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Newfane is third Niagara County school district with excess surplus, state audit finds

NEWFANE – Newfane Central has become the third school district in Niagara County to be flagged this year by the state for having too large a surplus and allegedly overtaxing residents.

Starpoint and Royalton-Hartland were the other districts so far found to have improperly accumulating money in amounts greater than state law allows, but it seems to have become a common practice statewide in the era of the tax cap.

Four other school districts across the state were cited for the practice this week along with Newfane, and there have been many others in the last few months.

State law limits a school district’s fund balance, or surplus, to 4 percent of the district’s expenditures for the ensuing year. In an era where tax levy increases are limited to 2 percent or less, depending on the inflation rate, many districts seem to have concluded that having money saved up is a good idea.

“Districts could put the money to better use by reducing their tax levy,” said Brian Butry, spokesman for State Comptroller Thomas P. DiNapoli.

The audit said that since 2011, Newfane has been appropriating far more fund balance than it needed to spend – $2.8 million a year, on average.

“This practice allowed the district to circumvent the 4 percent statutory limit imposed on the level of unrestricted fund balance,” the audit found. Newfane also exceeded limits on the size of two reserve funds – retirement benefits and unemployment insurance – by $9.8 million as of last June, according to the audit.

Newfane budgets also included hugely overestimated costs, and the appropriated money wasn’t spent, according to the audit. Overestimates from 2011 through 2015 totaled $8 million on employee benefits and $3.5 million on special education, the audit found.

By putting back the unspent money, the audit calculated the real surpluses for the last four years were 11 to 12 percent of the following year’s spending. Meanwhile, the district was increasing the property tax levy by an average of 1.5 percent a year.

Superintendent Michael J. Baumann, who came to Newfane in November, said he anticipates no tax increase this year, especially since the cap for Newfane is 0.59 percent, which works out to about $70,000.

“Here in Newfane, they have tried to build in some cushion in case of unforeseen circumstances,” Baumann said. “There’s been some recognition we were padding things a little too much. … The problem is, if you get hit with something (unexpected), it’ll decimate your reserves.”

He said that under the law, when a 60 percent majority of voters must approve raising taxes above the tax cap, all school districts are budgeting conservatively. “If something happens, you can’t go to the taxpayers next year and ask for a 6 percent increase. Then you’ll get no increase and you’ll be on a contingent budget,” Baumann said.