Fiscal Stress Designation was Expected Since School Budget Remains Focused on Student Opportunities - A message from the BOEMarch 12, 2015
Recent news headlines identified the New Paltz Central School District as a school in “moderate financial stress." This designation is something that might be confusing or raise concern with our community. The following information might help build understanding of what this designation means.
The parameters for this designation are established by the New York State Comptroller’s Office, who uses several factors in determining a school's financial stress tolerance. One of these factors is the level of "fund balance” available. Each year, a limited amount of any unspent money may be retained (totaling no more than 4% of the operating budget). New Paltz has less fund balance available than is recommended by the Comptroller’s Office, and was therefore designated as a school in moderate fiscal stress.
Fund balance provides a safety net for emergencies or unanticipated expenses. It can also be used as a revenue stream to offset a future year's tax levy and prevent program reductions.
In New Paltz, the use of the fund balance has been a deliberate budgeting strategy used to save programs and opportunities for students, which have been at risk under budgeting constraints created by the Tax Cap and the effect of the lost funding through State Aid cuts and the Gap Elimination Adjustment (GEA).
As revenue from the State Aid has been limited, the district was faced with daunting decisions: cut programs to reach the Tax Cap level, or increase taxes by attempting to exceed the cap. Neither of these options are in the best interest of our students or taxpayers, so the last option that was available was to use fund balance to save programs without further increasing taxes. This decision to preserve programs for another year also had the effect of reducing the amount of fund balance that was left and resulted in this designation as a district in “moderate financial stress”. Schools across New York State dismantled their programs, made significant increases in class sizes, and made other reductions that impacted the quality of education available to its students. In New Paltz, we have tried very hard to isolate our students and taxpayers from the impact of the Tax Cap and GEA, and while they could not be completely avoided, using fund balance has enabled us to minimize the consequences.
The New Paltz Board of Education is working hard to develop budget strategies that both protect programs and stay within limits of the Tax Cap and the taxpayer needs. The BOE now has a policy in place to maintain a 2% to 4% fund balance. This is the level recommended by our external auditor as well as the comptroller.
Although we have worked diligently to build our fund balance to the State’s recommended levels, emergencies have also occurred (such as increased enrollment of students with special needs or emergency facilities work). We rely on fund balance to pay for these items so that budget cuts in other areas are not necessary to cover the unanticipated expenses.
As State Aid is restored, fund balance levels can be rebuilt. New York State initially reduced State Aid when it was experiencing its own budget deficit. The State is now projecting a budget surplus in excess of $4 Billion. We are hopeful that the time for restored State Aid is near. Our communities are putting increasing pressure on the State to properly fund education. We are hearing more support from lawmakers. In the meantime, the Board needs to make local decisions about the best ways to prudently manage our assets in order to maintain the quality school system we have today.
It should also be noted that the current proposed Capital Project is not linked to the fiscal stress rating by the Comptroller’s Office. If the referendum is approved, the revenue for the project (generated from the tax levy) is secured and exempt from the Tax Cap limit. The only link to the fiscal stress ranking related to the proposed Capital Project would be the consequences of a failed referendum. If the referendum is rejected, major repair work will need to be undertaken, and likely that these situations will arise on an emergency basis. Should this happen, the fund balance would be further reduced and in turn would increase the fiscal stress designation. If the fund balance is not at a sufficient level to cover the cost of the repairs, it is also likely that programs and opportunities for students would be reduced in the future in order to cover the cost of the emergency repairs.
Should you have any questions about the fiscal stress designation, please feel free to email your questions and/or comments to the Board of Education at email@example.com.
Brian Cournoyer, President
Ruth Quinn, Vice President