December 7, 2011
J. CHRISTIAN BOLLWAGE, MAYOR; CITY COUNCIL OF THE CITY OF ELIZABETH; AND THE CITY OF ELIZABETH, APPELLANTS,
BRET SCHUNDLER, COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF EDUCATION; THE NEW JERSEY DEPARTMENT OF EDUCATION, AND THE ELIZABETH BOARD OF EDUCATION, RESPONDENTS.
On appeal from a Final Decision of the Commissioner of Education.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 31, 2011
Before Judges A. A. Rodriguez, Sabatino and Ashrafi.
Appellants, the City of Elizabeth and its mayor and council, appeal from a June 18, 2010 decision of the Commissioner of the New Jersey Department of Education to reinstate and certify the statutorily required minimum tax levy for the City of Elizabeth school district. Appellants contend the Commissioner's decision is unconstitutional because it abrogates the statutory right of the voters to reject the budget proposed by the Board of Education and the statutory right of the City's governing body to recommend cuts in the school budget. We affirm the Commissioner's decision. It was mandated by the School Funding Reform Act of 2008, L. 2007, c. 260 (codified at N.J.S.A. 18A:7F-43 to -63 and amending other statutes). Appellants have not shown violation of any constitutional rights.
The 2008 legislation amended statutes pertaining to State financial aid to local school districts. Section 28 of the Act, codified at N.J.S.A. 18A:7F-5(b), provides in part:
Each district shall have a required local share. For districts that receive educational adequacy aid pursuant to subsection b. of section 16 of P.L. 2007, c. 260 ([N.J.S.A.] 18A:7F-58), the required local share shall be calculated in accordance with the provisions of that subsection.
The Elizabeth school district receives educational adequacy aid from the State. Therefore, its local share of the school budget must be calculated in accordance with N.J.S.A. 18A:7F-58.
Applying these statutes, the Department of Education's Division of Finance wrote to the superintendent of the Elizabeth school district in March 2010 stating that the mandatory local share of the school budget was $48,673,323, to be funded by a general tax levy for the 2010-11 school year. That tax levy would be a ten percent increase from the general school tax levied upon the city's property owners the previous year.
The Board of Education proposed a budget in the precise amount calculated by the Department of Education. However, in a school election held on April 20, 2010, pursuant to N.J.S.A. 18A:22-33, city voters defeated the proposed budget and tax levy.
Generally, if voters reject a school budget, the municipal governing body and the board of education must confer about potential modification of the budget. N.J.S.A. 18A:22-37. The governing body must then certify to the county board of taxation the amount of the local school tax to be levied. Ibid. If the governing body fails to certify the local school tax levy, or if the board of education contests the amount certified, the Commissioner of Education must fix the local school budget and certify the amount of taxes to be levied for that purpose.
N.J.S.A. 18A:22-38; Bd. of Educ. of Twp. of Deptford v. Mayor & Council of Twp. of Deptford, 116 N.J. 305, 313 (1989); Bd. of Educ., Twp. of E. Brunswick v. Twp. Council, 48 N.J. 94, 102-06 (1966).
In this case, despite the voters' rejection of the budget, the Executive County Superintendent for Union County wrote to the Municipal Clerk of the City of Elizabeth that the governing body "must certify the original amount [$48,673,323] . . . the minimum tax levy to meet the . . . local share required by N.J.S.A. 18A-7F-5." The city council did not follow the County Superintendent's directive. Instead, it certified a reduced school budget and tax levy of $43,727,407. The Elizabeth Board of Education appealed the certified amount to the Commissioner. On June 18, 2010, the Commissioner decided the dispute in favor of the Board of Education and certified to the Union County Board of Taxation that the minimum school tax levy for Elizabeth for 2010-11 must be $48,673,323 as originally determined.
The mayor and city council filed this appeal before us to challenge the Commissioner's decision. Besides contending that the decision deprives the governing body of its statutory right to recommend cuts in the school budget, they argue that the school budget election is meaningless if the Commissioner can simply override the voters and reinstate the original budget as proposed without consideration of the cuts recommended by the governing body. They also contend that the Commissioner's decision was arbitrary and unreasonable because the school budget is bloated with unnecessary expenses while at the same time the district planned to eliminate several hundred instructional positions. In support of their arguments, appellants refer to a letter of June 1, 2010, to the Commissioner, in which the County Superintendent provided a long list of "questionable allocations" in the budget, as well as raises for top administrators of the Elizabeth school district.
Initially on this appeal, we reject the contentions of the Commissioner and the Board of Education that appellants lack standing to appeal the Commissioner's decision. Appellants do not claim that constitutional equal protection rights of municipal taxpayers have been violated by the Commissioner's action, as was the claim of the plaintiff school districts in Stubaus v. Whitman, 339 N.J. Super. 38, 51 (App. Div. 2001), certif. denied, 171 N.J. 442 (2002). Rather, plaintiffs' primary claim is that the statutory rights of the governing body itself have been violated by the Commissioner's action because the decision took no account of the voters' rejection of the budget and the governing body's proposed budget. They claim that the governing body's right to recommend cuts is absolutely protected by N.J.S.A. 18A:22-37. They further contend that the statutory rights of the voters and the governing body are in insoluble conflict with the provisions of the 2008 school funding legislation that impose a minimum tax levy. Appellants' complaint is not derivative of claims of taxpayers but contains direct claims of statutory violation and resultant unconstitutionality. Those claims confer standing upon the mayor and governing body to pursue this appeal.
As to the merits of appellants' claims, our standard of review is limited. Pub. Serv. Elec. & Gas Co. v. N.J. Dep't of Envtl. Protec., 101 N.J. 95, 103 (1985).
[T]he judicial role is restricted to three inquiries: (1) whether the agency action violates . . . express or implied legislative policies; (2) whether there is substantial evidence in the record to support the findings upon which the agency based application of legislative policies; and (3) whether, in applying the legislative policies to the facts, the agency clearly erred by reaching a conclusion that could not reasonably have been made upon a showing of the relevant factors.
These inquiries are "subsumed in the search for arbitrary or unreasonable agency action." Ibid. "Arbitrary and capricious action of administrative bodies means willful and unreasoning action, without consideration and in disregard of circumstances.'" Worthington v. Fauver, 88 N.J. 183, 204-05 (1982) (quoting Bayshore Sewerage Co. v. Dep't Envtl. Prot., 122 N.J. Super. 184, 199 (Ch. Div. 1973), aff'd, 131 N.J. Super. 37 (App. Div. 1974)).
Where the Legislature has "delegated a great amount of discretion to the administrative experts, deference must be accorded to the administrative agency's expertise and experience in its domain." In re The Harborage, 300 N.J. Super. 363, 379 (App. Div. 1997) (quoting Riverside Gen. Hosp. v. N.J. Hosp. Rate Setting Comm'n, 98 N.J. 458, 469 (1985)). Thus, there is a strong presumption of the agency's reasonableness in rendering its decision. In re Holy Name Hosp., 301 N.J. Super. 282, 295 (App. Div. 1997). The burden of showing that an agency's decision was arbitrary and capricious is on the party challenging it. Ibid. We are not bound, however, by an agency's "determination of a strictly legal issue." Russo v. Bd. of Tr., 206 N.J. 14, 27 (2011).
Here, we do not undertake to determine whether the school district's budget is either appropriate or not appropriate as a matter of policy. Not only is such a determination not a proper function of the court, but we lack the factual record to consider that issue.
The issue on appeal involves application of a statutory formula for determining the minimum local share for a school district that receives educational adequacy funding from the State. Appellants have not argued that the Commissioner incorrectly applied the statutory formula set by N.J.S.A. 18A:7F-58. Pursuant to that formula, the Commissioner determined that the Elizabeth school district was required to include a local share for 2010-11 at ten percent higher than its 2009-10 budget, which amount was calculated as $48,673,323.
The 2008 Act mandates a local tax levy to fund the district's local share. It provides:
In order to meet this requirement, each district shall raise a general fund tax levy which equals its required local share.
No municipal governing body or bodies or board of school estimate, as appropriate, shall certify a general fund tax levy which does not meet the required local share provisions of this section. [N.J.S.A. 18A:7F-5(b).]
We agree with the Board of Education and the Commissioner that the decision challenged on appeal was essentially a ministerial one required by the 2008 Act. The Commissioner had no discretion under the law to reduce the budget below the mandated statutory minimum.
Contrary to appellants' contentions, there still seems to be purpose and effect in the statutory provisions for school budget elections and the role of the governing body when a budget is defeated by voters. At oral argument on this appeal, the Board of Education acknowledged that the governing body's objection to specific items in the school budget should be taken into consideration, and that the County Superintendent and the Commissioner could require modifications of specific allocations in the school budget when the voters defeat the budget and the governing body raises objections to specific expenditures. Appellants could not say they had made such requests of the Commissioner. Rather, their only claim is that the voters and the governing body have rights to demand cuts in the school budget, and that the Commissioner should not have approved the amount mandated by the 2008 Act.
We reach no conclusions as to what might have been done to answer the concerns of the city council and the County Superintendent as to allegedly "questionable allocations" in the Elizabeth school budget. The legal issues raised in that regard have not been squarely presented or argued in the parties' briefs. We only decide that appellants have failed to demonstrate arbitrary or unreasonable action by the Commissioner in certifying the school budget and local tax levy, or a constitutional violation in application of the 2008 school funding laws. The Commissioner was authorized and, in fact, required by N.J.S.A. 18A:7F-5(b) and -58 to mandate the local share and property tax levy to fund that share.
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