Title: Board of Education of the City of Passaic v. New Jersey Department of Education

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Early in the litigation, the District withdrew its second issue, which dealt with the reallocation of monies from its undesignated general fund. The third, and final, question was whether the DOE could reduce state preschool aid midway through the school year based on a per-pupil methodology. It is that issue that the Court addresses in its opinion. On February 22, 2002, the DOE approved the District's initial amended early childhood budget for the 2002-2003 school year at $18,064,151. This was based on a projected enrollment of 1,917 three- and four-year olds. A mid-year audit revealed that the actual enrollment was only 1,038. The DOE approved a revised District budget of $12,330,283 based on the revised enrollment figure and then reduced the District's previously-awarded Preschool Expansion Aid (PSEA) using a per-pupil calculation to establish the adjusted award. To satisfy preschool budget demands for the remainder of the 2002-2003 school year, the District sought an additional $1,157,163. The District appealed the PSEA reduction to the Commissioner, arguing that DOE had acted in an arbitrary and capricious manner in adjusting the award using a per-pupil methodology. The Commissioner referred the matter to the Office of Administrative Law. An Administrative Law Judge (ALJ) conducted two days of hearings before concluding that the District's challenge to the per-pupil calculation was without merit. The Commissioner accepted the ALJ's findings and conclusions. The District appealed to the Appellate Division. In an unpublished opinion, that court held that the per-pupil methodology used to calculate the downward adjustment in the District's preschool budget was a proper exercise of the Commissioner's discretion. The Supreme Court granted the District's petition for certification. HELD: Adjustments to state aid formulas that are not calibrated with program costs cannot be made late in the school year unless there is a meaningful opportunity for the District to present information related to actual costs and the adjustment is then realigned with those actual costs. 1. The District argues that the per-pupil methodology used by the DOE inflated the District's savings after it experienced lower than anticipated enrollments in its preschool programs. Further, the District suffered a deficit because certain fixed costs were not reduced by the lower enrollments, thus resulting in a PSEA award that fell below actual need. Those adjustments were in contravention of the Legislature's direction in the Fiscal Year 2003 Appropriations Act. (p. 7) 2. The Court held in Abbott VIII that district budgets and DOE responses must be developed and articulated with specificity and that preschool budget calculations must yield funding decisions that are based not on arbitrary, predetermined per-student amounts, but rather on a record containing funding allocations developed after a thorough assessment of actual need. The approach taken by the Commissioner in this case is acceptable only if the Commissioner affords the District an opportunity to present data on fixed costs that cannot be reduced, and if an adjustment is made to the calculation taking into account those continuing expenses, which would bring the overall PSEA recapture amount into line with actual need. (pp. 8-9) 3. The Court's focus on actual need is consistent with the Legislature's language in the Fiscal Year 2003 Appropriations Act. "Actual need" should not be construed to mean "approximate need." (pp. 10-11) The judgment of the Appellate Division is modified and, as modified, is AFFIRMED. JUSTICES LONG, LaVECCHIA, ALBIN, WALLACE, and RIVERA-SOTO and A ppellate Division JUDGE STERN (t/a) join in CHIEF JUSTICE PORITZ's opinion. JUSTICE ZAZZALI did not participate. Petitioner-Appellant, v. NEW JERSEY DEPARTMENT OF EDUCATION, Respondent-Respondent. Argued October 27, 2004 Decided May 19, 2005 On certification to the Superior Court, Appellate Division. Richard E. Shapiro argued the cause for appellant. Michelle L. Miller, Deputy Attorney General, argued the cause for respondent (Peter C. Harvey, Attorney General of New Jersey, attorney; Nancy Kaplen, Assistant Attorney General, of counsel; Allison Colsey Eck, Deputy Attorney General, on the brief). CHIEF JUSTICE PORITZ delivered the opinion of the Court. Millville, supra, regarding that issue, nor will we again review prior relevant opinions in the Abbott v. Burke cases or the applicable statutory and administrative funding mechanisms. See id. at ___ (slip op. at 18-25, 4-10). In respect of the District s claim relating to the reallocation of monies from its undesignated general fund, the District sought to withdraw that issue early in this litigation and has not presented argument on it before this Court. We therefore will not consider that issue. We address here the sole question whether the Commissioner s per-pupil methodology is reasonable under the circumstances. In this case, the testimony reflects the preschool plan is based upon the projected costs required to provide preschool programs and services to the District s eligible universe of three and four year olds. The budget consists of fixed as well as recurring costs. A per pupil amount is arrived at by dividing the total budget by the number of students enrolled in the programs. The per pupil cost is an estimate of how much it costs the District to educate an individual student in its preschool program. Petitioner s program did not enroll as many students as originally projected; thus, the Petitioner s preschool program did not expand as projected. Contrary to Petitioner s assertions, utilizing the per pupil amount to both increase and decrease the preschool budget over the course of a school year is a fair estimate since it is based on the projected expenses of the entire program. . . . [A]ctual costs incurred cannot be accurately determined until the end of the school year when [the] final audit is prepared. In order to provide adjustments, both increases and decreases, in the current year, the Respondent and the District must use estimates in an attempt to accurately gauge the costs to be incurred, during the fiscal year. . . . The per pupil amount accounts for all of the budgeted costs, is uniformly applied and provides a methodology that should closely approximate the audited costs incurred in providing a preschool education to the District s eligible three and four year old population. Payments of Abbott Preschool Expansion Aid shall be based on documented expansion of the preschool program. Upon the Commissioner of Education s request, Abbott districts will be required to provide such supporting documentation as deemed necessary to verify that the actual expansion in the preschool program has occurred in the 2002-2003 fiscal year. Such documentation may include enrollment and attendance data that may be subject to an audit. Appropriate adjustments to a district s Abbott Preschool Expansion Aid amount may be made by the commissioner based on actual need. [FY03 Appropriations Act, L. 2002, c. 38 (emphasis added).] The FY03 Appropriations Act thus directed that in adjusting a district s PSEA award, the Commissioner was to take into account the district s actual need. We do not believe that actual need should be construed to mean approximate need. In sum, we hold that adjustments to state aid formulas that are not calibrated with program costs cannot be made late in the school year unless there is a meaningful opportunity for the District to present information related to actual costs and the adjustment is then realigned with those actual costs. BOARD OF EDUCATION OF THE CITY OF PASSAIC, PASSAIC COUNTY, Petitioner-Appellant, v. NEW JERSEY DEPARTMENT OF EDUCATION, Respondent-Respondent. DECIDED May 19, 2005 Chief Justice Poritz PRESIDING OPINION BY Chief Justice Poritz CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY