Case Title: INDEP. SCH. DIST. NO. I-20 OF MUSKOGEE COUNTY v. OKLA. STATE DEPT. OF EDUCATION

Citation: 

Docket Number: 95684

State: oklahoma

Court: Oklahoma Supreme Court

Date: 2003-03-04T00:00:00Z

Document:
INDEP. SCH. DIST. NO. I-20 OF MUSKOGEE COUNTY v. OKLA. STATE DEPT. OF EDUCATION  INDEP. SCH. DIST. NO. I-20 OF MUSKOGEE COUNTY v. OKLA. STATE DEPT. OF EDUCATION 2003 OK 18 65 P.3d 612 Case Number: 95684 Decided: 03/04/2003 THE SUPREME COURT OF THE STATE OF OKLAHOMA INDEPENDENT SCHOOL DISTRICT NO. I-20 OF MUSKOGEE COUNTY, Plaintiff/Appellee, v. OKLAHOMA STATE DEPARTMENT OF EDUCATION, Defendant/Appellant. CERTIORARI TO THE COURT OF CIVIL APPEALS, DIVISION IV Honorable Mike Norman, Trial Judge ¶0 The appellee, Independent School District No. I-20 of Muskogee County (school district) received an overpayment in state aid from the appellant, the State Department of Education (Department). The overpayment occurred because of a computer error. After the Department discovered the error, it requested an Attorney General opinion asking for a determination of whether it could recoup the overpayment pursuant to 70 O.S. 2001 §18-118 . The Attorney General determined that it could. Subsequently, the Department informed the district that it was going to recover the overpayment over a period of ten years by withholding a portion of future state aid. The school district filed an action for declaratory judgment in the district court of Muskogee County. The Department objected to the venue, arguing that Oklahoma County was the proper venue. The trial court entered judgment for the school district. The Department appealed and the Court of Civil Appeals affirmed in part and vacated in part. On certiorari we hold that: 1) pursuant to CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT REVERSED AND CAUSE REMANDED. D.D. Hayes, Muskogee, Oklahoma, for Plaintiff/Appellee, Kay Harley, General Counsel, Department of Education, Oklahoma City, Oklahoma, Scott D. Boughton, Assistant Attorney General, Oklahoma City, Oklahoma, for Defendant/Appellant. KAUGER, J: ¶1 We granted certiorari to address three issues: 1) whether the State Department of Education may withhold future payments to a school district pursuant to FACTS ¶2 Title 70 O.S. 2001 §18-118 provides for the recoupment of state monies which have been "illegally apportioned to, or illegally disbursed or expended by," a school district. ¶3 Since 1988, the appellee, the Independent School District No. I-20 of Muskogee County (school district/district) has used computer software provided by National [65 P.3d 615]Computer Systems (NCS) to compute student statistical attendance reports which are used to determine the district's average daily membership. ¶4 Apparently unbeknownst to the district, the upgrade created a glitch which erroneously changed how the software calculated the district's annual statistical reports. On May 24, 1996, NCS sent the district another upgrade which could have corrected problems caused by the first upgrade. However, this upgrade was not installed on the system until after the district ran the annual statistical reports which were used by the Department to calculate the district's average membership. Consequently, the district's annual statistical report, which was produced for filing at the end of May in 1996, showed inflated student attendance numbers. ¶5 Because state aid is calculated, in part, by using the higher of the past two years' average daily membership figures of a school district, ¶6 Sometime in early 1998, the Department became aware that the school district had received a large increase in state aid. The Department asked the State Auditor and Inspector to audit the school district's attendance figures for the years involved. On August 11, 1998, the State Auditor released the audit which confirmed inflated attendance figures. The Department verified the State Auditor's figures and requested a formal opinion from the Attorney General asking for a determination of: 1) whether the Department was obligated to recover the excess money paid to the school district; and 2) whether the Okla. Const. art. 10, §26 ¶7 On July 20, 1999, in response to the inquiry, ¶8 Subsequently, the school district requested a hearing pursuant to the Adminis-[65 P.3d 616]trative Procedures Act. ¶9 The Department sought to dismiss the action, arguing that venue was not proper in Muskogee County. On June 12, 2000, the trial court entered an order establishing venue in Muskogee County. A non-jury trial was held on November 17, 2000; and on December 1, 2000, the trial court entered judgment for the school district. The Department appealed, and on September 10, 2002, the Court of Civil Appeals affirmed in part and vacated in part. We granted certiorari on November 18, 2002. I. ¶10 PURSUANT TO ¶11 Title 70 O.S. 2001 §18-11821 requires the Board to audit the funds of public school [65 P.3d 617] districts, and it provides for joint and several liability of school district officers and employees who divert state money from the purpose for which it was apportioned. The statute also provides that if an audit discloses that state monies have been "illegally apportioned to, or illegally disbursed or expended by, a school district or any of its officers or employees," the Board must either demand that the money be returned or it must withhold the unreturned amount from subsequent allocations of state funds. ¶12 The school district argues that there is no evidence of any bad faith, dishonesty, wrongdoing, fraud or malice on the part of the school district's officers or employees, thus the Board has no authority under §18-118 to recoup state money which was disbursed as a result of a computer error. The Department asserts that: 1) the overpayment was illegally apportioned because the district received funding for which it did not qualify under the law; and 2) it is under an affirmative duty to recover state monies which have been illegally apportioned regardless of how the overpayment occurred. It also insists that allowing the district to keep the erroneous apportionment would be tantamount to the state making a gift to the school district in violation of art. 10, §15 of the Okla. Const.22 ¶13 In determining whether a statute applies to a given set of facts, we focus on legislative intent ¶14 The purposes of the state aid program include providing the best possible educational opportunities to every child in Oklahoma and creating a beneficial use of public funds expended for education. ¶15 The State Department of Education, through the State Board of Education, is responsible for administration of the public school system in the state. ¶16 Section 18-116 provides penalties for knowing and wilful violations of the state aid program of the Code. ¶17 The Code sets forth calculations for determining eligibility, apportionment and disbursement of state aid which rely on accurate attendance figures. II. ¶18 THE CONSTITUTIONAL DEBT LIMITATIONS OF THE OKLA. CONST. ART 10, §26 DO NOT PRECLUDE THE DEPARTMENT'S RECOVERY OF THE OVERPAYMENT. ¶19 The school district argues alternatively that if §18-118 applies to the facts of this cause, ¶20 Article 10, §26 of the Oklahoma Constitution prohibits school districts from becoming indebted, in any manner, or for any purpose, by an amount exceeding the income and revenue provided for a fiscal year [65 P.3d 620] without the assent of three fifths of the voters. ¶21 Recently, in Southern Correction Systems, Inc. v. Union Public Schools, ¶22 While the school district may be obligated to the Department to repay the funds, the recoupment provisions of §18-118 do not constitute any kind of deficit financing for the purposes of the constitutional debt limitations. Recouping the money that the Department seeks does not require a tax levy by the district nor does it come from the district's tax collections. Further, recovery of the funds does not in any way amount to the taking away of anything ever legally belonging to the school district ----- the district was never actually entitled to receive the funds. Accordingly, the constitutional debt limitations of the Okla. Const. art. 10, §26 are inapplicable to the Department's recovery of the overpayment. III. ¶23 VENUE IS PROPER IN THE COUNTY WHERE THE SCHOOL DISTRICT IS LOCATED. ¶24 The Department insists that the provisions of the Administrative Procedures Act ¶25 The school district contends that the Act applies because the action of the Department in adopting the Attorney General opinion constitutes an adoption of an administrative rule. Accordingly, it insists that venue is proper in the district court of Muskogee [65 P.3d 621]County ----- where the school district is located. It also insists that Allen v. State ex rel. Bd. of Trustees of Oklahoma Uniform Retirement System for Justices and Judges, ¶26 Absent a specific statute to the contrary, ¶27 In Grand River Dam Authority v. State, supra, we addressed the Administrative Procedures Act's application to Attorney General opinions. ¶28 Six years later, we issued Allen v. State ex rel. Bd. of Trustees of Oklahoma Uniform Retirement System for Justices and Judges, supra, which involved a retired judge's appeal from a decision of the Board of Trustees for the State Public Employees Retirement System that denied his request for credit for active military service. The Court noted that an agency's obedience to the legal advice of the Attorney General ---- whether considered binding or merely advisory ---- effected adoption of the Attorney General's opinion as a rule. We recognized that after an agency's adoption of an Attorney General's advice as a basis for its standard of legal conduct, the procedural remedy of a declaratory-relief suit afforded by the Administrative Procedures Act, ¶29 Although Allen did not involve a challenge to venue, it's analysis is instructive here. This is not a suit in which the Attorney General's opinion is directly challenged by an agency, like Grand River. Rather, the record documents that the Department relied upon the advice of the Attorney General to support its decision to recoup the money it overpaid to the school district. The minutes of the January 20, 2000, meeting of the State Board of Education reflect that the Attorney General's opinion was discussed as a basis for seeking recoupment. Additionally, the letter sent by the Department to the school district which denied the school district a hearing on the matter indicates that the Department reached its decision because it was following the Attorney General's opinion. ¶30 Under the rationale of Allen, the Department's adoption of the Attorney General's opinion constituted a de facto rule which is subject to challenge under the declaratory judgment provision, CONCLUSION ¶31 The state aid program seeks to assure equal educational opportunities among the school districts by apportioning state monies objectively. CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; TRIAL COURT REVERSED AND CAUSE REMANDED. WATT, C.J., OPALA, V.C.J., HODGES, LAVENDER, HARGRAVE, KAUGER, BOUDREAU, WINCHESTER, JJ., concur. SUMMERS, J., not participating. [ 65 P.3d 624 ] FOOT