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New Jersey Association of School Administrators v. Schundler

August 3, 2010

NEW JERSEY ASSOCIATION OF SCHOOL ADMINISTRATORS, DR. TERRY VAN ZOEREN, DR. SIMON BOSCO, JOSEPH ABATE, JR. AND JOHN GOLDEN, PLAINTIFFS-APPELLANTS,
v.
BRET SCHUNDLER, COMMISSIONER OF EDUCATION OF THE STATE OF NEW JERSEY, AND PAULA T. DOW, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY,*FN1 DEFENDANTS-RESPONDENTS.



On appeal from a Final Agency Decision by the Commissioner of Education.

The opinion of the court was delivered by: Wefing, P.J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued March 2, 2010

Before Judges Wefing, Grall and Messano.

Plaintiffs New Jersey Association of School Administrators ("Association"), Dr. Terry Van Zoeren, Dr. Simon Bosco, Joseph Abate, Jr. and John Golden challenge certain regulations adopted by defendant Commissioner of Education. Plaintiff Association is the professional association for individuals employed as school superintendents and assistant school superintendents in New Jersey. Individual plaintiffs Dr. Terry Van Zoeren, Dr. Simon Bosco and Joseph Abate, Jr. are all employed as school superintendents; plaintiff John Golden is employed as an assistant school superintendent. For the balance of this opinion we shall simply refer collectively to plaintiffs.

I.

The regulations in question, entitled "Fiscal Accountability, Efficiency and Budgeting Procedures," were promulgated in 2008 and are codified at N.J.A.C. 6A:23A-1.2 to -22.15. They were adopted in response to statutory enactments intended to provide a new funding formula for state aid for schools, to promote greater efficiency and stronger budgetary controls and, as a result, slow the steady increase in real property taxes in New Jersey. The initial statement in the regulations sets forth their underlying purpose.

The purpose of these rules is to assure the financial accountability of boards of education through enhanced State monitoring, oversight and authority, and to ensure that each district board of education adopts an annual budget that provides adequate resources to meet the State Constitution's mandate for a thorough and efficient system of free public schools for all children. [N.J.A.C. 6A:23A-1.1.]

The history behind the promulgation of these regulations is set forth comprehensively in New Jersey Ass'n of School Business Officials v. Davy, 409 N.J. Super. 467, 472-80 (App. Div. 2009). In that matter, school business administrators challenged these same regulations, making some of the same arguments presented here. There is no need for us to restate that history here; rather, we incorporate it into this opinion. That history, however, informs our analysis of the issues before us; and we shall, when appropriate, refer to that history in considering plaintiffs' arguments and defendants' responses.

One of the statutory changes enacted that led to these regulations was the creation of the position of executive county superintendent of schools, charged with the responsibility "to monitor and promote administrative and operational efficiencies and cost savings within the school districts located in the county, while enhancing the effectiveness of the districts in providing a thorough and efficient system of education, . . ." N.J.S.A. 18A:7-1(b). The executive county superintendent is also charged with the duty to monitor those school districts in terms of their "instruction and program; personnel; fiscal management; operations; and governance." Ibid.

Plaintiffs in this action challenge nine discrete regulations granting the executive county superintendent extensive powers with respect to reviewing the employment contracts of school superintendents and assistant superintendents. The particular regulations are contained in subsections (1), (3), (4), (5), (6) (7), (8), (9) and (11) of N.J.A.C. 6A:23A-3.1(e). They set forth the particular standards the executive county superintendent must consider in determining whether to approve a proposed contract. They provide as follows:

(e) The contract review and approval shall be consistent with the following additional standards:

1. Contracts for each class of administrative position shall be comparable with the salary, benefits and other emoluments contained in the contracts of similarly credentialed and experienced administrators in other districts in the region with similar enrollment, academic achievement levels and challenges, and grade span. . . . .

3. No contract shall include provisions for the reimbursement or payment of employee contributions that are either required by law or by a contract in effect in the district with other teaching staff members, such as payment of the employee's State or Federal taxes, or of the employee's contributions to FICA, Medicare, State pensions and annuities (TPAF), life insurance, disability insurance (if offered), and health benefit costs.

4. No contract shall contain a payment as a condition of separation from service that is deemed by the Executive County Superintendent to be prohibited or excessive in nature. The payment cannot exceed the lesser of the calculation of three months pay for every year remaining on the contract with proration for partial years, not to exceed 12 months, or the remaining salary amount due under the contract.

5. No contract shall include benefits that supplement or duplicate benefits that are otherwise available to the employee by operation of law, an existing group plan, or other means; for example, an annuity or life insurance plan that supplements or duplicates a plan already made available to the employee. Notwithstanding the provisions of this section, a contract may contain an annuity where those benefits are already contained in the existing contract between that employee and the district.

6. Contractual provisions regarding accumulation of sick leave and supplemental compensation for accumulated sick leave shall be consistent with N.J.S.A. 18A:30- 3.5. Supplemental payment for accumulated sick leave shall be payable only at the time of retirement and shall not be paid to the individual's estate or beneficiaries in the event of the individual's death prior to retirement. Pursuant to N.J.S.A. 18A:30-3.2, a new board of education contract may include credit of unused sick leave days in accordance with the new board of education's policy on sick leave credit for all employees.

7. Contractual provisions regarding accumulation of unused vacation leave and supplemental compensation for accumulated unused vacation leave shall be consistent with N.J.S.A. 18A:30-9. Contractual provisions for payments of accumulated vacation leave prior to separation can be included but only for leave accumulated prior to June 8, 2007 and remaining unused at the time of payment. Supplemental payments for unused vacation leave accrued consistent with the provisions of N.J.S.A. 18A:30-9 after June 8, 2007 as well as unused vacation leave accumulated prior to June 8, 2007 that has not been paid, shall be payable at the time of separation and may be paid to the individual's estate or beneficiaries in the event of the individual's death prior to separation.

8. Contractual provisions that include a calculation of per diem for 12-month employees shall be based on a 260-day work year.

9. No provision for a bonus shall be made except where payment is contingent upon achievement of measurable specific performance objectives expressly contained in a contract approved pursuant to this section, where compensation is deemed reasonable relative to the established performance objectives and achievement of the performance objectives has been documented to the satisfaction of the district board of education.

11. No contract shall include a provision for a monthly allowance except for a reasonable car allowance. A reasonable car allowance cannot exceed the monthly cost of the average monthly miles traveled for business purposes multiplied by the allowable mileage reimbursement pursuant to applicable law and regulation and New Jersey Office of Management and Budget (NJOMB) circulars. If such allowance is included, the employee cannot be reimbursed for business travel mileage nor assigned permanently a car for official district business. Any provision of a car for official district business must conform with N.J.A.C. 6A:23A-6.12 and be supported by detailed justification. No contract can include a provision of a dedicated driver or chauffeur. [N.J.A.C. 6A:23A-3.1.]

In addition, plaintiffs challenge certain provisions of N.J.A.C. 6A:23A-5.2(a), which calls for each district to establish a policy that "shall include, to the extent practical and cost effective" the following provisions:

2. Establishment of procedures to ensure the prudent use of legal services by employees and board of education members and the tracking of the use of those services that should include:

iv. A provision to maintain a log of all legal counsel contact including name of legal counsel contacted, date of contact, issue discussed and length of contact. Legal bills shall be compared to the contact log and any variances shall be investigated and resolved;

4. Professional services contracts are issued in a deliberative and efficient manner such as through a request for proposals based on cost and other specified factors or other comparable process that ensures the district receives the highest quality services at a fair and competitive price or through a shared service arrangement[.]*fn2

Plaintiffs contend that all of these regulations are invalid for a variety of reasons, including that they violate both the United States Constitution and New Jersey Constitution since they represent an impermissible taking, are unconstitutionally vague and violate the equal protection clause of the Fourteenth Amendment; contravene existing statutory provisions; and are ultra vires and void because the Commissioner lacked the authority to promulgate them.

II.

We note first the standard which governs our consideration of these issues. Agency regulations "are accorded a presumption of validity." N.J. State League of Municipalities v. Dep't of Cmty. Affairs, 158 N.J. 211, 222 (1999). Our courts give "great deference" to administrative agencies when they adopt rules implementing their enabling statutes. N.J. Soc'y for the Prevention of Cruelty to Animals v. N.J. Dep't of Agric., 196 N.J. 366, 385 (2008). However, the "presumption of validity does not attach if the regulation on its face reveals that the agency exceeded the power delegated to it by the Legislature." In re N.J. Individual Health Coverage Program's Readoption of N.J.A.C. 11:20-1 et seq., 179 N.J. 570, 579 (2004).

"[A] regulation can only be set aside if it is proved to be arbitrary or capricious, plainly transgresses the statute it purports to effectuate, or alters the terms of the statute and frustrates the policy embodied in it." In re Adopted Amendments to N.J.A.C. 7:7A-2.4, 365 N.J. Super. 255, 265 (App. Div. 2003). The party challenging the rulemaking has the burden of demonstrating that the rulemaking was arbitrary, unreasonable, or capricious. In re N.J. Individual Health, supra, 179 N.J. at 579; In re Adoption of Amendments to N.J.A.C. 6:28-2.10, 3.6 & 4.3, 305 N.J. Super. 389, 401-02 (App. Div. 1997).

We first take up plaintiffs' contention that these regulations impermissibly reduce the compensation for school administrators and are thus contrary to the federal and state constitutional prohibitions against depriving a person of property without due process of law. U.S. Const. amend. XIV, § 1; N.J. Const. art I, ¶ 1. See Klumpp v. Borough of Avalon, ___ N.J. ___ (2010). State law determines whether there is a protected property interest. Twp. of Montville v. Block 69, Lot 10, 74 N.J. 1, 7 (1977). Plaintiffs must demonstrate an entitlement to a property interest created by state statute or regulation in ...


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