Region One mulls spending leftover funds, but local finance boards object

FALLS VILLAGE — Should the Region One School District be allowed to put surplus funds aside for a rainy day? Should the board be permitted to use surpluses to fund specific projects such as replacing the gym floor at Housatonic Valley Regional High School?

With rising fuel prices and an array of maintenance projects on the horizon, the Region One Board of Education is considering changing its bylaws to allow it to hold a portion of its budget surpluses, perhaps for important projects that might otherwise demand a special referendum requiring taxpayer approval.

For the 2007-08 season, preliminary figures indicate that surpluses in the the region’s three budgets (high school, superintendent’s office and special education) totaled about $291,000 out of a nearly $14 million spending package. Region One’s bylaws require it to return those funds to each of the six member towns (Cornwall, Falls Village, Kent, North Canaan, Salisbury and Sharon) in the form of credit against high school tuition payments for the following year.

At a special Aug. 11 meeting of the Region One Board of Education, Business Manager Sam Herrick reported that local boards of education, which set policy in the six K-8 schools, are allowed to set aside certain fund balances for specific purposes. In July, for example, the Salisbury Central School Board of Education voted unanimously to transfer $30,000 from a fund surplus to a 2008-09 budget line for heating oil.

But on the regional level, if the Board of Education finds that it underbudgeted for heating oil for the following year, as may be the case at Region One, the board would have to either cut funds from existing line items to cover the shortfall or hold a special referendum to ask taxpayers for more money.

Herrick suggested that Region One could also use surpluses to pay down its debt. The district has several outstanding bonds for various projects from 1997, 2002 and 2005. Some of those bonds are payable after 15 years, others after 20 years. But all of them could be paid off ahead of schedule without penalty.

If, for example, a $200,000 bond could be paid down by half, then the savings would be far greater than $100,000 because the reduction in the principal also results in lower interest payments, Herrick explained.

"I personally feel from a long-term perspective it would benefit the district and would benefit the member towns more than sending back one sixth of the total surplus — or proportionally more or less depending on the size of the [local] district," Herrick said.

Looming in the future is the almost certain need to replace the gymnasium floor in the high school. That gym was built in the 1960s, but the hardwood floor suffered significant water damage in 2004.

"The gym floor is going to be an issue at some point," Principal Gretchen Foster said. "It’s pretty close."

Board Chairman and Sharon representative Judge Manning asked Herrick how much it would cost to replace the floor. For the floor alone, costs would probably be in the $100,000 range, but the more costly issue could be the sub-floor. If the subfloor contains asbestos, it might need to be completely replaced and disposed of with special procedures as well. It might even require the insertion of a vapor barrier to guard against future moisture and to protect a total investment that could top $250,000, Herrick explained.

"I don’t think we have a moisture problem, but the asbestos is a potential issue," Herrick added.

If the Region One board wants to spend some of its yearly surpluses (up to 1 percent of the total budget) on specific projects, then Herrick said it has the statutory authority to do so if the board changes the current bylaws requiring it to return fund balances to the member towns. However, it would likely be a controversial move since many of the boards of finance of the member towns object to the concept.

"It’s a political problem," said Manning, who has broached the subject informally with several finance boards. Indeed, two finance board chairmen confirmed their opposition in interviews with The Lakeville Journal.

"I think it’s bad budgeting," said Chuck Lemmen, who chairs the Board of Finance in Falls Village.

Lemmen said if the Region One board wants extra funds for special projects or to pay down debt, then it should put those funds into its proposed budgets and subject them to taxpayer scrutiny at its annual budget referendum in May.

"Taxpayers have a right to know what their dollars are paying for," Lemmen said. "Otherwise voters might suspect [the Region One board is] trying to pad other line items so that they can be put into the fund." Lemmen was quick to add that he "is sure" the board does not "intend to do anything illegal or unethical."

"If they know they need a gym floor, they should put it in the budget," Lemmen insisted.

George Jacobsen, a member of the Kent Board of Finance, declined to speak for his board but said, "Personally, I’m negative on it." He echoed Lemmen’s sentiment that funds for special projects should be set aside at the beginning of the budget process "rather than taking the funds by default" at the end of the year.

"For them to invent another good purpose is bad budgeting," Jacobsen added. "You don’t ask me for $10 for food and then spend it on liquor."

Herrick told the Region One board he could conduct additional research on the issue and bring it up again at a meeting in the fall when planning for the upcoming budget year typically begins. The fiscal year goes from July 1 to June 31.