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Shoreham-Wading River district built reserves above legal limit, state says

The Shoreham-Wading River school district, like many systems on Long Island, amassed millions of dollars in surplus cash reserves in recent years that were more than double the legal limit allowed annually, state auditors said Tuesday.

An audit report covering district finances for the 2013-14 through 2015-16 school years found that the system’s unassigned reserves, commonly known as “rainy day” funds, totaled more than $7.6 million in each of the three years reviewed.

Those funds were equivalent to an average 11 percent of Shoreham-Wading River’s total annual budgets over those three years. In contrast, the state’s legal limit is 4 percent for such surpluses, which are supposed to be set aside for emergencies.

Shoreham-Wading River is the 24th school district on Long Island since 2014 to be slammed by the state’s fiscal watchdogs for maintaining excessive reserve funds.

Auditors described the district’s budgeting as “unrealistic,” adding that excess funds should be applied to legitimate purposes such as reducing property taxes.

Neil Lederer, who was Shoreham-Wading River’s interim superintendent at the time the audit was released, responded in a written statement that the size of the district’s reserves reflected its cautious approach to budgeting.

Lederer wrote that “the district adheres to a conservative approach within the budget development process in order to be able to operate under a worst-case scenario.”

Auditors in Comptroller Thomas DiNapoli’s office rejected that position.

“District officials indicated that they budget conservatively because certain items, such as retirement costs and state aid, are not always readily available,” they wrote. “However, employee salaries and benefits costs are largely driven by contractual agreements and, therefore, should be reasonably predictable and not consistently overestimated.”

Lederer on July 1 was succeeded as schools chief by Gerard Poole, who formerly served as Freeport’s assistant superintendent for curriculum.

Cash reserves are a longstanding issue of dispute on the Island, where school spending and taxation rank among the highest in the nation.

School representatives, as well as many private financial analysts, have said that a 4 percent limit on rainy-day reserves is unrealistically low and should be raised. These advocates cite frequent episodes in recent state history — the latest being the economic downturn beginning in 2008 — when districts with inadequate reserves were forced to lay off teachers and cut student programs.

Taxpayer groups have responded that district cash surpluses have to be carefully monitored, lest the money be used to grant employee unions unreasonable raises. Such groups also have noted that the 4 percent reserve limit is legally binding and have demanded that any amounts over that should be used to curb taxes.

Shoreham-Wading River’s voter-approved budget of $74.8 million for 2017-18 raised property-tax collections 4.7 percent, compared with an Island-wide average of 1.73 percent.

The district has about 2,250 students and more than 400 employees.

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