IN RE: PETITION FOR AUTHORIZATION TO CONDUCT A REFERENDUM ON THE WITHDRAWAL OF LIBERTY TOWNSHIP FROM THE GREAT MEADOWS REGIONAL SCHOOL DISTRICT

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-4783-06T34783-06T3

IN RE: PETITION FOR AUTHORIZATION

TO CONDUCT A REFERENDUM ON THE

WITHDRAWAL OF LIBERTY TOWNSHIP

FROM THE GREAT MEADOWS REGIONAL

SCHOOL DISTRICT

 

Argued January 27, 2009 - Decided

Before Judges Winkelstein, Fuentes and Chambers.

On appeal from a final decision of the Commissioner of Education, Board of Review.

Vito A. Gagliardi, Jr., argued the cause for appellant, Township of Liberty (Porzio, Bromberg & Newman, attorneys; Mr. Gagliardi, of counsel and on the brief; Kerri A. Wright, on the brief).

Jason P. Gratt argued the cause for respondent, Great Meadows Regional Board of Education (Bevan, Mosca, Giuditta & Zarillo, attorneys; Michael S. Selvaggi, of counsel and on the brief; Mr. Gratt, on the brief).

William R. Edleston argued the cause for respondent, Township of Independence.

Sookie Bae, Deputy Attorney General, argued the cause for respondent, Board of Review (Anne Milgram, Attorney General, attorney; Nancy Kaplen, Assistant Attorney General, of counsel; Ms. Bae, on the brief).

PER CURIAM

On February 5, 2007, the Township of Liberty filed a petition to withdraw from the Great Meadows Regional School District (the District) in Warren County. The District consists of two municipalities, Liberty and the Township of Independence. Independence opposed the withdrawal. Following a public hearing, on April 20, 2007, the Board of Review (the Board) denied Liberty's application. On May 31, 2007, the Board amplified its decision. We affirm substantially for the reasons expressed by the Board.

The District, formed in 1993, consists of three schools: Liberty Township Elementary School, attended by Liberty Township children from kindergarten through fifth grade (K-5) (Liberty Elementary); Independence Township Central School, attended by Independence Township children from K-5 (Independence Central); and Great Meadows Regional Middle School (Great Meadows Regional), attended by children of both townships from grades six through eight. Both townships send their students to Hackettstown High School for grades nine through twelve, pursuant to a sending-receiving agreement.

Liberty's withdrawal would result in the dissolution of the District. N.J.S.A. 18A:13-63. Upon the dissolution, the Liberty students would leave Great Meadows Regional and return to Liberty Elementary, which would revert to the K-8 school it was prior to the formation of the District. Liberty submitted a dissolution Feasibility Study and a Supplement to that study (collectively the Study). According to the Study, the dissolution would cause a loss of between forty to sixty students per grade in grades six through eight at Great Meadows Regional. Enrollment at Liberty Elementary, which has a capacity of 358 students, could range between 388 and 421 students as a K-8 school over the next five years. Classrooms dedicated to art and music would likely be lost, as would an additional classroom used by the Warren County Special Services District. The Study predicted that Independence Central would not need any changes. The sending-receiving agreements with Hackettstown School District would continue.

The Study proposed a staggered transition plan where, in the first year, Liberty students entering the sixth grade would remain at Liberty Elementary, while seventh and eighth grade students would remain at Great Meadows Regional. The following year, only eighth grade students would remain at Great Meadows Regional, with sixth and seventh graders remaining at Liberty Elementary.

The Study indicated that even if Liberty Elementary used rooms currently dedicated to music, art and computers as regular classrooms, enrollment could exceed capacity, requiring additional classrooms. Therefore, as addressed by the Study, replication of the curriculum now offered at Great Meadows Regional would require portable classrooms or additional construction at Liberty Elementary.

The studies submitted by both parties contain additional analysis and conclusions concerning the debt that would be incurred upon dissolution; the cost of new construction at Liberty Elementary, other administrative costs caused by having two separate districts, the State aid that would be received by the separate districts, the quality of education that would be provided upon dissolution, and property tax considerations.

The Board determined that upon dissolution, Liberty would incur an excessive debt burden. The Board relied upon the parties' projections of what Liberty's borrowing margin would be as an independent district. A school district's borrowing margin is established by a formula that relates to the amount of debt a district can incur through the issuance of bonds, which is determined by a percentage of the averaged equalized valuation of taxable property within a district. See N.J.S.A. 18A:24-1b; N.J.S.A. 18A:24-19. As a K-8 district, Liberty would have a total borrowing margin of 3% of the average equalized valuation of its taxable property. N.J.S.A. 18A:24-19.

The Study stated that Liberty would have a total borrowing margin of $8,574,634 after dissolution. After subtracting Liberty's proportional share of Great Meadows's net school debt, calculated to be $3,351,301, Liberty would be left with an available borrowing margin of $5,223,333. The Split Trail Report, which Liberty attached to its supplemental brief to the Board, estimated Liberty's total borrowing margin to be $9,237,324 and the net school debt to be $2,293,165, resulting in an available borrowing margin of $6,944,159.

The District submitted a report prepared by Vincent D. Yaniro of VDY Consulting. The Yaniro report calculated that Liberty had a total borrowing margin of $9,213,232, and would incur $2,332,800 of Great Meadows's school debt upon dissolution. The report discussed the $5,268,700 construction cost for Liberty Elementary, the same figure calculated in the Study, as part of Liberty's outstanding debt. Using the numbers in the Yaniro report, the Board concluded that upon dissolution, Liberty would only have an available borrowing margin of $1,611,732. While none of Liberty's submissions include an available borrowing margin this low, the Split Trail Report stated that if Liberty authorized the anticipated bonds for the addition, Liberty would use nearly 82% of its available borrowing margin. This would result in a remaining borrowing margin similar to that referenced in the Yaniro report.

Originally, both Liberty and the Board assumed that when Liberty borrowed the money to pay for the addition, the State would contribute 40% of Liberty's yearly payments on that debt. The Board was concerned that this State aid would not be available when the addition was constructed; therefore, it requested that the parties analyze Liberty's debt burden assuming that debt service would no longer be available. The Yaniro report concluded that without State debt service, the project would cost an additional $733,402 over a four-year period. While the Split Trail Report notes that this loss would "have a slightly negative impact," it concludes that the average taxpayer in Liberty would still save over $1,100 compared to the current configuration. This conclusion was based on the original tax impact analysis contained in the Study, as well as on the assumption that the current formula for State aid will remain in place. The Warren County Superintendent (the Superintendent) noted that even with 40% debt service, Liberty would assume $2,561,695 in debt from the Regional District, and $3,161,220 of new debt for the addition.

The Board also considered a letter submitted by Edwards Engineering Group stating that stricter future environmental treatment standards would require Liberty to replace Liberty Elementary's sewage treatment system at a potential cost of over $500,000 (plus operating costs). Edwards recommended a septic system at the cost of $250,000 to $350,000. The Board found that this cost should be considered in light of Liberty's borrowing margin.

The Board found not only that dissolution would cause Liberty to incur an excessive debt burden, but that the remaining school districts could not maintain efficient school systems without excessive costs. In reaching that decision, the Board relied upon the following: the need for Liberty to obtain temporary classrooms to accommodate additional sixth through eighth grade students and administrative staff; the need for Liberty to hire additional administrative and support staff; the need for Liberty to purchase additional professional services, equipment, and supplies; and that Great Meadows Regional would be underutilized after dissolution.

According to the Study, portable classrooms might be necessary at Liberty Elementary to match the co-curricular courses available at Great Meadows Regional. The number of new classrooms needed would depend on the desired class size, and whether there would be dedicated music, art, and computer rooms.

In his letter objecting to Liberty's proposed withdrawal, the Superintendent stated that Liberty Elementary would need portable classrooms during the three- to five-year transition period, while construction would be ongoing, and dedicated classrooms would not be available for art and music. Similarly, the Yaniro report concluded that portable classrooms would be necessary during construction, regardless of whether a staggered transition was implemented pursuant to Liberty's proposal. That report stated that four portable classrooms for twenty-five pupils would be necessary, each of which would cost $150,000 per year. The Study confirmed this need, proposing an addition including six classrooms with a maximum capacity of twenty-five, an art room, computer room, and a multi-purpose room. The Board adopted the Yaniro report's conclusion that temporary classrooms could cost Liberty $600,000 per year over a period of three to five years following dissolution.

The Study further noted that upon dissolution, Liberty would need to hire a new superintendent, a business administrator, two secretaries, and possibly a bookkeeper. It described the need for a second administration as a disadvantage of withdrawal. The Split Trail report found that an administrative principal (a combination of a superintendent and principal) and a business administrator would not be sufficient to run an effective and efficient K-8 school at Liberty Elementary.

The Yaniro report concluded that Liberty would need to hire the following central office staff: a superintendent, business administrator, secretaries, a bookkeeper, and a treasurer. The report noted that office space for this staff could add a significant expense. It also stated that Liberty would have to hire child study team personnel, including a supervisor, psychologist, speech therapist, and a social worker; nine additional teachers for the approximately 140 students coming from Great Meadows Regional; a custodian; and a technology specialist. The Yaniro report estimated that the new staff would cost Liberty $1,338,480.

The Yaniro report projected that upon dissolution, Liberty would incur additional costs, exclusive of the costs for new staff, including board of education expenses, supplies for the new students, and utilities and supplies for the new addition to Liberty Elementary. Some of these expenses, such as the purchase of office furniture, start-up costs, and technology expenses, were one-time expenditures. The Study did not include these calculations, but noted that the loss of economies of scale in ordering supplies and materials was one of the disadvantages of withdrawal.

The Yaniro report determined that Great Meadows Regional had a capacity of 564 students, and that 358 pupils were currently attending. The report concluded that if 140 pupils leave Great Meadows Regional to attend Liberty Elementary, this excess capacity would increase to 346, and the building would be "significantly underutilized." The Superintendent also felt that Great Meadows Regional would be significantly underutilized without the Liberty students. Liberty's submissions do not address this issue.

In denying Liberty's petition, the Board considered three additional consequences of dissolution: that it would be "extremely difficult" for the separate districts of Liberty and Independence to prepare sufficient budgets due to the 4% property tax cap on school districts; that Liberty relied on an old formula for the calculation of State aid in determining that it would receive more State aid upon dissolution; and that educational programs would be lost and class sizes would become more difficult to equalize upon dissolution.

The Board considered that Liberty based its State aid calculations on prior aid awards under a former version of the Comprehensive Education Improvement and Financing Act, N.J.S.A. 18A:7F-4.1 to -63 (CEIFA). In the past, the State used the aid formula set forth in CEIFA to determine aid to school districts. However, between 2001-2002 and 2006-2007, State aid was "frozen," and the CEIFA formula was not recalculated from year to year. At the time of the Board's decision, the Legislature and Governor were preparing a new State aid formula for the 2008-2009 school year. That legislation was passed in January 2008. See L. 2007, c. 260.

The Study estimated that during the time period that CEIFA aid was frozen, Liberty would have received an average of $9,832 in State aid per pupil, instead of the average of $5,925 per pupil it received as part of the District. Aid to Independence would have dropped to an average of $3,115 per pupil. Thus, Liberty was subsidizing Independence during this time period. These calculations were based on the State aid received in 2001-2002, the last year the CEIFA formula was used.

The Yaniro report questioned these calculations, given the uncertain status of CEIFA at the time. According to the Yaniro report, the new formula might allocate aid between Liberty and Independence more evenly, based upon the greater number of total pupils and at-risk and special education pupils in Independence. That report also asserts that aid may be more equalized between the townships because the townships' income disparity is less than its per-pupil property valuation disparity. Thus, the Yaniro report's property tax analysis included calculations assuming that State aid was equalized, and added back in the cost of portable classrooms and the addition to Liberty Elementary without State aid. This resulted in a still-significant tax increase for taxpayers in Independence, and an insignificant decrease for the taxpayers in Liberty.

The Board also noted that upon dissolution, some educational programs would have to be eliminated due to lack of space or students, and smaller numbers of students in each grade would make it more difficult to equalize class sizes. The Board was concerned about the continued viability of art and music offerings at Liberty Elementary, which was supported by the Feasibility Study's statement that approximately 140 students would leave Great Meadows Regional upon dissolution, and facilities might not be available at the elementary school for music and art programs.

Ordinarily, an appellate court will reverse the decision of an administrative agency only if it is arbitrary, capricious or unreasonable, or it is not supported by substantial credible evidence in the record as a whole. Henry v. Rahway State Prison, 81 N.J. 571, 579-80 (1980). Considerable weight is given to agency expertise where such expertise is relevant. Nanavati v. Burdette Tomlin Mem'l Hosp., 107 N.J. 240, 251 (1987). An appellate court, however, is not bound by an "agency's interpretation of a statute or its determination of a strictly legal issue." In re Taylor, 158 N.J. 644, 658 (1999) (internal quotation omitted). And our review calls for "careful and principled consideration of the agency record and findings." Id. at 657-58 (internal quotation omitted).

The New Jersey Constitution requires that the State provide "a thorough and efficient system of free public schools for the instruction of all the children in the State between the ages of five and eighteen years." N.J. Const. art. VIII, 4, 1. Prior to 1975, the expenses of all school districts were apportioned on a per-pupil basis. Petition for Authorization to Conduct a Referendum on Withdrawal of N. Haledon Sch. Dist. v. Passaic County Manchester Reg'l High Sch. Dist., 181 N.J. 161, 165 (2004). In 1975, an amendment to N.J.S.A. 18A:13-23 required districts to apportion costs based on the equalized value of real estate, which shifted costs to municipalities that had higher property values. Ibid. In 1993, the statute was amended again to provide that districts could choose either the equalized value method, the per-pupil method, or some combination of the two. Id. at 166; N.J.S.A. 18A:13-23. N.J.S.A. 18A:13-23.3 provides a procedure for a district to modify its cost apportionment.

When the board of education of a local school district, constituting part of a regional school district, or that municipality's governing body, wishes to withdraw from the regional school district, it may apply to the county superintendent of schools to investigate whether withdrawal is advisable. N.J.S.A. 18A:13-51. The superintendent is required to file a report that provides information regarding the financial and educational effects of such withdrawal. N.J.S.A. 18A:13-52. Even if the superintendent recommends against withdrawal, the withdrawing district may petition the Commissioner of Education for permission to submit the issue to the voters by way of a referendum. N.J.S.A. 18A:13-54. The Commissioner then submits the petition for withdrawal to the Board for a decision as to whether to authorize a referendum. N.J.S.A. 18A:13-56.

The Board must consider the educational and financial impact of the withdrawal, both on the withdrawing and remaining school district. N.J.S.A. 18A:13-56. The petition may only be denied upon a finding by the Board that

1. An excessive debt burden will be imposed upon the remaining districts, or the withdrawing district . . . ;

2. An efficient school system cannot be maintained in the remaining districts or the withdrawing district . . . without excessive costs;

3. Insufficient pupils will be left in the remaining districts . . . to maintain a properly graded school system; or

4. Any other reason, which it may deem to be sufficient . . .

[N.J.S.A. 18A:13-56b.]

The last factor, the catchall phrase in N.J.S.A. 18A:13-56b4, is limited to a reason of the same character as the other three factors, namely, a constitutional impediment to providing a thorough and efficient free public education for students in grades K-12. In re Authorization to Conduct a Referendum on the Dissolution of Union County Reg'l High Sch. Dist No. 1, 298 N.J. Super. 1, 8 (App. Div.), certif. denied, 149 N.J. 37 (1997). Thus, the Board may only deny the petition if any of the first three factors are present, or for a reason that would conflict with the State's obligation to provide a thorough and efficient system of education. Ibid.

Although N.J.S.A. 18A:13-56b1 mandates that a petition be denied if an excessive debt burden will result, the statute does not define what constitutes an excessive debt burden. N.J.S.A. 18A:24-1 defines certain terms that pertain to a school district's financial status. Included among those terms is "borrowing margin," which establishes a formula for the amount of money a school district may borrow for capital expenditures, and is related to the equalized value of real estate of the municipality. N.J.S.A. 18A:24-1. The borrowing margin is set by statute; a K-6 school district has a borrowing margin of 2.5% of the total average valuation of the taxable property in the district; while a K-8 district has a borrowing margin of 3%. N.J.S.A. 18A:24-19.

Here, the Board determined that factors one and two of N.J.S.A. 18A:13-56b were present petitioner's withdrawal from the district would result in an excessive debt burden and would interfere with the maintenance of a thorough and efficient education. Liberty challenges those findings, first arguing that if it was permitted to withdraw from Great Meadows Regional, it would not incur excessive debt, and therefore, the Board had no grounds to deny the petition under N.J.S.A. 18A:13-56b1. Liberty asserts that when N.J.S.A. 18A:13-56 refers to "excessive debt burden," which it does not define, it must mean the available borrowing margin for a school district. Liberty argues that because both the District and Liberty have calculated that Liberty's expected debt upon withdrawal will not exceed its borrowing margin, Liberty's debt burden cannot be considered excessive under the statute.

Liberty further argues that the Board considered several improper factors in concluding that it would incur excessive debt: that debt service may not be available, which Liberty contends was already taken into account in its estimates; the need for sewer repairs, which Liberty contends is a speculative expense not supported by competent evidence on the record; and the need for temporary classroom units, which Liberty describes as a rental expense that would not factor into its debt. Liberty asserts that the Board should not have considered whether Liberty might not have enough borrowing margin for emergencies because emergency needs would be covered by Liberty's operating budget, not from debt.

We begin with Liberty's argument that excessive debt burden is the equivalent of borrowing margin. In In re Petition for Authorization to Conduct a Referendum on the Withdrawal of the Borough of Oradell from the River Dell Regional School District, ___ N.J. Super. ___, ___ (App. Div. 2009), also decided today, we rejected a similar argument. In doing so, we "ascribe[d] to the statutory words their ordinary meaning and significance, and read them in context with the related provisions so as to give sense to the legislation as a whole." DiProspero v. Penn, 183 N.J. 477, 492 (2005). "We [gave] effect to all of the words of [the] statute," so as "not [to] render any of them 'inoperative, superfluous or meaningless.'" In re Borough of Oradell, supra, ___ N.J. Super. at ___ (slip op at 15) (quoting Cruz v. Trotta, 363 N.J. Super. 353, 358 (App. Div. 2003)). Applying those cannons of interpretation, we disagree with petitioner's construction of the term "excessive debt burden," reasoning as follows:

The Legislature used the term "excessive debt burden," not "borrowing margin." N.J.S.A. 18A:13-56b1. The Legislature, presumably aware of the already existing borrowing margin formula, chose not to graft that formula onto the statutory procedure for withdrawal from a regional district. If the Legislature intended for the Board to be constrained by the district's "borrowing margin," it could have used that term. See Am. Fire & Cas. Co. v. N.J. Div. of Taxation, 189 N.J. 65, 82 (2006) (internal quotation omitted) ("[t]he legislature is presumed to be familiar with its own enactments").

Being undefined, we consider the term "excessive debt burden" to be more expansive than the term "borrowing margin," which is constrained by its statutory definition. Our decision is informed by the statutory scheme, which affords to the Board broad discretion in its consideration of withdrawal applications. The Board of Review consists of high level State officials having expertise in the area of public education. N.J.S.A. 18A:13-56. A Board may require an initial investigation on a county level, the submission of feasibility studies, and analysis of financial information and indebtedness. Ibid.

The Board is charged with considering the effect of a proposal to withdraw "upon the educational and financial condition of the withdrawing and remaining districts." Ibid. The words used in the statute are in the main undefined, leaving room for the Board to exercise its judgment based on both factual and policy considerations. See, ibid. (using the undefined terms "efficient school system," "excessive costs," "insufficient pupils," and "properly graded," as well as "excessive debt burden"). Given this context, our view is that the Legislature intended to provide the Board with flexibility in defining "excessive debt burden," considering the facts, and applying the Board's expertise on a case-by-case basis. Thus, to determine what constitutes an excessive debt burden, a Board may consider other factors that impact the financial status of the withdrawing and remaining districts, as the Board did here.

[Id. (slip op. at 15-17).]

And here, the Board had sufficient evidence in the record to conclude that, upon the withdrawal of Liberty and the dissolution of the District, Liberty would assume an excessive debt burden. In reaching this conclusion, the Board relied upon the following facts: Liberty's post-dissolution borrowing margin, as calculated by both Liberty and the District; the costs of construction of an addition to Liberty Elementary, which may not be funded by State debt service aid; that tax savings to Liberty may not be realized due to the suspension and likely modification of the current formula for State funding; and the need for an upgrade to sewer facilities at Liberty Elementary in the future. The Board concluded that the resulting debt burden would be excessive because in the event of an emergency or construction cost overruns, or if Liberty did not receive the expected State debt service, Liberty would be faced with a "dire situation" with respect to borrowing and could incur a burden on its taxpayers.

Our current economic climate validates the Board's concern that State aid may not be available when the addition is constructed. As the Yaniro report points out, the Study estimates are based on the assumption that the current formula for State aid will remain in place. The Yaniro report concluded that without State debt service, the project would cost an additional $733,402 over a four-year period. The Superintendent noted that even with 40% debt service, Liberty would assume $2,561,695 in debt from the District, and $3,161,220 of new debt for the addition. Furthermore, although some emergency expenses may be part of the new district's operating budget as opposed to capital debt, at some point, Liberty may be required to issue bonds to cover the costs of significant operating expenses such as repairs, portable classrooms, and construction overruns. The Board was entitled to rely on this evidence in concluding that Liberty's resulting debt burden would be excessive.

And too, though Liberty asserts that the evidence does not support the need for sewage treatment repairs or replacement, the Board was within its discretion to accept the conclusions set forth in the engineer's letter offered by the District. That letter provided that stricter enforcement of environmental standards would require Liberty to replace the sewage treatment system at a cost of over $500,000; or, alternatively, the installation of a septic system, at a cost of between $250,000 and $350,000. Liberty did not contest these figures before the Board.

We next turn to Liberty's argument that the Board erroneously concluded that upon Liberty's withdrawal from the District, an efficient school system could not be maintained without excessive costs. Liberty asserts that the evidence in the record merely establishes that the resulting school systems would be less efficient, but does not establish that they would be so inefficient as to lead to excessive costs. The Board asserts that its determination of "excessiveness" need not be based upon numbers alone, but also on the effectiveness of the existing District, which it argues is already providing an excellent education to the students of Liberty and Independence, and that the added costs of Liberty's withdrawal would not convey a benefit to either municipality. Independence adds that the dissolution of Great Meadows would be inefficient, a waste of taxpayer dollars, and contrary to New Jersey's policies in favor of regionalization.

The Board was within its discretion to conclude that upon dissolution of Great Meadows, Liberty and Independence would be unable to maintain an efficient school system without incurring excessive costs. Because N.J.S.A. 18A:13-52b2 does not define "excessive costs," the Board may make a case-by-case determination of whether the costs of withdrawal would be excessive. Here, the Board's grounds for finding that Liberty could not maintain an efficient district without excessive costs are supported by the record.

Liberty contests the necessity of temporary classrooms, arguing that the need for them is speculative. Liberty's submissions acknowledge, however, that temporary classrooms may be needed. While none of the reports submitted stated that these units would definitely be needed, a fair inference from the credible evidence in the record supports the Board's finding that they will be necessary.

Liberty claims that the teachers for Liberty Elementary would not be an additional cost because they would come from Great Meadows Regional, which would decrease costs for Independence. However, Liberty's submissions to the Board did not articulate this argument, or explain how educational offerings at Great Meadows Regional could be maintained without these teachers. Further, Liberty's own submissions and its brief on appeal acknowledge that at least some new administrative staff would need to be hired. Thus, the Board had sufficient credible evidence to determine that additional administrative staff and teachers would contribute to excessive costs.

Liberty next claims that many of the professional services and equipment costs the Board considered were one-time-only expenses, and therefore, are not relevant to the "maintenance" of an efficient school system. Nevertheless, although these costs alone may not have been sufficient to support a finding of excessive costs, the Board was within its discretion to consider them along with the other considerations supporting a finding of excessive costs. Notably, the Study acknowledged that economies of scale would be lost when ordering supplies.

Next, Liberty contests the relevance of the evidence that Great Meadows Regional would be underutilized upon dissolution, asserting that the Board only concluded that Liberty (and not Independence) would be unable to maintain an efficient school system. Liberty asserts that because Great Meadows Regional would become the property of Independence, its underutilization does not increase Liberty's costs, and is therefore irrelevant. We disagree. This argument would require the Board to ignore the conditions of the existing regional district in considering the statutory factors. As we have indicated, the context and language of N.J.S.A. 18A:13-56 provides the Board with discretion to define what is "excessive" in a given case. Here, that Liberty proposes to incur significant expense to educate students that could already be accommodated without additional expense at the existing regional middle school is a relevant consideration in determining whether the costs of dissolution would be excessive.

Liberty argues that the additional factors cited by the Board in support of its denial, pursuant to N.J.S.A. 18A:13-56b4, were improper because they do not implicate constitutional concerns. The Board argues that it was required to consider these additional issues under N.J.S.A. 18A:13-56 because they were relevant to "the effect of the proposed withdrawal or dissolution upon the educational and financial condition of the withdrawing and the remaining district[s]."

While the fourth factor of N.J.S.A. 18A:13-56b refers to "any other reason" which the Board may deem sufficient to justify a denial, the other reasons advanced must "be of the same character as the other three factors, as each factor implicates the State's constitutional obligation for the maintenance of a thorough and efficient system of free public schools." North Haledon, supra, 181 N.J. at 173 (internal quotation omitted). "Any less weighty reason would be an inadequate ground for compelling constituent local school districts and municipalities to preserve a regional school district against the will of a majority of the voters in a majority of its local districts." Ibid.

One of these additional factors with which Liberty takes issue is the Board's conclusion that N.J.S.A. 18A:7F-38, which prohibits expansion of school budgets by more than 4% per year, would require each of the municipalities to make drastic cuts in education for budgetary reasons. See L. 2007, c. 62; N.J.S.A. 18A:7F-38. In April 2007, the Legislature passed this act, which limits the amount a school district can increase its tax levy in any given year. Ibid. Although the statute's applicability to new school districts created by deregionalization is unclear, we need not resolve that issue in that we have concluded that for the other reasons, the Board was correct in denying Liberty's petition. The Board's consideration of N.J.S.A. 18A:7F-38 in the context of the remaining factors is not ground for disturbing the Board's decision.

Liberty asserts that the Board should not have considered the viability of the assumptions it made about the State aid it would receive under CEIFA. We disagree. State aid had been frozen for the previous five years, which was sufficient to raise concerns that Liberty's withdrawal might not bring the expected financial benefits in the form of State aid. Though these concerns alone may not have been of sufficient weight to support a denial of Liberty's petition, this issue was not the primary basis for the Board's denial. The Board only discussed this issue at the close of its decision, explaining that the uncertainty regarding State aid caused it to give less weight to Liberty's conclusion that dissolution would allow it to receive an increase in aid. The Board did not abuse its discretion in considering these issues.

Liberty argues that the Board should not have relied upon unsworn comments to conclude that Liberty's withdrawal would cause programs to be eliminated, or make it more difficult to equalize class sizes. The Board argues that there was other evidence to support this conclusion, namely, the Study's conclusion that the loss of students at Great Meadows Regional "may also affect the middle school's ability to maintain full enrollment in some special area elective courses."

Though we have not been provided with a record of the public hearing where these concerns about educational offerings were apparently raised, the Study's statements that dissolution would cause approximately 140 students to leave Great Meadows Regional to attend Liberty Elementary, and could cause art and music classes to be lost at Liberty Elementary, provide support for the Board's concern about the elimination of programs. The Board did not abuse its discretion in considering this issue.

In arguing that the costs of dissolution would not be excessive, Liberty relies, in part, on a prior Board decision permitting a referendum on dissolution despite the necessity of building a new school if dissolution was approved. See In re Div. of Assets and Liab. Among Constituent Dists. of Lower Camden County Reg'l High Sch. Dist. No. 1, 381 N.J. Super. 91 (App. Div. 2005), certif. denied, 186 N.J. 605 (2006). There, however, the issue was not whether the Board's initial action in permitting the question of dissolution to go to the voters was proper. Rather, the issue was the division of the dissolved regional district's assets. Id. at 93-94.

The Board reasonably concluded that the factors in N.J.S.A. 18A:13-56b were not met. The Board did not err in its application of the evidence to the statutory factors.

We affirm primarily for the reasons expressed by the Board.

The current version of CEIFA basically employs two types of aid: wealth-equalized aid (which is based on a district's ability to raise local revenue), and categorical aid (based on a cost factor for a particular category of students in each district). See New Jersey Department of Education, A Formula For Success: All Children, All Communities 19 (December 18, 2007), available at http://www.state.nj.us/education/ssf/ reports/AllChildrenAllCommunities.pdf.

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