Southold School District administrators are questioning the fairness of a state report that classifies the district as “susceptible to fiscal stress.”
In the report released last week by State Comptroller Thomas DiNapoli, Southold is listed as one of 87 school districts designated as fiscally stressed under Mr. DiNapoli’s new Fiscal Stress Monitoring System. The report evaluated 674 school districts during the 2013 fiscal year and found nearly 13 percent of them are struggling with their budgets. The report classified 12 school districts as being in “significant fiscal stress,” the most severe category, 23 in “moderate fiscal stress” and 52 as “susceptible to fiscal stress.” A fourth category is “no designation.”
In a statement, Mr. DiNapoli acknowledged that some factors are out of local districts’ hands, such as reductions in state aid, a cap on local tax revenue and decreases in reserves. Nonetheless, the report indicates the importance of recognizing the fiscal areas where districts may be in danger, and the comptroller’s office is using a new point system to classify the financial health of districts.
Southold was deemed “susceptible to fiscal stress,” the third lowest, or least, serious of the four classifications on the scale.
It was the only local district named in the report to be at risk for fiscal distress.
Mr. DiNapoli’s spokesman, Brian Butry, said this is the first year the report has been done and it didn’t evaluate the specific actions that caused the spikes in financial irregularities that indicated a district may be experiencing fiscal stress. In Southold’s case, Mr. Butry said the district received the “susceptible to fiscal stress” score based on the combination of its operating deficit and short-term debt.
In a meeting with The Suffolk Times on Tuesday, Southold Superintendent David Gamberg, Stephen Harrison, the district’s assistant superintendent for business, and Christopher Reino, of Cullen & Danowski in Port Jefferson Station, the district’s audit consultant, all said they understand the state’s reasons for issuing such a report — but they called its findings unfair.
Mr. Reino, whose firm represents nearly 80 New York school districts, said Suffolk County schools had an automatic hit under the short-term debt component of the comptroller’s scoring. This is because those schools issue Tax Anticipation Notes in September since they don’t receive tax revenue until January.
Nassau County schools don’t experience that problem because taxes there are received at the beginning of the school year, he said.
The most significant contribution to the low fiscal score in Southold’s case was triggered by the district’s using about $2.4 million from the voter-approved capital improvement reserve fund for roof, cafeteria and classroom improvements. Mr. Harrison said the mechanism to get those monies out of the reserve fund and into the capital fund triggered the fiscal stress score because monies from the capital reserve fund had to flow through the district’s general fund.
“They are taking into account that transfer as an expense but not including the funding source that supports that transfer,” Mr. Harrison said, adding the district would have been found to be in perfect health if the reserve transfer hadn’t been counted.
The report comes about five months after Mr. DiNapoli released a favorable report on a recent audit of Southold’s financial procedures that showed a significant improvement compared to the last report issued in 2006.
“We appreciate the state’s effort to provide us with tools and information that allow us to use some long-range forecasting,” Mr. Gamberg said. “Having said that, we want to be very clear to our taxpayers in Southold that, given the review of this finding, we are very comfortable and confident that we are not — in any way — under fiscal stress based upon the state’s definition of that, in my opinion.”