Friday, May 11, 2012

Spending Plan Too High?

In a recent letter to the editor, the vice-president of the Potsdam School Board made an interesting point during the justification of his vote to approve a spending plan which exceeds the property tax cap. His point was that at the end of the 2010-2011 school year, the Board of Education made a decision to purchase a bus instead of bond the purchase. This decision caused the property tax cap to be lower than it could have been. That statement sparks an interesting question. Where did they get $90,000 to use for that bus purchase? (I may not have the amount correct, but buses are very expensive). The most likely answer is that, at the end of the school year, the district found that there was so much money left in the spending plan that the undesignated fund balance would exceed the maximum allowed by law.

The amount of the fund balance is a figure which is always noted when the school district's external auditors complete the end of the year audit. If the amount is excessive, it is noted in the management letter, which is filed with the New York State Education Department and/or the New York State Comptroller. School district administration and Boards of Education never want to draw attention to the amount of funds which they have put away, especially when they are going to the taxpayers with increases in the school tax levy.

During my last years on the school board, the district found itself with excess funds every year(the limit then was 2% of the following year's spending plan, now it is 4%). In June, the business manager and the Superintendent would come to the Board of Education and ask to "forward spend". This means that they wanted to spend money in the current year for needs in the next year's budget (I distinctly remember a $40,000 truck one year). There was usually a lively discussion with debate about accepting the recommendation, creating reserves, or giving the money back to the taxpayers by reducing the tax levy. There was usually some compromise and often the audit letter noted that there was an undesignated fund balance which exceeded the 2% maximum. It was believed that 2% was a figure that was too low so we took a chance on having too much money in that fund. Of course, now the limit has been raised to 4%.

According to the spending plan document, for 2010-2011, there was almost $1.6 million dollars in unspent budget funds. I wonder how much forward spending was done in June of last year besides that bus purchase and why did the district's administration and Board of Education think it was still necessary to ask the taxpayers for a 4.75% increase in the 2011-2012 tax levy?

According to the most recent budget reports presented to the Board of Education on May 8th, there is over $1.5 million dollars unspent and unencumbered in the 2011-2012 (this year's) spending plan. Once again, there are questions. How much forward spending will the business manager and the Superintendent recommend in June? How much "extra" money has been built into next year's spending plan? And finally, why is the Potsdam community being asked to approve a spending plan which exceeds the state-legislated property tax cap?

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