New York Charter Schools Assn. v. DiNapoli, 16 N.Y.3d 73 (2010)

The Legislature violates Article V, § 1 of the New York State Constitution when it assigns and directs the State Comptroller to audit charter schools, as charter schools are not political subdivisions of the State, and auditing them is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions.

Summary

This case addresses whether the New York State Legislature violated the state constitution by directing the State Comptroller to audit charter schools. The Court of Appeals held that the Legislature exceeded its constitutional authority. The Court reasoned that charter schools are not political subdivisions of the state, and auditing them is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions. The decision emphasizes the limits on the Legislature’s power to assign duties to the Comptroller and underscores the independent character of the Comptroller’s audit function. It clarifies that the Comptroller’s authority is primarily tied to auditing political subdivisions of the state and administrative duties directly related to those audits, rather than extending to any entity receiving state funds.

Facts

In 1998, the New York Legislature enacted the Charter Schools Act, creating a system of charter schools. Charter schools are considered part of the public school system but operate independently. They are funded primarily with public monies, with school districts paying tuition for resident students attending charter schools. In 2005, the Legislature amended the law to direct the State Comptroller to audit all school districts, BOCES, and charter schools by March 31, 2010. The State Comptroller then notified several charter schools of scheduled performance audits to assess academic achievement and compliance with student selection procedures.

Procedural History

Several charter schools challenged the Comptroller’s authority to conduct these audits. The Supreme Court denied the respondents’ motion for summary judgment and permanently enjoined the Comptroller from conducting further charter audits. The Appellate Division reversed, finding the Legislature did not violate the state constitution. The Court of Appeals then reversed the Appellate Division, reinstating the Supreme Court’s order and judgment.

Issue(s)

Whether the Legislature violated Article V, § 1 of the New York State Constitution by assigning the State Comptroller the power and duty to audit charter schools.

Holding

No, because charter schools are not political subdivisions of the State, and the task of auditing charter schools is not an administrative duty incidental to the Comptroller’s constitutionally prescribed functions.

Court’s Reasoning

The Court of Appeals held that the Legislature’s assignment of auditing authority over charter schools to the Comptroller violated Article V, § 1 of the New York State Constitution. Article V, § 1 outlines the Comptroller’s duties, including auditing vouchers, official accounts, and revenue collection. It also allows the Legislature to assign the Comptroller supervision of the accounts of any political subdivision of the state and administrative duties incidental to those functions. The Court emphasized that the “plainly expressed constitutional prohibition” of Article V, § 1 does not support an expansive reading of the term “incidental.”

The Court distinguished its holding from Matter of McCall v. Barrios-Paoli, 93 N.Y.2d 99 (1999), stating that while the Comptroller has the authority to inquire into the management and operations of city agencies (political subdivisions), this does not extend to entities that are not political subdivisions simply because they receive state funds and perform a governmental function.

The Court also rejected the argument that the Comptroller’s authority to audit all vouchers before payment implies a “post-audit” authority to confirm that funds have been correctly disbursed. It stated that the Comptroller’s authority to audit monies paid by a school district to a charter school, acting as a conduit, does not extend to questioning the wisdom of how charter schools provide instruction. Once the funds are transferred, they are no longer under the State’s control.

The Court noted that charter schools are still subject to fiscal oversight by the Board of Regents, their charter entity, the school’s board of trustees, and mandatory independent annual audits. Further, a school may lose its charter if it fails to meet educational standards.

The Court concluded that the provisions of General Municipal Law § 33 (2) and Education Law § 2854 (1) (c), to the extent they direct the Comptroller to conduct audits of charter schools, are unconstitutional.