State charges that the Middle Country school district accumulated $12 million in excess reserves has sparked a war of words, with local school officials accusing Albany auditors of taking a shortsighted view in the midst of a statewide fiscal meltdown.
An audit report from the State Comptroller's Office, released earlier this week, says Middle Country accumulated reserves year after year, mostly by overestimating expenses in amounts ranging from $5.8 million to $15.8 million annually.
The report adds that the district ended the past school year with total reserves of $38.6 million - millions of dollars more than allowed by law.
Incensed district officials respond that the state's report examines the situation "myopically, and does not present a fair and balanced view."
In a counter-response, state auditors declare Middle Country officials "are not allowed to ignore legal requirements just because they do not like them."
Behind the heated rhetoric is a serious debate over how far schools should go in accumulating "rainy day" funds. In Middle Country, as in many other districts, school leaders accuse the state of disregarding their need to prepare for unforeseen financial emergencies.
As an example, local authorities cite Gov. David A. Paterson's decision this week to close a state budget gap by withholding $750 million in statewide aid to schools and other local government agencies.
"We're so careful with every dollar that we budget, because we don't want our community to get hit with a surge [in taxes], which is what is happening right now," said Roberta Gerold, superintendent of Middle Country schools.
Middle Country serves 11,000 students in central Brookhaven Town - the third-highest enrollment on the Island. The district's budget is $200.2 million.
State officials contend that an economic slowdown is no time for schools to pile up surplus cash that could be used to lower taxes instead. State Comptroller Thomas DiNapoli, who will be up for re-election next year, has hammered away for months on this theme, which has proved popular with taxpayer groups.
"School districts shouldn't be stashing it away at the expense of taxpayers," said Emily DeSantis, a spokeswoman for the comptroller's office.
Another audit report released this week finds that Malverne schools accumulated $1.7 million in excess reserves. District officials say they recently transferred $1.1 million in reserves to a capital-repairs fund, which is legally permissible.
One irksome question for school districts is how to meet ballooning costs of retirees' health insurance. In 2004, a Washington D.C.-based accounting standards board issued guidelines requiring government agencies such as schools to include such costs in their financial statements.
DiNapoli has ruled against attempts by districts such as Malverne and Middle Country to set aside reserves to meet these costs, saying such reserves are not legal. The comptroller has proposed new legislation allowing this, but state lawmakers have not yet acted.