Superior Court: North Kingstown Schools Cannot Knowingly Overspend

Alongside continuing financial difficulties among Rhode Island’s cities and towns, March has brought significant clarification of the budgetary relationship between school departments and municipal governments.

On March 15, the Supreme Court “denied petition for writ of certiorari in Town of Tiverton v. Tiverton School Committee.”  In other words, the high court declined to review the decisions of Education Commissioner Deborah Gist and the Board of Regents regarding a long-running dispute between the two governing bodies of Tiverton.  (The Supreme Court has not, by this denial, confirmed the commissioner’s legal reasoning; it has merely determined that the case does not fit within its current list of priorities.)

At issue was whether a municipal government is responsible for school budgets determined at the beginning of the fiscal year even when state aid falls short of estimates.  With the court’s denial, the commissioner’s decision stands as state law on the question, requiring towns to provide schools with the full amount “appropriated” through its budget process, indemnifying schools against losses in state aid.

In Tiverton, the ruling had limited immediate repercussions, because both the school department and the town experienced surpluses during the budget year in question.  A related ruling from the Superior Court has more immediate implications for North Kingstown.

In Town of North Kingstown v. North Kingstown School Committee (PDF), the Town of North Kingstown requested an order from the court that would bar the school committee from overspending its budget and incurring debts that the town would be responsible for paying.  According to the facts of the case, the school department projected a deficit for the fiscal year of $618,546, resulting from shortfalls in state aid, Medicaid reimbursements, and tuition from Jamestown students as well as a failure to realize anticipated concessions during contract negotiations with the North Kingstown Education Support Professionals and the hiring of five new employees.

While denying a preliminary injunction, Justice Brian Stern issued a writ of mandamus “to the School Committee that it shall not authorize purchase orders or financial commitments unless it can be proven to the Town that there will not be an excess of expenditures, encumbrances, and accruals over revenues.”  That is, the school department cannot spend more than its budget allows.

In the process of arriving at his conclusion, Stern clarified two important points of running controversy in Rhode Island.

The first relates to the availability of Caruolo Actions, regarding which Stern writes:

… the legislative intent [is] that if a School Committee cannot comply with its appropriated budget, then it must bring a Caruolo action in a timely manner from when it discovers that it cannot operate in a non-deficit position while complying with its mandates and contracts. It is contrary to the intent of the legislature to allow a School Committee to knowingly incur an end of the year deficit where corrective action can no longer be taken, only to be appropriated additional funds under the Caruolo Act.

This, however, is merely a summary and restatement of the rules clarified in School Committee of City of Cranston v. Bergin-Andrews (2009).  Caruolo suits require school committees to have followed several steps in an attempt to avoid deficits, including following the appropriated budget, petitioning the Department of Education for relief from state regulations, and making an official effort to work with the town government to resolve the dispute.  The more significant clarification is that which relates to the Tiverton case:

This Court finds that the meaning of the phrase “total revenue appropriated” is clear and unambiguous in this statute. It refers to the total budget for the schools as appropriated by the Town. This includes all line items in the School Fund unless expressly contingent in the budget itself. In this case, none of the line items were contingent in the budget; therefore, this Court finds that the total revenue appropriated is $58,092,043.

That revenue total includes $186,000 in state aid that the town expected but did not receive.  Therefore, the term “appropriation” in the relevant state law appears to have two distinct meanings:

  1. The earmarking of funds of which a government body has authority (i.e., a town can appropriate its tax revenue, and the state can appropriate its own revenue to the town or the school department).
  2. The budgeting of funds over which the municipal government has no real authority, but which it reasonably expects to receive.

The ambiguity arises in General Law 16-9-1, which refers to “money appropriated by the state or town or otherwise for public schools in the town.”  The question in Tiverton mainly concerned whether a town’s estimates of state aid constitutes an appropriation on the part of the town or 16-9-1 requires the school to live within the revenue appropriated separately by the state and by the town from their own resources.

Justice Stern has expanded on the legal resolution of this ambiguity by allowing for the possibility that a town’s budget can make its own “appropriation” of state funds “expressly contingent” upon the actual aid that the state appropriates for the town’s schools.