Asbury Park Board of Education v. New Jersey Department of Education

The opinion of the court was delivered by

SKILLMAN, P.J.A.D.

This appeal, which involves the validity of regulations adopted by the Commissioner of Education to govern the determination of additional supplemental State aid to be disbursed to Abbott school districts in 2003-04, is before us for the second time. Appellants’ primary argument is that the definition of “maintenance budget” in those regulations conflicts with the definition of that term in an order issued by the Supreme Court on July 23, 2003. Abbott v. Burke, 177 N.J. 596, 832 A.2d 906 (2003).

When this appeal was first brought before us, the only context in which the Department of Education (DOE) had applied the regulation’s definition of “maintenance budget” was in the determination of the Abbott districts’ preliminary maintenance budget figures for the 2003-04 school years. Moreover, twenty appeals from the Commissioner’s final decisions regarding those preliminary budget figures were then (and still are) pending before this panel. Most significantly, we concluded that paragraph four of the Court’s July 23rd order clearly prescribed the methodology by which the Abbott districts’ preliminary maintenance budget figures were to be determined, and that the regulation’s definition of “maintenance budget,” and the DOE’s methodology for determining preliminary maintenance budget figures, could not be reconciled with that paragraph of the order.

Accordingly, by an opinion issued'on January 26, 2004, “we concluded] that N.J.A.C. 6A:10-3.1(e) and the definition of ‘maintenance budget’ in N.J.A.C. 6A:10-1.2 are invalid as applied to the determination of the Abbott districts’ preliminary maintenance budget figures ... [and] directed] the DOE to redetermine the Abbott districts’ preliminary maintenance budget figures in conformity with paragraph four of the July 23rd order and to issue revised figures to the Abbott districts within ten days of the fifing of this opinion.” Asbury Park Bd. of Educ. v. N.J. Dept. of Educ., 369 N.J.Super. 481, 493, 849 A.2d 1074, 1081-82 (App.Div.2004). In addition, we sustained the validity of N.J.A.C. 6A:10-3.1(e)(1)(i) and (ii) and N.J AC. 6A:10-3.1(f), but concluded that there was no need to determine the validity of any other DOE regulation in order to decide the pending budget appeals. Id. at 499-500, 849 A.2d at 1085.

Ten days following issuance of this opinion, on February 5, 2004, the DOE issued revised preliminary maintenance budget figures. On the same day, the DOE also issued final maintenance budget figures for the 2003-04 school year based on the DOE’s review of each district’s Comprehensive Annual Financial Report (CAFR).

On February 10, 2004, appellants filed an emergent motion for relief in aid of litigants’ rights and/or clarification of our January 26, 2004 opinion. In their brief in support of the motion, appellants argued that both the DOE’s revised preliminary maintenance budget figures and its final maintenance budget figures conflicted with the Supreme Court’s July 23rd order and this court’s January 26th opinion.

In its answering brief, the DOE argued that both its revised preliminary and final maintenance figures conformed in all respects with the Court’s order and this court’s opinion. In addition, the DOE argued that its filing of a notice of petition for certification with the Supreme Court had divested this court of jurisdiction to consider the part of appellants’ motion which sought clarification of this court’s opinion.

On February 17, 2004, this court issued an order which denied appellants’ motion for relief in aid of litigants’ rights on the merits. This order also denied appellants’ motion for clarification on the ground that the DOE’s filing of a notice of petition for certification had divested this court of jurisdiction to modify or supplement the terms of the judgment embodied in its January 26, 2004 opinion.

On February 19, 2004, the Supreme Court temporarily remanded this appeal to us “to consider [the] motion for clarification on the merits on an expedited basis.” That same date, we entered an order granting appellants’ motion for clarification. Our order indicated that a supplemental opinion would follow and afforded the parties an opportunity to file supplemental briefs with respect to the issues presented by appellants’ motion, which were submitted earlier this week.

Appellants’ motion for relief in aid of litigants’ rights and/or clarification presented two arguments. First, appellants argued that the DOE’s revised preliminary maintenance budget figures violated the July 23rd order and this court’s opinion because they did not include adjustments for documented increases in non-discretionary expenditures. Second, appellants argued that the DOE’s final maintenance budget figures violated the July 23rd order because they were based on the Abbott districts’ actual expenditures during the 2002-03 school year, rather than their 2002-03 approved budgets. It is unclear whether appellants’ first argument was presented solely in support of their motion for relief in aid of litigants’ rights, which this court denied in its February 17, 2004 order, or whether appellants also presented that argument in connection with their motion for clarification. In any event, we are satisfied that any issue concerning the omission of adjustments for documented increases in non-discretionary expenditures from the revised preliminary maintenance figures is now moot, because the final maintenance budget figures, which include those adjustments, supersede the preliminary figures with respect to future payments of supplemental Abbott v. Burke State aid in the 2003-04 school year. Consequently, the only issue we need to decide is the validity of the DOE’s definition of “maintenance budget” as applied to the determination of the final maintenance budget figures.

Our original opinion only addressed the validity of the DOE’s definition of “maintenance budget” as applied to the determination of preliminary maintenance budget figures. Asbury Park, supra, at 491-94, 849 A.2d at 1080-82. We concluded that paragraph four of the Court’s July 23rd order resolved this issue. This paragraph contains the following directive:

Within 30 days of the issuance of this Order, the DOE shall provide in a Notice to each district preliminary maintenance budget figures for the 2003-2004 school year consisting of the 2002-2003 approved budget and an estimate of the supplemental funding that will be needed to support that currently approved budget If the DOE deletes an expenditure from a district’s 2002-2003 budget related to the district’s non-instructional programs and based on the effective and efficient standard, the DOE must include in the written notice to the district the expenditure deleted along with a specific statement explaining why the program or part thereof is no longer effective and efficient.

[177 N.J. at 598-99, 832 A.2d at 908 (emphasis added).]

Thus, paragraph four clearly directs the DOE to determine preliminary maintenance budget figures on the basis of the Abbott districts’ “2002-03 approved budget[s]” plus an estimate of the supplemental funding needed to support “that currently approved budget” (emphasis added), less deductions for any non-instructional programs or parts of programs that the DOE finds to be ineffective and inefficient. Asbury Park, supra, 369 N.J.Super. at 492, 849 A.2d at 1081. Our original opinion concluded that the DOE’s definition of “maintenance budget,” which required supplemental State aid only for those programs, services and positions that were not only “approved” in the Abbott districts’ 2002-03 budgets but also actually “provided” during the 2002-03 school year, could not be reconciled with the Court’s unequivocal directive to the DOE to determine preliminary maintenance budget figures on the basis of the Abbott districts’ “2002-03 approved budget[s].” Ibid. We found confirmation for this interpretation of paragraph four in the tape of the July 10th oral argument before the Supreme Court. See id. at 492-93, 849 A.2d at 1081.

Because our original opinion rested solely on an interpretation of paragraph four, and paragraph four only deals with the methodology for determining the Abbott districts’ “preliminary maintenance figures for the 2003-2004 school year,” 177 N.J. at 598-99, 832 A.2d at 908, our discussion of the validity of the DOE’s definition of “maintenance budget” ended by noting: “We express no view concerning the validity of the DOE’s definition of ‘maintenance budget’ as it may be applied in any context other than the determination of preliminary maintenance budget figures.” Asbury Park, supra, 369 N.J.Super at 493-94, 849 A.2d at 1082.

We were able to determine the validity of the DOE’s definition of “maintenance budget” as applied to the determination of the Abbott districts’ preliminary maintenance budget figures solely on the basis of paragraph four, without undertaking to interpret paragraph two. However, because paragraph four deals only with the methodology for determining preliminary maintenance budget figures, the issue presented by appellants’ motion for clarification — the validity of the DOE’s definition of “maintenance budget” as applied to the determination of final maintenance budget figures — requires us to interpret paragraph two.

Paragraph two states:

The Statewide aggregate amount of Additional Abbott Burke State Aid shall be presumptively calculated as the total amount of Additional Abbott Burke State Aid approved for the Abbott districts for Fiscal Year 2002-2003, subject to adjustment as required for a maintenance budget. A maintenance budget shall mean that a district will be funded at a level such that the district can implement current approved programs, services, and positions and therefore includes documented increases in non-diseretionary expenditures. Examples of non-diseretionary expenditures are increases in contracted salaries, health benefits, and special education tuition. Maintenance does not include the restoration of programs, positions, or services that were reduced in 2002-2003, or new programs, positions, or services, except in respect of Paragraph 2c. of the Court’s Order of June 24, 2003 (pertaining to those elementary schools without a whole school reform developer in place in 2002-2003 and permitting whole school reform contracts in certain circumstances), irrespective of the timing for the promulgation of regulations governing that provision.

[177 N.J. at 598, 832 A.2d at 907]

Appellants argue that “the Court’s Order contemplated that the baseline maintenance budget for the 2003-04 school year would consist of approved 2002-03 programs, services and positions.” On the other hand, the DOE argues that paragraph two reflects “the Court’s decision to adopt the DOE proposal of ‘program maintenance’ rather than ‘funding maintenance.’ ”

Initially, we note that the only place in the July 23rd order where the Court used the term “2002-2003 approved budget” was paragraph four. Although the Court also used the modifier “approved” in the definition of “maintenance budget” in paragraph two, the word “approved” in paragraph two modifies “current ... programs, services and positions” rather than the “2002-2003 ... budget.” The key sentence in paragraph two states in pertinent part that “[a] maintenance budget shall mean that a district will be funded at a level such that the district can implement current approved programs, services, and positions.” The Court’s mandate that an Abbott district “be funded at a level such that the district can implement current approved programs, services and positions” does not require a program, service or position to be funded at the same level as in the prior year if experience has shown that it can be provided at a lower level of funding than was provided in the prior year’s budget. Paragraph two also states that “[m]aintenance does not include the restoration of programs, positions, or services that were reduced in 2002-03.” The clear import of this statement is that a 2003-04 maintenance budget does not need to include full funding for programs, services or positions that were part of 'an Abbott district’s approved 2002-03 budget if those programs, services or positions were reduced or eliminated during the course of the 2002-03 school year.

Consequently, the definition of “maintenance budget” in paragraph two does not require the DOE to use the 2002-03 approved budget as a baseline for determining the 2003-04 budget, but instead allows the DOE to use any methodology that ensures that “[an Abbott] district will be funded at a level such that the district can implement current approved programs, services, and positions.” The Court’s further stipulation that “Maintenance does not include the restoration of programs, positions, or services that were reduced in 2002-2003,” indicates that what the Court intended by “current” approved programs, services and positions was not simply all programs, services and positions that were included in the district’s approved 2002-03 budget, but rather only those programs, services and positions that were “current,” i.e., still in existence, when the 2003-04 budget was formulated.

This interpretation of paragraph two is also supported by paragraph one, which states that “K-12 programs provided for in the 2002-2003 school year will be continued.” For a program to be “continued” in 2003-04, it must have been not only authorized in the budget for 2002-03 but actually have been created and still in existence at the end of that year.

Appellants argue that however paragraphs one and two might be construed in isolation, when construed in light of paragraph four, they require the use of the Abbott districts’ 2002-03 approved budgets as the baseline for determining both their preliminary and final maintenance budget figures because there is no logical distinction between the methodologies for determining preliminary and final budget figures. However, this argument ignores the context in which the Court adopted the methodology prescribed in paragraph four for determining preliminary maintenance budget figures. When the July 23rd order was issued, the beginning of school was only a little more than a month away. Consequently, the DOE had to use a methodology for determining supplemental Abbott v. Burke State aid that could be quickly calculated based on available budgetary data. The Abbott districts’ 2002-03 approved budgets provided readily available figures that could be determined without any investigation into what programs, services and positions the Abbott districts actually had provided in the 2002-03 school year or any audit of their actual expenditures during that year.

Moreover, even though paragraph four of the July 23rd order directed the DOE to determine the Abbott districts’ preliminary maintenance budget figures on the basis of their 2002-03 approved budgets, paragraph two clearly informed the districts that they could not use any extra money they might receive under this methodology for “the restoration of programs, positions, or services that were reduced in 2002-2003, or new programs, positions, or services.” Thus, properly construed, the July 23rd order itself indicates that a program, service or position had to be not only “approved” in the 2002-03 budget but also actually “provided” in the 2002-03 school year in order to be considered part of a true maintenance budget. Therefore, there is nothing inherently inconsistent or illogical in using a methodology based on 2002-03 budget figures to determine an Abbott district’s preliminary 2003-04 budget figures, but subsequently utilizing data regarding the actual cost of school programs and services in 2002-03 to provide a more accurate projection of the likely cost of those programs and services in 2003-04. We also note that if such a projection turns out to be too low due to unforeseen circumstances, such as a significant increase in energy costs, a district may seek additional supplemental funding from the DOE under N.J.A.C. 6A:10-3.1(g).

The dissent’s view that the DOE’s use of actual 2002-03 expenditures as the baseline for determining the Abbott districts’ 2003-04 final maintenance budget figures will prevent timely disposition of their budget appeals is incorrect. The Commissioner’s determinations in the districts’ appeals from the preliminary budget figures relating to inefficiencies and ineffectiveness of programs, services and positions and documented increases in non-discretionary expenditures have been carried forward in the final budget figures.¹ Consequently, our decisions in the budget appeals from those determinations also will apply to the final budget figures. Moreover, because the DOE erroneously used actual expenditures rather than approved budget figures in determining the baseline preliminary budget figures, our review of the Commissioner’s determinations relating to the components of those figures, such as salaries, may result in modifications of this part of the final budget figures. It is of course possible for the DOE’s determination of a final budget figure to generate new issues that would require administrative review, such as a dispute concerning the amount of excess surplus at the close of the 2002-03 school year or the allocation of expense items between accounts payable and encumbrances. However, this would be equally true, regardless of whether the DOE used the Abbott districts’ 2002-03 approved budgets or their actual expenditures as the baseline for the determination of the final maintenance budget figures.

Accordingly, we conclude that the definition of “maintenance budget” in N.J.A.C. 6A:10-1.2, as meaning “a budget funded at a level such that the district can implement 2002-2003 approved and provided programs, services, and positions,” and the part of N.J.A.C. 6A:10-3.1(c), which provides that a maintenance budget for 2003-04 shall “contain[ ] only those programs, positions, and services approved and provided in 2002-2003[,]” are facially valid as applied to the determination of final maintenance budget figures.

Although we uphold the facial validity of these regulations, we are aware from our review of the records in the twenty pending Abbott budget appeals that the DOE has construed its regulations to authorize a budget methodology under which the baseline for determining an Abbott district’s 2003-04 budget is solely the actual expenditures in 2002-03 for programs, services and positions. However, this methodology is not specifically set forth on the face of the regulations challenged in this appeal. Furthermore, we do not perceive anything inherently unreasonable in the use of 2002-03 actual expenditures as the baseline for determining 2003-04 final maintenance budget figures. To the contrary, we concur with the DOE’s view that the amount of money an Abbott district actually had to expend to provide a particular program or service last year provides a more reliable starting point for determining what it will cost to provide that same program or service this year than the amount that was budgeted before the beginning of the year.

Our review of the records in the individual budget appeals reveals problems in the DOE’s application of this methodology in those cases where an Abbott district has made a persuasive showing that a particular program or service probably will cost more to provide in 2003-04 than it did in 2002-03. However, those problems do not affect the facial validity of the DOE’s definition of “maintenance budget,” but instead can be properly addressed within the framework of the pending Abbott budget appeals based on the records in the hearings before the Office of Administrative Law.

Accordingly, we conclude that the definition of “maintenance budget” in N.J.A.C. 6A:10-1.2 and the part of N.J.A.C. 6A:10-3.1(c) challenged by appellants are facially valid as applied to the determination of the Abbott districts’ 2003-04 final maintenance budget figures.

1 As appellants note in their supplemental briefs, there are differences between some of the preliminary and final budget figures, which are apparently attributable to the CAFR budget review process. We assume that the DOE will address those differences and provide appellants and the court with appropriate explanations as soon as possible.