By KATIE HOOS
The City School District of New Rochelle was identified as being under “moderate financial stress” according to a recent study by the state comptroller, putting pressure on the district as it approaches the 2014-2015 budget.
The study by state Comptroller Thomas DiNapoli, which reviewed the fiscal status of school districts throughout New York, found that, at the end of the 2012-2013 school year, 87 school districts statewide were financially stressed.
“School districts are a critical barometer to the fiscal health of our local communities,” DiNapoli said. “Unfortunately, reductions in state aid, a cap on local revenue and decreased rainy day funds are creating financial challenges that more and more school districts are having trouble overcoming.”
The categories the districts were scored in include fund balance, operating deficits, cash on-hand and short-term debt. The districts were rated in each category and given an overall percentage score to determine the level of stress the district was facing.
The City School District of New Rochelle received a 50 percent score, therefore placing them the in the “moderate stress” category, which required scores of more than or equal to 45 percent.
In large part, the district’s grade stems from its anticipated nearly $8 million erosion of its fund balance by year’s end.
Twenty-two other districts in the state were in this category, as well.
The other categories were “significant stress,” which required a score of more than or equal to 65 percent, and included 12 school districts, and “susceptible to fiscal stress,” which required a score of more than or equal to 25 percent that included 52 school districts in the state.
New Rochelle was the only district in Westchester County classified as experiencing “moderate stress,” putting it in the bottom 5 percent of all 674 districts in the state.
The Hendrick Hudson Central School District was the only other Westchester school district the report classified as financially stressed; having been categorized as
“susceptible to fiscal stress.”
According to a statement released by the New Rochelle Board of Education, the reason the district received a “moderate stress” score is due to its declining reserve fund balance, which is weighted as 50 percent of the total score.
“The…declining fund balance—which is primarily the result of the economic downturn over the past few years—rising mandated pension contributions and health care costs, negative adjustments in state aid, all coupled with the tax levy spending cap; this has required us turn to our fund balance,” the board statement said, “which we had built-up in better economic times to fully fund our annual spending plans and maintain our educational programs.”
Fund balance is the accumulated excess of revenue over expenses.
The school district has had a declining fund balance over three years, from $17.9 million by the end of 2011 down to $13.1 million by the end of 2013. The district is expecting the fund balance to level-off at $10.3 million by the end of 2014.
John Quinn, assistant superintendent for business administration, said he expects pension costs to top-out and decrease in the coming years, and anticipates $2.4 million in state aid for the upcoming 2014-2015 budget year.
The district is also grappling with a negative bond outlook rating from Moody’s, an international bond credit rating business that analyzes public and corporate securities.
In January, Moody’s rated the school district’s bonds at a high quality and very low credit risk level of Aa2, but rated the outlook as negative due to continued tax appeals and declining fund balance. This negative outlook could affect future interest rates when the school district goes out for bonds.
With the school district beginning preparations for its 2014-2015 budget, it will be facing tough decisions in trying to increase the reserve fund while managing cuts and layoffs. According to Quinn, the district has already cut nearly 200 staffing positions over the last five years while increasing budgetary spending by 4.37 percent, less than 1 percent a year. Additionally, property tax revenue has increased by over 14 percent over that same span.
Acting Superintendent Jeffrey Korostoff said the district plans to increase fund balance in coming year.
“As we are beginning to develop our budget for the upcoming school year, we will be paying particular attention to the extent to which we rely on fund balance,” he said.
The district received Democratic Gov. Andrew Cuomo’s recommendations for the 2014-2015 school budget, mandating a 1.46 tax cap—the highest amount of property tax a person is required to pay—instead of the maximum allowable tax cap of 2 percent. Assistant Superintendent Quinn said this reduced growth factor is due to the low rate of inflation.
“It’s very clear it’s going to continue to be a very challenging budget environment,” Quinn said.