July 19, 2007; as amended July 26, 2007
BOARD OF EDUCATION OF THE TOWNSHIP OF EAST BRUNSWICK, MIDDLESEX COUNTY, PETITIONER-APPELLANT,
NEW JERSEY STATE DEPARTMENT OF EDUCATION, COMMISSIONER OF EDUCATION, RESPONDENTS-RESPONDENTS.
On appeal from the Final Decision of the State Board of Education, SB No. 30-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted May 8, 2007
Before Judges Kestin, Weissbard and Payne.
In this appeal, petitioner, the East Brunswick Board of Education, contests the decision of the State Board of Education to dismiss, as moot, East Brunswick's challenge to the manner in which respondent, the Department of Education, calculated reimbursement for certain special education costs as constituting de facto rulemaking prohibited by the Administrative Procedure Act (APA), N.J.S.A. 52:14B-1 to -25, and Metromedia, Inc. v. Dir., Div. of Taxation, 97 N.J. 313 (1984). We affirm.
The matter arises from the Department's implementation of the Comprehensive Educational Improvement and Financing Act of 1996 (CEIFA), N.J.S.A. 18A:7F-1 to -36, which, among other things, requires that certain eligible expenses incurred by school districts be reimbursed by the State. In the relevant period, CEIFA provided that any district whose special education expenses for an eligible student exceeded $40,000 in a single school year could apply to the Commissioner of Education (Commissioner) for additional special education aid for that school year. N.J.S.A. 18A:7F-19(b). A review panel appointed by the Commissioner would then determine if the district's request should be granted, considering factors including, but not limited to: an assessment of whether the district is spending appropriate amounts of regular and special education funds on special education pupils; the facts of the particular case or cases at issue; the district's level of compliance with regulatory requirements; and the impact of the extraordinary costs on the district's budget. [Ibid.]
Following CEIFA's passage, on December 5, 1997, the Department of Education, the state agency authorized to administer the Act, issued a memorandum and application that school districts could use in seeking extraordinary special education funds. The memo indicated that "[s]everal factors will be taken into account in determining a district's eligibility for additional aid" and that, at a minimum, the Department must consider the statutory factors outlined in CEIFA. In addition to those factors, the Department stated it would "[a]ssess the district's placements and placement costs for the applicable school year," as well as any "other factors the state review panel deems appropriate to the individual application."
Over the ensuing years, the criteria for receipt of extraordinary special education expense reimbursement changed. On October 29, 1998, the Department issued a memorandum stating that, in addition to previously established factors, the review panel would now "review the district's projected budget surplus and actual budget surplus in relation to the [reimbursement] request."
On February 16, 2000, the Department issued another in its series of memoranda and applications. This memo noted that the instructions regarding a district's budget surplus had been "revised as a result of a recommendation made by the Commissioner's Summer Work Group on Special Education Funding," and that "all districts with program approval should receive at least 50% funding of their extraordinary costs." The application accompanying the memo contained an exposition of the Department's policy regarding actual and projected budget surpluses. The instructions stated that those districts having "an actual budget surplus less than or equal to their projected budget surplus will receive 100% of their extraordinary costs (costs in excess of $40,000)," whereas those having an actual budget surplus that exceeded the projected surplus would receive between 50% and 100% of their extraordinary costs, as determined by the amount of funding available. Finally, if the actual budget surplus exceeded the projected surplus, and the actual surplus was "greater than 6%,"*fn1 the district would receive only 50% of its extraordinary costs. For reasons apparently unrelated to the budgetary surplus rules, East Brunswick was deemed ineligible for any reimbursement of extraordinary costs for the 1999-2000 school year.
On December 7, 2001, the Department once again sent out a memorandum regarding extraordinary costs reimbursement. This memo, covering the 2001-2002 school year, listed the statutory factors that the Department would consider when determining a district's eligibility, but made no mention of actual or projected budget surpluses. However, the instructions accompanying the application, which were available on the Department's website along with the application, repeated the prior year's budget surplus formula.
In late July 2002, the Department informally notified all applicants of their eligibility for reimbursement of costs incurred in the 2001-2002 school year, triggering a flood of questions and complaints concerning the reduced reimbursement amounts. In response, Assistant Commissioner of Education Richard Rosenberg issued an explanatory letter, dated July 31, 2002, in which he cited budgetary constraints and the budgetary surplus rules, noting that each district's eligible costs were either 100% or 50%, depending on the amount of the district's actual budget surplus and its relation to both any projected surplus and its proportion of the total budget. No mention was made of the sliding 50% to 100% scale for actual surpluses that did not exceed 6% of the total budget, as included in the 2000-2001 memo and the online instructions for the 2001-2002 application.
On August 12, 2002, East Brunswick was notified by the Department that it would receive a total of $211,947 in reimbursement for its extraordinary special education expenses -- a number that reflected both a 50% reduction, because East Brunswick's actual surplus for the 2001-2002 school year exceeded its projected surplus, and a prorated disbursement of 42.72%, the latter deduction being required by budget shortfalls.*fn2
In 2001, the Legislature amended CEIFA. L. 2001, c. 356.*fn3
The amendments, effective January 6, 2002 (the 2002 Amendments), altered the provisions covering the reimbursement of extraordinary special education costs, setting a timeline for achieving full-funding of such costs by the 2005-2006 school year. The amendments also designated a district's 2001-2002 reimbursement for each student as a floor below which annual awards for that pupil in the next three school years could not fall unless the district's actual expenditure for that student was reduced below the 2001-2002 level. N.J.S.A. 18A:7F-19(b).
East Brunswick contested the 50% deduction in reimbursement that resulted from its budget surplus and, on November 4, 2002, applied to the Commissioner of Education to resolve the dispute, specifically alleging that the Department's action was arbitrary and capricious and that the formula used by it to calculate the reduction was not promulgated in accordance with the APA, and therefore was invalid.
Determining that the matter was a contested case, the Commissioner transferred it to the Office of Administrative Law on January 9, 2003. Both parties moved for summary decision. On April 6, 2004, the Administrative Law Judge (ALJ) to whom the matter had been assigned issued a written initial decision in which he found that the Department had engaged in improper rulemaking, in violation of the APA, when it established the formula for evaluating special education aid applications that took into consideration a district's projected and actual budget surpluses. Consequently, the ALJ granted East Brunswick's motion for summary decision and denied the Department's cross-motion.
On May 21, 2004, the Commissioner issued a final decision determining that the special education reimbursement guidelines embedded in the 2001-2002 application instructions did not constitute "rules" as that term is understood in the context of the APA. He, therefore, set aside the initial decision of the ALJ and remanded the matter to permit the ALJ's consideration of whether the rule was arbitrary or capricious or was ultra vires -- issues that, in light of his decision on the rulemaking issue, the ALJ had not previously addressed.
Upon receipt of the Commissioner's decision, East Brunswick filed a further appeal to the State Board of Education, which referred the matter to the Board's Legal Committee. In a report dated November 16, 2005, the Committee determined that, regardless of whether the Department's actions constituted improper rulemaking, petitioner's appeal was moot in light of the 2002 amendments to CEIFA.
Thereafter, the State Board of Education directed East Brunswick to supplement the record on appeal with documentation detailing the amount of extraordinary aid petitioner received for the 2002-2003 through 2004-2005 school years. Following receipt of the requested documentation, the State Board additionally requested that East Brunswick provide any documentation that would demonstrate whether the Department's 2001-2002 decision regarding East Brunswick's reimbursement had a continuing effect upon its extraordinary expense reimbursements in the subsequent three years. East Brunswick did not respond substantively, stating that any such documentation was within the control of the Department.
On May 5, 2006, the State Board of Education issued a decision on East Brunswick's appeal in which it agreed with the Legal Committee's report and found that the matter was moot. In doing so, the Board noted that East Brunswick's administrative procedural concerns were obviated by the 2002 amendments to CEIFA, which established a specific formula for the calculation of extraordinary aid, and it noted further that East Brunswick had failed to demonstrate an ongoing impact resulting from the Department's 2001-2002 calculations of extraordinary aid. The present appeal was filed shortly thereafter.
On appeal, East Brunswick claims on multiple bases that the matter is not moot. First, East Brunswick notes that the 2002 CEIFA amendments established the 2001-2002 extraordinary aid allocation as a baseline for such allocations over the next three school years. It then contends that the award of extraordinary aid in 2001-2002 was miscalculated, that the base amount of compensation East Brunswick was entitled to in the subsequent three years was thus effectively lowered, and that an ongoing harm resulted. Second, East Brunswick contends that, should it prevail, it is entitled to the money it was denied in 2001-2002. East Brunswick's entitlement to damages therefore would vivify its claim, precluding a finding of mootness. We do not accept East Brunswick's position.
As we have noted, the original version of CEIFA enacted in 1996 directed the review panel to weigh a variety of factors when determining how much extraordinary aid a district should receive in a given school year; it did not, however, establish any concrete or explicit formula to be used, and a final aid determination was largely discretionary with the panel. The 2002 CEIFA amendments established a mandatory payment schedule, removing any discretion the Department previously had when allocating extraordinary aid. Specifically, the 2002 version of CEIFA provided that any expenditure on an eligible individual student in excess of $40,000 would be compensated at a rate of 60% for the first $20,000 over that amount, 70% for the next $20,000, and 80% for any amount in excess of $80,000. The amended version of the Act also provided that in the case of an individual classified pupil for whom additional special education State aid was awarded to a district for the 2001-2002 school year, the amount of such aid awarded annually to the district for that pupil for the 2002-2003, 2003-2004 or 2004-2005 school year shall not be less than the amount for the 2001-2002 school year, except that if the district's actual special education costs incurred for the pupil in the 2002-2003, 2003-2004 or 2004-2005 school year are reduced below the amount of such costs for the pupil in the 2001-2002 school year, the amount of aid shall be decreased by the amount of that reduction.
We agree with the Board that the amendment mooted East Brunswick's appeal. The formula that East Brunswick challenged, which imposed a 50% reduction in eligibility for extraordinary aid when a district's actual budget surplus exceeded its projected budget surplus, was no longer in use by the time East Brunswick's complaint was filed. Although the 2001-2002 extraordinary aid reimbursement then served as a floor for future aid allocations until 2005, as of the end of the 2004-2005 school year the continuing effect of any aid allocation from 2001-2002 was terminated. The current version of CEIFA requires extraordinary special education expenses "incurred in the 2005-2006 school year and thereafter" to be fully compensated. N.J.S.A. 18A:7F-19(b)(2).
Given the present statutory mandate for full funding of extraordinary costs, any factors previously used by the Department in allocating extraordinary special education aid are no longer in use and are in no danger of being re-implemented by the Department. If East Brunswick's appeal is construed as confined to the propriety of the Department's 2001-2002 formula, its mootness is evident. See Mercer Cty. Deer Alliance v. State Dept. of Environmental Protection, 349 N.J. Super. 440, 448 (App. Div. 2002)(noting that any defect in the original promulgation of a rule is cured by the subsequent proper adoption of a superseding rule or statute).
It is well-accepted that this court may reach the merits of an otherwise moot claim if the matter is capable of repetition, yet evading review, Gilbert v. Gladden, 87 N.J. 275, 295-296 (1981), or concerns matters of substantial public importance, In re Geraghty, 68 N.J. 209, 212 (1975). Because the Legislature has now spoken on the reimbursement issue and has substantially limited the Department's discretion in making its awards, the former exception is inapplicable to the current matter. East Brunswick therefore seeks to invoke the latter exception to the mootness doctrine, but its argument is unconvincing. East Brunswick claims the underlying issue is the Department's failure to follow statutory guidelines, thereby making the issue one of substantial public importance. However, this argument is essentially a restatement of East Brunswick's claim that the APA was applicable to the Department's actions in 2001-2002. Under East Brunswick's logic, any invalid rulemaking by a governmental agency thus could be transformed into a matter of substantial public importance capable of overcoming a defense of mootness.
Certainly, any time a government agency violates the provisions of statute, assuming such to have occurred, a public interest is affected, but decisions recognizing a public interest sufficient to overcome a mootness defense have typically addressed fundamental and lasting issues regarding the exercise of power under the school laws that are absent here. See e.g. Dunellen Bd. of Educ. v. Dunellen Educ. Assn., 64 N.J. 17, 21-23 (1973)(Commissioner's assertion of authority under school laws to determine validity of local school board's consolidation of departments and the arbitrability of dispute between the board and the union raised issue of substantial public importance); East Brunswick Bd. of Educ. v. Twp. Council of East Brunswick, 48 N.J. 94, 109 (1966)(contested authority of Commissioner to decide budget dispute between township council and local board of education raised public interest issue sufficient to overcome any challenge of mootness).
In this case, the Department is not asserting that it is exempt from the provisions of the APA, but rather is arguing that a no-longer-viable statutory provision authorized its actions. There is no broader question of public importance at stake, and the Legislature's elimination of budgetary concerns as a factor in reimbursing special education costs has nullified the underlying issue. Neither exception to the doctrine of mootness is applicable.
East Brunswick further contests the Board's finding of mootness by focusing on the effect of the 2001-2002 aid award on subsequent school years. However, East Brunswick has produced no evidence of actual damage as the result of the adoption of 2001-2002 levels of reimbursement as a floor applicable to the three succeeding years. Yet, it has the burden of proving damages, and should be in possession of the documentation detailing the amount of reimbursement requested and received for each eligible student in the subject years that would constitute prima facie evidence of harm, if harm existed. In the absence of such evidence, there is no foundation in fact for East Brunswick's argument that the presence of a continuing harm avoids a determination of mootness.
Even if damages were to be proven,*fn4 East Brunswick could not, thereby, avoid dismissal of its action. As the Department argues, standard practice and public policy dictate that East Brunswick cannot now recover any aid denied to it in past years.
In an allied context, we have stated that "[o]ur courts have long recognized that purely prospective relief is often appropriate in the field of government taxation and finance even when a statutory enactment is held to be unconstitutional." Town of Secaucus v. Hackensack Meadowlands Dev. Comm'n, 267 N.J. Super. 361, 378 (App. Div. 1993), certif. denied, 139 N.J. 187 (1994). We found the rationale behind this policy to be rooted in the public interest in governmental fiscal stability. "Governmental entities rely upon anticipated revenues in preparing their budgets and 'in making appropriations and expenditures.'" Ibid. (quoting Salorio v. Glaser, 93 N.J. 447, 465, cert. denied, 464 U.S. 993, 104 S.Ct. 486, 78 L.Ed. 2d 682 (1983)). To afford decisions affecting anticipated State expenditures and district reimbursements retroactive effect would necessitate a judicial unraveling of the "fiscal skein" that the courts, in the past, have declined to undertake. See, e.g., Robinson v. Cahill, 62 N.J. 473, 520, cert. denied sub nom., Dickey v. Robinson, 414 U.S. 976, 94 S.Ct. 292, 38 L.Ed. 2d 219 (1973).*fn5
We find this precedent to be applicable to the present matter. We reject as legally and factually unsupported East Brunswick's newly-formulated argument that relief could be afforded to it without regard to the status of prior reimbursements to other districts. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).
In light of our affirmance of the Board's decision that the issues raised by East Brunswick were mooted by the 2002 amendments to CEIFA, we decline East Brunswick's invitation to determine whether the Department's prior reimbursement procedures were promulgated in violation of the APA.