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Board of Education of the Borough of Mountainside, Union County v. Board of Education of the Township of Berkeley Heights

March 15, 2010


On appeal from a Final Decision of the State Board of Education, 25-1/08.

Per curiam.


Argued October 27, 2009

Before Judges Wefing, Messano and LeWinn.

The Board of Education of the Township of Berkeley Heights (Berkeley Heights) appeals from a Final Decision of the Commissioner of Education (the Commissioner) that essentially adopted the findings of facts and conclusions of law made by an administrative law judge (ALJ) in her summary decision. In so doing, the Commissioner resolved disputes that had arisen between Berkeley Heights and the Board of Education of the Borough of Mountainside (Mountainside) pursuant to a sending/receiving agreement (the Agreement), see N.J.A.C. 6A:23A-17.1(f),*fn1 whereby Mountainside reimbursed Berkeley Heights for tuition costs associated with high school students domiciled in Mountainside who attended school in Berkeley Heights.

We have considered the arguments raised on appeal in light of the record and applicable legal standards. We affirm.


Initially we set forth the regulatory scheme governing these sending/receiving agreements. In order to meet the obligation to provide a free public education, N.J.S.A. 18A:38-1, "any New Jersey school district[] may enter into a send-receive relationship with another district whereby it sends its pupils to the receiving district's schools for one grade or more, N.J.S.A. 18A:38-8, in return for a tuition payment . . . ." English v. Bd. of Educ. of Boonton, 301 F.3d 69, 72 (3d Cir. 2002), cert. denied, 537 U.S. 1148, 123 S.Ct. 852, 154 L.Ed. 2d 851 (2003). Tuition may "not exceed the 'actual cost' of the students enrolled, N.J.S.A. 18A:38-19, with 'actual cost' defined in detail by the New Jersey Administrative Code." Id. at 73.

N.J.A.C. 6A:23A-17.1(f) provides:

The receiving district . . . and the sending district . . . shall establish by written contractual agreement a tentative tuition charge for budgetary purposes. Such tentative charge shall equal an amount not in excess of the receiving district['s] . . . "estimated cost per student" for the ensuing school year . . . for which tuition is being charged, multiplied by the "estimated average daily enrollment of students" expected to be received during the ensuing school year . . . .

The sending and receiving districts must enter into an agreement for the ensuing school year . . . no later than seven days prior to the date on which the proposed budget for the ensuing school year is required to be submitted to the . . . county superintendent. [N.J.A.C. 6A:23A-17.1(f)(3).] The sending district shall be required in the contractual agreement to pay 10 percent of the tentative tuition charge no later than the first of each month from September through June of the contract year. [N.J.A.C. 6A:23-17.1(f)(3).]

The regulations contemplate the need for adjustments to be made based upon the actual tuition costs and number of students in any given school year. See In re Div. of Assets and Liabs. Among the Constituent Dists. of Lower Camden County Reg'l High School Dist. No. 1, 381 N.J. Super. 91, 104 (App. Div. 2005) (recognizing the Commissioner's role in rectifying tuition payments between the sending and receiving school districts), certif. denied, 186 N.J. 605 (2006). Upon the Commissioner's determination that the tentative yearly charge was more or less than the "actual cost per student" in any given year, N.J.A.C. 6A:23A-17.1(b), the regulations authorize the parties to make adjustments to their agreement in ensuing years. See N.J.A.C. 6A:23A-17.1(f)(6) and (7).*fn2

We now turn to the facts presented here. Mountainside and Berkeley Heights entered into the Agreement in 1997.*fn3 While the Agreement generally complied with the regulations, the parties initially chose a per student average cost for the first two years of the Agreement and simply continued to use that estimate during the initial years the Agreement was operational. In this respect, their course of conduct deviated from strict compliance with the regulatory formula.

Both parties functioned under the Agreement, however, without apparent problem until July 2005, when Mountainside hired a new secretary/business administrator who reviewed the payments previously made under the Agreement. As a result, Mountainside claimed it was owed credits for overpayments made for the 2001-02 and 2002-03 school years. Berkeley Heights agreed and credited Mountainside $402,500 toward the overcharges; the parties consented to the credit being paid in monthly installments over the remainder of the current school year. The parties further agreed to continue discussions regarding credits that would be anticipated from the 2003-04 school year, due to be certified in December 2005 and reflected in the 2006-07 budget cycle.

When informal negotiations proved to be unsuccessful, the parties, through their school business administrators and superintendents, engaged in a mediation session at the county superintendent's offices on March 16, 2006. Berkeley Heights claimed that Mountainside was owed a "maximum" further credit of $127,482; Mountainside claimed a much more significant credit. The parties could not reach any agreement as impending budget submissions loomed.

Mountainside advised the county superintendent that it "would have no choice but to adopt [a] budget with those credits [it claimed were due] included as an offset to [the] tuition payments to Berkeley Heights." Mountainside's business administrator certified that it was "apparent" to both parties that "each of [the] districts would likely adopt budgets reflecting [their] respective positions on the matter, and take appropriate steps to resolve [the] disagreement afterwards."

On March 27, 2006, Berkeley Heights approved its proposed 2006-2007 budget that included the $127,482 credit, not the $673,496 that Mountainside alleged was owed. Mountainside's representative on the Berkeley Heights Board, Marybeth Schaumberg, certified that "[i]t was well known to both the Mountainside and Berkeley Heights Board[s] by then that our two Business Administrators were seriously at odds over the proper method of calculating the[] credits." The next day Mountainside adopted its budget for the 2006-07 school year reflecting a credit of $673,496 from Berkeley Heights.

On July 11, 2006, Mountainside filed a verified petition with the Commissioner, seeking "a credit or refund . . . [in] the sum of $673,496, representing total overcharges for fiscal years 2001-2002, 2002-2003 and 2003-2004." On August 1, Berkeley Heights filed an answer that denied it overcharged Mountainside, and pled as an affirmative defense the "applicable statutes of limitations." The matter was transmitted to the Office of Administrative Law (OAL) as a contested case.

Berkeley Heights billed Mountainside for tuition payments under the Agreement in September and October 2006. Mountainside refused to pay. On November 8, Berkeley Heights filed a cross-petition seeking an order compelling Mountainside to "immediately pay . . . all monies wrongfully withheld[,]" and "[d]eclaring that [Mountainside] pay the full amount due and owing for the 2006-07 school year."

On November 22, 2006, Mountainside filed a motion for summary decision. Berkeley Heights cross-moved for summary decision asserting that Mountainside's petition was time-barred. In the alternative Berkeley Heights contended that it was entitled to "summary decision on the merits" because Mountainside had utilized a "method of calculation [that was] erroneous." Each side filed replies to the other's motion.

The ALJ reserved decision and, without objection, scheduled a date to take testimony "on the issue of the proper method of calculating tuition credits under" the regulations. Both sides submitted expert reports; at a plenary hearing on April 24, 2007, each side's expert testified.

On July 20, the ALJ issued her decision. After an exhaustive discussion of the applicable regulations, how they applied to the specific facts alleged, and mathematical calculations based upon those facts, the judge concluded that neither Mountainside's claim, nor Berkeley Heights's cross-claim was time-barred, and that she was empowered to decide that issue in a summary fashion. She also determined that the parties were "not free to agree to a [funding] formula that contradict[ed] the provisions of the statute and regulations[,]" and that "the proper method of calculating tuition credit [wa]s that which was outlined in regulation." Pursuant to "the proper formula," the judge determined that "Mountainside, in order to be current[,] should pay Berkeley Heights $2,980,313.90 for the 2006-2007 school year. In addition, Mountainside should receive a credit of $236,046.10, which would bring the total estimated tuition for the ...

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