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Perth Amboy Board of Education v. Christie

June 14, 2010

PERTH AMBOY BOARD OF EDUCATION, APPELLANT,
v.
CHRIS CHRISTIE, GOVERNOR OF THE STATE OF NEW JERSEY, RESPONDENT.



Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued May 18, 2010

Before Judges Carchman, Parrillo and Lihotz.

On appeal from Executive Order 14, February 11, 2010.

On February 11, 2010, Governor Christie signed Executive Order 14 (EO14). 42 N.J.R. 660 (March 15, 2010). EO14 characterized the current State fiscal crisis as an emergency and directed the Director of the Division of Budget and Accounting (Director) to withhold State aid to school districts for the remainder of fiscal year (FY) 2010 in an amount equal to the anticipated surplus funds for each district as determined by the Commissioner of the Department of Education (Commissioner). Id. at 661. The executive order provided that if a district needs additional funds to offset the lost State aid for the remainder of school year 2009-2010, it may request that the Commissioner transfer funds from the surplus to the current year's operating costs. Id. at 661, ¶ 6. According to N.J.S.A. 18A:7F-7, part of the Comprehensive Education Improvement and Financing Act, N.J.S.A. 18A:7F-1 to -63 (CEIFA), excess surplus funds are designated to be used for the next year's school budget.

Perth Amboy Board of Education (appellant or Perth Amboy) challenges the executive order as violating constitutional principles of separation of powers, N.J. Const. art. III, ¶ 1, because it conflicts with N.J.S.A. 18A:7F-7. We disagree and hold that EO14 is authorized both statutorily and constitutionally.

I.

The preamble and paragraph 1 of EO14 describe the State's current economic crisis as an "unprecedented" fiscal emergency, in that "actual and anticipated revenue collections by the State continue to fall far below the amounts estimated in the Fiscal Year 2010 Appropriations Act[.]" 42 N.J.R. 660-61. Specifically, the State expects revenue shortfalls of $442 million and $180 million in its sales and corporate business taxes, respectively; a $200 million shortfall in the combined collections of realty transfer and insurance premium taxes; $415 million in previously identified revenue shortfalls; and a $121 million reduction in the estimated beginning balance, resulting in a total projected funding shortfall of $1.333 billion for FY 2010 after taking into account other revenue adjustments. Ibid. Together with the State's additional unanticipated spending needs of $872 million for essential State programs, the estimated budget deficit for the current fiscal year amounts to $2.2 billion. Id. at 661.

To remedy this funding shortfall, EO14 mandates the Director to immediately place into reserve items of appropriation in an amount sufficient to balance the State's budget. Ibid., ¶ 2. Because school aid comprises thirty-five percent of the State's budget for FY 2010, State of New Jersey Office of Management and Budget, Fiscal 2010 Budget in Brief, at 41 (2009), available at http://www.state.nj.us/treasury/omb/ publications/10bib/BIB.pdf, some portion of the funds to be put in reserve were targeted to come from State school aid. Noting in its preamble that "many school districts currently have surplus monies in their budgets that are available but not budgeted that could be made available to support those districts' current expenses during the current period of fiscal emergency[,]"*fn1 42 N.J.R. 661, EO14 requires the Director, in consultation with the Commissioner, "to determine the amount of State school aid that must be frozen in order to meet the fiscal emergency." Ibid., ¶ 3.

Upon such an assessment, the Commissioner is to "review the budgets of all school districts" to determine for each district "the amount of unanticipated surplus*fn2 and reserve account monies" (surplus) - available but not yet budgeted - that could be used to support the district's current operating year's (2009-2010) budget in the event of a withholding of State school aid. Ibid., ¶ 4. The Commissioner is directed to "allocate the amount of State school aid determined by the Director to be frozen among all the school districts[,]" provided that the amount "shall not exceed the [s]urplus for each school district or the amount of its remaining State school aid for [FY] 2010." Ibid., ¶ 5. The Director is then instructed to "place into reserve from State school aid for each school district the amount specified by the Commissioner." Ibid.

EO14 also authorizes the Commissioner to grant school districts, upon request, the right to transfer funds from their surplus to their current operating accounts, if necessary "to pay ongoing costs of operation." Ibid., ¶ 6. Significantly, the executor order does not require the transfer of surplus funds but allows such transfers when needed to meet current operating costs.*fn3 Ibid. It is our understanding that Perth Amboy has not requested any transfers to support operating costs for the current school year.

All State officials are required to cooperate in the implementation of the executive order, and the State Treasurer is to make recommendations and report to the Governor on the fiscal crisis. Ibid., ¶ 7-9. The Governor, in turn, may take additional action if necessary, and the executive order remains in force until supplemented by the Governor or until the FY 2011 Appropriations Act takes effect. Ibid., ¶ 10-11.

Pursuant to EO14, the Director, in consultation with the Commissioner, determined that of the $2.2 billion needed to be placed in reserve to meet the State's funding shortage, $475 million in State school aid would be withheld. The Commissioner allocated that amount to each school district by withholding State aid equal to 100% of the district's excess surplus and twenty-five percent of the district's reserve account balances and under-projected fund balance.

On February 11, 2010, each district was notified by memorandum of the amount of its withholding and the amount of unanticipated surplus and reserve account balances on which the allocation was based.*fn4 Perth Amboy was advised that, according to Department of Education (Department) records, the district had under-projected its fund balance by $417,945 and had excess surplus of $15,155,778 from the 2008-2009 school year that had not been appropriated for the 2009-2010 budget. This amount was reserved and intended for the 2010-2011 budget, as required by N.J.S.A. 18A:7F-7. Thus, it was determined that out of its total school ...


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