5 school districts sue Oklahoma State Department of Education over alleged underpayments

Five school districts have alleged in a lawsuit the Oklahoma State Department of Education shortchanged their state funding by hundreds of thousands of dollars.

The lawsuit was filed Friday in Oklahoma County District Court on behalf of Midwest City-Del City Public Schools, Ponca City Public Schools, Muskogee Public Schools, Quapaw Public Schools and Lone Wolf Public Schools.

The districts contend the state agency miscalculated their allocation of motor vehicle tax revenue by a total of $237,148 in May. They argue they will lose an additional $2.85 million in Fiscal Year 2021 if the error continues. Fiscal Year 2021 begins July 1.

"The OSDE looks forward to responding in court, but will remain focused on students, families and the professionals working in support of them in our public schools," department General Counsel Brad Clark said in a statement.

The lawsuit requests an Oklahoma County judge to order the Department of Education to correctly calculate their state aid for Fiscal Year 2020 and 2021.

“If OSDE persists with its incorrect calculations and application of state aid statute, the Plaintiff districts will each suffer losses in FY 2021 equal to twelve times the loss it has suffered to date,” the lawsuit states.

The same five districts have been underpaid in motor vehicle collections before. They sued state tax officials in 2016, arguing the Oklahoma Tax Commission miscalculated their motor vehicle tax apportionments.

In 2018, an Oklahoma County district judge ordered the Tax Commission to pay back nearly $22.8 million over 13 months to the school districts. The Tax Commission was instructed to pay one-thirteenth of the total amount each month.

The Oklahoma Court of Civil Appeals upheld the ruling, and the Oklahoma Supreme Court declined to hear the Tax Commission’s appeal.

In the lawsuit filed on Friday, the school districts alleged the Department of Education mistakenly reduced their state funding because of the previous court order.

The state agency deducts each school district’s state aid funding by the amount it receives from local tax sources, including motor vehicle collections.

The lawsuit alleges the department didn’t separate the Tax Commission’s monthly reimbursement payment for February 2019 from the districts’ total motor vehicle tax revenue, causing the state agency to take out too much from their state allocation.

For example, Mid-Del Public Schools’ monthly repayment from the Tax Commission was $158,944 for February 2019, the only payment that allegedly has caused miscalculations so far.

The state Department of Education included the $158,944 reimbursement as part of the district’s total revenue from local tax sources, but it should have been considered separate, the lawsuit states. This would have caused Mid-Del to receive $158,944 less in state aid funds.

"This lawsuit relates to an issue that began as litigation in 2016 with the Oklahoma Tax Commission and its interpretation of a statute," Clark said. "It has been appealed and re-litigated in multiple other forums. Plaintiffs have also attempted to achieve their desired outcome through the legislative process."