Court Opinion

ID: 4250124
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:23:22.34547+00
Date Added: 2024-06-11T14:44:09.247549
License: Public Domain

IN THE SUPREME COURT OF IOWA
                            No. 51 / 05-1255

                        Filed September 28, 2007

IOWA ASSOCIATION OF SCHOOL BOARDS,

      Appellant,

vs.

IOWA DEPARTMENT OF EDUCATION and
THE IOWA AUDITOR OF STATE,

      Appellees.

      Appeal from the Iowa District Court for Polk County, Scott D.

Rosenberg, Judge.

      Nonprofit corporation representing interests of school districts

appeals district court decision on judicial review affirming agency

declaratory orders refusing school districts’ request to use special

property tax levy to pay portion of districts’ fuel costs. AFFIRMED.

      Dennis W. Johnson and Cristina F. Kuhn of Dorsey & Whitney

LLP, Des Moines, for appellant.

      Thomas J. Miller, Attorney General, and Christie J. Scase,

Assistant Attorney General, for appellees.
                                      2

TERNUS, Chief Justice.

      School districts in Iowa want to use a special property tax levy to

pay for a portion of their transportation fuel costs. The appellant, Iowa

Association of School Boards, sought separate declaratory rulings from

the appellees, Iowa Department of Education and the Iowa Auditor of

State, that would authorize member school districts to expend property

taxes levied under Iowa Code section 298.4 (2003) on fuel purchased

under a “fleet services program” administered through the association.

Both agencies ruled school districts could not use monies raised by the

special property tax levy permitted by section 298.4 for this purpose.

The agencies’ declaratory orders were affirmed by the district court on

judicial review. After considering the arguments of the parties and the

relevant legal authorities, we agree with the district court and affirm its

decision.

      I. Background Facts and Proceedings.

      The facts in this case are undisputed. Every school district in Iowa

is required to provide transportation to students living more than a

specified distance from the student’s designated school.         Iowa Code

§ 285.1(1).   The annual cost of fuel to provide this transportation is a

major expense for school districts.       While the expense of fuel poses a

challenge in itself, budgeting for this expense in a time of fluctuating fuel

prices is even more challenging.

      School districts operate on a fiscal year of July 1 through June 30.

See id. § 24.3. Local property taxes and state aid are the two primary

funding sources for the districts. See generally id. ch. 257. In order to

allow sufficient time to set property tax rates for the following year,

districts must certify a budget for the upcoming fiscal year by April 15.

See id. §§ 24.17, .20.     After a budget is certified and the time for
                                             3

amendment has expired, the district’s authorized expenditures may not

exceed the budgeted amount, as supplemented by any unspent balance

from the preceding year.          Id. § 257.7.     In addition, the authorized tax

rates and levies computed on the basis of the certified budget are final

for the ensuing fiscal year. Id. § 24.20.

       Because budgets are finalized so far in advance, school districts

face a constant uncertainty over the impact an increase in fuel prices will

have on their operating budgets. The Iowa Association of School Boards,

a nonprofit organization representing the interests of its public-school-

district members, devised a way to assist school districts in reducing and

managing unpredictable and rising fuel costs.                    Through a program

administered by the association, Iowa Joint Utilities Management

Program, Inc. (IJUMP), participating members are offered the opportunity

to purchase fuel at a set price throughout the fiscal year. Under IJUMP’s

“fleet services program,”1 each participating district enters into a twelve-

month, renewable participant agreement that designates IJUMP as the

district’s contracting agent for the purchase and delivery of vehicle fuel.

The district is then permitted to purchase fuel throughout the fiscal year

at a guaranteed price that is established on January 31 of the preceding
fiscal year.

       In addition to promising to pay for gasoline purchased pursuant to

the agreement, the district agrees to pay an annual “risk management

fee” determined on the basis of the price per gallon and the total number

of gallons that the district “elects to insure” during the term of the

       1The  “participant agreement” between the individual school districts and IJUMP
refers to the fuel-purchase arrangement as “Fleet Services,” “the Fleet Services
Program” or “IJUMP-Fleet Services.” In contrast to the contractual language, the
association refers to the fleet services program in its pleadings and briefs as a “fuel risk
management program.” We, like the agencies whose decisions are challenged in this
appeal, choose to use the contractual language.
                                      4

contract.    IJUMP uses the management fee collected from the

participating district to pay any difference between the guaranteed fuel

price and the actual price of fuel delivered to the district. At the end of

the fiscal year, any surplus in the district’s account, i.e., any remaining

management fee paid by the district, may be rolled over to the next fiscal

year. Alternatively, the district may choose to receive a payment based

on the number of gallons of fuel purchased during the year, minus

program administration costs. If the management fee is insufficient to

cover the difference between the guaranteed price and the actual cost of

the fuel used by the district, IJUMP will bill the district for the shortfall

or will charge a higher fee in the following year to cover the deficit.

      The present dispute arises from participating districts’ desire to

pay the management fee required by the fleet services program through a

special “district management levy” authorized by Iowa Code section

298.4. Section 298.4 allows a district to levy a property tax in addition

to the property taxes for the general school fund permitted by chapter

257. The tax collected through the district management levy must be

placed in the district’s management levy fund and can be expended only

for purposes specified in section 298.4.

      In January 2005, the association, on behalf of its members, filed

petitions for declaratory order with the Iowa Department of Education

and the Iowa Auditor of State seeking declaratory rulings that the school

districts had the authority to use district management levy funds to pay

the management fee required for participation in IJUMP’s fleet services

program. The association contended this expenditure was authorized by

section 298.4(3), which allows payments from the district management

levy fund “[t]o pay the costs of insurance agreements under section

296.7.”
                                      5

      In identical declaratory orders, the department and auditor ruled

that the fleet services program was not “insurance” as that term is used

in section 296.7. The agencies stated that “[t]he essence of an insurance

agreement is that one party pays consideration to a second party in

return for the second party assuming some specified risk for the first

party.”   They noted that, under the fleet services program, “no risk is

assumed by IJUMP. The risk remains with the participating districts at

all times.” The agencies concluded the fleet services program was “akin

to a budget-billing plan where the certainty of the price of fuel is set for a

twelve-month period, but increases are still eventually absorbed solely by

the district.” Based on this analysis, the agencies ruled the management

fee for the fleet services program did not represent the cost of an

insurance agreement, and accordingly, “a district may not fund any part

of its participation from the district’s management levy funds.”

      The association filed a petition for judicial review, asking the court

to reverse the agencies’ decisions. Initially, the district court determined

the Department of Education had authority to interpret chapters 296

and 298. Therefore, granting appropriate deference to the department’s

interpretation of the pertinent statutes, the district court reviewed the

department’s decision under section 17A.19(10)(l). This statute states, in

part, that the court “shall reverse, modify, or grant other appropriate

relief from agency action” if the agency action is “[b]ased upon an

irrational, illogical, or wholly unjustifiable interpretation of a provision of

law.” Iowa Code § 17A.19(10)(l). After analyzing the language of section

296.7(1), the court agreed with the agencies that the participant

agreement for the fleet services program was not an “insurance

agreement” as contemplated by that statute. Therefore, the court held,
                                            6

“the agencies logically, rationally and justifiably applied [the governing

statutes] to the facts of this case.”

      The association has appealed the district court’s decision, raising

two   issues.       First,       the   association    contends    the   department’s

interpretation of section 298.4(3) and section 296.7(1) is not entitled to

deference.      Secondly, the association argues school districts have

authority to use district management levy funds to pay the management

fee required for participation in the IJUMP fleet services program. We

address each issue separately.

      II. Standard of Review.

      A. General Principles.              We review district court decisions on

judicial review of agency action under the standards of Iowa Code

chapter 17A, the Administrative Procedure Act.                   Mosher v. Dep’t of

Inspections & Appeals, 671 N.W.2d 501, 508 (Iowa 2003).                          Section

17A.19(10) governs review of the agency action itself.                  Applying the

standards of section 17A.19(10), we determine whether our conclusions

are the same as those of the district court. Id.

      In this case, the association’s challenge is based on the agencies’

alleged   erroneous          interpretation      of   the   controlling     statutes.

Consequently, one of two possible standards for review applies. Under

section   17A.19(10),        a    court   must    reverse   agency      action    when

“substantial rights of the person seeking judicial review have been

prejudiced because the agency action is any of the following”:

            c. Based upon an erroneous interpretation of a
      provision of law whose interpretation has not clearly been
      vested by a provision of law in the discretion of the agency.
             ....
           l. Based upon an irrational, illogical, or wholly
      unjustifiable interpretation of a provision of law whose
                                       7
      interpretation has clearly been vested by a provision of law
      in the discretion of the agency.

Iowa Code § 17A.19(10)(c), (l).    As a comparison of these provisions

reveals, the appropriate standard of review depends on whether the

legislature has clearly vested the interpretation of the statute at issue in

the discretion of the agency.

      When an agency has not clearly been vested with the discretion to

interpret the pertinent statute, the court gives no deference to the

agency’s interpretation of the statute. Id. § 17A.19(11)(b). Under these

circumstances, the court on judicial review simply determines whether

the agency’s interpretation was “erroneous.” Id. § 17A.19(10)(c); see also

Auen v. Alcoholic Beverages Div., 679 N.W.2d 586, 590 (Iowa 2004).

When the agency has been granted discretion to interpret the statute at

issue, the court must “give appropriate deference” to the agency’s

interpretation. Iowa Code § 17A.19(11)(c). In this situation, the agency’s

interpretation of the statute will be followed unless it is “irrational,

illogical, or wholly unjustifiable.”       Id. § 17A.19(10)(l); see also ABC

Disposal Sys., Inc. v. Dep’t of Natural Res., 681 N.W.2d 596, 602 (Iowa

2004).

      In deciding whether the interpretation of a statute has clearly been

vested by a provision of law in the agency’s discretion, we give no

deference to the agency’s view of this matter. Iowa Code § 17A.19(11)(a).

To inform our decision, we consider “ ‘the precise language of the statute,

its context, the purpose of the statute, and the practical considerations

involved.’ ”   Mosher, 671 N.W.2d at 509 (quoting Arthur E. Bonfield,

Amendments to Iowa Administrative Procedure Act, Report on Selected

Provisions to Iowa State Bar Association and Iowa State Government 63
                                          8

(1998) [hereinafter Bonfield]). Based on this review and using our “ ‘own

independent judgment,’ ” we decide whether

       “[w]e have a firm conviction . . . that the legislature actually
       intended (or would have intended had it thought about the
       question) to delegate to the agency interpretive power with
       the binding force of law over the elaboration of the provision
       in question.”

Id. (quoting Bonfield at 63).

       B. Discussion.2         Iowa Code section 256.1 establishes the

Department of Education “to act in a policymaking and advisory capacity

and to exercise general supervision over the state system of education

including . . . [p]ublic elementary and secondary schools.” The director

of the department has numerous specified duties.                    See Iowa Code

§ 256.9.     Section 256.9(16) provides that the director “shall . . .

[i]nterpret the school laws and rules relating to the school laws.”                Id.

§ 256.9(16). It is undeniable that this statute clearly vests the director

with discretion to interpret “school laws.”             Although the association

acknowledges the director’s duty and authority to interpret school laws,

it argues sections 298.4 and 296.7 are not school laws. According to the

association, these provisions are taxing statutes. We disagree.

       Section 298.4 authorizes school districts to levy a tax on all taxable

property in the district, requires that the proceeds of the levy be

deposited in a district management levy fund, and specifies five purposes

for which this fund can be expended. Section 296.7 authorizes school

districts to enter into specified insurance agreements and to levy taxes

       2As   noted above, the auditor’s declaratory order was identical to the
department’s declaratory order. Therefore, if either agency has clearly been granted
discretion to interpret the pertinent statutes, we must give deference to the agency
interpretation and review the agency order under the “irrational, illogical, or wholly
unjustifiable” standard.    Because we determine the department was given such
discretion, we need not consider whether the auditor had any discretion with respect to
this matter.
                                           9

under section 298.4 to pay for such agreements. While sections 298.4

and 296.7 certainly deal with taxation, we think their primary purpose is

to delineate and control school spending. The principal focus of these

statutes is not on the assessment and collection of the tax, but on the

expenditure of the tax revenues.           Moreover, both provisions are located

in Title VII, “Education and Cultural Affairs” subtitle 6, “School

Districts,”   rather   than   in   Title       X,   “Financial   Resources,”   which

encompasses various taxing laws. Chapter 256, in which the director is

charged with the interpretation of “school laws,” is also in Title VII

governing education.     Thus, the context of sections 298.4 and 296.7

supports the district court’s conclusion the department, acting through

its director, has been vested with discretion to interpret these provisions.

      In addition to the purpose and context of these laws, the practical

considerations involved also support our conclusion.                Because school

financing is so complex, there are practical reasons the legislature would

want all laws affecting school finances subject to the interpretive

authority of the agency charged with oversight of those finances—the

Department of Education. In an analogous situation, we held the Iowa

Utilities Board had clearly been vested with discretion to interpret laws

governing telecommunications companies based on the board’s “broad

authority . . . to regulate the rates and services of public utilities.” AT&T

Commc’ns of the Midwest, Inc. v. Iowa Utils. Bd., 687 N.W.2d 554, 561

(Iowa 2004). Similarly, in the present case, the department has broad

authority over school budgeting and financing. See generally Iowa Code

§§ 257.30 (establishing a school budget review committee in the

department, chaired by the director), .31 (describing extensive duties of

school budget review committee, including review of each district’s

proposed and certified budgets). Consequently, it would be odd, indeed,
                                         10

to exclude from the director’s duty to interpret school laws the provisions

governing school districts’ establishment and use of the district

management levy fund simply because the source of this fund is tax

revenues.

      For the foregoing reasons, we are convinced the legislature

intended to vest the department’s director with the discretion to interpret

sections 298.4 and 296.7. Accordingly, we give appropriate deference to

the   agency’s     interpretation   of   these   statutes   by   reviewing   its

interpretation under the standard set forth in section 17A.19(10)(l).

Under that standard, we will not reverse the agency’s interpretation

unless it is “irrational, illogical, or wholly unjustifiable.”      Iowa Code

§ 17A.19(10)(l).

     III. Use of District Management Levy Fund For Fleet Services
Program Management Fees.

      A. Relevant Statutes. As previously noted, a school district that

establishes a district management levy fund under section 298.4 may

use monies from this fund only for specified purposes.              One such

purpose is “the costs of insurance agreements under section 296.7.” Id.

§ 298.4(3). Section 296.7 provides in pertinent part:

             1. A school district . . . may . . . enter into insurance
      agreements obligating the school district . . . to make
      payments beyond its current budget year for one or more of
      the following mechanisms to protect the school district . . .
      from tort liability, loss of property, environmental hazards, or
      any other risk associated with the operation of the school
      district or corporation:
              a. To procure or provide for a policy of insurance.
              b. To provide a self-insurance program.
              c. To establish and maintain a local government risk
      pool.

Id. § 296.7(1).
                                      11

      B. Parties’ Contentions.       The department interpreted the term

“insurance agreements” in a traditional sense, holding an agreement

must at least transfer the risk of loss from one party to another to fall

within the statute. The association criticizes this interpretation, arguing

section 296.7 allows a school district to use the district management levy

fund for any mechanism that protects the district from any risk

associated with the operation of the school district.         It argues the

legislature’s   authorization   of   self-insurance   programs   and    local

government risk pools indicates section 296.7 “is not limited to only

traditional insurance agreements or insurance policies.”

      The department rejects the association’s broad interpretation of the

statute for several reasons. First, it asserts, the plain language of section

296.7 limits the included “mechanisms” to “insurance agreements” in the

form of “a policy of insurance,” “a self-insurance program,” or “a local

government risk pool,” none of which encompasses the fleet services

program agreement. Second, it contends if the fund could be used for

any expenditure that protects the district against any risk, there would

be no limit to what expenses could be transferred out of the general

budget and into the district management levy fund:

      The purchase of a sprinkler system or rental of an off-site
      computer data back-up site reduces the risk of disruption to
      the delivery of educational programs which could result from
      fire or a computer system crash. Similarly, inoculation of
      teachers with flu shots or hepatitis vaccine offers protection
      against teacher illness and protects against the potential
      cost and disruption to the operation of a school caused by
      teacher absences and the hiring of substitutes.

Finally, the department points out the limitations on taxing and

spending authority contained in the basic school finance formula, see id.

§§ 257.1–.4, would be readily circumvented under the association’s

interpretation, thereby thwarting the legislative goal in controlling school
                                       12

spending: “to equalize the amount of funds available to finance the

education of every child in the state regardless of where the child lives.”

Exira Cmty. Sch. Dist. v. State, 512 N.W.2d 787, 793 (Iowa 1994).

      C. Discussion. We focus our discussion on the core requirement

of section 296.7 that, regardless of what “mechanism” a district chooses

to employ (a policy of insurance, a self-insurance program, or a local

government risk pool), that mechanism must be “an insurance

agreement” that “protect[s] the school district . . . from tort liability, loss

of property, environmental hazards, or any other risk associated with the

operation of the school district.” Iowa Code § 296.7(1). The department

suggests this language restricts covered mechanisms to those that

accomplish the traditional purpose of insurance: protection against the

risk of loss.   The association interprets the phrase “any risk associated

with its operation” literally and broadly to mean any risk, not necessarily

a risk of loss. Based on our study of the statute and relevant authorities,

we are convinced the department’s interpretation of section 296.7(1) is

not irrational, illogical, or wholly unjustifiable.

      The goal of statutory interpretation is to ascertain legislative intent,

and that intent is determined by “the words chosen by the legislature.”

Auen, 679 N.W.2d at 590.          Consequently, to determine whether the

contract between IJUMP and the districts is an “insurance agreement”

that protects the school district from a “risk associated with the

operation of the school district,” we must identify what the legislature

meant by “insurance” and “risk.” Because these terms are not defined in

the statute, “we look to prior decisions of this court and others, similar

statutes, dictionary definitions, and common usage.”               Gardin v.

Long Beach Mortgage Co., 661 N.W.2d 193, 197 (Iowa 2003). In addition,

“we consider the context of the provision[s] at issue and interpret the
                                     13

provision[s] consistent with the entire statute of which [they are] a part.”

State v. Kamber, 737 N.W.2d 297, 299 (Iowa 2007).

      We begin with the common meaning of the word “risk.” Black’s

Law Dictionary defines “risk” as “[t]he chance of injury, damage, or loss;

danger or hazard . . . .” Black’s Law Dictionary 1328 (7th ed. 1999). The

general dictionary definition is similar: “possibility of loss or injury.”

Merriam-Webster’s    Collegiate    Dictionary   1008   (10th   ed.   2002).

Significantly, the common meaning of this term is consistent with its

usage in the context of insurance. A leading treatise on insurance law

suggests that the primary attribute of insurance is “the assumption of a

risk of loss and the undertaking to indemnify the insured against such

loss.” 1 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 1:9,

at 1–16 (1995) (emphasis added); accord 1 Eric M. Holmes & Mark S.

Rhodes, Holmes’s Appleman on Insurance 2d § 1.3, at 16 (1996) (noting

common-law definition of insurance describes insurer’s obligation to pay

“ ‘upon the destruction, loss or injury of something in which the [insured]

has an interest’ ” (emphasis added) (quoting Mass. Gen. Laws ch. 175,

§ 2 (1935)) [hereinafter “Appleman on Insurance 2d”]; 43 Am. Jur. 2d

Insurance § 2, at 49 (2003) (“Insurance, therefore, is a means of

distributing the risks of loss.”   (Emphasis added.)).    Another notable

treatise in this field states: “In the insurance contract, the risk of an

actual loss is distributed (socialized) among a large group of persons

exposed to a comparable risk of loss.” 1 Appleman on Insurance 2d § 1.3,

at 11 (emphasis added). “Loss” means “destruction,” “a person or thing

or an amount that is lost,” or “the amount of an insured’s financial

detriment by death or damage that the insurer becomes liable for.”

Merriam-Webster’s Collegiate Dictionary 687. Finally, we note the other

contingencies against which the school district may protect itself by
                                    14

using an insurance agreement—tort liability, loss of property, and

environmental hazards—all contain an element of injury, loss, or

damage. Based on these considerations, we think it is rational, logical,

and wholly justifiable to interpret section 296.7(1) as permitting only

insurance agreements that pay for mechanisms protecting the school

district against a risk of loss.

      The participant agreement for the fleet services program does not

protect the district against a risk of loss. As the department concluded,

the fleet services program is a budget-billing plan that allows the district

to defer payment of fuel costs in excess of the guaranteed price to the

next fiscal year.   Under the program, there is no loss incurred by the

district, and the district remains liable for the full cost of its fuel

purchases. The fleet services program does not provide loss protection.

      The association argues the possibility of high fuel costs is not the

only risk “insured” by the fleet services program:

             School districts fund their fuel expenditures from their
      general fund. Therefore, unanticipated increases in fuel
      expenditures during the fiscal year may at times force school
      districts to reduce educational programs or services for the
      students. IJUMP is intended to protect school districts from
      this risk of disruption in the delivery of educational
      programs and services.

Although avoidance of a disruption in the delivery of educational

programs and services may be the goal of districts participating in

IJUMP’s fleet services program, there is no provision in the contract

between IJUMP and the districts that even remotely addresses the

coverage of losses caused by a realization of the risk of such a

disruption.   The department’s refusal to interpret section 296.7(1) as

authorizing expenditures from the district management levy fund for any

mechanism that assists a district in merely avoiding a loss was not
                                    15

irrational, illogical, or wholly unjustifiable. Not only is the department’s

interpretation dictated by the language of the statute, such a dramatic

expansion of a district’s ability to transfer expenses out of its general

formula funding would undermine the limitations on spending imposed

by the school finance formula.

      We also reject the association’s argument that the legislature

intended to give districts wide latitude in spending the district

management levy funds because section 296.7(1) authorizes the use of

noninsurance mechanisms—self-insurance plans and local government

risk pools. See Iowa Code § 296.7(5) (stating a self-insurance program

and a local government risk pool are “not insurance” and not subject to

regulation under Iowa’s insurance laws).           Section 298.4(3) only

authorizes expenditures for “insurance agreements authorized by section

296.7,” and section 296.7 only authorizes school districts to enter into

specifically described “insurance agreements.”     (Emphasis added.)    We

think the legislature’s use of the term “insurance agreements” in both

statutes demonstrates its intent that the self-insurance programs and

risk pools permitted by section 296.7(1) be alternatives to traditional

insurance and not arrangements with a wholly different purpose.

      A review of pertinent authorities reveals that self-insurance and

risk pools, while not “insurance,” are recognized alternatives to

insurance that are designed to accomplish the same purpose as the

purchase of an insurance policy: protection against risks of loss. As one

treatise explains:

      In self-insurance the company, governmental entity or
      individual chooses not to purchase insurance but rather
      retains the risk of loss. In order to protect against losses,
      the self-insured will often set aside funds on a regular basis
      to provide its own pool from which losses will be paid. This
      can be analogized to the situation where a party purchasing
                                     16
      traditional insurance pays premiums to the insurer on a
      regular basis. However, in a self-insurance situation there is
      no shifting of the risk from the individual person or company
      to a larger group.

1 Appleman on Insurance 2d § 1.3, at 10 (emphasis added); accord

St. John’s Reg’l Health Ctr. v. Am. Cas. Co., 980 F.2d 1222, 1225 (8th Cir.

1992) (stating in a self-insurance program, “the risk of loss” is retained

by the person who bears the risk (emphasis added)); State v. Continental

Cas. Co., 879 P.2d 1111, 1116 (Idaho 1994) (“Self-insurance occurs

when an entity, rather than purchasing insurance to cover potential

losses, elects to pay off its losses as they arise, or to set aside fixed sums

into a reserve account to pay off intermittent losses.”           (Emphasis

added.)); Cordova v. Wolfel, 90 P.2d 1390, 1392 (N.M. 1995) (stating “self-

insurance is a process of risk retention whereby an entity ‘set[s] aside

assets to meet foreseeable future losses’ ” (emphasis added) (quoting

Robert E. Keeton & Alan I. Widiss, Insurance Law:               A Guide to

Fundamental Principles, Legal Doctrines and Commercial Practices § 1.3,

at 14 (1988))); Physicians Ins. Co. v. Grandview Hosp. & Med. Ctr., 542
N.E.2d 706, 707 (Ohio Ct. App. 1988) (“Self-insurance is the retention of

the risk of loss by the one upon whom it is directly imposed by law or

contract.” (Emphasis added.)); Black’s Law Dictionary 807 (defining “self-

insurance” as “[a] plan under which a business sets aside money to cover

any loss” (emphasis added)).      Thus, self-insurance, like an insurance

policy, contemplates protection against a risk of loss.

      Local government risk pools commonly have the same purpose. In

City of West Branch v. Miller, 546 N.W.2d 598 (Iowa 1996), this court

discussed a risk pool that had been formed by county governments. The

pool self-funded certain risks and purchased private insurance for other

risks. City of West Branch, 546 N.W.2d at 599. We observed that, with
                                         17

respect to the self-funded coverages in the risk pool, “the pool pays the

claims from the pool of money collected from pool members. In effect,

pool members share and pay the claims.” Id. at 603; accord Dobrowolska

ex rel. Dobrowolska v. Wall, 530 S.E.2d 590, 595 (N.C. Ct. App. 2000)

(holding that in order to constitute a risk pool, the risks of two or more

municipalities must be put in one pool for payment of all claims of all

entities). Thus, the purpose of risk pooling is to spread the risk of loss.

Consequently, local government risk pools are simply another way for

districts to protect against a risk of loss in lieu of purchasing a policy of

insurance.

      We conclude the inclusion of self-insurance and risk pools in

section 296.7(1) does not indicate a legislative intent to broaden

permissible expenditures from the district management levy fund beyond

those associated with protecting against risks of loss traditionally

covered by insurance policies. Given the commonly understood meaning

of risk in relation to insurance, self-insurance, and risk pooling, the

department was not irrational, illogical, or wholly unjustified in refusing

to expand the definition of “risk” to include an arrangement that does not

involve an actual loss.

      IV. Summary.

      Because the department has clearly been vested with discretion to

interpret sections 298.4 and 296.7, we give deference to the department’s

interpretation of these statutes and will reverse that interpretation only if

irrational,   illogical,   or   wholly   unjustifiable.   We   conclude   the

department’s interpretation of these statutes does not meet this standard

for reversal.     Accordingly, we affirm the declaratory rulings of the

department and the auditor that school districts may not use district
                                    18

management levy funds to pay the management fees required for

participation in IJUMP’s fleet services program.

      AFFIRMED.