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Chapter 6

Basics of School Law and Budgeting


 

6:1 What are the powers and duties of school boards?

School board powers and duties are determined by state and federal law. These laws may define what must be done and they may identify what gets decided locally. Some of the major state laws that determine the powers and duties of the board are outlined in question 1:3.

6:2 What are the primary legal functions of school boards?

The school board in and of itself operates like the three branches of government. In its “legislative” function, the board makes policy and determines the budget and the tax levy. In its “judicial” function, the board serves as an impartial decision-maker in any “due process” hearings (expulsion, termination, etc.), finding facts, applying law/policy, reaching conclusions and issuing orders. In its “executive” function, the board serves as an employer by hiring, evaluating [the superintendent], and compensating employees.

6:3 What is the legal manner in which school boards make decisions?

School boards make decisions at properly posted school board meetings. Normally school boards require a simple majority vote of those present at the board meeting for motions to carry. School boards should keep in mind, however, that state law and/or board policy may include other voting requirements. For example, section 118.22(2) of the state statutes requires a majority vote of the full membership of the school board to employ or dismiss a teacher who holds a contract under that statute, and section 65.90(5)(a) of the state statutes requires a two-thirds vote of the entire membership of the board to change the appropriations stated in the budget. In case of a conflict between the board’s rules of order or policy with a state statute, the board must yield to the state statute.

6:4 What constitutes a conflict of interest on the part of school board members?

There are both statutory provisions and common law (i.e., court) decisions that address potential conflicts of interest and related ethical issues for school board members. The state statutes that may come into play include: sections 19.41-59 (the local government code of ethics and related liability), section 946.12 (misconduct in public office), and section 946.13 (prohibiting certain private interests in public contracts). Under the common law, school board members also need to be aware of additional conflict of interest concerns and the doctrine of incompatible offices. The restrictions established under these various sources of law extend beyond the receipt of improper monetary gains and address a variety of situations where a board member may have divided loyalties or neglect or abuse their duties or authority. Some examples of the restrictions that apply to school board members are presented in this section.

One of several prohibitions established under section 19.59 of the state statutes is that local public officials may not use their public position or office to obtain financial gain or anything of substantial value for the private benefit of themselves or their immediate family, or for an organization with which they are associated. This statutory rule prohibits a board member from, for example, participating in any discussions or votes concerning the district’s employment of or other business arrangements with the board member’s spouse or, if there is a sufficient level of financial dependency, with any parent or child of the board member. (Under the common law, a board member may face conflict of interest scenarios that involve additional relatives of the board member.) The restrictions found in section 19.59 and in other areas of the law also dictate that board members must proceed with great caution in any dealings with vendors who might offer gifts of goods, entertainment, travel or meals. Conducting business in the public sector is very different from conducting business in the private sector. 

Under section 946.13 of the state statutes, the general rule is that an employee or board member may not have a direct or indirect private pecuniary interest in contracts with the school district if those contracts involve receipts and disbursements of more than $15,000 in any year. A violation of this requirement constitutes a felony. This is a “strict liability” statute, meaning that a person can be convicted under the statute regardless of their specific intent or any advance knowledge that their conduct was prohibited by the statute. Section 946.13 can be violated by actions taken either in a board member’s private capacity (e.g., by bidding on or entering into a district contract for their personal business) or in a board member’s public capacity (e.g., by participating in a decision to change a group insurance contract when the board member has coverage under the plan as a retiree from the district). Abstention from all board discussion/action on a contract does not necessarily cure this kind of conflict of interest. At best, abstention would address only the portion of the statute that restricts the board member’s actions as an elected official, and it would still be possible for the board member to commit a violation in the board member’s private capacity. Nonetheless, many school attorneys and WASB attorneys advise that nonparticipation in one’s official capacity is a minimum step that a board member must take if, for example, the board member’s spouse is seeking employment or some other business arrangement with the district.

Moreover, any time that a board member abstains from participating in a board discussion or board decision due to a known or potential conflict of interest, WASB attorneys and other school attorneys have further advised that it is best practice for the board member to physically leave the board room and have the minutes of the meeting expressly state that the affected board member was not present during that discussion or action. Again, depending upon the specific facts, taking these steps may not insulate the board member from all liability under the conflict of interest laws.

Abstention also does not solve issues with incompatible offices (i.e., two offices or positions that a board member cannot hold at the same time). For example, being a school board member is generally thought to be legally incompatible with being a paid employee of the same school district in any capacity. When offices are incompatible, the person affected must choose one position or the other.

As mentioned earlier in this section, even if section 946.13 of the state statutes and the statutory Code of Ethics did not exist in Wisconsin, judicial decisions have developed a common law doctrine surrounding conflicts of interest. As explained in the May 2013 WASB Legal Comment, “The long-established policy of the state is that public officers shall be free from any influence other than influence which comes from the obligations owed to the public. For school board members, this means that, as a general rule, no board members can vote on any question (or any contract) in which they have a direct, personal or financial interest. If a school board member votes on a matter in which he/she has a conflict of interest, a court is likely to set aside the school board member’s vote and/or allow a school board to declare the action void.” School boards should consult with their local school district legal counsel when these situations arise.

6:5 May school board members run for or hold an additional public office or position?

If a board member runs for or attempts to serve in another office or position, issues may arise under the doctrine of incompatibility of office and particular statutes or rules. (See Article VII, section 10 (1) of the Wisconsin Constitution and Supreme Court Rule 60.06).

Incompatibility of office is a common law doctrine (i.e., a judicial doctrine created by courts rather than a statute) that bars a person from holding two offices where one office is superior to the other such that the duties exercised under each might conflict to the detriment of the public, or where the nature and duties of two offices are such that public policy considerations bar one person from discharging the duties of both offices.

Incompatibility can arise in regard to an individual who is elected or appointed to two public offices that have overlapping terms of office. However, the most common application of “incompatibility of offices” in school districts is probably the notion that a board member cannot simultaneously hold a position of paid employment in the district. Opinions of the Wisconsin Attorney General and the former State Ethics Board suggest that holding even a relatively minor employment position (e.g., substitute teaching) can give rise to incompatibility concerns.

6:6 Are there any school district jobs that a school board member can hold while they are a board member? What about just occasional substitute teaching in the district?

In connection with serving on a school board, one example of an incompatible position is simultaneously being an employee of the same school district. The WASB is not aware of any court decisions or authoritative advisory opinions (e.g., from the Wisconsin Attorney General or the Wisconsin Ethics Commission) that have identified an exception for part-time employment, short-term employment, or substitute employment.

Even volunteering to perform responsibilities that are often performed by paid employees can raise “incompatibility” issues. In fact, as covered in question 6:7, a special statute was enacted to define conditions under which a current board member may serve as a volunteer coach or supervisor for student extracurricular activities. In the absence of the special statute, volunteer coaching may have been vulnerable to a determination of incompatibility.

6:7 Can school board members be coaches?

In 2015, the state Legislature enacted section 120.20 of the state statutes. Under that statute, a board member may serve as a volunteer coach or as a volunteer supervisor of an extracurricular activity if the school board member (1) does not receive compensation for such services; (2) agrees to abstain from voting on any issue that substantially and directly concerns the activity; and (3) completes a criminal background check procedure.

In the absence of the special statute, volunteer coaching by a current board member may have been vulnerable to a determination of incompatibility of office (see question 6:6.) The authorization to volunteer that is provided by section 120.20 does not apply to roles other than coaching and supervising extracurricular activities. Finally, even though such volunteering is now expressly permitted by section 120.20, a school board could conclude that it prefers not to authorize current board members to serve as a volunteer in those roles.

6:8 Can a school board member be employed by a company that provides services to the school district? Can a board member be one of the employees that provides those contracted services — such as a bus driver or food service employee?

The short answer to the question of whether a school board member may be an employee of a company that provides services to the school district is, “It depends.” It depends, for example, on factors such as whether the board member (or his/her spouse) has any ownership interest in the company and (even where there is no ownership interest) on the board member’s exact role and duties. But, at one extreme, where the board member is employed in a capacity that has no direct or indirect connection to the contract between the company and the school district, it is likely that the employment itself does not create an issue. At the same time, there could be some school board decisions in which such a board member would not participate due to his/her outside employment.

The second part of the question, about being one of the employees who actually provides the contracted services to the district, also does not have an easy, one-size-fits-all answer. In the specific examples of being a bus driver for a private transportation company or a food service employee of a third-party food service contractor, one approach would be to try to avoid some of the potential issues by working with the third-party employer to obtain assignments with other customers.

If it is not practical to avoid the issues in that manner, a potential legal concern is the doctrine of incompatible offices (see question 6:5). Although the WASB is not aware of any court decisions or authoritative advisory opinions that have determined that such third-party employment is either compatible or incompatible with serving as a board member, there is room to argue that the public policy reasons behind the doctrine could be applied to the situation. In addition, such a board member would have to be cautious in both his/her public capacity (as a board member) and his/her private capacity (as an employee of a private company) to avoid any conduct that would violate section 946.13 (a criminal statute that prohibits private financial interests in public contracts) or section 19.59 (the local government code of ethics). In short, these are situations that involve some legal risks and for which a board member may need to seek legal advice from his/her personal attorney.

6:9 What does a board member who has a family member employed by the school district need to be aware of? What are the differenes between having a spouse employed by the district as compared to a child, parent, or other relative?

This question correctly anticipates that the conflicts-of-interest analysis changes based on the type of relationship. One of the primary reasons for the differences has to do with the extent to which the board member has (or does not have) a direct or indirect financial interest in the relative’s employment or in a public contract that is closely related to the relative’s employment. So, a spouse is an example of a relationship that creates the broadest array of restrictions on and potential legal consequences for a board member’s conduct.

If the district-employed relative is an adult child of a board member with whom the board member no longer has any direct financial ties (e.g., the child is no longer on his/her parents health insurance, does not live at home, etc.), then some statutory rules and statutory consequences become less relevant. However, such a board member would still be advised to abstain from participating in a variety of potential votes that would affect their child’s employment.

This is because the common law (i.e., law that is defined through court cases as opposed to legislative statutes) establishes conflict-of-interest principles that will be applied to the parent-child relationship and to the divided loyalties that such a board member may have. A similar analysis would likely apply to other close relatives — such as a parent or an adult sibling. As a general rule, as the degree of kinship between the board member and his/her relative becomes more remote, there will be fewer restrictions on the board member’s participation in board decisions and other official conduct. All the same, sometimes board members elect to avoid participating in certain decisions out of an abundance of caution or due to the appearance of a potential conflict of interest, even if the law would not strictly require the board member to abstain.

As a bottom line answer to the question, the legal analysis that applies to these kinds of conflict-of-interest scenarios is very context sensitive. A board member who has a relative (or other person with whom the board member has a special relationship, such as a non-married partner with whom the board member resides) who is employed by the school district needs to carefully evaluate the extent to which they can lawfully participate in certain decisions affecting the employee’s compensation, performance evaluation, and other terms and conditions of employment. Disclosing such relationships to the other members of the leadership team can put the team in a better position to help spot potential issues and engage in timely problem solving. More generally, all school board members need to evaluate the extent to which they may have divided loyalties or other biases on particular issues that counsel against the board member’s participation in making some decisions.

6:10 Must school boards fill vacancies on the board when they occur?

Yes. A vacancy must be filled by appointment by the remaining members of the board. In addition, the school board of each common, union high and unified school district is required by section 120.12(28) of the state statutes to adopt a policy addressing how a school board vacancy will be filled if the remaining school board members have not appointed a replacement within 60 days of the date on which the vacancy first exists. Such policies may rely on locally defined procedures such as drawing lots to break a deadlock or fully delegating the appointment decision to the school board president.

6.11 Are school district purchases subject to competitive bidding?

Generally, most purchasing and procurement procedures are at the local school district’s discretion. Exceptions include mandatory bidding procedures that apply to energy savings contracts (under section 66.0133 of the state statutes) and health care insurance (under section 120.12(24) of the state statutes), and extensive competitive procurement requirements that apply to certain purchases that are made using federal funds (including, as an example, goods and services that a district purchases in connection with federal school nutrition programs).

In situations where competitive procurement procedures (such as the use of competitive bids) are not dictated by a state or federal law, board policy may state that the district will competitively bid or otherwise seek competitive quotes or competitive proposals for contracts or purchases that are over a specific dollar amount. Such a policy may also state how the district’s purchasing needs and any bid or proposal specifications will be publicized. 

Court decisions have established a general principle that once a governing body, such as a school board, exercises its discretion and commits to a particular procurement process for a particular purchase, the school district is generally required to follow that process through. For example, if a school district has solicited sealed bids for a contract and expressly committed to awarding the contract based on the district’s assessment of specific criteria, then the district is not permitted to drop those criteria and start a negotiation with just one of the bidders in the middle of the process.

For all purchases and contracts that are subject to school district discretion when it comes to determining the procurement procedures that the district will use, school districts generally find that it is advantageous to strike a balance between establishing some general parameters via policy while retaining substantial flexibility to customize procurement procedures on more of a case-by-case basis. Your district’s superintendent and business manager can provide more information about your district’s current approach to purchasing and procurement.

6:12 How is the budget formulated and approved?

The school board considers and adopts an annual operating budget for the district in accordance with state law. A school board should do all of the following in the development, approval and implementation of the annual operating budget:

  • Set goals and parameters that advise budget preparation.
  • Confirm the board’s agreement with a tentative timeline for key process steps that are proposed to the board by the superintendent and, if applicable, the director of business services. The administration’s proposal for the tentative timeline shall coordinate with the dates that important input data (such as the state budget and reasonable estimates of revenue and aid) are expected to be available.
  • Approve the proposed budget that will be forwarded for public review in connection with a budget hearing.
  • Issue appropriate notice of, hold and attend the annual public budget hearing and annual meeting (if applicable – unified school districts do not have an annual meeting). The budget hearing shall provide district residents and taxpayers with an opportunity to be heard on the proposed budget.
  • After the annual meeting (if applicable), budget hearing and no later than the date designated in state law for determining the district’s tax levy, adopt the final annual operating budget in light of the board’s goals, any feedback received from the public and applicable financial constraints.
  • Determine the district’s final tax levy in light of the final budget, with the board clerk timely certifying the tax levy to the appropriate municipalities.
  • During the period between July 1 and the board’s adoption of a final annual budget, the district may spend funds as needed to meet the immediate expenses of operating and maintaining the district’s educational programs. As to such expenditures made prior to final adoption of the annual budget, the district’s standard procedures for obtaining approval of purchasing decisions and payments shall apply, with added consideration given to temporarily deferring expenditures, purchasing decisions, and payments when reasonably practical and when the district will not be disadvantaged by doing so.

Solely to the extent required by state law, changes to (1) the amount of tax to be levied or certified, (2) the amounts of the appropriations, or (3) the purposes for such appropriations, as stated within a board-approved budget may require a two-thirds vote of the entire membership of the board for approval. (See section 65.90(5) of the state statutes.)

For detailed information, consult the WASB/WASBO Budget Cycle Handbook.

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