Court ends school finance challenge

Sheila G. Miller / The Bulletin Published Jan 18, 2013 at 04:00AM

The Oregon Supreme Court has ruled against a Sisters resident who sued the school district in 2008 over what he believed was an improper financial agreement.

The Oregon Supreme Court affirmed previous decisions by Deschutes County Circuit Court Judge Alta Brady and the Oregon Court of Appeals.

Sisters resident Mike Morgan in May 2008 filed a lawsuit against the school board stemming from when the Sisters School Board authorized a $2.1 million finance agreement in 2007. The finance agreement, which the school district backed with its full faith and credit, was to pay for school improvements like building upgrades, furniture and other expenditures.

Under state law, public bodies — such as school districts and cities — are allowed to issue full faith and credit obligations without getting voter approval.

But Morgan argued the financing was essentially the same as the school district passing a bond. Under state law, bonds can only be issued after voters within a school district approve them.

He asked the court to force the district to default on the obligations, arguing that as a taxpayer and voter his rights had been denied and he might be adversely affected by the financial agreement.

Morgan said his argument centered on the idea that taxpayers will pay the same or more in taxes for fewer services at the schools, because the obligations can be paid back with money from the general fund.

“What this scheme does is it allows the operating budget to pay for things that funding was never intended to pay, thereby diminishing the resources available in the classroom,” he said.

In an appeal, Morgan noted the district would have to pay as much as $240,400 each year in principal and interest payments until 2022. If it couldn’t follow through on those payments, the district would be forced to levy a tax to pay the bills.

In that way, Morgan argued, as a taxpayer he would be negatively affected.

Both lower courts threw out the lawsuit, saying that was not a valid reason to sue the school district.

The Oregon Supreme Court agreed. The court said it wasn’t enough that Morgan believed the sale of full faith and credit obligations was illegal; he had to demonstrate the act would affect his rights, and he hadn’t done so. The court also said in its opinion that the injury to Morgan had to be real, not “hypothetical or speculative.”

Morgan argued the sale of the obligations could prevent the school district from being able to properly operate.

“... He does not allege that the district’s potential inability to provide for its daily operations affects him in any way,” the opinion states.

Sisters School Superintendent Jim Golden did not return a call for comment.

Morgan said he’s disappointed with the opinion, particularly because it failed to clarify whether the state law allowing the sale of full faith and credit obligations without a vote is legal.

He wrote in an email that it was “a shame” the district had spent so much money and time arguing over whether taxpayers and voters had the right to vote on the obligations.

Morgan said the reasons his lawsuit was thrown out are not the heart of the issue.

“I didn’t file the complaint just right,” he said.

He said the Oregon Supreme Court may have avoided making a clear statement about the legality of the full faith and credit obligations because it was too messy.

“It could be one where the hairball is so big that even the Supreme Court doesn’t want to tackle it,” he said. “The hairball being that if we open Pandora’s box, there’s potentially hundreds of millions of dollars encumbered in these obligations. ... This opinion just avoided it.”

It wasn’t Morgan’s first run-in with the Sisters School District.

He ran for a spot on the school board in 2007, and filed a lawsuit with the district alleging the board was violating executive session law. The district settled that case, agreeing to record executive sessions and pay Morgan’s roughly $3,000 in attorney fees.

Morgan said his fight may be over, but he hopes to help others battle this particular law.

“I will certainly make it known to those that have an interest in protecting voter rights and the rights of taxpayers that I will certainly work with them to find another case that can be challenged,” he said.