BRISTOL — The Newfound Area School Board voted, 5-2, to return $1,069,556 of a $1.5 million year-end unexpended fund balance to the taxpayers, while retaining $438,593 to cover unanticipated expenses.
Those voting against the motion said there was no need to double the amount the district held back simply because they could, and argued for turning back more money to lower the tax assessments that had increased after voters broke the tax cap two years ago in order to replace the high school roof.
Board members originally agreed to retain $275,000 — the same amount as last year — and thus return more money to offset taxes when the New Hampshire Department of Revenue Administration sets the tax rate next month. Superintendent Stacy Buckley said that would be “a safe amount” to set aside against any dips in revenue or unanticipated expenses that might arise over the course of the school year.
Either way, by returning more than a million dollars to the voters, it would more than make up for the disputed $712,400 that the board had included in the district’s default budget for the coming year.
Taxpayers had not realized until after the district’s annual meeting that the school board had taken the precedent-setting step of including money voters had never appropriated in the default budget in order to cover facilities improvements identified in a capital improvement program adopted without a public hearing. Although residents asked the school board to remove the $712,400 from the budget, the board took no action, prompting the threat of a lawsuit.
School Administrative Unit 4 officials have maintained that the school district’s attorney, Barbara Loughman, has advised that including capital improvement projects in the default budget — never before attempted by an Official Ballot district — was a legitimate move.
At the board’s Sept. 10 meeting, Board Chair Jeff Levesque of Groton said that having a year-end unexpended fund balance of $1.5 million would allow them to return the money saved on the high school roof project, which cost $200,000 less than they had anticipated, as well as the capital improvement money included in the default budget.
“We have to give that back,” he said before advocating for retaining $200,000 to $250,000 for unexpected expenses.
The consensus fell apart when Business Manager Michael Limanni argued for retaining the maximum amount allowed by statute.
Why the surplus?
Limanni explained why the unexpended fund balance was so high: Through careful management, the school district ended the year with almost $800,000 in savings, some of it due to final expenses coming in at a lower cost than anticipated and some due to higher than anticipated revenues. He said $60,000 of the savings could be attributed to canceling a contract for a venting project that the contractor could not complete according to specifications.
The district has never had to draw from the retained funds, so the $275,000 appropriated last year got added to the calculation, he explained. The formula also takes into account the $337,646 that the school board returned to reduce last year’s taxes. The net result was the unexpended fund balance of $1,508,149.
Having adopted the state statute that allows the district to retain up to 2.5 percent of that balance to cover unexpected costs, the school board had the option of keeping as much as $438,593, Limanni said.
In arguing for retaining the maximum allowed by law, Limanni told the board that it was a way to stabilize the tax rate. Just as revenues came in higher than anticipated last year, they could come in lower next year, he said. Expenses might be higher than anticipated. If the board were to return all but $200,000 this year, it might not be enough to offset next year’s costs, resulting in a spike in taxation that would seem even larger because of the reduced tax impact this year. Having a larger retained fund would allow the district to cover costs without increasing taxes, similar to the way municipalities operate, he said.
Vincent Paul Migliore of Bridgewater and Christine Davol of New Hampton said there was no reason to retain more than last year, and that the board should return as much as possible, since the current tax rate is elevated, due to the tax cap override two years ago.
“It would be absolutely insane to keep $438,000 in additional dollars in the retained fund balance, which is [only] an option for us to consider,” said Migliore.
Davol said she supports avoiding spikes in the tax rate, but she agreed with Migliore that stabilizing the tax rate at its current high level is the wrong thing to do, particularly at a time when the school board is facing strong criticism for its decision on the default budget.
Sharon Klapyk of Danbury and Sue Cheney of Alexandria argued for withholding as much money as possible, rather than returning it to offset taxation.
Klapyk said, “I’m for the students,” adding, “I’m a planner. … We all have a savings account. We plan for emergencies in our own life, and we don’t have a budget of $22 million. I feel we have these numbers available, and that’s exactly what we should be doing.”
Cheney compared the retained fund to an insurance policy. “You hope you’ll never have to use it.”
Migliore said the highest unanticipated expense would likely be for special education, which might cost $100,000, so there was no need to set aside four times that amount. He warned of a voter backlash next year because of the high default budget, after voters had rejected the proposed budget in March.
Both Klapyk and Cheney dismissed those concerns, with Klapyk saying there was no way to know why residents voted as they did, and Cheney noting that many who would have voted in March stayed home because of the bad weather.
Buckley deflected comments about the default budget, saying it was a settled issue, and the majority of board members agreed. By providing the million-dollar tax cut, they take away much of the incentive for a court challenge, and if left unchallenged, the district will be able to put capital project funds in the default budget every year going forward.
Migliore is working to make sure that does not happen. In a letter to area newspapers, Migliore is asking voters to rally against the higher retained funding before board members sign the state MS/25 budget form at their next meeting on Sept. 24, and to press for an answer on whether the board acted properly in including the $712,400 in the default budget.
