Appeal of the BOARD OF EDUCATION OF THE GARRISON UNION FREE SCHOOL DISTRICT from action of the Board of Education of the Highland Falls Central School District regarding nonresident tuition rates.

 

 

(January 16, 2004)

 

Donoghue, Thomas, Auslander & Drohan, attorneys for petitioner, Daniel Petigrow, Esq., of counsel

 

Rains & Pogrebin, P.C., attorneys for respondent, Howard Miller, Esq., of counsel

 

MILLS, Commissioner.--The Board of Education of the Garrison Union Free School District ("petitioner") challenges the nonresident tuition rates established by the Board of Education of the Highland Falls Central School District ("respondent").  The appeal must be dismissed as to petitioner"s claims regarding nonresident tuition rates for the school years 1997-98 through 2001-2002, excess cost aid and Boards of Cooperative Educational Services ("BOCES") aid for the school years 1997-98 through 2001-2002, and remanded with respect to the nonresident tuition rates set for the 2002-2003 school year.

Petitioner operates one school building where resident students in kindergarten through eighth grade are educated.  Petitioner"s high school age students have the option of attending respondent"s schools or the schools of another neighboring school district. 

With the exception of the 2000-2001 and 2002-2003 school years, petitioner and respondent have entered into contracts that set the nonresident tuition rate petitioner pays for education services provided to its resident students.  For a number of years, until the 1999-2000 school year, the nonresident tuition charge agreed to in these contracts calculated the tuition for regular education students by using the average percentage increase of three factors:  local taxes, the per pupil tuition paid by the United States government for students residing at the United States Military Academy, and the nonresident tuition formula ("State formula") articulated in Commissioner"s regulations (8 NYCRR "174.2).  Tuition for special education students was calculated by use of the State formula. 

In June 2001, petitioner"s superintendent, Dr. Ellen Bergman ("Bergman"), received a proposed contract for the 2001-2002 school year that set the nonresident tuition rate for regular education students at the same level as the previous year, $7,091, and stated that the special education rate would be set by the State formula.  Bergman received the initial invoice from respondent for the 2001-2002 school year on or about November 1, 2001. 

By memo dated November 19, 2001 and letter dated November 29, 2001, Bergman asserted that the tuition rate charged for petitioner"s special education students pursuant to the state formula was excessive and she sought to discuss the matter with respondent"s superintendent, Dr. Geniene M. Guglielmo ("Guglielmo").  On December 12, 2001, Bergman sent Guglielmo a check representing payment for the estimated cost of regular education student tuition for the first quarter of the 2001-2002 school year.  On January 2, 2002 petitioner authorized execution of a contract with respondent with a tuition rate of $7,091 per regular education student for the 2001-2002 school year and petitioner also authorized payment of the balance of the first quarter tuition for special education students. 

Efforts to schedule a meeting to discuss the special education tuition rate continued between the staffs of the respective boards during the first half of 2002.  On May 1, 2002, Bergman and Guglielmo met, along with respondent"s president.  Respondent refused to alter its tuition rates. 

On or about August 6, 2002, the superintendents met again and Guglielmo gave Bergman a proposed contract for the 2002-2003 school year.  That proposed contract set the nonresident regular education tuition rate at $7,091, the same rate as the prior school year.  By letter dated August 26, 2002, Bergman asserted that the nonresident regular education tuition rate set by respondent was excessive and demanded a refund of $96,720 for the 2001-2002 school year and a refund of $119,856 for excess cost aid and BOCES aid for the years 1997-2002.  On October 2, 2002, members of the respective boards and the superintendents met in an attempt to resolve the issue.  After failing to do so, petitioner resolved to bring this appeal.

Petitioner contends that the nonresident regular education tuition it has paid to respondent since the 1997-1998 school year exceeds the maximum nonresident tuition allowed in the Commissioner"s regulations.  Petitioner alleges that respondent failed to properly account for payments it received from the United States government when it calculated the nonresident tuition rate for the 1999-2000 school year and has improperly kept excess cost aid it received on behalf of special education students for the years 1997-1998 through 2001-2002.  Petitioner asserts that it has continued to pay the alleged excessive nonresident tuition rates set by respondent because of concern that its students would not be allowed to continue in respondent"s schools. 

Petitioner requests that I direct respondent to reimburse petitioner for regular education tuition payments for the school years 1997-1998 through 2000-2001 that petitioner paid in excess of what the rate would have been if the State formula had been used to calculate the tuition rate and that respondent be directed to reimburse petitioner for tuition overpayment for regular education students for the 2001-2002 school year once the rate set by the State formula is posted on the State Education Department ("SED") website.  Petitioner also requests that respondent be directed to calculate nonresident tuition for the 2002-2003 school year in accordance with the State formula because respondent does not maintain accounting records indicating the actual net cost of instructing nonresident students.  Petitioner asks that respondent be directed to reimburse petitioner for excess cost aid it received on behalf of special education students and BOCES aid claimed and received for the period 1997-1998 through 2001-2002.  Petitioner also asks that SED audit forms filed by respondent during the period 1997-1998 through 2001-2002 to determine if respondent has properly accounted for tuition payments made by the United States.

Respondent argues that the appeal is untimely and should also be dismissed pursuant to the doctrines of laches, waiver, estoppel and unclean hands.  Respondent asserts that petitioner is bound by the terms of the last expired contract with respect to the regular education tuition rate and that petitioner should be estoppel from seeking a reduction in that rate.  Respondent states that it has credited petitioner with excess cost aid for 2000-2001 and 2001-2002 and that reimbursement it received for BOCES aid was factored into the State formula to set the tuition rate for special education students. 

Respondent further argues that the State formula does not apply because petitioner and respondent contractually agreed to a different formula to calculate regular education nonresident tuition and that districts are not required to use the State formula to calculate nonresident tuition.  Respondent asserts that the placement of petitioner"s students in its schools has never been in jeopardy, even though petitioner has failed to pay any tuition for the 2002-2003 school year.  Respondent also asserts a counterclaim in the amount of $128,971.20 for education services rendered to petitioner"s students in September and October 2002.  Respondent seeks additional relief in the form of costs, disbursements and attorneys" fees.

Initially, I must address the procedural issues.  Respondent sought permission pursuant to "276.5 of the Commissioner"s regulations to submit an additional affidavit from a district administrator and a purchase order dated July 1, 2002 sent by petitioner to respondent purporting to show that petitioner by its actions agreed to a nonresident tuition rate of $7,091 for 2002-2003.  Respondent does not explain why it did not submit this information with its answer (see, Appeal of O"Brien, et al., 42 Ed Dept Rep __, Decision No. 14,868; Appeal of Mackay, 39 id. 815, Decision No. 14,391).  Moreover, petitioner has argued that it continued to pay the higher rate for fear that respondent would refuse to provide educational services to its students.   Under these circumstances, I decline to consider respondent"s submission.

The claims related to the nonresident tuition rates established for the school years 1997-1998 through 2001-2002 must be dismissed as untimely.  An appeal to the Commissioner of Education pursuant to Education Law "310 must be commenced within 30 days of the action or decision complained of, unless delay is excused by the Commissioner for good cause shown (8 NYCRR "275.16; Appeal of the Board of Education of the East Moriches Union Free School District, 41 Ed Dept Rep 45, Decision No. 14,610).  Petitioner argues that it has good cause for delay because respondent"s representatives prolonged discussions and negotiations and respondent never took action or issued a letter in response to petitioner"s claims.  Petitioner further contends that because final nonresident tuition reports posted on the SED website were modified and may be modified again, it cannot accurately calculate alleged tuition overpayments.  I do not find any of these reasons to be good cause to excuse petitioner"s delay.

Petitioner commenced this appeal on October 24, 2002, more than 10 months after executing its most recent (2001-2002) contract with respondent and more than three months after the expiration of that contract on June 30, 2002.   There is no indication that respondent ever deviated from its position that petitioner was bound to pay the nonresident tuition rate as calculated in those contracts.  Moreover, the discussions and exchange of correspondence between the parties and their representatives throughout 2001 and the first 8 months of 2002 did not extend petitioner's time to commence an appeal to the Commissioner, since requests for reconsideration do not toll the limitation period (Appeals of T.M.,Sr., 42 Ed Dept Rep __, Decision No. 14,855;  Appeal of Bratge, 40 id. 180, Decision No. 14,454).  While it appears that petitioner did not realize that the nonresident regular education tuition it had been paying may have exceeded the maximum permissible under "174.2 until advised by counsel to that effect in July 2002, that is no excuse for the delay in bringing this appeal.  Both petitioner and respondent are charged with knowledge of the law, including the provisions of "174.2 that govern tuition contracts.

Nor does petitioner offer any explanation why possible rate changes posted on SED"s website provide an excuse for its delay.  It appears petitioner was able to ascertain the amount of overpayment with enough certainty to request a refund from respondent in the amount of $96,720 for nonresident regular education tuition for 2001-2002, as well as $119,856 in excess cost aid and BOCES aid for 1997 through 2002 in Bergman"s letter to Guglielmo dated August 26, 2002.  Yet this appeal was not commenced until two months after that letter.  Thus, petitioner"s claims regarding the 1997-1998 through 2001-2002 school years must be dismissed as untimely. 

Because I have determined that petitioner"s claims for the 2001-2002 and earlier school years are time-barred, I need not consider respondent"s remaining procedural defenses to such claims. 

I reject respondent"s argument that petitioner continues to be bound by the expired contract.  The record shows that with respect to the 2002-2003 school year, the 2001-2002 tuition contract expired on June 30, 2002, and the parties were engaged in discussions on a new contract through at least August 2002.  In the absence of a written contractual agreement for the 2002-2003 school year, the tuition must be established pursuant to Education Law "2045(1) and Part 174 of the Commissioner"s regulations, both of which require the tuition to reflect the actual cost of educating the children involved (Matter of the Bd. of Educ. of the Southampton UFSD, 20 Ed Dept Rep 101, Decision No. 10,331; Appeal of the Board of Education of the East Moriches Union Free School District, supra). 

I also reject respondent"s arguments that petitioner"s claim is barred by unclean hands or estoppel.  Respondent was advised in June 2001 that the nonresident regular education tuition it was charging was in excess of the maximum permissible under "174.2, while petitioner was apparently unaware of this problem until July 2002.  The parties had not agreed on a 2002-2003 contract at the time their 2002-2003 budgets were approved.  Under these circumstances, the equities favor petitioner and respondent"s failure to factor in a reduced tuition rate in developing its 2002-2003 budget is attributable to its own inaction when advised that it may be acting illegally, rather than its alleged reliance upon petitioner"s previous agreements or other actions. 

In any case, the general rule is that equitable estoppel may not be invoked against a governmental agency to prevent it from discharging its statutory duties (Parkview Associates v. City of New York, 71 NY2d 274; A.C. Transportation, Inc. v. Varsity Transit, Inc., et al., 253 A.D.2d 330, mot. for leave to appeal den. 93 NY2d 808).  Like the school district transportation contracts at issue in A.C. Transportation Inc. v. Varsity Transit, Inc., et al., supra, I find that tuition contracts under Education Law "2045 involve the exercise of a governmental function.  The record does not support a finding that petitioner induced respondent to change its position in reliance on petitioner"s promises or actions.  Therefore, the general rule applies and respondent"s estoppel defense must be rejected (Id. at 339).

Turning to the merits of petitioner"s claims regarding the 2002-2003 school year, the rate of nonresident tuition charged by respondent must be established in a manner consistent with the provisions of Part 174 of the Commissioner"s regulations.  Section 174.2 provides, in pertinent part:

"...The charge for the instruction of each nonresident pupil shall not exceed the actual net cost of educating such pupil.  If the accounting records of the school district providing such instruction are not maintained in a manner which would indicate the net cost of educating such pupil, a board of education...shall compute the tuition to be charged for the instruction of each nonresident pupil admitted to the schools of such district..., in accordance with the following formulae..." (8 NYCRR "174.2). 

Accordingly, the use of a particular formula is not necessarily required.  Rather, the Commissioner"s regulations provide that a receiving district (respondent) may utilize its own formula, provided that: (1) its accounting records are maintained in such a manner as would indicate the net cost of educating each nonresident pupil, and (2) the amount charged is not in excess of the actual net cost of educating each such pupil (see, Education Law "2045; 8 NYCRR "174.2; Appeal of the Board of Education of the East Moriches Union Free School District, supra; Matter of Volker, et al., 4 Ed Dept Rep 161, Decision No. 7,501).

 Therefore, respondent"s assertion that it may charge petitioner more than the State formula rate as long as the two parties agree to the rate has no merit.  There is no evidence in the record that respondent maintains its accounting records in a manner that would indicate the net cost of educating a nonresident student, or that the amount respondent computed as tuition for 2002-2003 represents the actual cost of educating each pupil.  In fact, the record shows that respondent"s supervisor of accounting and purchasing was advised in a letter dated June 29, 2001 from consultant Gregory Illenberg, formerly SED"s coordinator of State Aid, that respondent could not charge more than the State formula rate.  Absent such evidence, respondent may not set nonresident tuition at a rate higher than the State formula.   

As to respondent"s counterclaim for $129,971.20 in tuition for educational services rendered to petitioner"s students in September and October 2002, the record indicates that petitioner submitted a check for $130,135.83 to cover that tuition on January 16, 2003.  Finally, respondent"s request for attorneys" fees and costs must also be denied, because the Commissioner of Education has no authority to award attorneys" fees or costs in an appeal pursuant to Education Law "310 (Appeal of Wendy and Robert L., 39 Ed Dept Rep 224, Decision No. 14,222). 

 

IT IS ORDERED, that the appeal be dismissed with respect to the tuition rates established for the 1997-1998 through the 2001-2002 school years.

 

IT IS FURTHER ORDERED, that the matter be remanded to respondent for re-computation of the nonresident tuition rate charged to petitioner for the 2002-2003 school year in accordance with the formula prescribed in "174.2 of the Commissioner"s regulations, unless respondent can demonstrate that it maintained its records on a per-pupil basis so as to document the net cost of educating nonresident pupils; provided that in no event shall such charge exceed the actual net cost of educating such pupils.

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