Even if the West Virginia Department of Education did short Kanawha County and five other county school systems by millions of dollars, an insurance company wouldn’t have to pay those counties for what they lost out on, a judge ruled last week.
Henry Wood, the attorney trying to recoup the money, said that if Kanawha Circuit Judge Charles King’s ruling stands, the state won’t have to pay up itself.
Wood said the counties are seeking a combined roughly $11 million, including more than $5 million being sought by Kanawha County.
“If insurance coverage doesn’t exist, then the state is immune from being sued” to recoup the money, Wood said.
He said Wednesday that he hasn’t yet spoken to his clients about whether they want to appeal to the state Supreme Court.
If the high court upholds King’s ruling, Wood said the only recourse to get the money would be in the state Legislature. A 2015 West Virginia Legislative Auditor’s Office report made the underfunding allegation in the first place.
The legislative audit said the department had miscalculated school system appropriations for seven years, underfunding 36 counties by a total of $52 million and overfunding 19 by $22 million during that time.
That means districts statewide were underfunded a net $30 million due to the education department’s alleged misreading of state law regarding how it was supposed to distribute dollars through the state school aid funding formula, according to the report.
Joe Panetta, the education department’s chief operations officer at the time, said “we don’t agree that it’s a misinterpretation” but also said “the law is not clearly written.”
In 2016, the Kanawha, Greenbrier, Marion and Pocahontas boards of education sued multiple defendants, including the department, the state Board of Education, Panetta and then-state schools superintendent Michael Martirano.
Three Fayette County residents sued to recoup money for their county school system, which was under state control at the time. In 2017, the Randolph County Board of Education also sued.
Wood represented all these plaintiffs.
National Union Fire Insurance Co. of Pittsburgh — which is principally based in New York — intervened in the cases. That company insured the defendants for various acts, including “wrongful acts.”
But the company pointed out an exclusion to its wrongful act coverage that said “this insurance does not apply to ... any claim arising out of the levy, imposition, collection, payment or failure to pay, or refund, of taxes, assessments, fees and charges or the valuation of property for assessment purposes.”
“The money that the Plaintiffs are alleging was improperly paid to the various West Virginia county Boards of Education is comprised entirely of taxpayer money,” The judgewrote. Therefore, the coverage exclusion applies, he wrote.
Wood said he’s made a parallel request to the Legislative Claims Commission for recouping the alleged underfunding, but that request was on hold pending the circuit court’s ruling.
But even if the Legislative Claims Commission finds that the counties should be paid, lawmakers ultimately get to decide whether to heed the commission’s recommendation, Wood said.
He said the commission recommends “awards based upon the state’s moral obligation, a perceived moral obligation to make something right that is wrong.”
Regarding whether the circuit court suit would continue if there is no chance to recoup the money in the courts, Wood said “there will be an attempt going forward to try to get clarity with respect to the manner in which the West Virginia Department of Education determines how much money each county gets of these state aid funds. That’s important going forward.”