Decision No. 14,353

MILLS, Commissioner.--Petitioner appeals the adoption of two resolutions by the Board of Education of the City School District of the City of Mount Vernon ("respondent") during a contingency budget. The appeal must be sustained in part.

Mount Vernon is a small city school district with less than 125,000 inhabitants. In 1996, amendments to the Education Law permitted voters in small city school districts to vote for the first time on school district budgets (Education Law "2601-a, L.1996, c.171, "15). The law became effective on September 1, 1996, and applied to budgets for the 1997-98 school year.

The voters rejected respondent’s proposed budget on May 6, 1997 and again on June 24, 1997 (seeAppeal of Gallagher, 39 Ed Dept Rep ___, Decision No. 14,331). Thereafter, respondent adopted a contingency budget in accordance with Education Law "2601-a(5).

On July 1, 1997, respondent passed resolution #97-336, approving a "proposal from the National Urban Alliance for Effective Education at Teachers College, Columbia University ["NUA"], to conduct an instructional/programmatic study of the Mount Vernon School System, as per letter attached dated June 25, 1997, in the amount of $90,000." The letter called for an overall project budget of $180,000. On August 12, 1997, respondent adopted resolution #97-386, authorizing "the addition of another $92,000 in order to fully fund the attached proposal by [NUA] for a total project cost of $182,000." On August 27, 1997, respondent adopted resolution #97-390 authorizing payment of $182,461.50 to then Superintendent Dr. William C. Prattella, upon submission of his resignation effective October 6, 1997.

Petitioner contends that the expenditures authorized by resolutions #97-386 and #97-390 are not ordinary contingent expenses as defined by Education Law "2601-a(5)(c). Petitioner requests that I direct respondent not to pay these expenses.

Respondent asserts that the $92,000 authorized by resolution #97-386 was a proper contingent expense since it merely fulfilled a pre-existing contractual obligation created pursuant to resolution #97-336, passed on July 1, 1997. Additionally, respondent contends that the payment to NUA is an ordinary contingent expense because the services contracted for are necessary for the district to maintain its educational program and assure the health and safety of the students and staff. Respondent also argues that petitioner’s appeal is untimely because petitioner is actually appealing the July 1 resolution to hire NUA for $180,000 (resolution #97-336).

I will first address the procedural issue of timeliness. An appeal to the Commissioner must be commenced within 30 days from the performance of the act complained of, unless excused by the Commissioner for good cause shown (8 NYCRR "275.16). Petitioner contends that resolution #97-336 only authorized payment of $90,000 and did not reference any further payments. Additionally, he argues that the public portion of the resolution did not contain the attached letter indicating that the entire proposal was for $180,000, and that resolution #97-386 was completely separate from, rather than an amendment of, resolution #97-336. In any event, it appears respondent did authorize additional funding in the amount of $92,000 on August 12, 1997. Since the petition was served on September 10, 1997, within 30 days of this action, I decline to dismiss the appeal as untimely.

Turning now to the merits, the responsibility for determining what constitutes an ordinary contingent expense lies in the first instance with the board of education (Appeal of Gorman, 39 Ed Dept Rep ___, Decision No. 14,265; Appeal of Johnson, 38 id. 327, Decision No. 14,045; Appeal of Nolan, et al., 35 id. 139, Decision No. 13,492). Any question concerning a board’s determination of such an expense may be referred to the Commissioner of Education for determination (Education Law ""2024, 2601-a[6]). Generally, an expense may be considered contingent if it is a legal obligation of the district or if it is necessary to maintain the educational program, preserve property or assure the health and safety of the students and staff (Appeal of Brousseau, 36 Ed Dept Rep 150, Decision No. 13,685; Formal Opinion of Counsel No. 213, 7 id. 153). For the 1997-98 school year, under Education Law "2601-a(5), ordinary contingent expenses included teachers’ salaries, statutorily required expenses (such as regular transportation), legal obligations of the district, library books and other library instructional materials, and items necessary to maintain the education programs of the district. (Interschool athletics, field trips and other extracurricular activities are now also considered ordinary contingent expenses as a result of 1997 amendments to "2601-a[5]).

I disagree with respondent’s contention that the hiring of NUA pursuant to the first resolution (#97-336) is an ordinary contingent expense. First, respondent contends that the hiring of NUA was "necessary to maintain the educational program." It asserts that its educational system was deteriorating to the point where the district was unable to provide satisfactory educational services to its students. It contends, therefore, that outside independent experts were necessary to evaluate the system. Respondent states that the goal of NUA’s proposal was "to strengthen the efforts of professional staff working in the district and to focus Mt. Vernon’s efforts on behalf of the students." Its purpose was to provide a broad overview of the educational system in Mt. Vernon and to make recommendations to respondent and the superintendent on how to maintain and improve the overall quality of the educational system.

While the goals of NUA’s proposal appear legitimate and such service may prove useful to the district, there is nothing in the record to support respondent’s contention that the cost of the proposed project is an expenditure authorized by statute or necessary for the district to maintain its education program, preserve property or assure the health and safety of the students and staff (Appeal of Shravah, 36 Ed Dept Rep 396, Decision No. 13,760, aff’d Education Alternatives, Inc. v. Mills, Supreme Court, Albany County, Special Term (Lamont, J.), December 18, 1997; Appeal of Nolan, et al, supra; Appeal of Cappa, 14 Ed Dept Rep 80, Decision No. 8873; Formal Opinion of Counsel No. 213, supra). Indeed, fees for surveying the school system by various individuals, groups or organizations are specifically excluded from the list of ordinary contingent expenses (Formal Opinion of Counsel No. 213, supra).

Respondent attempts to distinguish this case from Shravah, wherein the Commissioner held as impermissible under a contingency budget the hiring of consultants "to review district operations and make recommendations for the creation of [the] budget" when existing personnel could perform such function. Respondent claims that its personnel are incapable and inadequately trained to undertake the services described in NUA’s proposal, and thus Shravah is inapplicable. However, aside from respondent’s self-serving statement that existing district personnel could not adequately perform this function for the district, there is nothing in the record to support respondent’s contention. Moreover, even if existing personnel could not perform this function, as discussed above I find that the hiring of NUA was not a necessary expense and thus does not constitute a permissible contingent expense (Formal Opinion of Counsel No. 213, supra at 157).

Respondent also argues that the authorization of an additional $92,000 pursuant to resolution #97-386 was a permissible contingent expense because it satisfied a pre-existing contractual obligation created under resolution #97-336. However, that resolution was passed on July 1, 1997, after the voters had rejected the budget for the second time on June 24, 1997, necessitating the adoption of a contingency budget pursuant to Education Law "2601-a(5). Accordingly, respondent’s argument fails because no contractual obligation existed prior to respondent’s obligation to adopt a contingency budget.

Respondent’s answer, while not explicitly clear, implies that payment to NUA under both resolutions has already occurred. Thus, while it appears that I am unable to enjoin respondent from expending or disbursing those funds to NUA, I explicitly order and admonish respondent to refrain from authorizing expenditures for noncontingent expenses while the district is operating under a contingency budget (Appeal of Gorman, 39 Ed Dept Rep ___, Decision No. 14,265). I am also referring this matter to the Department’s Office of Audit Services.

Respondent maintains that the payment made to Dr. Prattella under resolution #97-390 was an ordinary contingent expense because it was legally obligated to pay the sum set forth in the agreement as settlement of pending litigation as well as payment of a pre-existing contractual obligation. On May 6, 1997, at the first budget vote and general election, five new members of the board of education were elected. At a board meeting on June 12, 1997, the outgoing board members voted to extend Dr. Prattella’s contract as superintendent until June 30, 2000. However, on July 1, 1997, the newly elected board voted to rescind the resolution passed by the outgoing board. Dr. Prattella appealed the rescission to the Commissioner, who issued a decision on June 15, 1998 upholding his appointment until June 30, 2000 (Appeal of Prattella, 37 Ed Dept Rep 693, Decision No. 13,960).

Prior to the issuance of that decision, however, respondent passed resolution #97-390 authorizing settlement of Dr. Patella’s appeal against it. (The Commissioner was not advised of this settlement prior to his decision of June 15, 1998). Resolution #97-390 authorized "the settlement of litigation between Dr. William C. Prattella and the Board, Appeal of Dr. William C. Prattella against the Board of Education, by the payment of a retirement incentive to Superintendent William C. Prattella consisting of $182,461.50 to be paid in one lump sum to Dr. Prattella by October 6, 1997 upon his furnishing the Board with a letter of resignation effective October 6, 1997 and upon the exchange of General Releases." Respondent argues that the June 12 vote of the outgoing board was legal and valid and could not be nullified by the new board. Consequently, respondent contends that the payment was a mutually agreed-upon buy-out agreement of Dr. Prattella’s contract, or, in the alternative, a settlement of the litigation in the district’s best interest.

Ordinary contingent expenses include legal obligations, including pre-existing contractual obligations (Formal Opinion of Counsel No. 213, supra). Moreover, "2601-a(5)(c) specifically provides that contingency expenses include "items of expense for legal obligations of the district, including, but not limited to, contractual obligations, debt service, court orders or judgments. . .." In addition, "2601-a(5)(e) includes expenditures for necessary legal expenses. Prior cases have held that a payment made to a former superintendent to settle claims arising from a contract is a legal obligation of the district and constitutes an ordinary contingent expense (Matter of Rowley, 22 Ed Dept Rep 385, Decision No. 11,002; seealsoCedar v. Comm of Educ., 30 A.D.2d 882 (1968). Accordingly, I find the settlement of Dr. Prattella’s appeal against the district to be a permissible expense.

THE APPEAL IS SUSTAINED TO THE EXTENT INDICATED.

IT IS ORDERED that respondent refrain from authorizing expenditures for noncontingent expenses while the district is operating under a contingency budget.

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