governor be joined as indispensable parties. Trial commenced on December 26, 1972.

After more than 60 days of trial proceedings the court issued its “Memorandum Opinion Re Intended Decision” on April 10, 1974, and on August 30 of the same year filed its findings of fact and conclusions of law, there being 299 of the former and 128 of the latter. Judgment was entered on September 3, 1974, and defendants’ motion for a new trial was denied on October 28, 1974. This appeal followed.

I Our decision in Serrano I, which due to the then legal posture of the proceeding directed itself only to the sufficiency of allegations of the complaint to state a cause of action and contemplated full trial proceedings for the proof of such allegations, nevertheless attracted the immediate attention of the California Legislature.

As a result the lawmakers passed two bills—Senate Bill No. 90 (S.B. 90) and Assembly Bill No. 1267 (A.B. 1267)—which, upon becoming law during the pendency of trial proceedings, brought about certain significant changes in the public school financing system then under judicial scrutiny. Recognizing this, all parties to the action thereupon entered into a stipulation that for purposes of trial the California system for the financing of public schools should be deemed to include all law applicable at the time of trial.

This agreement was later incorporated as follows among the trial court’s conclusions of law: “For purposes of this litigation, the California system of financing public schools, includes not only all pertinent provisions of the California Constitution, statutes, and administrative codes, and all pertinent provisions of federal statutes and regulations, but includes all modifications, amendments, and additions to the California statutes and administrative codes resulting from the California Legislature’s enactment of those bills known as S.B. 90 and A.B. 1267.” (See Stats. 1972, ch. 1406; Stats. 1973, ch. 208.) In view of these developments we think it appropriate at this point, before undertaking a description of the particulars of the trial court’s judgment, to review in some detail the specific nature of the changes in the financing system which were wrought by the Legislature following our decision.

Because our understanding of these changes depends in large part on an understanding of the system as it existed at the time of Serrano I, we begin by reiterating the description of that system, based on the allegations of the complaint and certain matters judicially noticed, which we set forth in our earlier opinion. Clarity of exposition dictates that the following excerpt be extensive. A. The System Prior to S.B. 90 and A.

B. 1267 In Serrano I, we described the prior financing system as follows: “We begin our task by examining the California public school financing system which is the focal point of the complaint’s allegations. At the threshold we find a fundamental statistic—over 90 percent of our public school funds derive from two basic sources: (

a) local district taxes on real property and (

b) aid from the State School Fund. “By far the major source of school revenue is the local real property tax. Pursuant to

article IX,

section 6 of the California Constitution, the Legislature has authorized the governing body of each county, and city and county, to levy taxes on the real property within a school district at a rate necessary to meet the district’s annual education budget. (Ed. Code, § 20701 et seq.) The amount of revenue which a district can raise in this manner thus depends largely on its tax base—i.e., the assessed valuation of real property within its borders.

Tax bases vary widely throughout the state; in 1969-1970, for example, the assessed valuation per unit of average daily attendance of elementary school children ranged from a low of $103 to a peak of $952,156—a ratio of nearly 1 to 10,000. (Legislative Analyst, Public School Finance,

Part V, Current Issues in Educational Finance (1971) p. 7.) “The other factor determining local school revenue is the rate of taxation within the district. Although the Legislature has placed ceilings on permissible district tax rates (§ 20751 et seq.), these statutory maxima may be surpassed in a ‘tax override’ election if a majority of the district’s voters approve a higher rate. (§ 20803 et seq.) Nearly all districts have voted to override the statutory limits.

Thus the locally raised funds which constitute the largest portion of school revenue are primarily a function of the value of the realty within a particular school district, coupled with the willingness of the district’s residents to tax themselves for education. “Most of the remaining school revenue comes from the State School Fund pursuant to the ‘foundation program,’ through which the state undertakes to supplement local taxes in order to provide a ‘minimum amount of guaranteed support to all districts ....’(§ 17300.) With certain minor exceptions, the foundation program ensures that each school district will receive annually, from state or local funds, $355 for each elementary school pupil (§§ 17656, 17660) and $488 for each high school student. (§ 17665.) “The state contribution is supplied in two principal forms. ‘Basic state aid’ consists of a flat grant to each district of $125 per pupil per year, regardless of the relative wealth of the district. (Cal.

Const., art. IX, § 6, par. 4; Ed. Code, §§ 17751, 17801.) ‘Equalization aid’ is distributed in inverse proportion to the wealth of the district. “To compute the amount of equalization aid to which a district is entitled, the State Superintendent of Public Instruction first determines how much local property tax revenue would be generated if the district were to levy a hypothetical tax at a rate of $1 on each $100 of assessed valuation in elementary school districts and $.80 per $100 in high school districts. (§ 17702.) To that figure, he adds the $125 per pupil basic aid grant.

If the sum of those two amounts is less than the foundation program minimum for that district, the state contributes the difference. (§§ 17901, 17902.) Thus, equalization funds guarantee to the poorer districts a basic minimum revenue, while wealthier districts are ineligible for such assistance. “An additional state program of ‘supplemental aid’ is available to subsidize particularly poor school districts which are willing to make an extra local tax effort.

An elementary district with an assessed valuation of $12,500 or less per pupil may obtain up to $125 more for each child if it sets its local tax rate above a certain statutory level.

A high school district whose assessed valuation does not exceed $24,500 per pupil is eligible for a supplement of up to $72 per child if its local tax is sufficiently high. (§§ 17920-17926.) “Although equalization aid and supplemental aid temper the disparities which result from the vast variations in real property assessed valuation, wide differentials remain ill the revenue available to individual districts and, consequently, in the level of educational expenditures.

For example, in Los Angeles County, where plaintiff childrenx attend school, the Baldwin Park Unified School District expended only $577.49 to educate each of its pupils in 1968-1969; during the same year the Pasadena Unified School District spent $840.19 on every student; and the Beverly Hills Unified School District paid out $1,231.72 per child. (Cal. Dept. of Ed., Cal. Public Schools, Selected Statistics 1968-1969

(1970) Table IV-11, pp. 90-91.) The source of these disparities is unmistakable: in Baldwin Park the assessed valuation per child totaled only $3,706; in Pasadena, assessed valuation was $13,706; while in Beverly Hills, the corresponding figure was $50,885—a ratio of 1 to 4 to 13. (Id.) Thus, the state grants are inadequate to offset the inequalities inherent in a financing system based on widely varying local tax bases. “Furthermore, basic aid, which constitutes about half of the state educational funds (Legislative Analyst, Public School Finance,

Part II, The State School Fund: Its Derivation, Distribution arid Apportionment (1970) p. 9), actually widens the gap between rich and poor districts. (See Cal. Senate Fact Finding Committee on Revenue and Taxation, State and Local Fiscal Relationships in Public Education in California (1965) p. 19.) Such aid is distributed on a uniform per pupil basis to all districts, irrespective of a district’s wealth. Beverly Hills, as well as Baldwin Park, receives $125 from the state for each of its students. “For Baldwin Park the basic grant is essentially meaningless.

Under the foundation program the state must make up the difference between $355 per elementary child and $47.91, the amount of revenue per child which Baldwin Park could raise by levying a tax of $1 per $100 of assessed valuation. Although under present law, that difference is composed partly of basic aid and partly of equalization aid, if the basic aid grant did not exist, the district would still receive the same amount of state aid—all in equalizing funds. “For Beverly Hills, however, the $125 flat grant has real financial significance.

Since a tax rate of $1 per $100 there would produce $870 per elementary student, Beverly Hills is far too rich to qualify for equalizing aid. Nevertheless, it still receives $125 per child from the state, thus enlarging the economic chasm between it and Baldwin Park. (See Coons, Clune & Sugarman, Educational Opportunity: A Workable Constitutional Test of State Financial Structures (1969) 57 Cal.L.Rev. 305, 315.)” (Serrano I, at pp. 591-595.) It was the above-described system, then, which concerned us in Serrano I.

If, we held, the allegations of the complaint upon trial were found to be true, thus establishing that the system described was the one actually existing in California, that system would be invalid as in violation of state and federal equal protection provisions. The Legislature, apparently recognizing the likelihood of such a finding, decided not to await the outcome of such proceedings but to address itself immediately to the problem. (For an early comment on the practical economics confronting the Legislature in its response to Serrano I see Post & Brandsma, The Legislature’s Response to Serrano v.

Priest, 4 Pacific L.J. 28.) It is to the changes resulting from these legislative efforts that we now proceed to direct our comments. B. The New System The changes brought about by the passage of S.B. 90 and A.B. 1267, while significant, did not purport to alter the basic concept underlying the California public school financing system.

That concept, which we may refer to as the “foundation approach,” undertakes in general to insure a certain guaranteed dollar amount for the education of each child in each school district, and to defer to the individual school district for the provision of whatever additional funds it deems necessary to the furtherance of its particular educational goals.

As indicated in the foregoing excerpt, the mechanisms by which this concept was implemented prior to the adoption of S.B. 90 and A.B. 1267 were basically four: (1) basic aid, (2) equalization aid, (3) supplemental aid, and (4) tax rate limitations and overrides. The new law retained three of these, the element of supplemental aid (see text accompanying fn. 12, ante) being discontinued. The basic aid component remained the same, i.e., $125 per ADA.

Thus it was fundamentally through adjustments and alterations in the remaining two areas—equalization aid and tax rate limitations and overrides—that the Legislature sought to bring the system into constitutional conformity. Perhaps the most dramatic aspect of the new law was a substantial increase in the foundation level.

For the fiscal year 1973-1974 this figure, which constitutes the minimum amount per pupil guaranteed to each district by the state, was in general raised for elementary school districts from the previous level of $355 per ADA to the sum of $765 per ADA, and for high school districts from $488 to $950 per ADA. (§§ 17656, 17665.) Corresponding increases were provided for small schools (see fn. 10, ante), and areawide foundation programs (fn. 12, ante) were retained.

Provision was also made to offset the so-called “slippage factor,” which has been the result of yearly increases in the assessed valuation of real property within the districts (leading to an increase in the amount of local contribution through application of the “computational tax rate” (fn. 11, ante) and a corresponding decrease in state contribution).

Thus, a yearly increase in the foundation level of approximately 7 percent for the first three years and 6 percent thereafter was prescribed. (§ 17301, former subd. (e); see present § 17669.) At the same time, however, the “computational tax rate” was raised from $1 to $2.23 at the elementary level and from $0.80 to $1.64 at the high school level. (§ 17702.) The second major aspect of the new program involved the creation of “revenue limits,” or limitations on maximum expenditures per pupil in each school district exclusive of state and federal categorical support and of revenue generated by permissive override taxes. (§ 20902 et seq.) These provisions, generally speaking, allowed a district without a voted override to levy taxes at a rate no higher than would increase its expenditures per pupil over 1972-1973 base revenues by a permitted yearly inflation factor.

A district having a school tax rate which produced revenues in excess of foundation levels would receive inflation adjustments which decreased in magnitude as those revenues rose above foundation levels. On the other hand, a district having base revenues which, when added to the full inflation allowance, did not reach the foundation level, could increase its revenues by up to 16 percent of the preceding year’s revenue limit per ADA.

The combination of the foregoing rate limitation structure and the ever-advancing foundation levels would, it was contemplated, produce a phenomenon known as “convergence.” While poorer districts could move with comparative rapidity toward the rising foundation levels, richer districts, due to the diminished inflation adjustment permitted them, would increase their revenue bases at a much slower rate. This prognosis was complicated, however, by the fact that district revenue limits applied only to revenue generated by the maximum general purpose tax rate available to a district in the absence of voter approval.

Such limitations might be exceeded as before (see text following fn. 9, ante) if a majority of the voters in the district voted an override (§ 20906). Permissive overrides (i.e., overrides which can be imposed without voter approval) were also authorized to raise revenue for certain special purposes, such as capital outlay.' II With this background in mind we turn to a consideration of the trial court’s findings and judgment. As indicated above, the trial court issued voluminous and comprehensive findings in support of its judgment. While we do not here undertake to present a complete

summary of those findings, especially as they duplicate what has been pointed out above, it is important for present purposes to indicate their substance as they relate to the effect and validity of the system as it now stands following the legislative alterations enacted after our decision in Serrano I. A. Findings of Fact The court found in substance as follows: The California public school financing system following the adoption of. S.B. 90 and A.B. 1267 continues to be based upon the foundation concept.

Although there have been substantial increases in foundation levels, those increases, considered alone, do not eliminate any of the unconstitutional features which existed at the time of Serrano I. The retention of the basic-aid element in the foundation program, for example, continues to have an anti-equalizing effect by benefitting only those districts not eligible for equalization aid.

Moreover, basic-aid districts continue to be favored over equalization-aid districts insofar as they may reach the foundation level with a tax rate less than the computational rate or by using the comptational rate raise revenue in excess of the foundation level. The revenue limit feature of the new law has similarly serious defects. By taking 1972-1973 revenues as its base figure, it perpetuates inequities resulting from property tax base differentials.

More importantly, it will allow total “convergence” between high-spending revenue limits and rising foundation levels only after many, perhaps as many as 20, years—even assuming no voted overrides. After five years of functioning —again assuming that no voted overrides occur, many high-wealth, high-spending districts will still be spending two to three times more per pupil than many low-wealth districts are able to spend.

Even when the “convergence” has run its course, there will continue to be a substantial inequality between basic-aid and equalization-aid districts, again assuming no voted overrides, due to the fact that the former districts will be able to achieve the foundation level at a tax rate which is less than the computational rate. Thus, to the extent that equal tax rates can produce differing expenditure levels, or that equal expenditure levels can be produced by differing tax rates, the system will continue to generate school revenue in proportion to the wealth of the individual district.

This potential disparity is exacerbated by the continued availability of voted overrides pursuant to

section 20906. The passage of such overrides by high-wealth school districts would operate to nullify the contemplated “convergence” effect sought to be achieved by increased equalization aid and the imposition of revenue limits. The operation of the latter feature, in combination with continuing inflation, will make it impossible for high-wealth, high-spending districts to maintain the present quality of their programs, and therefore such districts will have a great incentive to vote tax rate overrides because even a slight rate increase in such districts will raise substantial revenues.

In the districts having a relatively low assessed valuation per pupil, on the other hand, the incentive to vote such overrides will be less, for only a substantial increase in the tax rate will be sufficient to produce substantial additional revenues. As a result, the extent of local control (i.e., “the opportunity to go above the foundation program level in pursuit of a higher quality program”) will continue to be a function of district wealth under the new law._ The effect of disparities in district wealth also continues to be felt in the area of capital outlay.

Permissive override taxes for this purpose, authorized by the new law for the repayment of bonded indebtedness- and state aid loans, generate more revenue at a given tax rate in districts with a high assessed valuation per pupil than in districts with lower assessed valuation per pupil.

Moreover, wealthier districts, being generally able to generate sufficient funds for capital outlay purposes within their bonding capacities, are often not required to levy permissive override taxes for the repayment of state aid loans, which is the only source of assistance for districts whose bonding capacity is insufficient to finance needed capital improvements. Municipal tax overburden, which “refers to high property tax rates for other governmental services than education,” is a phenomenon of low-wealth, low-spending districts as well as high-wealth, high-spending districts.

The problems associated with this phenomenon—such as vandalism, bilingualism, old buildings, disadvantaged youth, and poverty —are present in all such districts, but the wealthier districts from the point of view of assessed valuation per pupil are better able to respond to such problems than the poorer districts. Similarly, the presence of small districts, which require greater expenditures because of “diseconomies of scale,” is not confined to wealthier districts, and wealth differences among such districts create substantial disparities in both tax rates and expenditures.

While federal revenue grants to school districts in which federal tax-exempt facilities are located must be considered in evaluating wide disparities in assessed wealth per pupil, the availability of such revenue under Public Law 81-874 has been substantially curtailed, accounts for only a negligible amount of total educational revenue in California, and affects only a small number of districts. Even among such districts wide variations in assessed wealth create inequity in tax rates and spending levels.

In view of all of the foregoing it is clear that substantial disparities in expenditures per pupil resulting from differences in local taxable wealth will continue to exist under S.B. 90 and A.B. 1267. The reason for this is that essentially local wealth is the principal determinant of revenue, that high wealth districts do not need to make the same tax effort as low' wealth districts in order to reach, let alone exceed, the level of the foundation program and that in this setting, basic aid becomes anti-equalizing and “convergence” of doubtful achievement.

There exist several alternative potential methods of financing the public school system of this state which would not produce wealth-related spending disparities.

These alternative methods, which are “workable, practical and feasible,” include: “(1) full state funding, with the imposition of a statewide property tax; (2) consolidation of the present 1,067 school districts into about five hundred districts, with boundary realignments to equalize assessed valuations of real property among all school districts; (3) retention of the present school district boundaries but the removal of commercial and industrial property from local taxation for school purposes and taxation of such property at the state level; (4) school district power equalizing[,] which has as its essential ingredient the concept that school districts could choose to spend at different levels but for each level of expenditure chosen the tax effort would be the same for each school district choosing such level whether it be a high-wealth or a low-wealth district; (5) vouchers; and (6) some combination of two or more of the above.” Substantial disparities in expenditures per pupil among school districts cause and perpetuate substantial disparities in the quality and extent of availability of educational opportunities.

For this reason the school financing system before the court fails to provide equality of treatment to all the pupils in the state. Although an equal expenditure level per pupil in every district is not educationally sound or desirable because of differing educational heeds, equality of educational opportunity requires that all school districts possess an equal ability in terms of revenue to provide students with substantially equal opportunities for learning.

The system before the court fails in this respect, for it gives high-wealth districts a substantial advantage in obtaining higher quality staff, program expansion and variety, beneficial teacher-pupil ratios and class sizes, modem equipment and materials, and high-quality buildings. There is a distinct relationship between cost and the quality of educational opportunities afforded. Quality cannot be defined wholly in terms of performance on statewide achievement tests because such tests do not measure all the benefits and detriments that a child may receive from his educational experience.

However, even using pupil output as a measure of the quality of a district’s educational program, differences in dollars do produce differences in pupil achievement. B. Conclusions of Law and Judgment Although we consider it unnecessary to set out a comprehensive review of the trial court’s 128 conclusions of law, the most fundamental of those conclusions were incorporated into the judgment, which we now describe.

The trial court held that the California public school financing system for elementary and secondary schools as it stood following the adoption of S.B. 90 and A.B. 1267, while not in violation of the equal protection clause of the Fourteenth Amendment to the federal Constitution, was invalid as in violation of former

article I, sections 11 and 21, of the California Constitution (now art. IV, & 16 and art. I, § 7 respectively; see and compare Serrano I, supra, at p. 596, fn. 11), our state equal protection provisions. Indicating the respects in which the system before it was violative of our state constitutional standard, the court set a period of six years from the date of entry of judgment as a reasonable time for bringing the system into constitutional compliance; it further held, and ordered that the existing system should continue to operate until such compliance had been achieved.

The judgment specifically provided that it was not to be construed to require the adoption of any particular system of school finance, but only to require that the plan adopted comport with the requirements of state equal protection provisions.

Finally, the trial court retained jurisdiction of the action and over the parties “so that any of such parties may apply for appropriate relief in the event that relevant circumstances develop, such as a failure by the legislative and executive branches of the state government to take the necessary steps to design, enact into law, and place into operation, within a reasonable time from the date of entry of this Judgment, a California Public School Financing System for public elementary and secondary schools that will fully comply with the said equal-protection-of-the-law provisions of the California Constitution.” Ill Defendants advance three substantive contentions on appeal.

First, it is urged that the trial court employed inappropriate criteria insofar as it focussed on the notion of so-called “fiscal neutrality” to the exclusion of other factors relevant to its determination. If the trial court had employed appropriate criteria, it is suggested, the system as improved by S.B. 90 and A.B. 1267 would have been seen to be free from constitutional objection on equal protection grounds. Second, defendants urge that an improper legal standard of equal protection review was utilized.

The proper standard, it is contended, even under our state constitutional provisions, is that requiring no more than a rational relationship, critically analyzed, between the financing method chosen and some legitimate state purpose. Third, and assuming that the financing system before the court is to some extent inconsistent with state constitutional provisions guaranteeing the equal protection of the laws, it is urged that those provisions are to that extent in conflict with other provisions of the state Constitution and, in accordance with the principle of consistency in constitutional

interpretation, should be made to yield pro tanto in order to avoid such conflict. IV Before taking up the foregoing contentions, we first dispose of a preliminary procedural matter. Defendants urge that the trial court was without jurisdiction to proceed in this matter because two allegedly indispensable parties—the Legislature and the Governor—were not joined. (See Code Civ.

Proc., § 389.) It is pointed out that “the operative and directory provisions” of the judgment “are addressed solely to the Legislative and Governor,” and that the parties defendant in the action lack all power to bring about the relief sought by plaintiffs and awarded by the trial court—i.e., the restructuring of the state public school financing system in a manner which will comply with provisions of our state Constitution guaranteeing equal protection of the laws. Reference is made to certain legislative reapportionment cases, notably Silver v.

Brown (1965) 63 Cal.2d 270 [46 Cal.Rptr. 308, 405 P.2d 132], and to the fact that the Governor and the members of the Legislature were there made parties. To do otherwise in this case, it is urged, “would deny [the] people who created this financing system through their elective representatives of their day in Court....” This contention is based on several misconceptions and inaccurate statements of the record. First, it is clear that the trial court— wholly cognizant of the well-established principle, rooted in the doctrine of separation of powers (Cal. Const., art.

Ill, § 3), that the courts may not order the Legislature or its members to enact or not to enact, or the Governor to sign or not to sign, specific legislation—by no means addressed the “operative and directory provisions” of its judgment to the Legislature and Governor. On the contrary it simply declared that the public school financing system before it, which was administered by the parties defendant, was in violation, of state constitutional provisions guaranteeing equal protection of the laws.

The trial court also indicated that it would retain jurisdiction over the matter so that any party might apply for “appropriate relief’ in the event that the lawmakers and the Governor had failed within a reasonable time, set by the judgment at six years, “to take the necessary steps to design, enact into law, and place into operation” a system which would comply with those provisions.

However, it explicitly and properly refrained from issuing directives to the lawmakers and the chief executive, státing in its judgment: “. . . [T]his judgment is not intended to require, and is not to be construed as requiring, the adoption of any particular plan or system for financing the public elementary and secondary schools of the state ....” Secondly, as the reapportionment cases themselves indicate, it is the general and long-established rule that in actions for declaratory and injunctive relief challenging the constitutionality of state statutes, state officers with statewide administrative functions under the challenged statute are the proper parties defendant. (See Yorty v.

Anderson (1963) 60 Cal.2d 312, 317-318 [33 Cal.Rptr. 97, 384 P.2d 417], and cases there cited; cf. D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1 [112 Cal.Rptr. 786, 520 P.2d 10]; City of Carmel-by-the-Sea v. Young (1970) 2 Cal.3d 259 [85 Cal.Rptr. 1, 466 P.2d 225, 37 A.L.R.3d 1313].) The fact that in the reapportionment context the Legislature and its members may also be considered proper parties stems from the direct institutional interest of those parties in the determination. (See and cf. Silver v. Jordan (S.D.

Cal. 1964) 241 F.Supp. 576, 579, affirmed (1965) 381 U.S. 415 [14 L.Ed.2d 689, 85 S.Ct. 1572]; Minnesota State Senate v. Beens (1972) 406 U.S. 187, 194 [32 L.Ed.2d 1, 8, 92 S.Ct. 1477].) In the instant case, on the other hand, as in the great majority of cases brought against state administrative officers to challenge the constitutionality of a statute or statutes administered by them, the Legislature and the Governor lack any similar interest.

The interest they do have—that of lawmakers concerned with the validity of statutes enacted by them—is not of the immediacy and directness requisite to party status; it may thus be fully and adequately represented by the appropriate administrative officers of the state. Moreover, even should the Legislature and the Governor be considered proper parties to this litigation (i.e., parties subject to permissive joinder or capable of intervention), it is clear that they could in no case be considered indispensable parties, or parties without whom the action could not fairly proceed.

Indispensable parties, as we said in Bank of California v. Superior Court (1940) 16 Cal.2d 516, at page 521 [106 P.2d 879], are parties “whose interests, rights, or duties will inevitably be affected by any decree which can be rendered in the action. Typical are the situations where a number of persons have undetermined interests in the same property, or in a particular trust fund, and one of them seeks, in an action, to recover the whole, to fix his share, or to recover a portion claimed by him. The other persons with similar interests are indispensable parties.

The reason is that a judgment in favor of one claimant for part of the property or fund would necessarily determine the amount or extent which remains available to the others. Hence, any judgment in the action would inevitably affect their rights.” Manifestly, the Legislature and the Governor have no interest in this proceeding which is remotely comparable to that contemplated by this language.

Moreover, as we also said in the Bank of California case, in dealing with the doctrine of indispensable and necessary parties “we should . . . be careful to avoid converting a discretionary power or a rule of fairness in procedure [] into an arbitrary and burdensome requirement which may thwart rather than accomplish justice.” (16 Cal.2d at p. 521; see also Muggill v. Reuben H.

Donnelley Corp. (1965) 62 Cal.2d 239, 241 [42 Cal.Rptr. 107, 398 P.2d 147].) In the instant case it is quite clear that no governmental interest has lacked for able and willing advocates in the absence of the Legislature and Governor as parties. This case has been well-known to those entities since its inception, yet they have at no point sought intervention or indicated any interest in doing so. Even more significantly, this is a matter whose resolution, has been anxiously awaited by the parties and the public at large for more than seven years.

In light of these considerations we are convinced that to invoke the doctrine of indispensability, and thus require the renewal of trial proceedings on this ground, would indeed be to “thwart rather than accomplish justice." V Defendants’ first substantive contention, as indicated above, concerns the criteria employed by the trial court in its examination óf the school finance system before it.

The trial court, it is urged, by confining its inquiry to the matter of wealth-related disparities among the several school districts, improperly ignored certain other factors—for example, the “adequacy” and “equality” of educational programs—and thus oversimplified the problem before it.

This point of view, it is claimed, is reflected in the terms of the judgment itself. (See par. 4 of the judgment set forth ante in fn. 21.) The application of proper criteria, defendants argue, would require the trial court to look not merely to the operation of particular “mechanisms” utilized by the system but to the overall results achieved in terms of “a fair balance, statewide, between equal educational opportunities and local supplementation.” To do otherwise, it is urged, is to adopt a nearsighted approach which, in its zeal to perfect one “mechanism” in the system, imposes a standard of “neutrality” upon all its other elements. “Municipal overburden,” with its attendant problems, also covered by trial court findings, is cited by defendants as a particular example of an -area requiring not “neutrality” but special efforts according to the circumstances.

Defendants offer two formulations of what they consider to be adequate criteria for the assessment of the public school financing system. In their opening brief they suggest a tripartite test which is less an alternative to the “fiscal neutrality” approach of the trial court than what turns out to be defendants’ description of the system at issue from the standpoint of its overall effect.

Perhaps realizing the unwieldiness of this formulation, they proceed in their reply brief to state the apparent kernel of their position in more straightforward terms: of the three types of revenues available to school districts—foundation funds, categorical aids, and local supplements—only the third, it is asserted, is “unequalized,” or dependent upon taxable district wealth and the capacity or willingness of the voters to pay additional school taxes.

The percentage of total state school district revenues represented by these “unequalized” revenues, defendants assert, “provides an objective measure of the relative weights given by the system in a given year to equal educational opportunities and local participation in school fiscal affairs.” So long as this figure is sufficiently low—defendants suggest 10 percent as an appropriate figure—the relevant competing interests are adequately accommodated. This, then, is the “optimum balance” criterion which defendants would suggest that we utilize in preference to the “fiscal neutrality” approach of the trial court.

If we were to do so, it is asserted, we would find that the subject system, as improved by the provisions of S.B. 90 and A.B. 1267, is in approximate compliance with the suggested standards. The fundamental defect in this argument is that it flies in the face of our holding in Serrano I and also of the findings of the trial court, which were carefully grounded on that holding.

In Serrano I we held that if the allegations of the complaint were sustained—which allegations dealt not only with district disparities in revenue-producing capability but also with the effect of such disparities on the quality of education in the various districts (see Serrano I, supra, at p. 601, fn. 16)—then “the financial system must fall and the statutes comprising it must be found unconstitutional” as in violation of equal protection. (Serrano I, supra, at p. 615.) We described the system in question (i.e., the system alleged to exist in the complaint) as one which “conditions the full entitlement to [the interest in education] on wealth, classifies its recipients on the basis of their collective affluence[,] and makes the quality of a child’s education depend upon the resources of his school district. . . .” (Id. at p. 614.) It follows, therefore, that any system in which the two basic elements of this description are present—i.e., (1) the conditioning of the availability of school revenues upon district wealth, with resultant disparities in school revenue, and (2) the dependency of the quality of education upon the level of district expenditure—must be declared invalid unless it finds justification sufficient to satisfy the applicable equal protection test.

The trial court, scrupulously adhering to the law as set forth in our previous opinion, concluded in essence that the new school financing system, although considerably improved over that which was before us in Serrano I, nevertheless retained the foregoing ingredients of the former system. This determination was recorded in no less than 299 findings of fact, none of which is challenged by defendants as lacking in substantial support. In these circumstances defendants cannot now be heard to maintain that different “criteria” should have been employed by the trial court.

The “criteria” utilized by the trial court in assessing the discriminatory effect of the system before it were those enjoined upon the court by our opinion in Serrano I. Clearly there was no error in this respect. Moreover, even if defendants’ “optimum balance” argument were not foreclosed by our decision in Serrano I—and if it be further assumed that the recomménded 90/10 ratio might be sufficient to satisfy constitutional demands—it is apparent that the factual premises on which such argument is based are open to serious question.

In the first place, the figures upon which defendants base their assertion of present compliance with the suggested standard (see fn. 31, ante, and accompanying text) are drawn from 1973-1974 fiscal data, that is, data reflecting the immediate impact of the post-Serrano I enactments. It is clear, however, that in 1973-1974 the various pressures—notably increasing inflation and declining enrollment—tending to augment the district ratio of local supplements to other revenues had not fully manifested themselves.

Under the present system which, according to the trial court’s findings, makes the ability of particular school districts to cope with such pressures vary according to the taxable wealth of the particular district, it can be expected that future years will see an increase statewide in the ratio of local supplements to other revenues. In such circumstances, the extent of an individual district’s participation in the statewide increase will be geared to its taxable wealth.

To ask, as defendants do, that we defer our notice of such probable future disparities to the time of their actual occurrence is to ask that we ignore inherent defects in the system which we are called upon to examine.

More fundamentally, however, we point out that the basic factual premise upon which defendants posit the above argument—namely that under the subject system 90 percent of total statewide school expenditures are “equalized” or, in other words, are not “dependent upon the taxable wealth in a school district and the capacity and willingness of the voters to pay additional school taxes”—is flatly and fully contradicted by the factual determinations of the trial court.

The lion’s share of those revenues asserted to be in the “equalized” category is composed of revenue represented by the foundation program (approximately 74 percent of all revenue), yet the trial court explicitly found that the tax effort required of a school district to attain the foundation level varied according td the taxable wealth of that district. Thus, these revenues can by no means be considered “equalized” under defendants’ own definition of that term.

If we include foundation program funds among those funds which are “unequalized,” the ratio becomes not 10 percent to 90 percent in favor of “equalized” revenues but approximately 84 percent to 16 percent in favor of “unequalized” revenues. Finally, we offer some comments upon the complex problems associated with “municipal overburden,” which defendants and some of the amici curiae, notably the San Francisco Unified School District, see as a critical problem under any system of school financing. It is important to recognize at the outset that “municipal overburden” is a banner under which many armies march.

Strictly speaking, the term relates to the phenomenon, prevalent in concentrated urban areas, of high property tax rates for governmental services other than education. Such a phenomenon, it is suggested, must be taken into account when comparing school tax rates in various districts; a lower school tax rate in an urban area, it is urged, cannot be realistically compared with higher tax rates in suburban or rural areas in terms of “equal tax effort” because the taxpayers residing in districts in the latter areas may bear a lighter overall tax burden in terms of a total rate.

As the trial court found, however, the phenomenon in question is not limited in its occurrence to districts such as San Francisco where a relatively high assessed valuation (due to a concentration of business and industry) combined with a comparatively small ADA permits a relatively low school tax rate. On the contrary, the residents of districts in Los Angeles, San Diego, and San Jose, for example—with a much lower assessed valuation per ADA—suffer from the same typically urban problems and require similarly high nonschool tax rates to meet them.

The system before us, by tying a district’s ability to respond to its educational needs and desires to its taxable wealth per ADA, clearly discriminates among equally beleaguered urban districts from the point of view of their respective capacities to bring educational benefits to the students resident within their borders. The term “municipal overburden” is also sometimes used to designate certain problems related not to high nonschool tax rates but to additional burdens of school expenditure imposed upon urban districts by the facts of urban life.

When there is widespread poverty, disadvantaged youth, and bilingualism, in a district, it is argued, not only do purely educational costs rise due to the necessity for increased effort to overcome motivational and adaptive problems, but costs related to matters like vandalism rise as well. Again, however, the incidence of these problems is not limited to districts of any particular level of wealth per ADA.

From the point of view of providing education, those districts which are able to meet the above problems because of a relatively high assessed valuation per ADA are clearly favored over districts which lack that advantage. The immediately foregoing discussion reveals but one aspect of a more fundamental and pervasive problem. As defendants state the matter in their reply brief: “The weak relationship between expenditures per pupil and taxable wealth per pupil... is explained in part by factors affecting the cost of offering substantially equivalent school programs in different school districts.

For example, some school districts have old buildings which require expensive maintenance; some have a disproportionate number of older teachers entitled to higher salaries; some must spend excessive amounts for security, and for the repair of vandalized buildings. Some high schools in remote parts of the State have only a few students and must maintain costly classes for less than ten students. Some schools must insulate rooms to keep out distracting noise from airports or freeways.

Some are located in parts of the State where climatic conditions require unusually high expenditures for heating or air conditioning.” Under the system we here examine, however, the ability of a school district to meet those problems peculiar to it depends in large part upon the taxable wealth of that district per ADA. A fiscally neutral system, if tailored in a responsive and responsible way, would in no way resemble the specter which defendants raise.

Rather, it would make the individual district’s ability to meet its own particular problems connected with providing educational opportunity depend upon factors other than the wealth of the district, and thus dissipate the discrimination which characterizes the system before us. For all of the foregoing reasons we reject in its entirety defendants’ constellation of contentions dealing with the criterion of “fiscal neutrality” adopted by the trial court.

We have concluded, upon a complete review of the findings and the evidence, that the discrimination in public ' schooTffhancirig of whichplaintifFs complain has been shown to exist under the system here at issue, and that the trial court, in so* finding, employed" proper~critená7Wenow' proceed to address the question whether the system as shown to exist is invalid as in violation of constitutional guarantees.

VI In Serrano I this court, in its determination of whether or not the allegations of the complaint stated a cause of action, was faced at the outset with the task of choosing the proper equal protection standard to be applied. “[T]he United States Supreme Court,” we pointed out, “has employed a two-level test for measuring legislative classifications against the equal protection clause. ‘In the area of economic regulation, the high court has exercised restraint, investing legislation with a presumption of constitutionality and requiring merely that distinctions drawn by a challenged statute bear some rational relationship to a conceivable legitimate state purpose. ... [1] On the other hand, in cases involving “suspect classifications” or touching on “fundamental interests,” . . . the court has adopted an attitude of active and critical analysis, subjecting the classification to strict scrutiny. . . .

Under the strict standard applied in such cases, the state bears the burden of establishing not only that it has a compelling interest which justifies the law but that the distinctions drawn by the law are necessary to further its purpose.’ ” (Serrano I at p. 597, quoting from Westbrook v.

Mihaly (1970) 2 Cal.3d 765, 784-785 [87 Cal.Rptr. 839, 471 P.2d 487], vacated on other grounds (1971) 403 U.S. 915 [29 L.Ed.2d 692, 91 S.Ct. 2224].) Concluding on the basis of the complaint that the case before us involved both a “suspect classification” (because the discrimination in question was made on the basis of wealth) and affected a “fundamental interest” (education), we proceeded to apply the latter standard.

Addressing ourselves to the state interest advanced by defendants—local decision-making power and fiscal control—we concluded that it was not incumbent upon us to decide whether that asserted interest was “compelling” or whether the existing financial system was “necessary” to its furtherance because under the facts as alleged the notion of local control was a “cruel illusion for the poor school districts” due to limitations placed upon them by the system itself. “In

summary,” we held, “so long as the assessed valuation within a district’s boundaries is a major determinant of how much it can spend for its schools, only a district with a large tax base will be truly able to decide how much it really cares about education. The poor district cannot freely choose to tax itself into an excellence which its tax rolls cannot provide.

Far from being necessary to promote local fiscal choice, the present financing system actually deprives the less wealthy districts of that option.” (Serrano I at p. 611.) During the progress of trial proceedings below, the United States Supreme Court rendered its decision in San Antonio School District v. Rodriguez, supra, 411 U.S. 1.

There, addressing itself to an equal protection attack on the Texas public school financing system— which like the system here in question is based on the “foundation approach”—the high court held that that system (1) did not result in a suspect classification based upon wealth, and (2) did not aifect any fundamental interest, education being less than fundamental for these purposes because it was not explicitly or implicitly guaranteed or protected by the terms of the federal Constitution. (Id., at pp. 33-34, 61-62 [36 L.Ed.2d at pp. 42-43, 59-60].) Accordingly, the court held, the so-called “strict scrutiny test” for equal protection review of state laws under the Fourteenth Amendment to the United States Constitution was inappropriate.

Reinforced in this conclusion by the fact that the case before it involved peculiarly local questions of taxation, fiscal planning, and educational policy—and -thus raised serious considerations of federalism and deference to local decision (id., at pp. 40-44 [36 L.Ed.2d at pp. 47-50])—the high court proceeded to examine the Texas system under the less stringent “rational relationship” test, concluding that .such a relationship to the state purpose of local control was shown. (Id., at pp. 48-55 [36 L.Ed.2d at pp. 51-56].) We—along with the trial court and the parties—think it is clear that Rodriguez undercuts our decision in Serrano I to the extent that we held the California public school financing system (if proved to be as alleged) to be invalid as in violation of the equal protection clause of the Fourteenth Amendment to the United States Constitution.

However, as we made clear in footnote 11, our decision in Serrano I was based not only on the provisions of the federal Constitution but on the provisions of our own state Constitution as well. Our footnote 11 read as follows: “The complaint also alleges that the financing system violates

article I, sections 11 and 21 [now in substance

article IV,

section 16 and

article I,

section 7(b)] of the California Constitution.

Section 11 provides: ‘All laws of a general nature shall have a uniform operation.’

Section 21 states: ‘No special privileges or immunities shall ever be granted which may not be altered, revoked, or repealed by the Legislature; nor shall any citizen, or class of citizens, be granted privileges or immunities which, upon the same terms, shall not be granted to all citizens.’ We have construed these provisions [] as ‘substantially the equivalent’ of the equal protection clause of the Fourteenth Amendment to the federal Constitution. (Dept, of Mental Hygiene v.

Kirchner (1965) 62 Cal.2d 586, 588 [43 Cal.Rptr. 329, 400 P.2d 321].) Consequently, our analysis of plaintiffs’ federal equal protection contention is also applicable to their claim under these state constitutional provisions.” (Serrano I at p. 596.) The first question here facing us is that of the proper

interpretation of the foregoing two sentences in light of Rodriguez. Three possible

interpretations of this language have been suggested to us. All proceed on the premise properly embraced by all parties hereto, that the footnote’s citation of our second Kirchner opinion forecloses any argument that a classification which satisfies federal equal protection standards by the same token satisfies our own constitutional provisions.

Granting this, however, defendants argue that our reliance in Serrano I on United States Supreme Court cases dealing with the proper application of the strict scrutiny standard of review must be reexamined in light of Rodriguez, and that such reexamination must result in the conclusion that neither a “suspect classification” nor a “fundamental interest” is here involved, precluding use of a strict scrutiny standard for purposes of resolving the state constitutional question.

Plaintiffs, on the other hand, urge that removal of the federal ground by Rodriguez leaves our Serrano I rationale wholly intact on state grounds. Alternatively they argue that if Rodriguez is to be utilized by analogy in applying our state constitutional provisions—so that, for example, a “fundamental interest” for state purposes would be held to exist only if the right in question is explicitly dt implicitly guaranteed by the state Constitution—the interest in education will be seen to meet this test. This, it will be recalled, was the theory adopted by the trial court (see fn. 19, ante, and accompanying text).

The primary position adopted by plaintiffs on this point is the correct one. As Serrano I makes clear through its reference to our second Kirchner opinion (and as all parties hereto are agreed), our state equal protection provisions, while “substantially the equivalent of’ the guarantees contained in the Fourteenth Amendment to the United States Constitution, are possessed of an independent vitality which, in a given case, may demand an analysis different from that which would obtain if only the federal standard were applicable.

We have recently stated in a related context: “[I]n the area of fundamental civil liberties—which includes ... all protections of the California Declaration of Rights—we sit as a court of last resort, subject only to the qualification that, our

interpretations may not restrict the guarantees accorded the national citizenry under the federal charter. In such constitutional adjudication, our first referent is California law and the full panoply of rights Californians have come to expect as their due. Accordingly, decisions of the United States Supreme Court defining fundamental rights are persuasive authority to be afforded respectful consideration, but are to be followed by California courts only when they provide no less individual protection than is guaranteed by California law.” (People v.

Longwill (1975) 14 Cal.3d 943, 951, fn. 4 [123 Cal.Rptr. 297, 538 P.2d 753]; see also People v. Disbrow (1976) 16 Cal.3d 101, 114-115 [127 Cal.Rptr. 360, 545 P.2d 272]; People v. Norman (1975) 14 Cal.3d 929, 939 [123 Cal.Rptr. 109, 538 P.2d 237]; People v. Brisendine (1975) 13 Cal.3d 528, 548-552 [119 Cal.Rptr. 315, 531 P.2d 1099]; Burrows v. Superior Court (1974) 13 Cal.3d 238, 245-246 [118 Cal.Rptr. 166, 529 P.2d 590]; Mandel v. Hodges (1976) 54 Cal.App.3d 596, 615-617 [127 Cal.Rptr. 244]; State v. Kaluna (1974) 55 Hawaii 361 [520 P.2d 51, 58-59]; Bakery.

City of Fairbanks (Alaska 1970) 471 P.2d 386, 401-402; see generally Note, Project Report: Toward An Activist Role for State Bills of Rights (1973) 8 Harv. Civ. Rights—Civ. Lib.L.Rev. 271; Falk, Foreword: The State Constitution: A More Than “Adequate” Nonfederal Ground (1973) 61 Cal. L.

Rev. 273; Note, Rediscovering the California Declaration of Rights (1974) 26 Hastings L.J. 481.) Thus, the fact that a majority of the United States Supreme Court have now chosen to contract the area of active and critical analysis under the strict scrutiny test for federal constitutional purposes can have no effect upon the existing construction and application afforded our own constitutional provisions. Nor can the additional fact—if it be a fact—that certain of the high court’s former decisions (which may have been relied upon by us in Serrano

I) may not be expected to thrive in the shadow of Rodriguez cause us to withdraw from the principles we there announced on state as well as federal grounds. For these reasons then, we now adhere to our determinations, made in Serrano I, that for the reasons there stated and for purposes of assessing our state public school financing system in light of our state constitutional provisions guaranteeing equal protection of the laws (1) discrimination in educational opportunity on the basis of district wealth involves a suspect classification, and (2) education is a fundamental interest.

Because the school financing system here in question has been shown by substantial and convincing evidence produced at trial to involve a suspect classification (insofar as this system, like the former one, draws distinctions on the basis of district wealth), and because that classification affects the fundamental interest of the students of this state in education, we have no difficulty in concluding today, as we concluded in Serrano I, that the school financing system before us must be examined under our state constitutional provisions with that strict and searching scrutiny appropriate to such a case.

We are fortified in reaching this conclusion by language appearing in the Rodriguez decision itself.

The high court, in passing upon the validity of the Texas system under the federal equal protection clause, repeatedly emphasized its lack of “expertise” and familiarity with local problems of school financing and educational policy, which lack “counselled] against premature interference with informed judgments made at the state and local levels.” (Rodriguez, supra, at p. 42 [36 L.Ed.2d at p. 48].) These considerations, in conjunction with abiding concerns from the standpoint of federalism, in the high court’s view “buttressed] [its] conclusion that Texas’ system of public school finance is an inappropriate candidate for strict judicial scrutiny.” (Id., at p. 44 [36 L.Ed.2d at p. 49].) This court, on the other hand, in addressing the instant case occupies a position quite different from that of the high court in Rodriguez.

The constraints of federalism, so necessary to the proper functioning of our unique system of national government, are not applicable to this court in its determination of whether our own state’s public school financing system runs afoul of state constitutional provisions.

Moreover, while we cannot claim that we have achieved the perspective of “expertise” on the subjects of school financing and educational policy, our deliberations in this matter have had the benefit of a thoughtfully developed trial record (comprising almost 4,000 pages of testimonial transcript, replete with the opinions of experts of various accomplishments and persuasions, and a clerk’s transcript of almost equal size), comprehensive if not exhaustive findings on the part of an able trial judge, and voluminous briefing by the parties and no less than nine amici curiae, among which are included the state Superintendent of Public Instruction.

We believe that this background amply equips us to undertake the searching judicial scrutiny of our state’s public school financing system which is required of us under our state constitutional provisions guaranteeing equal protection of the laws.

We point out in closing, however, that our application of the strict scrutiny test in this case should in no way be interpreted to imply an acceptance of the theory, adopted by the trial court and advanced as an alternative rationale by plaintiffs and some of their supporting amici, by which the Rodriguez approach to assessing “fundamentalness” in affected rights is applied by analogy in the state sphere. (See fn. 20, ante, and accompanying text.) Suffice it to say that we are constrained no more by inclination than by authority to gauge the importance of rights and interests affected by legislative classifications wholly through determining the extent to which they are “explicitly or implicitly guaranteed” (Rodriguez, supra, at p. 33 [36 L.Ed.2d at p. 43]) by the terms of our compendious, comprehensive, and distinctly mutable state Constitution.

In applying our state constitutional provisions guaranteeing equal protection of the laws we shall continue to apply strict and searching judicial scrutiny to legislative classifications which, because of their impact on those individual rights and liberties which lie at the core of our free and representative form of government, are properly considered “fundamental.” VII For the reasons above stated, we have concluded that the state public I school financing system here under review, because it establishes and I perpetuates a classification based upon district wealth which affects the fundamental interest of education, must be subjected to strict judicial scrutiny in determining whether it complies with our state equal \protection provisions.

Under this standard the presumption of constitutionality normally attaching to state legislative classifications falls away, and the state must shoulder the burden of establishing that the classification in question is necessary to achieve a compelling state interest. (Serrano I at p. 597; see also Weber v. City Council (1973) 9 Cal.3d 950, 958-959 [109 Cal.Rptr. 553, 513 P.2d 601].) Basing our determination upon the amply supported factual findings of the trial ¡i court, which we have summarized in

part II above, we conclude without | hesitation that the trial court properly determined that the state failed to bear this burden. Our reasons for this conclusion are essentially those stated by us on this point in Serrano I. The system in question has been found by the trial court, on the basis of substantial and convincing evidence, to suffer from the same basic shortcomings as that system which was alleged to exist in the original complaint—to wit, it allows the availability of educational opportunity to vary as a function of the assessed valuation per ADA of taxable property within a given district.

The state interest advanced in justification of this discrimination continues to be that of local control of fiscal and educational matters. However, the trial court has found that asserted interest to be chimerical from the standpoint of those districts which are less favored in terms,of taxable wealth per pupil, and we ourselves, after a thorough examination of the record, are in wholehearted agreement with this assessment.

The admitted improvements to the system which were wrought by the Legislature following Serrano I have not been and will not in the foreseeable future be sufficient to negate those features of the system which operate to perpetuate this inequity.

Foremost among these—especially in a period of rising inflation and restrictive revenue limits—is the continued availability of voted tax overrides which, while providing more affluent districts with a ready means for meeting what they conceive as legitimate and proper educational objectives, will be recognized by the poorer districts, unable to support the passage of such overrides in order to meet equally desired objectives, as but a new and more invidious aspect of that “cruel illusion” which we found to be inherent in the former system. (Serrano I at p. 611.) In short, what we said in our former opinion in this respect is equally true here. “[S]o long as the assessed valuation within a district’s boundaries is a major determinant of how much it can spend for its schools, only a district with a large tax base [per ADA] will be truly able to decide how much it really cares about education.

The poor district cannot freely choose to tax itself into an excellence which its tax rolls cannot provide. Far from being necessary to promote local fiscal choice, the present financing system actually deprives the less wealthy districts of that option.” (Id.) It is accordingly clear that the California public school financing system here under review, because it renders the educational opportunity available to the students of this state a function of the taxable wealth per ADA of the districts in which they live, has not been shown by the state to be necessary to achieve a compelling state interest.

Defendants, however, have one more string to their bow: they, joined by one of the amici curiae, contend that even in the event of such a holding by this court the financing system before us cannot be held to be in violation of state equal protection provisions, because other provisions of our state Constitution specifically authorize just such a system. It is to this contention that we now turn. VIII Defendants’ claim of specific state constitutional authorization for the public school financing system before us is primarily based upon the terms of

article XIII,

section 21, which provides: “Within such limits as may be provided under

Section 20 of this

Article [allowing the Legislature to provide maximum local property tax rates and bonding limits], the Legislature shall provide for an annual levy by county governing bodies of school district taxes sufficient to produce annual revenues for each district that the district’s board determines are required for its schools and district functions.” The argument, generally stated, is that a harmonious

interpretation of this

section along with other provisions requiring equal protection of the laws must operate to insulate distinctions based on district wealth disparities from state equal protection requirements. The argument proceeds on two distinct levels. First, it is urged, we held in Serrano I that the system there before us was “authorized” and “mandated” by the predecessor to

article XIII,

section 21 (former art. IX, § 6, par. 6); that holding, defendants and their supporting amicus assert, is now the law of the case, and to the extent that the system here in question shares in the shortcomings of the former system related to district wealth disparities, it too is so “authorized” and “mandated.” Second, it is pointed out, even if we are not compelled to this conclusion by the doctrine of the law of the case, the terms of the

section compel "the indicated result. We take up these contentions in order. At pages 595 and 596 of our opinion in Serrano I, in rejecting plaintiffs’ contention that the system there alleged to exist was violative of the provisions of

article IX,

section 5 (requiring “a system of common schools”), we observed that former

article IX,

section 6, paragraph 6 (now art. XIII, § 21), the provision hére at issue, “specifically authorizes the very element of the fiscal system of which plaintiffs complain.” (Id., at p. 596.) At a later point in the opinion, rejecting a contention of defendants that only de facto discrimination was here involved, we had occasion to observe that “[t]he school funding scheme is mandated in every detail by the California Constitution and statutes.” (Id., at p. 603.) It is urged that these two references, taken together, represent a holding that the system there before us was required by the terms of present

article XIII,

section 21. Insofar as the system now under examination shares in the features of the former system which we found objectionable in Serrano I, defendants argue, it is equally required by that

section under the doctrine of the law of the case. We reject such contentions as being utterly devoid of merit. Indeed, as we shall make clear, defendants’ seizure upon such fragments of our opinion in Serrano I as a basis of argument not only results in an unreasoned distortion of such language but more unfortunately displays an attempt to circumvent the rationale of Serrano I (now the law of the case) by emphasizing isolated words out of context. It is beyond question—and beyond cavil—that in stating that former

article IX,

section 6 “specifically authorizes the very element of the fiscal system of which plaintiffs complain,” we had reference to that “element” of the system permitting variations in expenditures per ADA among the several districts. This is made clear by the context of the statement and the language following it. Former

section 5 of

article IX (the “common schools” provision) should not, we held, be interpreted to apply to school financing and require “uniform educational expenditures” because such an

interpretation would render it inconsistent with former

section 6 (the provision here at issue) which allows variation in school district expenditures. This was not to say, however, that former

section 6 “authorized” or “approved” a system in which such variation was the product of disparities in district wealth. Any such conclusion would clearly have been at odds with our ultimate conclusion in Serrano I that the system there alleged to exist was violative of state as well as federal equal protection provisions. (5 Cal.3d at 596, fn. 11.) (See generally

Part VI, ante.) Similarly, by saying later on in our opinion, in disposing of an entirely different contention, that the school funding scheme was “mandated in every detail by the California Constitution and statutes” (id., at p. 603; italics added), we in no way implied that the constitutional provision in question “mandated” the system there alleged to exist.

The constitutional provision, as we shall point out more fully below, “mandated” only that there be a system allowing for local decision as to the level of school expenditures and that the mechanism to be utilized in providing revenues to permit such expenditures be a county levy of school district taxes. It was the statutes enacted under the aegis of that provision which tied the efficacy of local decision to district wealth. We conclude for the foregoing reasons that the doctrine of the law of the case is not helpful to defendants on this point. It remains for us to undertake an

interpretation of

article XIII,

section 21 (former art. IX, § 6, par. 6) in order to determine whether that provision requires a public school financing system which, like that before us, makes local decisions affecting educational opportunity depend for their effectiveness upon the taxable wealth per ADA in the district. We conclude without hesitation that it does not. As we have noted above,

article XIII,

section 21 of the state Constitution provides that the Legislature, within certain limits set by established maximum tax rates and bonding limits, “shall provide for an annual levy by county governing bodies of school district taxes sufficient to produce annual revenues for each district that the district’s board determines are required for its schools and district functions.” In so doing the provision both authorizes the Legislature to establish a mechanism by which the revenues “required” for each district are to be produced, and describes the character of that mechanism—i.e., “an annual levy by county governing bodies of school district taxes.” The provision does not, however, address itself to the question of the tax base to which the levy is to be applied, nor does it speak in terms of assessed valuation in any respect.

Manifestly it does not authorize disparities in school district expenditures based upon the relative wealth per ADA of a particular school district. Such disparities, insofar as they have been here shown to exist, are the result of legislative action, not constitutional mandate.

Article IX,

section 14 of the state Constitution clearly establishes that it is the Legislature which bears the ultimate responsibility for establishing school districts and their boundaries. By its exercise of this power, and by the concurrent exercise of its powers under

article XIII,

section 21 to provide for a school financing mechanism based upon county levies of school district taxes, it has created a system whereby disparities in assessed valuation per ADA among the various school districts result in disparities in the educational opportunity available to the students within such districts.

Thus, as we said in Serrano I, “[gJovcnuncntRl action drew the school district boundary lines, thus determining how much local wealth each district would contain [citations].” (5 Cal.3d at p. 603.) It is that action, which we reiterate is the product of legislative determinations, that we today hold to be in violation of our state provisions guaranteeing equal protection of the laws. It seems to be argued, however, that because

article XIII,

section 21 authorizes the financing of schools by a county levy of school district taxes, the Legislature is free to structure a system based upon this mechanism in any way that it chooses. Such a notion, we hasten to point out, is manifestly absurd. A constitutional provision creating the duty and power to legislate in a particular area always remains subject to general constitutional requirements governing all legislation unless the intent of the Constitution to exempt it from such requirements plainly appears.

In In re Jacobson (1936) 16 Cal.App.2d 497 [60 P.2d 1001], for example, the Legislature, acting pursuant to its power to create a system of inferior courts (former art. VI, § 11a), did so in a manner which granted greater jurisdiction to city courts in populous townships than to the same class of courts of less populous townships—regardless of the population of the particular city.

This, it was held, was in violation of the fundamental constitutional requirement that laws of a general nature have a uniform application. “The legislature derives its power to create courts from the Constitution,” the court stated, “but it may do so only in conformity with the provisions of the Constitution. It doubtless has the right to classify cities according to population, and having made such classification to prescribe different powers and regulations for each of the classes.

The powers and regulations must, however, be uniform for each of the classes.” (16 Cal.App.2d at p. 500; italics added.) Similarly, in Mordecai v. Board of Supervisors (1920) 183 Cal. 434 [192 P. 40] the Legislature, acting pursuant to its constitutional power to create and regulate the affairs of irrigation districts (former art. XI, § 13), enacted a comprehensive irrigation plan which exempted from its provisions those districts located in counties which had adopted a charter prior to a specific date. This, we concluded, it could not do. “It is argued, in effect, that this provision [former art.

XI, § 13] empowers the legislature to pass what laws it sees fit in regard to irrigation districts untrammeled by the general requirement that laws of a general nature shall have a uniform operation. We cannot agree with this. There is nothing to indicate that the power granted the legislature by this provision was not to be exercised by it subject to the general requirements of the constitution governing the manner in which the power of legislation when conferred or possessed shall be exercised.

The legislature has the power as conferred by the provision of the constitution just quoted to legislate concerning the affairs of irrigation districts, but that power, like the power of the legislature to legislate on other subjects, must be exercised in the manner in which the constitution provides that the power of legislation when it exists must be exercised. Before any grant of power to legislate on a particular subject can be held to be free of a general requirement governing all legislation, the intent of the constitution to that effect must be plain.

No such intent appears in the present instance.” (183 Cal. at pp. 441-442; italics added.) By the same token, we are here confronted with a situation in which the Legislature has been granted the power to provide for the financing of schools through the mechanism of county levies of school district taxes. Nothing in the constitutional provision establishing that power, however, indicates that its exercise is to be freed from general constitutional limitations applicable to all legislation.

Accordingly the Legislature, in its exercise of the subject power in conjunction with other powers possessed by it, was obliged to act in a manner consistent with such limitations. This it has not done. Instead it has undertaken to create a school financing system which, by making the quality of educational opportunity available to a student dependent upon the wealth of the district in which he lives, is manifestly inconsistent with fundamental constitutional provisions guaranteeing the equal protection of the laws to all citizens of this state. That system, we hold today, can no longer ' endure.

We also reject as wholly without merit the contention that the school financing system before us is somehow made necessary or permitted by the provisions of

article IX,

section 1, of the state Constitution. That

section provides: “A general diffusion of knowledge and intelligence being essential to the preservation of the rights and liberties of the people, the Legislature shall encourage by all suitable means the promotion of intellectual, scientific, moral, and agricultural improvement.” We declare ourselves at a loss to understand how this provision can be said to mandate or authorize the creation of a system which conditions educational opportunity on the taxable wealth of the district in which the student attends school.

For the foregoing reasons we cannot accept defendants’ argument that there exists some irreconcilable conflict between the requirements of our state equal protection provisions and other state constitutional provisions of equal stature—namely

article XIII,

section 21, and

article IX,

section 1. The latter provisions, as we interpret them, neither mandate nor approve a system such as that before us, and therefore the only conflict which here appears is that between the requirements of our state equal protection provisions and the proven realities of the present, legislatively created California public school financing system—a conflict which the trial court, b

[…]