On appeal from a Final Decision of the State Board of Education, Docket No. 6-1/05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Yannotti and LeWinn.
The Deron School of New Jersey (Deron or the school), located in Montclair, is a private school for disabled students. Pursuant to regulations promulgated by the New Jersey Department of Education (DOE), the school receives reimbursement from sending public school districts for the tuition costs of each disabled student. The school appeals from a decision by the State Board of Education (Board) that, for the school year 2002-2003, certain fringe benefits the school paid to its employees were not includable in the calculation of the school's actual cost per student. The Board disallowed pension fringe benefit costs of $8,778.00.
On appeal, the school claims that the Board should be equitably estopped from enforcing its regulation for the 2002-2003 school year because it had not enforced it in the past. The school further argues that the Administrative Law Judge (ALJ) improperly denied the school the right to depose two of the DOE's employees during the proceedings before the Office of Administrative Law (OAL). We conclude that the school's arguments are without merit and affirm the decision of the Board.
In calculating the amount of reimbursement from the sending school district for each student, the tuition rate shall not "exceed the actual cost per pupil as determined under rules prescribed by the [C]commissioner [of Education] and approved by the State Board of Education." N.J.S.A. 18A:46-21. One of those rules, N.J.A.C. 6A:23-4.5(a)23i, requires an equitable standard of distribution. The agency concluded that Deron's formula to calculate pension benefits did not meet this standard.
Since 1978, the school's pension contributions have been calculated using a formula referred to by the parties as "social security integration." Applying the social security integration formula, employees whose annual salaries exceed the "integration level" receive greater pension benefits than employees whose salaries do not reach the integration level. Those higher benefits are in the form of increased employer contributions to the employees' pension benefits, equal to 5.7% of their salary above the integration level.
Each year, Deron provides the DOE with its audited financial statements. Those financial statements have indicated that the school has provided its employees with social security integration pension benefits. Prior to 2002, the DOE did not question whether the school's formula met the regulatory requirements.
That changed during the audit for fiscal year July 1, 2002 to June 30, 2003. The DOE determined that as a result of the school's use of social security integration, its pension did not conform to DOE requirements. The DOE's Office of Compliance Investigation issued a report that included the following findings and recommendations:
1. The pension contributions calculation of the school's directors exceeded the same benefit made available to all other employees by 5.7% of their earnings. This does not conform to the requirements of N.J.A.C. 6A:23-4.5(a)(23) and is therefore disallowed.
The audit disclosed that four of the school's directors are given a 5.7 percent of earnings higher contribution to the Pension Plan than all other full time employees due to Social Security Integration. N.J.A.C. 6A:23-4.5(a)(23) requires an equitable standard of distribution that is attainable for all full-time employees in order for a fringe benefit to be considered an allowable cost in the calculation of the actual certified cost per pupil. The audit identified non-allowable pension fringe benefit costs of $8,778.00.
The private school must exclude $8,778.00 of pension benefit costs from the certified actual cost per pupil for the fiscal year ended June 30, 2003. In addition, any pension benefit costs incurred using the same formula must be excluded from the calculation of the 2003-2004 certified actual cost per pupil.
N.J.A.C. 6A:23-4.5(a)(23) requires an equitable standard of distribution that is attainable for all full-time employees in order for a fringe benefit to be considered an allowable cost in the ...