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State: Excessive surpluses in Freeport, Wantagh school districts

Freeport School District Superintendent Kishore Kuncham inside Mrs.

Freeport School District Superintendent Kishore Kuncham inside Mrs. Bonnie Murphy's kindergarten class at the New Visions Elementary School in Freeport, Dec. 12, 2016. Credit: Steve Pfost

State auditors this week rapped the Freeport and Wantagh school districts for compiling excessive budget surpluses over multiple years, bringing to 21 the total number of Long Island systems criticized for such practices since January 2014.

In Freeport’s case, auditors from the state comptroller’s office found that the district’s unrestricted fund balances — commonly known as “rainy day” accounts — equaled as much as 12 percent of annual budgets. That, auditors said, was more than three times the legal limit.

The review covered school years 2012-13 through 2014-15.

“Funding reserves at greater than reasonable levels essentially results in real property tax levies that are higher than necessary,” stated the report issued by the comptroller’s regional Hauppauge office, headed by chief examiner Ira McCracken.

Freeport Superintendent Kishore Kuncham strongly disputed the state’s calculations. He defended his administration’s budgeting approach in a 17-page letter to auditors, which presented a detailed description of the district’s efforts to hold down taxes and promote academic quality.

The letter said that Freeport, during the period examined by auditors, held its average annual tax-levy increase to 1.8 percent, while also improving graduation rates and adding college-level Advanced Placement courses to its high-school curriculum.

“Freeport Public Schools is extremely committed to providing an outstanding educational program and world-class opportunities for all students to blossom to their full potential,” Kuncham stated.

State auditors reported that Freeport overestimated expenses by an annual average of $12.2 million, or 8 percent. Auditors also looked at five district reserve funds set up for specific purposes such as workers’ compensation and unemployment insurance, and found that amounts set aside in four of those funds were five to eight times greater than what was needed to meet annual costs.

In Wantagh, state examiners also found that the district consistently overestimated expenses. They calculated that this allowed the district to build up excess reserves equivalent to between 5.3 percent and 8.6 percent of annual budgets between 2012-13 and 2014-15.

Wantagh officials responded that they acted in a financially responsible manner, by establishing a capital reserve fund that allowed the district to improve its buildings and grounds without borrowing money or raising taxes.

School board President Anthony Greco and Superintendent Maureen Goldberg, in their response letter, also described Wantagh as “a fiscally conservative school district” that had consistently kept tax-levy increases within state-imposed cap limits.

The issue of school-district reserve funds is a politically sensitive one in Nassau and Suffolk counties.

New York State limits districts’ unrestricted reserves to no more than 4 percent of annual budgets. The comptroller’s office has repeatedly reminded districts that the limit is set by state law, and that its auditors are responsible for reporting any violations and recommending corrections.

But many local school administrators and a substantial number of outside fiscal experts contend the 4 percent limit is unrealistic. The advocates have added that districts should be allowed to maintain “rainy day” reserves that are substantially larger to provide a financial cushion in times of economic uncertainty.

They cited, as an example, the state’s decision to cut financial aid to districts in 2010-11 and 2011-12, in the wake of a recession and stock market crash.

Kuncham, in his letter, stated, “Hopefully, the Governor and state legislature consider the practical and sound models that exist in the rest of the country and raise the unrestricted fund balance to a minimum of six percent or similar laws that apply to state and local governments [of no limit].”

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