In a recent decision, the New Jersey Appellate Division upheld a ruling by the state Commissioner of Education that dismissed a school board’s challenge to its state aid award.

In the case, the district had received a lower aid amount than what was named in the state aid notice. Though the difference in the aid amount was not disputed, the court held that the commissioner could not provide the amount listed in the notice because that amount had not received final approval by the Legislature. Further, the court’s decision affirmed that the matter was moot after the state treasurer, at the request of the New Jersey Department of Education (NJDOE), had loaned funds to the district.

In the matter, the governor’s budget for fiscal year 2020 recommended that the district receive $30 million in funding, which included additional transportation and special education categorical aid as provisional stabilization aid.

Subsequently, the commissioner issued state aid notices to New Jersey school districts, which notified districts of the aid amount that they would receive the next year including the aid categories in the governor’s original budget proposal. The notice required the district to adopt and submit a budget to the commissioner by a specific date, but the district did not meet the deadline.

The Annual Appropriations Act for that fiscal year, passed later by the Legislature and ultimately signed by Gov. Murphy, did not include the school aid categories Murphy initially proposed.

The school district then filed a request for emergent relief with the state education commissioner, arguing that it had received “assurances and promises” for $30 million in state aid. The district asked for that amount from the state Department of Education. By way of background, in making a request for emergent relief, a party is asserting that the issue is so urgent that a decision is necessary before a case can go through the typical hearing process and time table normally required for cases. After filing its request, the district approved a budget that included the aid categories originally recommended by the governor.

During a hearing before an administrative law judge, the board informed the judge that the district’s budget would be “null and void” in the absence of the $30 million of state funding, and the district would shut down on July 1.

On July 1, the commissioner requested an advance from the state treasurer of approximately $36 million in aid for the district from the School District Deficit Relief Account, which was essentially a loan. This request was granted with a repayment term of ten years.

The judge denied the board’s request for emergent relief on the grounds that the district would not “suffer irreparable harm.” Among other things, the judge said the board had enough money to meet its expenses through March.

The judge pointed out that the treasurer had advanced funds to the district, and the fact that the school board did not provide a budget by the deadline did not constitute an emergency. The commissioner upheld the administrative law judge’s decision, further finding that since the treasurer had advanced the funds, the board’s request to cover a budget shortfall was moot.

Moreover, the commissioner noted that a letter requesting an aid adjustment is not the proper way to achieve a “political remedy,” such as eliminating “the disparity between the governor’s recommended budget and the budget passed by the Legislature.”

In a May 21, 2021 decision, the Appellate Division affirmed the commissioner’s ruling.

The court found that “[t]he Commissioner did not have the power to appropriate direct funds for any school district.” Funding could only be appropriated by the Legislature, and the commissioner’s decision was not arbitrary, capricious or unreasonable. The court further noted: “…the Commissioner’s concern about chaos in the budget process cannot be discounted should another district decline to approve a budget and then declare an emergency because of its absence.”

It should be noted that this case did not address the situation where a board may not be able to meet its operational obligations. Board members with questions are encouraged to consult with the board attorney. More information about this matter can be found here or by consulting with the NJSBA Legal, Labor, and Policy Department at (609) 278-5254.