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Board of Education of the Township of East Brunswick, Middlesex County v. New Jersey State Dep't of Education

July 19, 2007; as amended July 26, 2007


On appeal from the Final Decision of the State Board of Education, SB No. 30-04.

Per curiam.


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 ...

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