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MCS officials say fund balance larger than expected


MASSENA - Massena Central School officials say a review by the St. Lawrence-Lewis Board of Cooperative Educational Services indicates that they have more money in their fund balance than anticipated.

“We have more accessible money than we had realized. They’re all anticipated year-end dollars. We are $1.2 million in the red versus an expected $4 million in the red. Although we’re still operating at a loss in a sense of having to dip into our reserves, for this year we’re dipping in a lot less than anticipated,” Finance Committee Chairman Michael J. LeBire said.

Although the actual final budget numbers won’t come until the books are closed and processed, Mr. LeBire said they believed total general support expenses were under-run by approximately $300,000, total instruction expenses were under-run by approximately $655,000 and employee benefits expenses were under-run by approximately $966,000.

On the revenue side, he said state aid revenues are higher than budgeted by approximately $1.15 million, charges for services revenues are higher than budgeted by approximately $600,000, miscellaneous revenues are higher than budgeted by approximately $150,000 and tax items revenues are less than budgeted by approximately $1 million.

“We had always planned to attempt to use as much of those reserve funds as possible to alleviate the tax burden over several years. This allows us some unexpected money moving forward,” Mr. LeBire said

District officials said in a press release issued Wednesday they contracted with the St. Lawrence-Lewis BOCES business department to take a closer look at the school’s finances after questions arose about the district’s reserves.

After reviewing the independent audit report, district officials said BOCES discovered they had $22 million in combined total reserve funds with more accessible funds than anticipated.

Some Finance Committee members were made aware of the updated fund balances earlier this month, they said.

Schools can set aside money in specially designated reserve funds and use that money only for specific purposes as defined by each fund. For example, district officials said, money in the capital reserve fund can only be spent on capital or building projects.

Districts can only set aside a reasonable amount of money that reflects the actual future expenses under the law, which allows them to save for the future, but also prevents them from needlessly hoarding money.

BOCES officials found the district had overfunded its Employee Benefits Accrued Liability Reserve, a fund to pay employees for unused leave time as outlined in its current contracts. As of May 2012, the district had more than $9 million in the fund above its anticipated expenses.

Massena Central officials said that overfunding was due in part to confusion over state guidelines regarding the use of EBALR funds.

They said Massena Central was among many districts that set aside money to pay their shared retiree health insurance costs. Setting that money aside protected taxpayers from a sudden tax increase when a large number of employees retired or insurance premiums rose dramatically, district officials said.

The New York State Comptroller’s Office later determined that this fund can only be used for unused leave time, leaving the district with the excess money. Because it’s a reserve fund and the money can be used only for the specified purpose, the district could not use it for other expenditures.

Comptroller Thomas DiNapoli has recommended that schools be allowed to create an Other Post-Employee Benefits fund, but the state has yet to grant districts that authority.

That means the district is currently limited in how it can use the excess $9 million. In 2012, board of education members acted on the comptroller’s ruling on EBALR funds allowing schools to use the funds to offset property tax increases.

In June, they transferred $2.6 million into the 2011-12 general fun, and will transfer another $2 million in the 2012-13 budget, they said, noting that will leave approximately $6.4 million in the EBALR fund.

“Our hope is that the state will take a closer look at EBALR funds and allow us to transfer those funds into an OPEB fund from which we can help pay for our retirees’ health insurance. Until then, we are sitting on $6.4 million that we cannot use effectively,” Mr. LeBire said.

The BOCES review also found that the district had rapidly accumulated excessive fund balances - money left over at the end of the fiscal year after all of the district’s bills are paid - over the past several years. That money can be rolled over as revenue into the next year’s budget to lower property taxes or it could be placed in a state-authorized reserve fund, set aside as fund balance or any combination of the three.

District officials said the excess funds were the result of “a history of overestimating expenses and underestimating revenues.”

Under state law, school districts may hold 4 percent of their budgets as fund balance. For Massena, that amounts to about $1.84 million.

“The problem is that New York’s rules on fund balance are outdated and impractical. As a practice, many districts in New York have routinely exceeded the 4 percent limit. In a district of this size, $1.84 million could disappear in the blink of an eye - one little hiccup could bring disaster. There is a fine line between having enough fund balance and having too much. At this point, this is clearly too much.” Mr. LeBire said.

The BOCES staff found that the fund balance used in the current 2011-12 spending plan will be approximately $3 million less than anticipated. The approved 2011-12 spending plan included using more than $4 million from reserves, but the current year-end forecast indicates approximately $1 million will be used from the reserves.

“We find we are utilizing far less of our reserves than anticipated again this year. We are still operating in the red but at a level far less than forecasted by our business office. Past decisions were made based on the information provided which indicated that we were quickly running out of money. With this new information as a starting point, we need to reexamine our budgeting practices and move forward making sound decisions for our community and its children” Mr. LeBire said.

Mr. LeBire has been closely aligned with Mr. Clough, and the superintendent of schools and the superintendent of business, Cynthia Yager, have been at odds for the past several months. Ms. Yager is retiring from the school district early next month.

Mr. LeBire said they will be reviewing future budget items to “try to identify if this is a one-time anomaly” or if there were areas that didn’t need to be cut.

Based on their current projections, Mr. LeBire said that, with a 4 percent increase in salaries, 7 percent increase in benefits, 4 percent annual increase in state aid and 2 percent annual increase in tax items, they are anticipating “burning up our reserve funds” by the 2015-16 school year.

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