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In re Use of Abbott Funds

August 18, 2009


On appeal from New Jersey State Board of Education.

Per curiam.


Submitted November 3, 2008

Before Judges Carchman and R. B. Coleman.

The Board of Education of the City of Elizabeth (Elizabeth Board), a former Abbott*fn1 district, appeals from a Final Decision of the New Jersey State Board of Education (State Board) dated December 7, 2007, which affirmed the decision of the Commissioner of Education (Commissioner) to deduct from the Elizabeth Board's 2006-2007 fiscal year the sum of $88,373 to compensate for the equal sum expended by the Elizabeth Board during the 2005-2006 fiscal year to pay for a twenty-page brochure and television communication to the public. Such print and television communications advocated for the purchase of two parcels of land in connection with a campaign to build new schools in Elizabeth.

Carlos Cedeno, a member of the Elizabeth Board appeared in two out of the three television spots that aired, and his photograph appeared in the brochure. He was also a candidate for the City Council and ran in the primary election two months after the publications. A campaign flier on behalf of Cedeno criticized local politicians for an alleged attempt to sell the same parcels of land to a political contributor at ten percent of its value.

By letter dated September 19, 2006, the Commissioner informed the Elizabeth Board that it had reviewed the actions of the Elizabeth Board and determined that its communications constituted political advertising in violation of State law, and therefore, constituted inappropriate expenditure of State funds. In that letter, the Commissioner also stated its authority pursuant to N.J.S.A. 18A:55-2 to "direct the State Treasurer to withhold funds provided by the State 'from any district which fails to obey the law,'" and informed the Elizabeth Board that it would be deducting such expenditures from its fiscal Year 2006-2007 school year budget.

The matter was referred to the Office of Administrative Law as a contested matter. Administrative Law Judge (ALJ) Jesse H. Strauss heard the matter and filed an Initial Opinion that essentially agreed with the Commissioner and ordered "that $88,373 in State funds be deducted from the Fiscal Year 2006-07 school year budget of the School District of the City of Elizabeth, Union County." ALJ Strauss noted that "[b]ecause Abbott districts receive public State funds, the Department of Education has a duty to scrutinize how they spend these monies to ensure that they are spent in accordance with their intended purpose." See N.J.A.C. 6A:10A-7.1(c). The Commissioner is authorized by the Appropriations Act, FY 2007, P.L. 2006, c. 45, to ensure that public funds are spent in an effective and efficient manner. Moreover, the Commissioner may direct the State treasurer to withhold funds from a district that fails to act in accordance with the law or the rules or direction of the Commissioner. N.J.S.A. 18A:55-2 and N.J.A.C. 6A:26A-6.1.

The ALJ relied primarily upon Citizens to Protect Public Funds v. Bd. of Educ. of Twp. of Parsippany-Troy Hills, 13 N.J. 172 (1953), involving a similar issue. In that case, the Court concluded that although the board had the authority to advocate for schoolhouses and to make reasonable expenditures to educate voters, it needed to give "full disclosure of all relevant facts," including the good and bad consequences of the proposal. Id. at 180-81. There, the Court held that the board's expenditure was unlawful and outside its authority because the board used public funds to advocate only one side of a controversial issue "without affording the dissenters the opportunity by means of that financed medium to present their side." Ibid.

In the case at bar, the ALJ found that the Elizabeth Board "failed to disclose all the relevant facts in its brochure and television spots," and that "the Board clearly sought to persuade Elizabeth residents that only its position had merit and . . . criticize[d] the mayor's proposed sale of the NJ Transit site to a private developer for less than its appraised value." The ALJ found it significant that Cedeno had made similar criticism of the mayor in his campaign for City Council. The Elizabeth Board asked the "City to work with the Board of Ed." and to "[c]all the Mayor and State Senator Ray Lesniak and tell them to start working for the children of Elizabeth." The ALJ concluded that the Elizabeth Board's communications became political advertisements.

In addition, the ALJ found that while the brochure and television spots discussed the Elizabeth Board's desire "to acquire two parcels of land for the construction of a new high school and physical education complex," the Elizabeth Board knew that it did not have State approval to acquire the land or to construct school facilities on it. In addition, the same site had been rejected for the construction of an elementary school due to possible contamination. The ALJ found that the Elizabeth Board (1) gave the residents "the false impression that it had secured State approval, particularly since the brochure emphasizes that such construction would be financed by the State"; and (2) made material misrepresentations by stating that it could purchase the property for the children and that the site would be a "perfect location" for a new high school, notwithstanding that it lacked State approval and the State had expressed environmental concerns.

The ALJ concluded that the challenged communications "fail[] the Citizens test for an implied power to reach residents regarding a public issue, and consequently is improper. The judge noted that in another similar case, Schettino v. Ridgefield Bd. of Educ., 93 N.J.A.R.2d (Vol. 4) 224 (Education), the Commissioner's remedy was to require a system of compliance review for board publications. However, the case at bar involves an Abbott district, and "the Legislature has specifically charged the Commissioner with the authority to withhold funds when she has determined that such a district is not operating in an effective and efficient manner and has not spent State funds wisely." See FY 2007 Appropriations Act, P.L. 2006, c. 45 and FY 2006 Appropriations Act, P.L. 200, c. 32.

The ALJ further found that the Elizabeth Board "misses the point when it argues in the abstract (1) that its communications were 'effective' because they reached the public and inquiries ceased about the effect on taxes of building new schools, and (2) that they were 'efficient' because the Board followed all appropriate laws and procedures in bidding the work to outside vendors and the cost was within that part of the budget allocated for publicity." Citing FY 2007 Appropriations Act, P.L. 2006, c. 45, the judge concluded that because it was "legally flawed, the Board's conduct was not an effective and efficient expenditure of State funds in furtherance of the implementation of Abbott v. Burke programs."

The Commissioner adopted the Initial Decision of the ALJ and directed the Department of Education "to take the steps necessary to effectuate an $88,373 deduction from the Board's 2006-07 school budget." On appeal, the Elizabeth Board persists in its contentions that (1) the communications and related expenditures were efficient and effective; (2) the communications fairly present the issues and (3) the deduction of the expenditure from its budget is not justified. After reviewing the record and the relevant law, ...

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