The 8th U.S. Circuit Court of Appeals decision comes after U.S. District Judge Brian Miller ordered an end to most of the payments, calling them counterproductive. He accused the districts of delaying desegregation to keep getting state money.
The appeals court ruled that Miller decided to end the payments without the state specifically asking him to do so. The court said the state must ask, in a separate court action, before a judge could make such a ruling.
A spokesman for Attorney General Dustin McDaniel said Wednesday that no decision has been made about whether the state would file such a request.
Arkansas is required by a 1989 settlement to fund magnet schools, transfers between districts and other programs to support desegregation and keep a racial balance in the North Little Rock, Pulaski County and Little Rock school districts. Those costs currently add up to about $38 million a year, according to the appeals court's ruling.
State lawmakers have long wanted to end the desegregation program funding, though the districts say they're still necessary.
Battles over school desegregation in Little Rock date back to 1957, when nine black teenagers needed the protection of federal troops to integrate Central High School. Little Rock sued the state and its two neighboring districts in 1982, and two years later a judge agreed that the districts hadn't done enough to help the city schools desegregate.
Miller issued his order to end the payments earlier this year, after hearings about whether two of the three school districts in question - North Little Rock and Pulaski County - should be declared unitary, or substantially desegregated.
"That came kind of out of the blue," Stephen Jones, the lead attorney for the North Little Rock district, said Wednesday about Miller's ruling.
Miller wrote that the payments should end in order to avoid "an absurd outcome in which the districts are rewarded with extra money from the state if they fail to comply with their desegregation plans and they face having their funds cut by the state if they act in good faith and comply."
But the appeals court said Miller did not make "specific findings of fact" to support his decision.
Miller, who referred to himself as "a middle aged black judge," instead wrote: "After reading the briefs, the transcripts from the various hearings, and the scores of exhibits filed herein, it is very easy to conclude that few if any of the participants in this case have any clue how to effectively educate underprivileged black children."
The appeals court also reversed Miller's decision to deny the North Little Rock district's request to be declared unitary. Miller had denied the request in part because he said the district offered only anecdotal examples of its efforts to recruit black teachers.
The 8th Circuit disagreed, noting that more than 16 percent of the district's educators are black, compared to 9 percent statewide.
Miller didn't return a phone message left at his chambers Wednesday. But he removed himself from the desegregation case earlier this year, saying he could no longer make unbiased decisions after the state took over his hometown's school district in eastern Arkansas.
Jones, the North Little Rock district's lawyer, said he was pleased with the appeals court's decision to deem the district unitary.
"In a sense, it's anticlimactic because I don't think it really changes how we're going to conduct our day-to-day business," he said.
Another federal judge had previously declared the Little Rock district unitary, but Miller refused to declare the Pulaski County district entirely unitary in his May order. The appeals court upheld that part of Miller's ruling, which found the Pulaski County School District lacking in nine areas in which it had to make changes to be considered desegregated.
Wednesday's opinion notes that Miller found the Pulaski County district "has given very little thought, and even less effort to complying with its desegregation plan. Complying with its plan obligations seems to have been an afterthought."
The appeals court "found no reason to disagree" with Miller's conclusion.
The Pulaski County Special School District's lead attorney, Sam Jones, declined to comment Wednesday.
The Little Rock district's lead lawyer, Chris Heller, praised the appeals court's ruling, adding that part of Miller's decision in May "concerned issues that had not been presented to the district court."
McDaniel said in a statement that Arkansas is moving toward ending the legal action surrounding the decades-old desegregation case and in turn, "taking the courts out of the classrooms" in the county.
(Copyright 2011 by The Associated Press. All Rights Reserved.)
Read the complete ruling (PDF)
With the Little Rock and North Little Rock school districts now fully unitary, today’s decision reminds us that taxpayer-funded desegregation payments are not perpetual, nor should they be seen as such.
Today, I renew a call to the parties in this case to come together for a meaningful discussion about what is best for the children of these school districts and the taxpayers of this State."
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