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Decision No. 15,026

Appeal of the Board of Education of the East Quogue Union Free School District, from action of the Board of Education of the Westhampton Beach Union Free School District regarding nonresident tuition.


(February 5, 2004)


Ingerman, Smith, L.L.P., attorneys for petitioner, Lawrence W. Reich, Esq., of counsel


Kevin A. Seaman, Esq., attorney for respondent



MILLS, Commissioner.--Petitioner appeals the computation of nonresident tuition for the 2001-2002 school year by the Board of Education of the Westhampton Beach Union Free School District ("respondent").  The appeal must be dismissed.

Petitioner has its own elementary school, but for more than twenty years, petitioner has contracted with respondent for the education of petitioner"s secondary students (grades 7 through 12).  On July 24, 2002, petitioner received the final bill from respondent for such services for the 2001-2002 school year.  Petitioner"s superintendent contacted respondent"s superintendent, stating that funds expended for elementary school capital construction projects should not be included in the net allowable appropriation upon which secondary school tuition was calculated for the 2001-2002 school year.  The superintendent asserted that, since petitioner"s secondary school students did not attend any classes at Westhampton Beach Elementary School, capital improvements or repairs to the elementary school did not provide any direct benefit to petitioner"s secondary students and therefore should not be included in the tuition calculation.

Respondent"s superintendent confirmed that elementary school capital construction costs had indeed been included in the tuition calculation, but stated that such inclusion was in accord with the Education Law and Commissioner"s regulations governing nonresident tuition rate calculations.  This appeal ensued.

I must first address several procedural objections raised by respondent.  Respondent first alleges that the petition should be dismissed because petitioner failed to comply with the requirement in Education Law "2040(1)(c) to obtain voter approval to enter into a contract for the education of all high school pupils of grades 7 through 12 in another district for a period of more than two but less than five years.  Petitioner and respondent executed an instruction contract for the period July 1, 2001 through June 30, 2003.  Petitioner concedes that there was no voter approval for the 2001-2002 school year, but contends that its board has the inherent responsibility and authority to provide for the education of its students.

Respondent correctly asserts that execution of a tuition contract under Education Law "2040[1][c] requires voter approval.  Petitioner was therefore without authority to execute a tuition contract for the 2001-2002 school year due to its admitted failure to obtain voter approval.  Therefore, in the absence of a valid contract for the 2001-2002 school year, the rate of tuition must be established pursuant to the provisions of Part 174 of the Commissioner"s regulations (Appeal of the Bd. of Educ. of the East Moriches UFSD, 41 Ed Dept Rep 45, Decision No. 14,610; Appeal of the Bd. of Educ. of the Southampton UFSD, 20 id. 101, Decision No. 10,331).

Respondent further argues that the petition should be dismissed because petitioner failed to name the State Education Department ("Department") as a necessary party.  Respondent contends that, because it relied on policies and nonresident tuition rate worksheets provided by the Department, as well as statute and regulations, the Department is therefore a necessary party to a challenge to those calculations.  However, it is well settled that Education Law "310 does not authorize an appeal to the Commissioner from actions taken by Department staff (Appeal of the City of Albany, et al., 43 Ed Dept Rep ___, Decision No. 14,961; Appeal of Sheppard, 41 id. 150, Decision No. 14,643).

Respondent also contends that petitioner should be estoppel from challenging respondent"s methodology to calculate nonresident tuition since petitioner has sent its secondary students to respondent district for more than twenty years; respondent has consistently used the same methodology to calculate the tuition rate; and petitioner did not prospectively object to the calculation methodology at the beginning of the 2001-2002 school year but instead waited until the end of the school year.  However, equitable estoppel does not apply against a government subdivision except in limited circumstances not applicable here (Parkview Assoc. v. City of New York, et al., 71 NY2d 274; Appeal of Perez, 42 Ed Dept Rep 71, Decision No. 14,779; Appeal of Prospero, 37 id. 62, Decision No. 13,804).  Additionally, I note that tuition payments are due at the end of the applicable school year (Appeal of the Bd. of Educ. of the Port Jefferson UFSD, 26 Ed Dept Rep 525, Decision No. 11,841).  Although petitioner had agreed to make periodic payments of the estimated tuition throughout the school year, petitioner timely initiated this appeal within thirty days of receipt of the final invoice for the 2001-2002 school year and is entitled to question the final computation of tuition for that school year.

The regulation at issue is "174.2(a), which establishes a formula for computation of tuition charges for nonresident pupils.  The regulation provides in pertinent part:

 (a)(1) The total general fund appropriation shall be ascertained from the district budget for the school year.  The amount of such appropriation shall be reduced by the amount of the appropriation for transportation, including debt services for buses, adult education, special schools, community services and any other appropriations which do not benefit such student (emphasis added) 8 NYCRR "174.2[a]).

Using the final total general fund appropriation figure, a per pupil cost of instruction is calculated, which is then distributed proportionately among four categories: half-day kindergarten, full-day kindergarten through grade 6, grades 7-12 and special education programs for children with disabilities.  The maximum nonresident pupil tuition that may be charged is determined by dividing the net cost of instruction of pupils in each category by the estimated average daily attendance of pupils in each category (8 NYCRR " 174.2[a][5]).

Petitioner contends that the highlighted phrase of "174.2(a)(1) requires respondent to subtract any capital construction costs for elementary schools from the total general fund appropriation for purposes of billing petitioner for the education of its secondary students, because those costs do not "benefit such students."  A response to this contention requires a review of the history of the tuition reimbursement formula and the data that are included in the calculation of the net cost of instruction per pupil.

     The formula for calculating nonresident tuition charges was first established in 1949 in Matter of Common School District No. 8, Town of Fayette, 70 State Dept Rep 69, Decision No. 5375.  This so-called "Seneca Falls formula" first determined the total cost of instruction for all pupils in grades K-12, and then allocated this total cost proportionately among student categories including grades 1-6 and grades 7-12.   Acting Commissioner Wilson noted that "[s]ince none of the items of expenditures except teachers" salaries can be clearly differentiated" to distinguish between the different grade categories, the Seneca Falls formula allocated the total cost of education to each category in the proportion that teacher salaries in each grade category bore to the total expenditure for teacher salaries (id.).  There was no requirement in the formula to segregate or allocate capital construction costs to specific grade categories.  The only allocation among grade categories was made in accordance to the proportionality of teacher salaries between categories.

     In 1962, Commissioner Allen in Matter of Common School District No. 2, Town of Geneva, et al., 2 Ed Dept Rep 319, Decision No. 7109, noted that although there had been certain changes, the Seneca Falls formula still represented the proper formula for computing nonresident tuition.  Consistent with the 1949 decision, the first step of the formula was described as "ascertain[ing] total estimated expenditures from budget for current year " for all school purposes except transportation, cafeteria, adult education, summer and other recreation and summer school" (id.).  Again, there was no requirement to allocate specific capital construction costs among the various grade categories.  In 1974, the Seneca Falls formula was codified as Part 174 of the Commissioner"s regulations (Matter of the Bd. of Educ. of the Mount Pleasant-Blythedale UFSD, 16 Ed Dept Rep 288, Decision No. 9398).   The phrase at issue in this appeal, "which do not benefit such student," appeared in the original wording of "174.2 and has not changed.

The Department"s State Aid unit has historically interpreted the phrase "benefit such student" in "174.2(a)(1) to refer generally to all nonresident students attending school in the district, not individualized within each of the grade categories, and the information solicited by the Department from school districts and used in the computerized formula reflect that historic interpretation.  The Department uses a computerized worksheet to implement the "174.2 formula and calculate nonresident tuition charges for each school district.  The necessary data for the worksheet is derived from a report of proposed appropriations for the ensuing school year that is submitted annually by each school district on the "School District Annual Financial Report" or "ST-3."  As one item of the ST-3 report, districts must list all appropriations for bond debt service for capital construction projects for the ensuing year, but need not specifically list and quantify the amount allocated for every individual project and what student category or categories the project may "benefit."  The total cost for school capital construction is included in determining the total general fund appropriation figure that is then used to determine the cost of instruction per pupil.

The "174.2 formula reduces the district"s total general fund appropriations by the amount of any expenditures that are not generally of benefit to the nonresident students in the district (such as adult education or community services).  Recognition of the relative influence on the cost of education by the number of students in each of the student categories is provided by the second step of the calculation, when the general total cost per pupil is allocated among the four categories ("174.2[a][2]).

As noted supra, the ST-3 form does not require districts to break down the total appropriations for each bond into specific subtotals for costs attributable to elementary school construction vis-"-vis secondary or other category.  There are legitimate reasons for not requiring this level of specificity to comply with the requirements of "174.2.  A school district may pay debt service simultaneously on many bonds for school construction in any given year; each bond can potentially cover a number of different construction projects; and the various projects may not be clearly distinguishable between the student categories.  In districts that have a number of bonds and multiple projects, the sheer administrative burden of attempting to identify individual pieces of the bonds and the proposed year"s construction expenditures that are attributable to each of the student categories would be unduly burdensome.

Moreover, a district"s facility needs and grade configurations may change over time, making it difficult to predict how a particular facility will be used in the future.  In that sense, it is impossible to determine whether a debt service payment on a 30-year bond made in the current year will ultimately directly benefit only elementary or only secondary students from the sending district.  Treating all construction costs as fixed costs attributable across grade levels is reasonable, given the burden that a microscopic allocation by grade level will require. In sum, the original Seneca Falls formulation did not require this level of detail " it recognized that "none of the items of expenditure except teachers" salaries can be clearly differentiated" to apportion costs among the student categories, and permitted these other costs to be lumped together in computing a total cost of instruction for all pupils (Matter of Common School District No. 8, Town of Fayette, supra).

A district that has accurate records reflecting actual costs to educate the students in each category separately may use such actual costs to calculate nonresident tuition per category rather than using the formula (Education Law "2045; 8 NYCRR "174.2; Appeal of the Bd. of Educ. of the East Moriches UFSD, supra; Matter of Volker, et al., 4 Ed Dept Rep 161, Decision No. 7501).  There is no indication in the record, however, that respondent keeps its records in that fashion.  I find no requirement in the regulation to implement a hybrid system whereby capital construction costs must be parsed out as actual costs per particular student, regardless of how the district keeps its records.

Of course, in a particular case, the districts that are parties to a tuition contract may specifically agree that particular costs or categories of costs, and the State building aid attributable to such costs, will be not be included in the calculation and the receiving district may recalculate the computerized rate provided by the Department so long as the total nonresident tuition rate charged does not exceed the maximum level imposed by the formula and  "174.2 (Appeal of the Bd. of Educ. of the East Moriches UFSD, supra).

I conclude that respondent reasonably and correctly used the tuition rate calculated by the Department pursuant to the formula in "174.2, and properly included all school capital construction costs in its computation of nonresident tuition for petitioner"s secondary students.