Big victory for LEAs in legal dispute over mandate claim audit rule
Published: October 5, 2010
In a ruling that could eventually force the state to pay millions of dollars in mandate claims submitted by local educational agencies throughout California, a state appeals court has agreed with a coalition of school districts and CSBA’s Education Legal Alliance that the state controller improperly refused to reimburse districts for mandated services provided by districts between 1998 and 2003.
The Sept. 21 decision by the 3rd District Court of Appeal in Sacramento comes in a lawsuit filed against the State Controller’s Office by Clovis Unified School District and six other districts. The court agreed that the state used an “invalid,” “underground regulation” to deny claims relating to costs of operating four state-required programs in the areas of collective bargaining, earthquake procedures, school choice and intradistrict transfers.
CSBA’s Education Legal Alliance helped pay the plaintiffs’ legal costs and filed supporting briefs in the appellate court.
“This is a major victory for school districts and county offices of education because the court has voided a rule that the state had been using to avoid paying schools for the costs of providing services that were mandated by the state,” said CSBA Counsel Richard Hamilton, who heads the Alliance.
In 1979, voters approved an amendment to the state constitution specifying that if the state mandates new programs or higher levels of services, the state must reimburse local governments—including schools—for the cost of providing those services. But the state has fallen far behind in fulfilling its obligations, frequently delaying and disallowing reimbursement claims. Districts and county offices have gone to court repeatedly in an effort to force the state to pay up.
The Clovis case centers on the so-called “Contemporaneous Source Document Rule,” which the state imposed in 2003 to determine the validity of claims for work done between 1998 and 2003. Previous audits had allowed employees to tally time spent at all meetings related to the mandated program at the end of the school year, rather than documenting each meeting separately at the moment it happened.
The 2003 rule required workers to have documented their work with signed declarations at the moment they performed it. In practical terms, this meant that claims must include “source” documentation, prepared by staff at or near the moment they incurred the costs related to the mandate—for example, at the conclusion of a meeting with parents.
The appellate court agreed with plaintiffs that the contemporaneous source rule, was, in fact, an “underground regulation” imposed on districts by the state without the required public notice and hearings, and without review by the state’s Office of Administrative Law.
Because the state imposed the new regulation retroactively to audits of school reimbursement claims, plaintiffs argued, “it is now physically impossible” for LEAs to come up with “contemporaneous” proof of work done years earlier when different audit rules were in effect.
Hamilton said it’s far too early to say when the state will pay districts and county offices for mandated services rendered so long ago. But, he said, it’s clear that the decision sets aside more than $10 million in audit penalties the state had hoped to impose on LEAs for failing to properly document reimbursement requests.
Hamilton said he’s optimistic that the $120.5 million in pending reimbursement claims for expenses incurred in these four programs between 2004-2006 will now “pass muster” with state auditors, provided claimants have met all other state audit requirements.
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