Siding with Union County commissioners, the N.C. Court of Appeals on Tuesday ordered a new trial in a budget funding dispute that had resulted in a $91 million judgment for the school board.
At issue was a stunning October 2013 judgment for the school board in its fight over how much money commissioners should provide them beyond what was already allocated for 2013-14.
Counties and school districts across the state are closely watching the case for the precedent it could set.
In its unanimous opinion, the three-member appeals panel said the trial court erred in allowing the school district to present evidence of capital funding needs for more than a single budget year.
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With the court reversing the $91 million judgment, there are three options for what happens next, county officials said. The school district could appeal to the N.C. Supreme Court within 35 days, there could be a retrial, possibly in late May or June, or the two boards could try to negotiate a resolution.
“I’m pleased with the (court’s) decision and believe it’s in the best interest of the citizens of Union County,” commissioners chair Richard Helms said. “But we still have work to do.”
He said the court’s ruling limits the funding fight to the amount the district sought in 2013-14.
The county said that less than $3 million is now in dispute. The school district originally asked for $86 million in operating funds, and the county ultimately sent the district about $83 million. The county said it also had covered all of the district’s requested capital needs for that year.
School board chair John Collins said he had not seen the court’s decision yet, but expects that the board will meet with its attorneys in the next week or so to discuss it.
School board attorney Richard Schwartz declined to discuss what he might recommend to the board. He noted that some issues remain for potential review, but added that the two boards have been working together cooperatively since the trial ended.
Meanwhile, legal fees in the case are approaching $2 million. The county’s totals have hit $802,932, while the school board’s bills came to $1.1 million, records show.
The two sides were about $8 million apart when they landed in court.
County commissioners had called the jury’s actions a “runaway verdict” that, if it stood, would result in a “catastrophic” tax increase or major cut in services. But the school board said commissioners had disregarded their legal obligation to provide sufficient funds to the school district.
About $5 million of the original judgment covered current operating expenses, and $86 million was for capital expenses for current and prior needs.
At the trial, the school district detailed millions of dollars in unmet capital needs over the past few years – including roofing, safety and security needs – and the jury appeared to have focused on numbers tied to those concerns.
In its 26-page ruling, the appeals court referred to a state statute that allows school districts to sue counties if they cannot resolve funding issues. The court said the statute “was never intended to open the door” for consideration of funding needs outside the scope of a single fiscal year.
“If (the school district) wants those previously unfunded amounts considered, it must include them in the proposed budget for the 2013-2014 fiscal year,” the court wrote.