Pressler, J.c.c., Temporarily Assigned.
Plaintiff Board of Education of the Borough of Fair Lawn (board), brought this declaratory judgment action seeking a definition of the obligation of defendant Mayor and Council of the Borough of Fair Lawn (borough) to pay over school moneys pursuant to N.J.S.A. 54:4-75. That statute, which governs the payment by all municipalities to their respective school districts of local taxes raised for public school support, has apparently not heretofore been the subject of any judicial construction. It provides in full as follows:
The governing body of each municipality shall pay over to the custodian of school moneys, in the case of school districts in which appropriations for school purposes are made by the inhabitants of the school district, within forty days after the beginning of the school year, twenty per centum (20%) of the appropriation for local school purposes, and thereafter, but prior to the last day of the school year, the balance of the moneys raised in the municipality for school purposes in such amounts as may from time to time be requested by the Board of Education, within thirty days after each request. The Board of Education shall not request any more money at any one time than shall be required for its expenditures for a period of eight weeks in advance; provided, however , that the Board of Education may at any time, but not earlier than fifteen days prior to the beginning of the school year, request sufficient moneys to meet all interest and debt redemption charges maturing during the first forty days of the school year. The governing body may make payments of such moneys in advance of the time and in excess of the amounts required by this section.
The specific question posed by this controversy is the extent to which, if any, the governing body may compel a board of education to submit to it detailed financial justification in support of its periodic payment request and the extent to which, if any, the governing body may refuse to honor
a periodic payment request either because the board of education refuses to respond to the governing body's demand for supporting information or because the governing body is not satisfied on either a quantitative or substantive basis with the information which is supplied.
The controversy here arose as a result of the refusal by the governing body of Fair Lawn to pay over to the board its anticipated payment in February 1976. The board thereupon commenced this action by verified complaint and order to show cause by which it sought, by way of interim relief, an order compelling the borough to make the February payment forthwith and directing the borough to honor its periodic requests until final disposition of this litigation. That relief was granted in order to insure the uninterrupted and orderly operation of the public school system pending final judgment.
With respect to the substantive question here raised, it is a matter of undisputed fact that the parties have been following for nearly 20 years a uniform and consistent practice in respect of school-money payments which varies somewhat from the basic statutory scheme. That scheme, as explicitly provided for by the quoted statute, mandates a payment by the municipality to the board of 20% of the local school appropriation within 40 days after commencement of the school year, that is, by August 10, the school year running from July 1 to the following June 30. No board request for that payment is required. Thereafter, the board must make periodic requests at least 30 days in advance of the desired payment date, the amount requested not to exceed more than it requires for its expenditures for the eight-week period following the payment date. Any remaining balance is required to be paid over to the board prior to the end of the school year. The governing body is, moreover, authorized to pay over school moneys in its discretion in advance of the time and in excess of the amounts required by the basic
scheme.*fn1 The payment method actually followed by the parties here was for the board, in effect, to waive the initial 20% payment and to submit to the borough six requisitions during the school year, the first at least 30 days prior to its commencement and bimonthly thereafter, each in the amount of approximately one-sixth of the annual appropriation. The borough, instead of making such bimonthly payments, however, made 12 monthly payments, each in the amount of one-half of the requisition. Thus the borough, rather than paying the requested amounts within 30 days of the requisition, as provided by statute, paid one-half of the requisition within 30 days and the other half within 60 days. Following this procedure, the board submitted a requisition in December 1975 for some $1.7 million, representing approximately one-sixth of the total of $10.26 million appropriation for the 1975-1976 school year. One-half of that appropriation, some $850,000, was paid by the borough in January. The refusal by the Borough to pay the second half of the requisition in February represented the culmination of a series of communications by the borough to the board during the fall of 1975 in which the Borough expressed dissatisfaction with this payment method and its intention to monitor closely the board's financial status by withholding whatever portion of the requisitioned sum the borough would determine that the board did not need for the ensuing eight-week period.
On the return date of the order to show cause the borough sought an opportunity to prove, by way of a plenary hearing, that the board did not actually need the full February payment in order to meet its expenditures for the next four weeks, and hence that its refusal to honor the requisition in full was justified.*fn2 The borough has never taken the position
that the board is making illegal or improper expenditures or is in any other way mismanaging school funds. Nor does it suggest that it is itself without the available funds to meet the requisition. Its actions here were apparently inspired by its belief that, before it could be compelled to make the statutorily mandated payments, the board would have to exhaust or at least invade its other financial resources -- specifically, its certificates of deposit which represent prior budgeted and current surplus. Since the borough's funds are also, of course, invested in certificates of deposit, it is evident that this dispute ...