South Country district gets state approval to borrow $11M — but can't use it to lower next year's taxes

State lawmakers on Wednesday approved an emergency bill to give the South Country school district an immediate $7 million infusion of aid and permission to borrow another $11 million — a move legislators said was necessary to prevent the financially  troubled district from running out of money in the coming weeks.

“This is not a bailout. It is a rescue,” Sen. Dean Murray (R-East Patchogue) told Newsday. “What we did was giving them permission to work out their fiscal problems and do so immediately.”

Lawmakers said they have asked the local district attorney's office to investigate how South Country got in such dire straits financially and whether criminal malfeasance was involved.

District officials said Wednesday that the $18 million authorized in the bill, which Gov. Kathy Hochul signed Wednesday, cannot be used toward lowering the tax levy for 2026-27.

South Country’s school board last week adopted a budget proposal that would raise its levy by 13.45%, which would pierce the district's tax cap and require at least 60% of voters to approve it in the May 19 budget vote.

John Belmonte, the district's acting assistant superintendent for finance and management services, said in an interview Wednesday the $7 million advance aid would ease the district’s cash flow problem. The district was expected to have a multimillion-dollar deficit by the end of June.

He described it as "a temporary loan of our own money” interest-free and to be paid back in 30 years. The advance will be used to help pay the district's bills for the rest of the school year and cannot be used to help offset the budget deficit, Belmonte said. 

Murray said that as a condition of the authorization, the district must submit quarterly reports to its chief fiscal officer, the school board and state agencies including the state Division of Budget, the state comptroller’s office, the education commissioner and committee chairs of both the state's Senate and Assembly.

Murray told Newsday he spoke with Suffolk County District Attorney Ray Tierney earlier Wednesday to request an investigation into whether criminal malfeasance had led to South Country's fiscal crisis. He said it was a joint request from him and Assemb. Joe DeStefano (R-Medford).

“I’m not accusing anyone in particular or saying there's a crime,” Murray said. “But I’ve never seen anything this bad in all my years of elected office. It makes you question how could this have happened and was there wrongdoing? I think the public deserves an answer.”

In the Assembly, DeStefano said the district is in distress and needed help but added: “You have my word, the people responsible for this will be held accountable.”

Superintendent Antonio Santana told Newsday Wednesday that “there’s no evidence of fraud” and “there will be no evidence of fraud.” The money, he said, all went into programs.

Tania Lopez, a spokeswoman for the Suffolk County District Attorney’s Office, said: “We do not confirm or deny that we are launching investigations.”

Multimillion-dollar shortfall

The language of the bill approved Wednesday gives the state Education Department until May 18 to approve the $7 million advance because that’s when the school district’s previous bond payment obligations come due, DeStefano said after the vote. But he said the money could be approved sooner, depending on when the district applies.

The authorization to borrow $11 million would allow the district to close its deficits from the past two years, including a projected $8.7 million deficit for the current school year and a negative $1.8 million in unassigned fund balance that resulted from overspending in 2024-25.

The language in the bill specified the $11 million must be used for “liquidating actual deficits in its general fund” at the close of the fiscal year ending in June.

Belmonte said that borrowing cannot be used to help offset the tax levy for next school year’s budget.

The 2026-27 budget “has to stand” on its own, Belmonte said. “That’s why we are funding it on the tax levy. The state wants us to make that correction.”

The 13.45% levy increase would make up for a $5.67 million shortfall in next year’s budget. If voters approve it, an average homeowner is estimated to pay an additional $749 per year in their school taxes.