On certification to the Superior Court, Appellate Division, whose opinion is reported 225 N.J. Super. 76 (1988).
For modification, affirmance and remandment -- Justices Clifford, Handler, Pollock, O'Hern, Garibaldi, and Stein. Opposed -- None. The opinion of the Court was delivered by Handler, J.
This case impels us to define more clearly the regulatory framework within which local boards of education and municipal governing bodies must exercise their respective responsibilities for developing and adopting an educational budget for the public schools. This process also directly implicates the role of the Commissioner and State Board of Education in effectuating local school budgets, including the standards that govern the administrative review of such budgets.
Consideration of these issues entails a clarification of Board of Education, East Brunswick Township v. Township Council, East Brunswick, 48 N.J. 94 (1966). There, the Court authorized the State Board of Education to review a municipality's
reduction of a school budget that had been rejected by the voters and appealed by the local school board. In order to facilitate this review, the Court required the municipality to submit detailed statements when its actions would result in "significant aggregate reductions" of the school board's budget. Id. at 106. In the current appeal, the voters rejected a school budget offered by the local board of education, and thereafter the municipality cut the budget and certified the reduced budget to the county board of taxation. It did not, however, submit accompanying statements explaining the basis for the budget cuts. The Commissioner of Education, without considering the educational merits of the budget, by summary judgment restored the budget cuts solely because of the antecedent failure of the municipality to have furnished such an explanatory statement. The ruling of East Brunswick did not deal expressly with whether under such circumstances a statement of reasons must accompany the budget reductions when they are made and certified or whether it is sufficient to submit reasons only after the local board appeals from the budget reductions. Moreover, East Brunswick did not deal expressly with the administrative consequences of the failure to timely submit such a statement of reasons.
The Board of Education of the Township of Deptford (hereinafter "board") presented a proposed budget to the township's voters on April 15, 1986. The voters rejected this budget, which totaled approximately eight million dollars, and pursuant to the statutory scheme of N.J.S.A. 18A:22-37, the board then submitted the budget to the Mayor and Township Council (hereinafter "council") for review. Representatives from the board and the council met to discuss the budget, and, on May 6, 1986, the council sent to the board an amended budget with a reduction of $611,528 or 7.5%. This was accompanied by a document that proposed specific reductions for each account number of the board's budget and indicated areas where the
council desired more information from the board. The council, however, provided no specific reasons for the proposed reductions. The council also requested that the two bodies meet together to discuss the council's proposed reductions. No meeting was held, however, because of a disagreement over whether the meeting should be open or closed. The council, on May 8, met and certified the budget as reduced by $611,528 to the county board of taxation.
On May 16, the board notified the council that it would appeal the reduction. The two bodies met on May 21 but were unable to reach a settlement. However, after the meeting, the council unilaterally adopted a new resolution to restore part of the earlier reduction from $611,528 to $183,300 or 2% of the total budget. This was then certified to the county board of taxation, again, however, with no statement of reasons.
The board appealed the amended budget with its revised reductions to the Commissioner of Education. The council filed an answer to this appeal, which included a list of recommended line-item reductions along with a statement of specific reasons for each reduction. The Commissioner transferred the action to the Office of Administrative Law as a contested agency action. The board then sought summary judgment on the ground that the council had failed to submit a statement of reasons for the reductions when it certified the budget to the county board of taxation. The Administrative Law Judge (ALJ) denied the motion, finding that the statement of supporting reasons supplied by the council when it filed its answer to the board's appeal before the Commissioner was satisfactory. On the merits, the ALJ found $103,350 of the proposed reductions to be proper, but restored $79,950 to the budget. Both sides filed with the Commissioner exceptions to the ALJ's recommended disposition of the appeal.
The Commissioner rejected the recommendation of the ALJ, granted the board's motion for summary judgment dismissing the municipality's answer to the appeal, and restored the entire
amount of the proposed reductions to the budget. In reversing the ALJ, the Commissioner found that the council's failure to supply a statement of reasons with its initial proposed reductions and certification was an arbitrary act within the meaning of East Brunswick, and that the filing of a statement of reasons with its answer to the board's appeal was itself untimely and inadequate, thus rendering the revised reduced budget equally arbitrary. The State Board of Education affirmed. However, the Appellate Division reversed, finding that the council's filing of reasons at the time it answered the local board's petition to appeal was "adequate and timely compliance with the intent and spirit of East Brunswick." Board of Educ. v. Deptford Township, 225 N.J. Super. 76, 84 (1988). This Court granted the board's petition for certification. 113 N.J. 333 (1988).
In East Brunswick, this Court reviewed the methodology for the final determination of a local school budget that has been rejected by the electorate. The framework governing the budget-making process is found in N.J.S.A. 18A:22-37 (formerly N.J.S.A. 18:7-82 (R.S.)). This provides that if the voters of the school district have rejected the budget prepared by the local board of education, the board must deliver its budget to the governing body of the municipality and thereafter engage in consultation with the governing body. The municipality must then determine the appropriations necessary to provide a "thorough and efficient" school system and must certify this amount to the county board of taxation. The statutory scheme sets a tight timetable for elections and subsequent submissions.*fn1
The primary thrust of the Court's decision in East Brunswick was to establish the power of the Commissioner of Education to review school budget reductions effected by a municipality following voter rejection of the school board's budget. The discretion of the Commissioner in reviewing such reductions is guided by the need not simply to identify and disallow arbitrariness in the budget-review process but to fulfill the State's educational policies. "[T]he Commissioner in deciding the budget dispute here before him, will be called upon to determine ...