School districts across New York are using their fund balances to make up for budget shortfalls, a practice state and local school officials say is unsustainable.
A recent survey by the New York State Association of School Business Officials revealed that 99 percent of school districts statewide tapped into their fund balances to "plug holes in their budgets," according to a press release issued by the association. The report found that 81 percent of survey respondents would deplete their fund balances within the next five years.
"Many school districts, especially those in low wealth rural and urban communities, will be facing both educational and financial insolvency within the next couple of years," NYSASBO Executive Director Michael. J. Borges said in a press release. "State policymakers and particularly the Education Reform Commission must soon address the reality that many school districts will not be able to meet their obligations to their students to provide a sound basic education."
The Tupper Lake, Saranac Lake and Lake Placid central school districts all applied portions of their fund balances to budgets for 2012-13. In Saranac Lake, the largest of the three, voters approved the use of $1 million of fund balance to supplement the budget; Lake Placid and Tupper Lake schools used $300,000 and $410,000, respectively.
In Saranac Lake, the amount of fund balance applied to the budget has steadily increased in recent years, even as the district cut costs by eliminating 10-plus jobs in each of the last four years. State aid has remained stagnant or decreased.
"The trend line there is the same for most schools: Everybody is being forced to use more fund balance than they're comfortable using because they can't go to the taxpayer for more than 2 percent on the (tax) levy, and their costs are going up greater than that," Superintendent Gerald Goldman said.
Goldman said salaries, pensions, health insurance and fuel costs continue to increase annually, most of them by more than a 2 percent margin.
"Districts will be hard pressed to maintain and fund a fund balance for very long," Lake Placid school Superintendent Randy Richards said. "The governor has said schools will get a slight state aid increase, maybe 3.2 percent. But I don't think you can sustain using $300,000 or $400,000 against taxes every year due to labor costs alone, as well as cost of living and energy costs. Mathematically, it's not sustainable.
"We've used it to keep taxes down, and now we're capped. We're still going to need to meet that bar the state has set," Richards added. "We're going to have to reduce programs. The cost is always a factor for taxpayers."
Tupper Lake school Business Manager Garry Lanthier said his district's fund balance is decreasing. He noted that if the $410,000 of fund balance hadn't been applied, it would have added more than 6 percent to the tax levy - an increase that 60 percent of voters would need to approve.
"Something's got to give," Lanthier said "Long-term, it's going to be some difficult choices."
Lanthier said districts need fund balances in the event that a teacher is hired or because of special education requirements.
Officials from all three school districts said they hope the fund balance dollars applied to the upcoming budget won't be exhausted by the end of the school year and can be carried over into 2013-14. Dan Bower, the Saranac Lake district's assistant superintendent for business, said the goal is to not use the fund balance.
"We start out the year trying to save the money right off the bat," he said. "The goal is, if we don't have to spend it all, we don't."
Bower said much of that depends on whether revenues - including state aid - meet projections.
"Budgets are getting tighter and tighter, and it's getting harder to save money during the school year," he added, "so you end up cutting into that unappropriated fund balance."
So what's the solution?
In its report, NYSASBO said increased state aid could help. It also recommended that the state implement "significant mandate relief to reduce school expenses," including a reduced need for annual internal audits, Wicks Law exemptions and requiring minimum health insurance contributions, among other suggestions.
Goldman said legislation requiring minimum contributions to health insurance premiums by employees would "make a huge difference.
"Anything that could help reduce personnel costs would be welcome," he said. "I'd say 80 percent of our budget is driven by personnel costs."
Goldman added that Gov. Andrew Cuomo and state lawmakers have talked the talk on mandate relief, but they haven't walked the walk.
"I don't recall that there have been any mandates that have been eliminated or reduced," he said.
Goldman said if New York's special education regulations mirrored those set by the federal government, it would result in more cost savings. The state has its own set of regulations for services for special-needs children that are more rigorous than federal regulations.
"If we were to adopt federal regulations wholesale, every district would reduce expenditures in the special education area," Goldman said.
Goldman and Richards said their school districts are running out of ways to keep costs down without making major cuts.
"Now anything else that goes on, they're going to be cutting into more than fat; it's going to be the meat that they're cutting into," Goldman said. "I'm not really looking forward to doing the budget next year."
Newly-elected Lake Placid school board President Mary Dietrich said districts can't afford to continue using fund balances to plug budget holes. She said there needs to be a greater sense of urgency when districts talk to each other about consolidating services. She also said districts will need to find alternative ways to save money.
"We can talk about how we can cut costs for the next six months, but at some point people are going to have to decide what sort of educational system they want and what they're willing to pay for it," he said.