At school vote time, some taxpayers eye reserves

A student asks his teacher a question about

A student asks his teacher a question about the Regents examinations. (May 1, 2013) (Credit: Heather Walsh)

A $352 million jump in proposed school spending for Long Island next year has reignited debate over an enduring question: Should districts draw down cash reserves in order to ease pressures on taxpayers?

Reserves, known as fund balances, are tempting targets. They also are elusive targets, due to the complexity of the dollar figures involved.

The Island's 120-plus school districts currently report a combined total of more than $2.1 billion in reserves -- equivalent to nearly one-fifth of budgeted spending. The bulk of that money is earmarked for specific purposes such as school renovations and repairs.

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Taxpayer activists contend that much of the stockpiled money could be used to help meet expenses and curb taxes. The issue has taken on increased urgency with the approach of Tuesday's school elections.

On the ballots are budgets for 2013-14 totaling nearly $11.5 billion, with spending increases averaging 3.22 percent for the Island. Increases averaged a record low 2.29 percent this year, the first time that statewide "cap" limits were in effect.

Steve Boder, 70, a retired sales manager who lives in Plainview, is among those who believe districts should make a greater effort to inform residents about reserve funds and their applications.

"They should put these numbers out front before elections, so people can see the numbers and be able to question whether this money is being spent or rolled over from year to year," said Boder, who served a dozen years as a school board trustee in another community.

"If history shows that the money is rolled over often, then maybe some of it should be returned to taxpayers."

School representatives respond that they already plow much of their reserve money back into spending. Some of those officials also assert that reserves are dwindling -- though the numbers they use to illustrate that point are contradictory -- and that cash should be conserved as a hedge against future economic shocks.

"Rainy-day funds are for rainy days," said Michael Borges, executive director of the New York State Association of School Business Officials. "School districts have money set aside for a variety of things, including retirement payments, workers' compensation and legal claims. So they can't just dip into that money whenever they want."

In the Plainview-Old Bethpage district, Ryan Ruf, the assistant superintendent for business, said he has spoken with Boder, and his district in February provided a public briefing on reserve funds. Ruf added that he plans to include reserve figures in a newsletter that will be sent to residents ahead of next year's elections.

"We want our community to know the reserves are there," said Ruf, noting that accumulated cash improves the district's financial stability and credit rating.

An important point to keep in mind is that districts maintain three general types of reserves, each with a different purpose:

Restricted fund balance: Money set aside for specific expenses, and not to be spent on anything else. Reserves allowed under state law include those used for school construction, retirement payouts and Workmen's Compensation.

Restricted reserves total $1.26 billion Islandwide, according to district reports compiled by the state Department of Education and released earlier this month.

Assigned fund balance:Money pulled out of reserves and put back in revenue pools to help pay annual expenses and hold down taxes. Assigned reserves on the Island total $397 million.

Unrestricted fund balance: Money available as a hedge against financial setbacks -- the so-called "rainy-day" money. The Island's unrestricted reserves total $448 million.

Under law, unrestricted reserves are normally limited to no more than 4 percent of a district's annual budget. When reserves drop well below that level, districts generally are regarded as financially troubled. Baldwin and Sachem, two districts facing big tax increases next year, both say they've drained reserves and now need to rebuild.

A majority of districts, both on the Island and statewide, project a decline in fund balances for 2013-14. However, districts made the same predictions last year, and yet their balances now are higher than then.

Why the discrepancy?

One explanation is that districts don't close their financial books until the end of each academic year -- in June -- so any projections offered at this time of year are likely to change in ensuing months.

Also, school administrators acknowledge privately that they budget at least a little more each year than they intend to spend, in order to guard against unforeseen circumstances. This is done, in part, in the widespread belief that the state's 4-percent limit on unrestricted reserves is unrealistically low.

"I am sure that every good business official will make sure that they don't run out of money by the end of the year," said Joseph Dragone, assistant superintendent for business in the Roslyn district and one of the region's most experienced administrators.

Another reason for stashing cash is that local governments, including school districts, face billions of dollars in future obligations for retirees' health benefits.

Current state law does not allow districts to establish reserves to cover those obligations, though many have tried to find a way around that. A proposed law to correct the situation has been introduced in the state Legislature, at the recommendation of the state comptroller's office.

An agency spokesman, Brian Butry, said his office takes the position that "there has to be a careful balance between hoarding your reserves and spending them down till you don't have any money left."

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