STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SCHOOL BOARD OF ORANGE COUNTY, )

)

Petitioner, )

)

vs. ) CASE NO. 81-1927RX

) STATE BOARD OF EDUCATION OF THE ) STATE OF FLORIDA, DEPARTMENT OF ) EDUCATION OF THE STATE OF ) FLORIDA, AND RALPH D. TURLINGTON ) AS COMMISSIONER OF EDUCATION OF ) THE STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above captioned matter, after due notice, on September 3, 1981, at Tallahassee, Florida, before Thomas C. Oldham, Hearing Officer.

APPEARANCES

For Petitioner: William M. Rowland, Jr. and

Andrew B. Thomas, Esquires Rowland, Thomas and Bruggeman

308 North Magnolia Avenue Post Office Box 305 Orlando, Florida 32802

For Respondents: Judith A. Brechner, Esquire

Deputy General Counsel State Board of Education Knott Building

Tallahassee, Florida 32301

In this proceeding, Petitioner challenges an alleged unpromulgated rule of Respondents, as expressed in a Memorandum issued by the Director, Division of Public Schools, Department of Education, to District School Superintendents, dated July 16, 1981, wherein they were advised that the district cost differential for 1980-81 had been recalculated with the result that the amounts received by district school boards under the Florida Education Finance Program (FEFP) had been adjusted to reflect increases or decreases for the 1980-81 fiscal year. A list of adjustments for the various counties attached to the Memorandum showed that far Petitioner's allocation would be decreased by

$873,103. The Petitioner alleges that the Memorandum constitutes an invalid rule for failure to promulgate the same pursuant to Chapter 120, Florida Statutes, and because Respondents have thereby exceeded their authority in that they have no right to withhold appropriated funds from Petitioner. An

administrative determination of the alleged rule's invalidity is sought pursuant to Section 120.56, F.S.

Respondents filed a Prehearing Motion to Dismiss the Petition on various grounds, and ruling was reserved thereon.

Petitioner called Carey E. Ferrell, Jr., Director of Public Schools, Department of Education, as a witness at the hearing, and Respondents presented the testimony of one witness, William C. Golden, Associate Deputy Commissioner of Education. Six exhibits were received in evidence.

Proposed Final Orders and Memorandums filed by the parties have been fully considered and those portions thereof which have not been adopted herein are considered to be either unnecessary, irrelevant, or unwarranted in fact or law.

FINDINGS OF FACT

1. Petitioner School Board of Orange County, Florida, operates the public schools in the School District of Orange County, Florida, which is part of the state system of public education. (Pleadings)

   
   

2. Each school district in Florida receives funds annually on a July 1 - June 30 fiscal year basis under the state Legislative Appropriations Act. The annual allocation from the Florida Education Finance Program (FEFP) to each school district for operation of schools is determined by a number of factors spelled out in Chapter 236, Florida Statutes. A "district cost differential" is then applied which takes into consideration each district's price level index as published in the Florida Price Level Index for the most recent three years. The resulting sum is divided by three, and a further fixed mathematical computation is applied to arrive at the result. The computation is made by the Department's Bureau of Management Systems and Services for the Director of Public schools, and approved by the Commissioner of Education. Application of the district cost differential results in either an upward or downward total amount allocated to the various school districts for school operation. (Testimony of Ferrell, Composite Exhibit 5)

   
   

3. The FEFP program began in 1973 with the requirement that a district cost differential be applied based upon a price level study. The legislature set the cost differential by statute for the years 1973-1975. Although the price level index is published each January for the preceding year, the cost differential computations in past years were made each July based on the price level index for the previous year. In 1976-1977, the Commissioner of Education was given the responsibility by statute to arrive at the district cost differential. During these years, the computation was made in July each year by using the preceding year's price level index. In 1978, the law was changed to require the use of the price level index for the most recent three years. (Subsection 236.081(2), F.S. (1978 Supp.)) (Testimony of Ferrell, Golden)

   
   

4. No price level index was prepared for the year 1979 because the legislature adopted the biennial system that year. Accordingly, in July 1980, the allocations to the various school districts for 1980-81 were estimated with the district cost differential being calculated on the basis of the 1976, 1977, and 1978 indexes. The Department then started distributing funds to the school districts for 1980-81 on the basis of 24 semimonthly payments. Various adjustments to the estimates normally are made during the course of the year in the amounts paid to the districts, based upon student enrollment and other factors. A small change is made in June of each year for anticipated summer

   school enrollment, and a final adjustment is made based upon actual summer school attendance. Such adjustments are always made retroactive to the beginning of the fiscal year. (Testimony of Ferrell).

   
   

5. By a Memorandum, dated December 19, 1980, to District School Superintendents, the Director of the Division of Public Schools provided a new calculation for the 1980-81 FEFP based on the July and October FTE (full-time equivalent), survey data and on a certification of the 1980 tax roll provided by the Department of Revenue. On February 25, 1981, another Memorandum from the same official was sent to District School Superintendents reflecting further adjustments based on the tax rolls provided by the Department of Revenue on February 13, 1981.

   
   

6. In the meantime, the price level index for 1980 had been received by the Department of Education, and it was decided that the district cost differential for the current year should be recomputed based upon the 1977, 1978, and 1980 indexes. Therefore, by Memorandum, dated April 10, 1981, the Director of the Division of Public Schools advised the District School Superintendents of the new calculations based upon updated student surveys, and the Department of Revenue certification of the 1980 tax roll, dated April of 1981, together with an adjustment of the cost differential to reflect inclusion of the 1980 price level index study. As a result of the recalculation, Petitioner's funds for the year were increased by $873.103. The adjustment in April was the final estimate of each district's funds to be distributed for the remainder of the fiscal year, as required under Department of Education Rule 6A- 1.452, Florida Administrative Code. The Rule requires that any difference in the amount of a district's entitlement by June 30th and the actual funds distributed shall be adjusted in the succeeding year. (Testimony of Ferrell, Exhibits 2-3, 4, 6).

   
   

7. By Memorandum of July 16, 1981, the Director of the Division of Public Schools advised the District School Superintendents that the district cost differential for 1980-81 had again been recalculated on the basis of the 1976, 1977, and 1978 price level studies due to language contained in the 1981- 82 Appropriations Act which stated that the district cost differential used in the calculation of the FEFP for any fiscal year should be the one used in calculating the initial allocation. The Memorandum stated that "This legislative interpretation of the statute effectively requires that we utilize the three latest studies in existence on July 1 for any fiscal year." The Memorandum then stated that since the previous interpretation of the statute was inconsistent with the legislative intent, a recalculation would have to be made for the past fiscal year and appropriate adjustments made for each school district, to be incorporated in the August FEFP calculation as prior year adjustments. A list attached to the Memorandum reflected the upward and downward adjustments for the various county districts, including a loss of funds to Orange County in the amount of $873,103. The adjustments were approved by the Commissioner of Education. By Memorandum, dated August 12, 1981, to District School Superintendents, the final FEFP computation computed pursuant to Rule 6A-1.452 was transmitted to District School Superintendents. The various deductions from the school districts are currently being made from funds appropriated under the 1981-82 Appropriations Act in semimonthly payments. (Testimony of Ferrell, Golden, Exhibits 1, 4)

   
   

8. On August 14, 1981, Petitioner filed Notice of Administrative Appeal against Respondents herein to the First District Court of Appeal, Case No. 8F383, from Respondents' action in withholding funds pursuant to its Memorandum of July 16, 1981, which was therein characterized as an "Order."

   CONCLUSIONS OF LAW

   
   

9. This rule challenge arises under Section 120.56, Florida Statutes. No issue has been raised as to the standing of Petitioner to challenge the alleged rule, and it is clear that the Respondents' action, as evidenced by its July 16, 1981, Memorandum whereby Petitioner's 1980-81 FEFT funds were reduced, substantially affected Petitioner's interests to the extent necessary to confer standing.

   
   

10. Chapter 236, Florida Statutes, provides, inter alia, for the financing of public schools in Florida, and establishes the criteria for the annual distribution of state funds to the various school districts. Among the criteria required to compute a school district's share of state funds in any particular year is a "district cost differential." Subsection 236.081(2), Florida Statutes, provides as follows:

    
    

    236.081 Funds for operation of schools.-- The annual allocation from the Florida Education Finance Program to each district for operation of schools shall be determined as follows:

    * * *

    (2) DETERMINATION OF DISTRICT COST DIFFERENTIALS--The commissioner shall annually compute for each district the current year's district cost differential. The district cost differential shall be calculated by adding each district's price level index as published in the Florida Price Level Index, prepared by the Executive Office of the Governor, for the most recent

    3 years and dividing the resulting sum by 3. The result for each district shall be multiplied by 0.008 and to the resulting product shall be added 0.200; the sum thus obtained shall be the cost differential for that district for that year.

    
    

    Subsection 232.081(6) provides that the total annual state allocation to each district for current operation shall be distributed periodically in the manner prescribed by regulations of the State Board of Education and that the district cost differential shall be a multiplying factor in calculating such allocation.

    
    

11. Subsection 236.081(6)(b) provides that the amount resulting from the calculations shall be the net annual allocation to each school district, but further provides:

    
    

    . . . However, if it is determined that any school district received an underallocation or overallocation for any prior year because of an arithmetical error, assessment roll change, full-time equivalent student membership error, or any allocation error revealed in an audit report, the allocation to that district shall be appropriately adjusted . . . .

12. Respondents filed a prehearing Motion to Dismiss the petition herein alleging that the Memorandum in question is not a rule, but simply reflects the distribution of an appropriation, citing Florida State Board of Education v. Brady, 368 So.2d 661 (Fla. 1st DCA 1979) and Opinion of the Attorney General 081-49, July 8, 1981. In support of the Motion, Respondents maintain that the Commissioner has no rulemaking authority and that only the State Board of Education possesses such authority for the Department of Education. They argue that the Commissioner was given the responsibility of calculating the district cost differential under subsection 236.081(2), Florida Statutes, and that he would be acting in violation of his statutory duties if he requested the State Board of Education to promulgate a rule on the subject. Respondents further contend that Petitioner's judicial appeal of the adverse action concerning funding as expressed in the aforesaid Memorandum wherein it characterized the document as an order rather than a rule, precludes it from maintaining this administrative action under the holding in State Department of Health and

    Rehabilitative Services v. Barr, 359 So.2d 503 (Fla. 1st DCA 1978). Respondents concede that if its Memorandum is determined to constitute a rule, it would be invalid in that it was not promulgated in accordance with the applicable provisions of Section 120.54, Florida Statutes.

    
    

13. Petitioner contends that the Memorandum of July 16 is a rule in that it is of general application and purports to interpret and implement the statute relating to district cost differentials. Petitioner does not question the mathematical calculation made by Respondents in arriving at the cost differentials, but challenges Respondents' determination as to when the differential is to be computed and applied, and as to which cost of living studies are to be used in the computation. It asserts that since the Memorandum constitutes a rule, it is invalid because it was not promulgated through Chapter

    120 rulemaking provisions and also because it otherwise is an invalid exercise of delegated legislative authority. Specifically, Petitioner states that Respondents erred in relying upon the language contained in the 1981-82 Appropriations Act in limiting its calculation to that first made at the beginning of the fiscal year, in that the legislature has no authority to amend general statutory law in an appropriations act and that, in any event, it could not operate retroactively to affect the 1980-81 school fund appropriations. Petitioner also claims that Respondents lack authority to make subsequent year adjustments for under-allocation or over-allocation of funds for a prior year because subsection 236.081(6)(b), F.S., permits such adjustments only for arithmetical error, an assessment roll change, full-time equivalent student membership error, or any error revealed in an audit report. Respondent concedes that none of those factors were present in the instant situation, but that its Rule 6A-1.452, F.A.C., authorizes such adjustments to be made in succeeding years. Petitioner, on the other hand, maintains that that Rule is void as an invalid exercise of delegated legislative authority. However, Rule 6A-1.452 was not challenged in this proceeding. Finally, Petitioner argues that the clear legislative intent is that the most recent price level index studies be used in arriving at the district cost differential, and that therefore Respondents originally were correct in incorporating the 1980 study in its April 1981 decision.

    
    

14. Subsection 120.52(14), Florida Statutes, defines "Rule" in pertinent part as follows:

    
    

    (14) "Rule" means each agency statement of general applicability that implements, interprets, or prescribes law or policy or

    describes the organization, procedure, or practice requirements of an agency . . . .

    
    

15. In determining the scope of the above-stated definition, the First District Court of Appeal in State, Dept. of Administration v. Harvey, 356 So.2d

    323 (Fla. 1st DCA 1978) stated as follows:

    
    

    The breadth of the definition in Section

    120.52 (14) indicates that the Legislature intended the term to cover a great variety of agency statements regardless of how the agency designates them. Any agency statement is a rule if it "purports in and of itself to create certain rights and adversely affect others," Stevens, 344 So.2d at 296, or serves "by [itsl own effect to create rights, or to require compliance, or otherwise to have the direct and consistent effect of law. McDonald v. Dep't of Banking and Fin, 346 So.2d 569, 581 (Fla. 1st DCA 1977) . . . .

    
    

    In relating the challenged Memorandum to the above language of the Court, it is necessary to inquire as to whether the contents of the document constitute a statement that purports "in and of itself" to create certain rights and adversely affect others. The statutory provision in question, subsection 236.081(2), F.S., is complete in itself which directs the Commissioner of Education to annually compute each district's cost differential in a specified mathematical manner1 utilizing the Florida Price Level Indexes for the "most recent 3 years." The Commissioner has purported to follow the statute as evidenced by the determination contained in the Memorandum of July 16, 1981, wherein he adhered to the method used at the outset of the fiscal year in question which predicated the district cost differential upon the 1976, 1977, and 1978 indexes. The mere fact that he could have construed the statute to require use of the latest price level index available at mid-year or at the conclusion of the year does not make his final determination subject to challenge as a rule. If he erred in his interpretation of the statute in any regard, his action in such respect is subject to the type of judicial appeal that petitioner instituted shortly after the commencement of this administrative proceeding.

    
    

16. Contrary to Petitioner's assertion, it is considered that the decisions in Brady, supra, and State, Dept. of Commerce v. Matthews Corp., 358 So.2d 256 (Fla. 1st DCA 1978) , support the above view. In Brady, the Court held that the question of whether a student will be considered as having obtained proficiency in any subject is a matter peculiar to the field of education and not one intended by the legislature to be arrived at through promulgation of rules pursuant to the Administrative Procedure Act. The Court therefore held that the student scoring criteria developed by the Commissioner in response to the pertinent statute directing him to perform such function was authorized without the necessity for rulemaking. Similarly here, it is considered that the allocation and disbursement of legislative appropriations is a subject which does not lend itself to the need for rulemaking under Chapter

120. In this regard, the Attorney General opined in Op. Atty. Gen. 081-49, July 8, 1981 that the provisions of Chapter 120 neither authorize nor require a state agency to adopt rules as to disbursement of its appropriations, but that promulgation of such rules would not be precluded if the agency is given the

statutory duty or discretionary authority to do the same. No statutory requirement has been pointed out in this proceeding which would mandate the promulgation of rules on the subject of school district cost differentials, and both parties agree that the Commissioner has no rulemaking authority.

1. In Matthews, the Court held that wage rate determinations on public construction contracts were not "rules" subject to formal rulemaking procedure because each determination was applicable only to a particular building or other works and bad no prospective application to other contracts. The Court thus found that the determinations bad "temporal as well as geographical limitations" and were deemed to constitute informal "orders" which could be subjected to Section 120.57 proceedings. Although here, the statutory provision in question, subsection 236.081(2), does not contemplate that agency interpretation of its language should change each fiscal year, its effect is "temporal" in the sense that the determination goes only to legislative appropriations for one year and, thus, each year's determination by the Commissioner has no prospective application to a succeeding year. Accordingly, it is believed that the principle enunciated in Matthews is equally applicable to the instant situation. It is therefore concluded that Respondents' determination as evidenced by its Memorandum of July 16, 1981, does not constitute a rule subject to formal rulemaking procedures.

   
   

2. This being the case, Respondents' Motion to Dismiss the petition is GRANTED.

   
   

3. In view of the foregoing determination, it is unnecessary to address Petitioner's complaint concerning Respondents' apparent reliance upon the language of the 1981-82 Appropriations Act providing that the district cost differential shall be the one used to calculate the initial allocation, nor is there any need to take up Petitioner's claim that Respondents exceeded the authority granted in subsection 236.081 (6)(b), to effect adjustments of funds for specified reasons.

   
   

4. It is determined that Petitioner has failed to establish that Respondents' Memorandum of July 16, 1981 constitutes a rule, and therefore its Petition is hereby dismissed.

DONE and ORDERED this 30th day of September, 1981, in Tallahassee, Florida.

THOMAS C. OLDHAM

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 30th day of September, 1981.

COPIES FURNISHED:

Judith A. Brechner, Esquire William M. Rowland, Jr. and Deputy General Counsel Andrew B. Thomas, Esquires

Department of Education Rowland, Thomas and Bruggeman

Knott Building 308 North Magnolia Avenue Tallahassee, Florida 32301 Post Office Box 305

Orlando, Florida 32802

Liz Cloud, Chief

Bureau of Administrative Carroll Webb, Executive Code Administrative Procedures

1802 Capitol Building Committee

Tallahassee, Florida 32301 Room 120 Holland Building

Tallahassee, Florida 32301

Docket for Case No: 81-001927RX

Orders for Case No: 81-001927RX