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What you need to know for 01/23/2018

Audit takes Schenectady school district to task

Audit takes Schenectady school district to task

The Schenectady City School District hasn’t been paying off its yearly temporary loans, costing it m

The Schenectady City School District hasn’t been paying off its yearly temporary loans, costing it more than $824,000 in interest and fees over the past three years, according to a state audit.

The state Comptroller’s Office released the audit Thursday. It criticized the school district for spending much of its savings and for borrowing more than it could pay back each year.

The borrowing was through “revenue anticipation notes,” which are based on the belief that the school district is going to get a certain amount of money in taxes and state aid, but needs the money months before it will be received.

However, the district borrowed more money than it was actually anticipating.

School board President Cathy Lewis said the problem was that some people don’t pay their property taxes.

“Remember, we don’t get fully paid by each tax payment,” she said.

The district can estimate how much tax will go uncollected, but Lewis said the district needs the money anyway.

The city makes the district whole, but not until years later. That’s not soon enough to pay off the loans without incurring interest.

Cash-flow fears

The auditors said the district should borrow less so that it could pay off its revenue anticipation notes entirely each year.

Otherwise, they warned, it could become a slippery slope, in which every year the district must borrow more to cover the last year’s debt and get enough money for the current year.

“If District officials do not take action to improve the District’s cash-flow situation, its cash position could deteriorate further, resulting in continued cash-flow shortages and a likely reliance on increasing levels of short-term debt to finance operations,” the audit said.

However, the district appears to be steadily improving the situation.

According to the audit, the district borrowed $4 million less in 2013-2014 than it did in the previous two years. The district borrowed $15 million last year.

Likewise, the amount of interest paid has gone down each year, from $339,569 in 2011-2012 to $194,400 in 2013-2014.

Lewis said the district would continue to work on reducing its use of the loans.

But, she added, the state could make it easier by dispersing state aid at the start of the school year. Instead, the aid mostly arrives in March, she said.

The audit also criticized the district for spending its savings. About half of its savings, $9 million, were spent over the past three years to balance the budget.

The audit said that Schenectady was “over-relying” on savings, and should stop using that money altogether.

Instead, the audit said, Schenectady should set aside about $6.5 million in savings to use for cash flow — not for budgetary expenses.

The district has about $3.5 million in savings right now, Lewis said.

She argued that the district did the right thing when it used savings to pay expenses. Every year, the savings was clearly delineated in the budget as a planned revenue.

“Governor [Andrew] Cuomo told school districts to use their reserves,” she said. “They want us down to 4 percent. But if you’re one penny over or one penny under, you get dinged.”

In 2011-2012, the district had about $18 million in savings — well over the 4 percent mark of $6.5 million. In the current budget, the district is not spending any of its remaining savings.

“So we look great,” Lewis said with some disgust. “We’ve made necessary cuts and deeper cuts than we’d like. It’d be nice if we had the $62 million.”

That’s the amount of additional state aid the district should be receiving, under the state aid formula. But virtually no district gets the amount of aid indicated in the formula. Schenectady Superintendent Laurence Spring has pushed for that to change, and most recently filed a complaint against the state regarding the issue. The audit did not mention the aid formula.

Spring said he brought it up with the auditors, telling them they were “ignoring” the biggest financial problem facing the district.

“Our issue is we’re shorted $62 million in revenue,” he said. “I told them they do not need to wait for a federal complaint to be filed. They can investigate independently.”

He urged them to do so. He’s also waiting for the U.S. Department of Justice to decide whether to investigate his complaint, but the most recent communication was not encouraging.

“We got a curious letter,” he said.

The letter, which was not written by a ranking official, said that the department believed the district had filed the complaint with the wrong agency. It said the department believed Schenectady was filing with the U.S. Department of Education’s office of Civil Rights.

Schenectady did file with that agency — only to have it rejected on the grounds that the agency wasn’t the right choice. Federal aid from the U.S. Department of Education is released in grants, not in the general state aid that Spring is criticizing.

Spring is trying to get a ranking official at the Department of Justice to take his call so he can try to get clarity on the letter.

He said he plans to tell them, “I don’t really care which of you takes it, but I think between you, one of you is responsible for enforcing the Civil Rights Act.”

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