Attorney General's Opinion
Attorney General Richard Blumenthal
April 9, 1997
Honorable Theodore S. Sergi
State Board of Education
Hartford, Connecticut 06145
Dear Commissioner Sergi:
You have asked for our opinion about whether you have correctly interpreted two aspects of Conn. Gen. Stat. 10-51 within the context of a rather long-standing fiscal dispute between Regional School District No. 12 acting through its board of education ("the board") and one of its member towns, Bridgewater, acting through its first selectman. This dispute was most recently brought to your attention by a complaint filed with the State Board of Education under Conn. Gen. Stat. 10-4b by the regional board's chairman. The first prong of the dispute centers around the board's method of billing the regional district's member towns for their statutorily mandated contributions to cover the regional district's "net expenses". The second prong deals with the board's transfer of certain unexpended funds to its "reserve fund for specific capital improvements or equipment purchases" established under 10-51(d).
By way of general budgetary background, 10-51(a) requires each regional board of education to prepare each year, after a public hearing, a budget for the next fiscal year. The budget must include, among other things, "estimated receipts and expenditures for the next fiscal year" as well as "estimated surplus or deficit in operating funds at the end of the current fiscal year." The board must make this budget available on request and deliver a "reasonable number" of copies to the town clerk of each member town at least five days before the regional district's annual meeting. The budget is then voted on at the regional district meeting.1 Once the budget is approved,2 the board "estimate[s] the share of net expenses to be paid by each member town in accordance with [10-51(b)]" and so notifies the treasurer of each member town. "Net expenses" are "estimated expenditures less estimated receipts as presented in a regional school district budget." 10-51(b). The board fixes the amount to be paid by each member town, and that amount must bear the same ratio to the net expenses of the district as the number of students which each town had enrolled in the regional district had to the total district enrollment for the preceding school year. Id. The board also fixes the date or dates of these payments. Id.
According to the information you have presented to us with respect to Regional District No. 12's practices, the board, prior to the start of the fiscal year, gives each member town a monthly billing schedule for the entire year based on the town's pro-rata student enrollment. The schedule is predicated upon the gross operating budget. During the course of the fiscal year, the board receives income from non-member town sources such as state grants, interest on investments, tuition of non-resident students, etc. The non-member town revenue received in any particular month is used to reduce the succeeding month's billing in pro-rated fashion. At the end of the fiscal year, the total amount paid by each town over the course of the year equals its share of net expenses stated in the approved budget for that year.
Bridgewater's first selectman has challenged this billing practice. He claims that each month's bill must be based strictly on "net expenses" as reflected in the annual budget. Bridgewater would pay the same amount each month based on the amount of net expenses in its annual approved budget. Your position is that 10-51 does not set forth any billing procedure so that as long as a member town is not required to pay during the course of the fiscal year more than its pro-rata share of net expenses, the board is acting within its 10-51(b) authority.
Your position on this issue is consistent with 10-51(b). While the concept of "net expenses" is the touchstone of 10-51, that precise term is not included in the operative language of 10-51(b) regarding member town payments to the board. That language states:
On the date or dates fixed by the board, each town in the district shall pay a share of the cost of capital outlay and current expenditures necessary for the operation of the district.
This statutory language signifies that the term "net expenses" controls the amount of money a member must pay in a fiscal year and establishes the ceiling of a town's fiscal responsibility in a given fiscal year absent supplemental budgetary processes.3 However, within those constraints the board has discretion, which must be exercised reasonably, in billing member towns. The board can set the dates and the amounts of the payments; it can even require that each member town pay its entire pro-rata share of net expenses in one payment at any time during the fiscal year. In fact, your staff has informed us that the method and time for member town payments varies significantly among the regional districts. The obvious purpose of this billing discretion is to make certain the board has adequate funds to operate at any point in time.
If the General Assembly had intended a board could bill its member town only for one-twelfth of its share of net expenses each month, it would have so directed in the statute. In short, "net expenses" is an "annualized" concept - not a ceiling on monthly billing. As long as a board does not require a town to pay more than its pro-rata portion of net expenses, the board is acting consistently with the 10-51. This billing practice had been utilized since the start of Regional District No. 12 in the 1960s. The district's financial records are audited annually; Conn. Gen. Stat. 7-392(c); and no auditors have challenged this method of billing. The interpretation of a board charged with administering a statute is given great deference. New Haven v. United Illuminating Co., 168 Conn. 478, 493 (1975); State ex rel James v. Rapport, 136 Conn. 177, 182 (1949). Where such long time construction is reasonable, it should be accorded great weight. Anderson v. Ludgin, 175 Conn. 545, 555-556 (1978). This rule of statutory construction is especially pertinent when applied in this instance to a fiscal practice which has consistently passed audit muster.
As to the second issue, whether unexpended funds may be transferred to the reserve fund in the absence of a specific budgetary appropriation, there is little room for administrative discretion because 10-51(d) explicitly requires an appropriation to the reserve fund. The issue was first raised in 1993 when the board found itself at the end of the 1992-1993 fiscal year with approximately $54,000 in unexpended funds; Bridgewater's pro-rata share of that amount was approximately $12,700. The board transferred the $54,000 to the reserve fund. The money was used to comply with an order of the State Department of Environmental Protection to replace a septic system at an elementary school4 and to replace the high school's roof. The board had not made a specific appropriation to the reserve fund for such work in its 1993 fiscal year budget as approved by the district voters. The first selectman challenged this transfer of funds; he claimed - and still does - that no such transfer can be made without a specific appropriation approved by the district's voters during the budget approval process so that Bridgewater's share of the $54,000, namely $12,700, should have been returned to it or credited against the amount owed by the town for the 1993 fiscal year. As a result, the first selectman reduced Bridgewater's payment to the board by that amount, which is still outstanding.5 The board, on the other hand, contended that it has the authority (presumably Conn. Gen. Stat. 10-222) to transfer the unexpended portion of any appropriation to any other item as long as it does not exceed the funding level approved by the district's voters. See Superintendent's letter of July 22, 1993, supra at p. 3. In a somewhat analogous vein, you state in your letter:
We read Section 10-51(d) as giving a regional board authority to transfer funds from its appropriated budget to this line item without the approval of the voters, much like the authority of the Board [contained in 10-222] to transfer funds from one line item to another.
We disagree. The resolution of this issue is compelled by the clear language of the statute. Accordingly, there is no need to employ the various axioms and corollaries of statutory construction since the pertinent statutory provisions manifest the legislature's intent. Adams v. Vaill, 159 Conn. 478, 483 (1969); Hurlbut v. Lemelin, 155 Conn. 68, 73 (1967).
We have pointed out previously that the board has substantial discretion in formulating its annual budget. The legislature requires an annual budget of a regional school district to contain only very general categories of information; 10-51(a); the legislature has not restricted, for the most part, a regional board's determination of what line items its budget shall contain. The board, therefore, may shape the specifics of its annual budget to accommodate its needs. Yet, in the area of funding a minor capital improvement6 or purchasing a particular piece of equipment, the General Assembly has explicitly legislated that funds used to pay for capital improvements or equipment must be provided for by an appropriation in the annual budget that specifies the improvement or equipment. Sec. 10-51(d) provides:
Upon the recommendation and the approval of a majority of the members of the board, a regional board of education may create a reserve fund to finance a specific capital improvement or the acquisition of any specific piece of equipment. Such fund shall thereafter be termed the "Reserve fund for specific capital improvements and equipment purchases." No annual appropriation to such fund shall exceed one per cent of the annual district budget. Appropriations to such fund shall be included in the share of net expenses to be paid by each member town. The board shall annually submit a complete and detailed report of the condition of such fund to the member towns.
(Underscoring added). It is clear from the underscored words that the General Assembly has intended that for a regional board to pay directly for specific capital improvements or specific pieces of equipment a reserve fund must be established and that if that fund is to be used for such an improvement or piece of equipment, a discrete appropriation must be made to the fund as part of the annual budget process. The appropriation to the fund is limited to one percent of the annual budget. Further, the use of the word "specific" connotes that the particular improvement or piece of equipment must be set out expressly in the budget so that the district voters may approve the proposed improvement or piece of equipment as part of the budgetary process. Otherwise, there would be no need for the word "specific"; the phrase "a reserve fund to finance a capital improvement or the acquisition of any piece of equipment" would suffice. However, it must be assumed that the General Assembly has not included superfluous or meaningless terminology; every word must be accorded a relevant meaning. Archibald v. Sullivan, 152 Conn. 663, 668 (1965). Additionally, the mandatory annual report to the member towns on the conditions of the fund further evidences that there is a distinction between the fund and other budgetary line items.
You have stated that you believe 10-51(d) allows the transfer of funds from another line item to the fund in the same manner 10-222 permits line item transfers. We disagree. Sec. 10-51 itself does not address transfers among line items. Sec. 10-222 permits a "local board of education" to transfer unexpended or uncontracted for funds from one line item to any other line item as long as that board does not exceed its overall appropriation. Regional boards' authority to transfer in that fashion resides in Conn. Gen. Stat. 10-47, which gives these boards "all powers and duties conferred upon [local] boards of education by the general statutes not inconsistent with the provisions of [part III of Chapter 164]." However, transferring surplus funds to the reserve fund to pay for capital improvements or equipment not expressly provided for by appropriation in the annual budget approved by the voters is inconsistent with 10-51(d), which requires a specific appropriation for the specific capital items. To the contrary, 10-51(c) directs the board to use any funds unexpended at the end of the fiscal year to reduce the district's net expenses for the succeeding year; the board cannot decide, during the course of the fiscal year, to finance without voter approval, any specific capital improvement from the reserve fund, no matter how prudent the improvement or the acquisition may be.
Although, as we have previously stated, our opinion that the clarity of the statutory provision obviates the need to refer to the various rules of and aids to statutory construction, we will, nonetheless, comment on the legislative proceedings surrounding the passage of 10-51(d) because, as part of his complaint, the board's chairman quoted part of Senator Casey's explanation of the bill on floor of the Senate in support of the board's position that the legislature intended to permit a regional board to transfer unexpended funds at its discretion to the reserve fund. The quotation was: "Current law requires regional boards to use any unexpended budget appropriation to reduce their expenses for the subsequent year." 1984 Sen. Proc., vol. 27, pt. 6, p. 2267. That statement was part of Sen. Casey's general description of the bill. It indicates only that there was, at that time, no budgetary mechanism for directly financing minor capital improvements and surplus funds could not be used for that purpose because those funds had to be applied to the next year's budget.7 The committee hearing on the bill was more informative.8 At the public hearing only one speaker, a member of the Regional District No. 4 board of education, addressed the bill on behalf of her board. She stated in pertinent part:
First [the bill], ... would allow regional boards of education to put money aside for future capital projects, rather than creating additional expense through bonding or borrowing. Large expenses, such as capital purchases and major plant repair, and maintenance projects can usually be predicted well in advance. The creation of a reserve fund would allow regional boards to put money aside in a fund for a specific purpose.
The yearly appropriation for such fund would be included in each member town's annual share of the regional district's net expenses.
1984 Joint Committee Hearings, Education, pt. 2, p. 388 (underscoring added). These statements support our reading of 10-51(d) to the effect that the funding for specific capital improvements must be specified in the annual budget or in a supplemental budget approved under 10-51(a).
Finally, in your letter you asked whether the State Board of Education has the authority to order Bridgewater to comply with the board's billing procedure. We deem it unnecessary to answer that question because we see no reason why Bridgewater will not abide by our opinion. By the same token, we presume that the regional board will do likewise. We fully expect that the town and the board will then settle their accounts to the extent necessary.
Very truly yours,
Bernard F. McGovern, Jr.
Assistant Attorney General
1 Sec. 10-51 also allows voting by referendum.
2 Sec. 10-51 requires voting at bi-weekly district meetings until a budget is approved.
3 If during the course of a fiscal year, non-member town revenue becomes less than estimated or unforeseen expenses arise, the board must submit a supplementary budget under the 10-51(a) process.
4 According to the superintendent of school's letter of July 22, 1993 to the first selectman, the board had been awarded a grant of $21,573 for the septic system replacement; this money was refunded to the member towns, once it was received. Whether the capital work in question could have been paid for from different budgetary line item is beyond the issue under consideration here.
5 According to our information, the board made similar transfers to the reserve fund in subsequent fiscal years and Bridgewater dealt with them accordingly.
6 The financing of major capital projects, i.e., building and equipping new schools or additions to schools, is governed by other statutes. Conn. Gen. Stat. 10-56-10-60a.
7 The bill passed the House on the consent calendar. 1984 Conn. House Proc., vol. 27, pt. 18, p. 6067.
8 As a general rule, only proceedings on the floors of the House and Senate are considered in construing legislation; State v. Galino, 201 Conn. 435, 445 (1986); Baker v. Norwalk, 152 Conn. 312, 316 (1965); but legislative committee haring testimony will be considered, when expedient. Gay and Lesbian Law Students Association v. Board of Trustees, 223 Conn. 453, 477, n. 19 (1996); Mahoney v. Lensink, 213 Conn. 548, 559, n. 15 (1990); Manchester Environmental Coalition v. Stockton, 184 Conn. 51, 57, 58, n. 8, 10 (1981).