On appeal from the New Jersey Department of Education.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 21, 2011
Before Judges Sapp-Peterson and Ostrer.
Appellant, Northern Burlington County Regional School District Board of Education ("District"), appeals from the final administrative agency action of respondent, Bret Schundler, in his former capacity as Commissioner, New Jersey Department of Education ("Commissioner"), withholding monthly state aid payments from the District for the period February 2010 through June 2010. We reverse and remand for further proceedings.
The Commissioner's action was prompted by the implementation of Governor Christie's February 11, 2010 Executive Order 14 (Executive Order), which mandated that the Director of Budget and Accounting ("Director") immediately place in reserve necessary funds to balance the State's budget. The Executive Order noted the existence of surplus funds in many local school districts' budgets and targeted those surpluses as a source of reserve funds.
The District educates children of military personnel who reside on federal property located at the joint McGuire/Fort Dix/Lakehurst military complex in Northern Burlington County. The military population within the District represents approximately twenty-five percent of its total student population. Although the federal government does not pay property taxes, it provides Federal Impact Aid, 20 U.S.C.A. § 7701 to -14 ("Act"), in order to strengthen and improve elementary and secondary schools educating "children who reside on Federal property and whose parents are employed on Federal property." 20 U.S.C.A. § 7701. Unless the Secretary of Education has granted an exemption, a state, in calculating its aid to a school district that educates children residing on federal property, may not consider payments to such districts, pursuant to the Act, in determining:
(A) the eligibility of a local educational agency for State aid for free public education; or
(B) the amount of such aid; or
(2) make such aid available to local educational agencies in a manner that results in less State aid to any local educational agency that is eligible for such payment than such agency would receive if such agency were not so eligible.
After the Governor signed the Executive Order, state aid payments to the District were withheld for the remainder of February 2010 through June 2010. In response, the District appealed to the Executive County Superintendent (ECS). In support of its appeal, the District submitted its most recent audited financial reports. Based upon a review of those financials and the District's corresponding budgets for 2008 and 2009, the ECS was satisfied that approximately $1.5 million of unanticipated Federal Impact Aid represented "[ninety-four percent] of the $1.6 [million] of unanticipated revenue received for the year and thus was a major contributor to the $2.2 [million] of Federal Impact Aid identified as an allowable adjustment in undesignated surplus and/or designated as legal reserves." The ECS therefore recommended approval of the District's request to adjust the "State Aid" reductions under the Executive Order, which he reasoned was "in accord with the apparent intent of the 'Impact Aid Law, Section .'" The ECS forwarded his recommendation to the Commissioner.
The ECS subsequently notified the District that its appeal would not be granted. The District continued to engage in discussions with representatives of the Commissioner and was once again advised, orally, that the state aid payments withheld would not be restored. The District formally petitioned the Commissioner to "consider a controversy which has arisen between the [District] and the [Commissioner], pursuant to the authority of the Commissioner to hear and determine controversies under the school laws[.]"*fn1
The Commissioner, "[a]fter careful analysis, consideration of [the District's] analysis, and [his] staff's discussion with [the District's] business administrator and auditor, . . . determined that the . . . original calculation of the reservation" based upon the District's excess ...