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Decision No. 14,610

Appeal of the BOARD OF EDUCATION OF THE EAST MORICHES UNION FREE SCHOOL DISTRICT from action of the Board of Education of the Center Moriches Union Free School District regarding the payment of nonresident tuition.

Decision No. 14,610

(July 27, 2001)

Smith, Finkelstein, Lundberg, Isler and Yakaboski, LLP, attorneys for petitioner, Frank A. Isler, Esq., of counsel

Ingerman Smith, LLP, attorneys for respondent, Mary Anne Sadowski, Esq., of counsel

MILLS, Commissioner.--Petitioner, the Board of Education of the East Moriches Union Free School District, challenges the nonresident tuition rates established by the Board of Education of the Center Moriches Union Free School District ("respondent"). The appeal must be dismissed with respect to the tuition rates established for the 1997-98 and 1998-99 school years, and remanded with respect to the tuition rate established for the 1999-2000 school year.

Petitioner"s school district is comprised of one school, grades kindergarten through 8. Accordingly, its high school-age students are given the option of attending high school in one of three neighboring school districts. Pursuant to contracts entered into annually, respondent agreed to educate petitioner"s students in grades 9 through 12 for the 1997-98 and 1998-99 school years. The contracts executed by the parties did not specify a rate of tuition, but rather provided that petitioner would pay respondent "tuition in accordance with the provisions of the Education Law."

Petitioner alleges that the nonresident tuition charged by respondent for the 1997-98, 1998-99 and 1999-2000 school years is far in excess of the rates permitted by the Education Law, the Commissioner"s regulations and the State Education Department"s (SED) computation of permissible rates, as published by SED on its web site. Accordingly, petitioner seeks an order from the Commissioner directing respondent to refund $84,400.80 and $120,926.40 for the 1997-98 and 1998-99 school years, respectively. With respect to the 1999-2000 and future school years, petitioner requests that I order respondent to adjust its tentative tuition rate based upon the tuition rate estimated by SED. Petitioner further requests that I order respondent to adjust its final tuition rate, after the close of the fiscal year, to an amount that does not exceed the actual net cost to educate its nonresident pupils.

Respondent asserts that petitioner"s claims arising out of the 1997-98 and 1998-99 contracts are time-barred. Respondent further contends that claims for those periods should be barred pursuant to the doctrine of laches. Respondent also asserts that because petitioner paid all invoices submitted, without reserving the district"s rights, the common law doctrine of accord and satisfaction applies, and petitioner is thus prevented from now challenging the accuracy of respondent"s calculations. Finally, respondent asserts that the methodology it employed for setting nonresident tuition rates is wholly consistent with the applicable provisions of the Education Law and the Commissioner"s regulations.

Before turning to the merits of this appeal, I must first address a procedural matter. Respondent"s counsel has submitted an affidavit, with two new documents attached, as a "supplement to the answer and affidavits previously submitted on behalf of respondent." The regulations of the Commissioner permit parties to submit additional affidavits and exhibits, but only with the prior permission of the Commissioner (8 NYCRR "276.5). Respondent"s "supplemental affidavit" was not submitted in accordance with "276.5 of the Commissioner"s regulations and, therefore, is not part of the record and will not be considered in this appeal.

Petitioner"s claims for reimbursement arising from the 1997-98 and 1998-99 contracts must be dismissed as untimely. An appeal to the Commissioner of Education must be commenced within 30 days of the decision or action complained of, unless excused for good cause shown (8 NYCRR "275.16). The record indicates that petitioner first questioned respondent concerning the rate of tuition for the 1997-98 and 1998-99 school years in a letter dated May 5, 1999. A series of oral and written communications concerning the tuition rates for those years followed. By letter dated February 3, 2000, the president of respondent board informed the president of petitioner board that the tuition rates established by respondent for the 1998-99 school year, and already paid by petitioner, would remain unchanged, and that no refund would be forthcoming. Specifically, respondent"s president wrote: "Our position is that we computed actual costs as requested, had the methodology and calculation verified, submitted a bill on the basis of the actual costs, received payment on the bill without objection, and closed out the year in question. I can think of no reason why we should or would reopen the issue and have not been given any reason to do so." This appeal was not commenced until May 18, 2000, considerably more than 30 days after respondent set, and petitioner paid, tuition for the 1997-98 and 1998-99 school years. Even if I were to determine that the parties" protracted discussions concerning the tuition rate extended the time for commencing this appeal, the February 3, 2000 letter written by respondent"s president would serve as its final determination in the matter. Accordingly, I must dismiss as untimely petitioner"s claims for reimbursement for the 1997-98 and 1998-99 school years.

Respondent asserts that the appeal should be dismissed pursuant to the common law doctrine of accord and satisfaction, in light of petitioner"s unconditional payment of all invoices submitted to it by respondent. An accord and satisfaction is described as follows: "An agreement of one party to give, and another party to accept, in settlement of an existing or matured claim, a sum or performance other than that to which he believes himself entitled, is an accord. The execution of the agreement is a satisfaction. Essential elements of an accord and satisfaction are a dispute as to the amount due and knowing acceptance by the creditor of a lesser amount." (19A NY Jur 2d, Compromise, Accord and Release, "1) In the instant case, while there is a dispute as to the amount due, it certainly cannot be said that there has been a "knowing acceptance by the creditor [i.e., respondent] of a lesser amount." Accordingly, the appeal will not be dismissed on this basis.

The papers submitted by both parties in this appeal refer repeatedly to their contracts for the 1997-98 and 1998-99 school years, and copies of those two contracts are appended to the petition. Conspicuous by its absence, however, is a contract for the 1999-2000 school year. I pursued this matter with SED"s Office of State Aid, which confirmed that it never received a contract from either party for the 1999-2000 school year.

Having failed to enter into a written agreement for the 1999-2000 school year, the rate of tuition must be established pursuant to the provisions of 8 NYCRR Part 174 (see, Appeal of the Board of Education of the Southampton Union Free School District, 20 Ed Dept Rep 101, Decision No. 10,331). Section 174.2 provides: "...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, as implied by petitioner. Rather, the regulations of the Commissioner provide that a receiving district 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 Volker, et al., 4 Ed Dept Rep 161, Decision No. 7,501). If, however, these two criteria are not met, a receiving district may charge no more than the formula rate, as published on SED"s web site.

Counsel for respondent summarized the district"s method of computing tuition rates for the 1999-2000 school year as follows: "In determining the actual net cost of instruction of nonresident pupils, Respondent Center Moriches employed the use of the formula set forth in Part 174.2 of the Commissioner"s regulations. However, when it determined the cost of instruction of pupils in its district, it did not distribute the total general fund appropriation by use of teacher salaries alone, but rather determined the actual appropriation in each category set forth in Part 174.2(a)(2) as permitted by the regulation. As set forth more fully in the affidavit of Joseph Donovan, Superintendent of Schools, the actual appropriation for each category was determined by utilizing actual costs, and allocations of actual cost based upon straight and weighted enrollment."

The record shows that Gregory Illenberg, formerly SED"s Coordinator of State Aid, provided guidance to the parties indicating that a district must maintain its records on a per pupil basis in order to charge a rate higher than the formula rate -- and that it was highly unlikely that a district would maintain its records in such a manner. Nothing in the affidavit provided by Superintendent Donovan, or in any of the other materials submitted, indicates that respondent did, in fact, maintain its records on a per pupil basis. Accordingly, unless respondent can demonstrate that it has maintained its records on a per-pupil basis, the rate of tuition for the 1999-2000 school year must be computed in accordance with the formula prescribed in 8 NYCRR "174.2, as published on SED"s web site.

IT IS ORDERED, that the appeal be dismissed with respect to the tuition rates established for the 1997-1998 and 1998-1999 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 1999-2000 school year in accordance with the formula prescribed in 8 NYCRR "174.2 unless respondent can demonstrate that it maintained its records on a per-pupil basis; in no event shall such charge exceed the actual net cost of educating such pupils.

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