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Hewlett-Woodmere district had $30M in excess cash reserves, state says

Hewlett Elementary School on Wednesday, Feb. 1, 2017

Hewlett Elementary School on Wednesday, Feb. 1, 2017 in Hewlett. Credit: Howard Schnapp

Hewlett-Woodmere schools accumulated more than $30 million in excess cash reserves while disregarding an official warning to correct such practices, the state comptroller’s office reported this week.

The South Shore system is the 23rd district on Long Island cited by state auditors since 2014 for piling up surplus funds beyond limits allowed by law.

State Comptroller Thomas P. DiNapoli, in his role as fiscal watchdog, cautioned schools statewide in a report last week to “be careful not to amass excessive levels of fund balance.”

Hewlett-Woodmere officials responded to the state’s audit by noting that they had frozen taxes in the current school year and plan to do so again for 2017-18. They added that a significant portion of the system’s reserves would be used, if voters approve, to upgrade school buildings without the need to borrow money.

Local administrators also described reserve funds as an essential cushion against sudden storm damage.

“Never was this more indisputable than in 2012 when the district suffered sizable losses due to superstorm Sandy,” district Superintendent Ralph Marino Jr. stated in a letter to state auditors.

Throughout Nassau and Suffolk counties, school administrators often contend that the state’s legal limit on unrestricted reserves — so-called “rainy day” funds — is unrealistically low. Many financial experts agree.

The current limit is 4 percent of annual budgets.

Taxpayer groups respond that, even if that is the case, districts make matters worse by overestimating expenses and then holding on to unspent funds. Such practices make it virtually impossible for local residents to make reasoned decisions as to whether or not budget proposals are valid, these groups say.

In Hewlett-Woodmere, state auditors found that the district overestimated costs of special education, teacher salaries and other obligations by a total $31.1 million between 2012-13 and 2014-15. As a result, year-end fund balances ranged between 5.9 percent and 6.5 percent, rather than the legal 4 percent.

Auditors added that Hewlett-Woodmere overfunded by almost $30.5 million nine reserve funds that had been set aside for specific purposes, such as contributions to employee pensions and other benefits. In one case, the report said, the district apparently ignored the auditors’ earlier warning — in 2009 — to cease the practice.

In that year, the comptroller’s office issued a report citing Hewlett-Woodmere for accumulating $10.1 million to cover certain retiree benefits.

Auditors found then that such reserves were not allowed and recommended that the money be transferred to other, legal uses. Despite the warning, auditors said, district reserves for such benefits actually grew by nearly $2 million in subsequent years.

This week’s report, issued by the comptroller’s regional office in Hauppauge, cautioned districts to maintain reasonable reserve balances. Action to the contrary “essentially results in real property tax levies being higher than necessary,” the report concluded.

Marino, in his letter of response to the Hauppauge office, wrote that the community “consistently demonstrates their support for the district’s budgetary decisions, as evidenced by more than 70 percent of the voters approving the proposed budgets in recent years.”

In May, the district’s $115.3 million budget passed 1,264-455 — 73.5 percent approval.

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