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Amity:  What to do with the surplus?

Amity:  What to do with the surplus?

When residents voted down the Amity School District budget twice this spring, the fact that the District has been carrying vast surpluses seemed to rub many people the wrong way, even if long-standing practice was to return some 80% of the surplus to the three member towns.

Last year, for instance, after the auditors closed the books on the 2020-21 school year, Amity returned about $1.2 million to Orange; $786K to Woodbridge and $450K to Bethany.  The money was transferred in January of this year.  The five-year average of unspent funds was $3.5 million, according to the March 14 budget narrative, out of a budget of some $51 million.

The return of surplus funds to the towns may have been a useful tool to keep the peace, but it does not align with state statute, as Amity board member Paul Davis found out when he checked what the Legislature prescribed for regional school districts’ surpluses.  According to Section 10-51c, “the board shall use any budget appropriation which has not been expended by the end of the fiscal year to reduce the net expenses of the district for the following fiscal year.  “When reading the passage, Davis emphasized the “shall,” leaving no room for interpretation.  “It can’t go anywhere else,” he said.  (Except limited funds to a capital and non-recurring fund.)

Returning funds to the towns is not permissible according to state statute.  It was an arrangement the towns had made with previous school administrations, as a way to prevent the district from rushing into a spending spree at the end of the school year.  The whole process was carefully watched over by the Amity Finance Committee – a committee with representation of the three boards of Finance and the Board of Education.

As recently as this spring’s budget narrative spelled out that the practice to apply surplus funds to the next budget “was discontinued six years ago…We have not carried forward any funds in the past five fiscal years.”

The question for the administration of School Supt. Dr. Jennifer Byars is how to handle the surplus of the 2021-22 Fiscal Year, since the towns have every reason to expect that income.  Should the district hold on to the surplus from the 2021-22 school year and apply it to this year?  Apply it to ‘23-24?  The Amity Board at its August 15 meeting decided to have the superintendent consult with the auditors, who are about to start their work.

Orange, for example, allocated an anticipated $700,000 from Amity in the current town budget.  Should the district follow the letter of the law and not return the left-over funds, it would leave Orange $700,000 in the hole.

Orange Finance Director John Cifarelli kept his cool.  He said so far, he had not been informed that the district will not return the surplus, and he was not going to comment on rumors.  The Orange Board of Finance has not met, and when it does, it will determine a course of action.

Due to the fact that town residents on May 18 approved a budget which included the original Amity budget request, while the third Amity referendum on June 20 approved a lower number, that provides the town with $200,000 in savings right there, he said.  If need be, the town can take the money out of its own fund balance to cover the shortfall.

Woodbridge Finance Director Anthony Genovese said the town does not allocate the income from Amity until it has received a check.  That means the town does not allocate the Amity surplus funds until the following fiscal year.

This year, for example the town included $611K in its budget.  These were funds from the 2020-21 school year that the town received in January of 2022.  He said he tries to encourage town officials not to use the Amity money for ongoing expenditures, rather than for one-time expenditures.  “Eventually, it will stop,” he said of the Amity payments.

The members of the Amity Finance Committee (AFC) were not amused when they heard from the superintendent that the district may not return the funds.  The AFC typically meets immediately preceding the regular board meeting and is informed of the financial decisions at hand.  Its decisions are recommendations to the regular Board of Education.

“I was not happy,” said Woodbridge Board of Finance Chairman, Matthew Giglietti, after the meeting.  He said if the district stops returning surplus funds there was no need for an AFC.  “It makes Amity autonomous,” he said.  “Why would I want to stay.”

Paul Davis does not agree.  If the school district uses the surplus to offset the budget of the following fiscal year, as the law says it should, it will actually help lower the budget requests going forward, he said.  The practice will benefit the taxpayers in a much more direct way.

In addition to Giglietti, the AFC consists of Joe Nuzzo, a member of the Orange finance board; Sharon Huxley of Bethany; and Board of Education members Christopher Browe (Orange), Andrea Hubbard (Bethany) and Dr. K. Sudhir, (Woodbridge).

In addition to the question of whether or not to return funds to the town, School Supt. Jennifer Byars asked the AFC to increase the percentage the district can put into a capital account.  So far, the district board had voted to cap it at 1% of the operating budget.  However, the law allows regional districts to put away as much as 2% for capital items.  The money will reduce the amount of bonding they would have to do, at a much higher price, she said.  But the AFC voted no, 5:1.

When the question came up during the regular board meeting, board member Carol Oladele cautioned not to send a message of easy spending.  “I don’t want to be tone-deaf to the community,” she said.  “We want to maintain good will with our community.  Consider what just happened,” she said, referring to the failed referenda.

Dr. Sudhir, a member of the AFC, said he voted to keep the capital reserve at 1% for exactly that reason, to be respectful to the community.  However, it later became clearer to him which projects would need to be cut, namely the roof projects.

If there is not enough money in the capital reserve, the district will have to bond to fix the roofs at the two middle schools, which are leaking in places.  Bonding costs can be very, very large, he said.  That is why he was changing his vote from no to yes.

In the end, the board voted to appropriate $929,000 from Capital Non-Recurring to pay for roof repairs; for the replacement of musical instruments, which are 50 years old; and for renovations to the Lecture Hall at Amity High School.  This time, the vote was unanimous.

By Bettina Thiel – Orange Town News Correspondent

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