1998 Alberta Court of Appeal Decision

REASONS FOR JUDGMENT OF
THE HONOURABLE MADAM JUSTICE RUSSELL

[1] The central issue in this consolidated appeal is the constitutional validity of certain provisions found under the School Act, S.A. 1988, c. S-3. 1, as amended by the School Amendment Act, 1994, S.A. 1994, c. 29, and the Government Organization Act, S.A. 1994, c. G-8.5. The allegations are that the provisions contravene the right of local school boards to reasonable autonomy, discriminate between public and separate schools, and violate a principle of mirror equality that is said to exist between public and separate schools.

BACKGROUND

[2] In May 1994, the province proclaimed amendments to the School Act. The amendments have the effect of centralizing control and decision-making in various areas relating to elementary and secondary education. Perhaps the most contentious change was the creation of a new scheme for funding school boards.

[3] By restructuring the way education was funded, the Government sought to remove fiscal inequity in the school system. The former funding scheme was characterized by school requisition mill rates that varied dramatically across the province, and fiscal disparity between school boards. Separate school boards were particularly disadvantaged. While changes to the School Act in 1988 addressed fiscal disparity at the local district level,.the Government sought to address the disparity on a regional level with the introduction of the 1994 amendments.

[4] The Government chose to inject more equality into the education system through the creation of a full provincial funding scheme. While there were other options that the Government might have considered to remedy the inequities of the former funding system, it is not for this Court to decide whether there is a better option. The issue is whether the option chosen is constitutionally valid.

[5] Under the new scheme, with the exception of a special plebiscite levy, school boards can no longer raise money through direct taxation. Instead, revenues from property assessment base are now pooled into a government fund called the Alberta School Foundation Fund ("the ASFF"). The monies in that fund are then disbursed to school boards on an equal amount per student basis. However, separate boards are not compelled to participate fully in the ASFF. Because of their special constitutional status, separate school boards are permitted to opt out and requisition taxes directly from ratepayers. Opted out boards only receive revenue from the ASFF as a top-up payment in the event that their local requisition amounts to less than the amount received by other boards through the ASFF. But, the Government maintains there is no financial benefit achieved by opting out because pursuant to s. 159.1(4) of the School Act, should an opted out board receive requisition amounts greater than the per student amount received by other boards, the excess must be paid to the ASFF. This requirement is, however, expressly made subject to the rights of separate schools electors under the Constitution.

[6] In addition to funds derived from property assessment base, the new funding scheme continues to provide monies in support of education through a system of grants from the province's General Revenue Fund. However, under the new scheme, school boards receive grant payments in accordance with a government policy document called Framework for Funding School Boards in the 1995-96 School Year ("the Framework"). It allocates funds to school boards using three blocks: the instruction block, the support block and the capital block. The instruction block provides for the cost of instructional programs and services such as basic instruction, special instruction for students with severe disabilities, home education and early childhood services. The support block provides for the cost of operating and maintaining schools, board governance, central office administration and student transportation. The capital block provides for the cost of school building projects including current school building projects and the debt owing on school buildings.

[7] All school boards receive the same amount per student for basic instruction. The amount of additional funding depends on several factors such as the number of severely disabled students, transportation needs and the sparsity of the student population. School boards can calculate their total funding allocation by using the rates prescribed at the end of the Framework. The amount available by way of grants from the General Revenue Fund is determined by subtracting the amount available from property assessments (whether from the ASFF or from a combination of the ASFF and opted out local requisition) from the amount of the total funding allocation.

[8] However, in addition to allocating funds, the Framework also places restrictions on a board's use of funds. Those restrictions include the following:

The transfer of funds from the instruction block to plant operations and maintenance and student transportation is permitted, but cannot exceed two percent of the instruction block.
A board may transfer from the instruction block to the support block an amount for system based instructional support services (e.g., curriculum development). However, that amount cannot exceed 1.6 percent of the instruction block, plant operations and maintenance, and student transportation funding for the 1995-96 year. The limit is 1.2 percent for the 1996-97 year, and 0.8 percent for the 1997-98 year.
Under the support block, expenditures on board governance and system administration are limited to a percentage of the total funding that is allocated to transportation, plant operations and maintenance, and the instruction block. The percentage varies between 4 and 6 percent, depending on the number of students.
No transfer is permitted to or from the capital block.

[9] For the purposes of this appeal, it is important to note that the Framework contains no provision spelling out the consequences of non-compliance and it does not specify whether its restrictions on spending apply to the tax monies collected by opted out boards. Nonetheless, the Government maintains that the Framework's restrictions apply not only to the spending of grant money and ASFF revenues, but also to property assessment monies collected by opted out boards. It also claims that failure to comply with the spending restrictions will result in penalties being levied against future grants from the province. Therefore, according to the Government, the Framework's restrictions attach directly to the receipt of provincial grant monies and indirectly to the use of board revenues generally.

[10] A new method of funding education was not the only change brought about by the amendments. Other changes include the addition of provisions compelling boards to meet certain Ministerial standards and increasing the Minister's control over board senior staff.

[11] Not surprisingly, the erosion of local control over schooling was not welcomed by all. The Public School Boards' Association of Alberta ("PSBAA"), the Alberta School Boards' Association ("ASBA") and others challenged the constitutionality of some of the amendments, and parts of the Government Organization Act. PSBAA is an association comprised of public school boards. ASBA represents all school boards in the province. It is worth noting here that PSBAA and ASBA have not challenged the province's laudable goal of achieving educational equity. They simply object to the means the Government has used to achieve it.

[12] At trial, PSBAA challenged the provisions on three bases. The first was that school boards were guaranteed reasonable autonomy under the Constitution Act, 1867 through law or convention, or under ss. 2(b) and 7 of the Charter. It was alleged that this autonomy had been violated by the erosion of local control over the recruitment and direction of senior staff, the selection of political representatives, program and management, and fiscal matters. The second line of attack was that the impugned provisions, by allowing only separate boards to opt out of the centralized funding system, discriminated against public schools in violation of s. 17(2) of the Alberta Act , 1905 (Can.), c. 3. This constitutional provision was also used to challenge the potentially wide discretion that can be given to the Minister of Education to make grants under the Government Organization Act. The last argument was that the provisions violated a principle of mirror equality implicit in s. 17(l) of the Alberta Act. ASBA took no part in the reasonable autonomy issue, arguing only the discrimination and mirror equality issues.

[13] The Alberta Catholic School Trustees' Association, the Board of Trustees of Lethbridge Roman Catholic Separate School District No. 9 and Dwayne Berlando, a separate school supporter, (collectively referred to as "ACSTA") became involved in the litigation only to ensure that the action did not adversely affect the existing rights and privileges constitutionally guaranteed in respect of separate schools under s. 17(l) of the Alberta Act. However, the significance of ACSTA's role in the trial should not be underestimated. Although it did not itself challenge the new legislative scheme, it asked the trial court not to discuss the nature and extent of separate school rights guaranteed by s. 17(l) of the Alberta Act. It also submitted that if the new legislative scheme were found to contravene mirror equality rights or s. 17(2) of the Alberta Act, any remedy given should expand the rights currently granted to public schools, rather than abridge the rights accorded in respect of separate schools. ACSTA took no position at trial on the reasonable autonomy issue.

[14] After considering the issues before him, Smith J. rejected the reasonable autonomy and discrimination arguments, but accepted the mirror equality argument. He held the legislation to be invalid to the extent that it did not allow public boards to opt out of the ASFF funding scheme. Notably, the trial judge found it unnecessary to decide whether the Framework's conditions applied equally to all school boards. He also did not discuss the nature and extent of the rights and privileges with respect to separate schools contained under s. 17(l). In his formal judgment, he suspended the declaration of invalidity until June 15, 1996. In February 1996, a stay of the trial judge's judgment was granted pending this appeal. The order granting the stay contemplated an additional stay of six months should the Government's appeal on the mirror equality issue be unsuccessful.

[15] PSBAA appeals the trial judge's rejection of the reasonable autonomy and discrimination arguments. It also objects to the stay that was granted. ASBA appeals only on the discrimination issue, and the Government appeals the decision on mirror equality. Although the Government initially urged this Court to refuse to hear part of PSBAA's reasonable autonomy argument because of non-compliance with s. 25 of the Judicature Act, R.S.A. 1980, c. J-1, it has since abandoned this jurisdictional challenge.

[16] ACSTA maintains the position it held at trial. Accordingly, it made submissions only on the discrimination and mirror equality issues, and urged this Court not to define the nature and extent of the rights which might accrue to separate school supporters under s. 17(l) of the Alberta Act.

[17] After submissions for this appeal were finished, and while this decision was under reserve, another panel of this Court issued a memorandum of judgment in Edmonton Roman Catholic Separate School District No. 7 v. Alberta (Minister of Education) (1 997), 47 Alta. L. R. (3d) 82 ("Capital Reserves"). That appeal dealt with whether the government had the authority to impose, by way of letter, a condition requiring that school boards apply their capital reserves to their outstanding unsupported capital debts for the 1993-1994 and 1994-1995 school years before the province would assume indebtedness for their unsupported capital debt in the 1995-1996 school year. The chambers judge and Court of Appeal held that there was statutory authority for the imposition of the condition and dismissed the Edmonton Separate School Board's case.

[18] We invited counsel to make submissions regarding the impact, if any, of the Capital Reserves decision on the current appeal. Having regard to the parties' submissions and the decision in Capital Reserves, we are of the view that the case has some impact on the matters now under appeal. It signals the extent to which and the way in which government may control capital spending under the current legislation and is relevant to both the discrimination and reasonable autonomy issues