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DISTRICT'S CONTINGENCY BUDGET TERMED ILLEGAL

Upon further review, the Lewiston-Porter School District's outside auditor has decided that the size of the district's current contingency budget violates state law, a conclusion opposite the one he reached two weeks ago.

District officials said spending for the rest of the school year will be reined in so that the district has enough money left to reduce school taxes next year. There will not be any tax refund checks.

In December, Franklyn M. Collins, a former School Board member, wrote to the district claiming that the budget was about $1.3 million higher than state regulations would allow.

Eugene D. Mahaney of the accounting firm of Lumsden & McCormick said earlier this month that the 1999-2000 Lewiston-Porter budget was legal.

But in a letter released by the district Friday, Mahaney changed his mind.

"I have reviewed the law and various information issued by the state Education Department on this subject," Mahaney wrote. "Based on this review, the district's adopted contingency budget of 1999-2000 does not comply with the above statute."

Mahaney did not explain what the problem is, nor did he return a call for further comment.

But Superintendent Walter S. Polka complained that the district relied on budgeting publications issued by Albany after the adoption of restrictions on contingency budgets in 1997, only to have the Education Department say this week that the publications were wrong.

"If we made a mistake with this, I'm sure there are other school districts that have made mistakes," Polka said.

School District Attorney F. Warren Kahn said, "We're going to meet in Albany with the (Education Department) financial people and find out what the correct amount should be, and to make sure it doesn't happen again."

He said that meeting will likely occur in mid-February.

School Board President Robert M. Presutti said a special board meeting at 7 p.m. Wednesday in the Primary Building will now include a budget workshop.

The board adopted a $28.6 million contingency budget for the current year after voters rejected a $28.8 million version at the polls last May. The rejected budget would have increased property taxes by 11 percent, but the contingency budget hiked them by 11 percent anyway.

Collins claimed that the contingency budget should have been no more than $27.3 million, which he said would have virtually wiped out any tax increase.

State law restricts a contingency budget to an increase of 4 percent or 120 percent of the inflation rate, whichever is less. For 1999-2000, the increase limit was 1.92 percent, Kahn said.

The argument begins when calculating the amount from which to measure the increase. Kahn said the baseline is the previous year's adopted budget total, minus capital expenses and debt service.

Polka asserted that the budget broke "the spirit of the law, rather than the letter of the law. . . . I still believe that we were right in terms of the letter of the law."

As for returning money to the taxpayers, who were taxed more heavily than they should have been, Kahn said, "They wouldn't get checks. I assume we would put controls on the spending and create a fund balance to reduce the taxes for next year."

Polka said that is exactly what will happen. He said controls on discretionary spending are being "implemented immediately."

Polka said he will urge the Education Department to walk the district through the correct calculation of a contingency budget and then issue new advisories to all the districts in the state.

Pam Kowalik of the News Niagara Bureau contributed to this story.

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