Report: East Quogue School District In ‘Moderate Fiscal Stress’

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A new state comptroller report released last week confirmed what East Quogue Elementary School officials have been lamenting for years: that the district is likely approaching economic hardship.

The report, which examined 674 districts throughout the state, classified the East Quogue School District as one of seven Long Island districts—and the only one on the South Fork—as suffering from “moderate fiscal stress,” the second-most severe rating on the scale designed by State Comptroller Thomas P. DiNapoli.

The nearby Eastport South Manor School District was designated as being “susceptible to fiscal stress,” a lower rating, because of its consistent operating deficit, according to the same document.

East Quogue Elementary School Principal Robert Long said this week that he agrees with the state’s assessment, adding that the restrictions of the state-mandated 2-percent tax cap have hit the small district particularly hard. “We do think it’s accurate,” he said of the report. “It actually verifies what we’ve been telling people for years.”

The comptroller’s report used a system designed by Mr. DiNapoli to identify early warning signs of economic distress in school districts using factors such as fund balances, operating deficits, cash on hand, cash flow borrowing and fixed costs, as well as demographic factors like changes in population, fluctuations in property values and child poverty rates.

Ratings were based on a weighted point system, with a total possible score of 21; the higher the score, the worse off a district is in terms of finances.

East Quogue received 12 points on the scale, or 55 percent of total points possible, while Eastport South Manor earned eight points. School districts receiving scores of five or less were not considered in fiscal stress, those receiving between six and 10 points were labeled as susceptible to fiscal stress, while those earning 11 to 14 points were determined to be in moderate fiscal stress. Districts scoring 15 points or more were labeled as being under significant fiscal stress.

Brian Butry, a spokesman for Mr. DiNapoli, said this system is designed to inform taxing districts, including schools and local governments, of impending financial hardships and identify specific problems while they can still be addressed. The more severe the rating, the more dire the situation, he noted.

“It’s more an early warning system giving not only local officials but also taxpayers an idea where their districts are at,” Mr. Butry said.

In 2013, the East Quogue School District’s fund balance stood at $382,979, or about 1.8 percent of its $21.7 million in general fund expenditures, according to the comptroller’s report. Districts are asked to maintain a fund balance that’s between 3 and 4 percent of its total operating budget. The shortfall earned the district two points on the scale.

The district picked up another three points for having a spending deficit of $788,710 for 2013 as East Quogue spent $21.7 million that year while taking in only $20.9 million in revenue, according to the report. The state wants school districts to keep their spending deficits to under 3 percent of their gross expenditures; East Quogue’s spending deficit accounted for 3.6 percent of that amount in 2013. The district’s spending deficit stood at 5.4 percent of its gross expenditures in 2012.

East Quogue also issued $5.5 million in debt last year, more than a quarter of what it brought in through taxes, earning it another three points on the comptroller’s scale.

Mr. Long said his district has blown through reserve funds in recent years as part of its efforts to keep teachers and programs in place despite limited tax revenues. In May 2013, the district attempted to pierce the tax cap with a proposed budget that would have increased spending by 2.9 percent, but the budget vote by district residents fell seven votes shy of reaching the necessary 60 percent majority to do so. As a result, officials had to cut nearly $600,000 off their initial $23 million budget proposal by eliminating an additional custodial position, three special education teachers and multiple teachers aides and assistants. That, combined with some unexpected expenses, has left the school in a tough situation.

Two years ago, East Quogue underestimated how much tuition it would need to pay the Westhampton Beach School District to educate its middle and high school students by approximately $400,000, an oversight that has contributed to East Quogue’s current fiscal woes. Tuition makes up close to half the district’s expenses.

“We’ve been trying to keep taxes as low as possible, and we wore down that fund balance doing so,” Mr. Long said. “We had been warned that we could be in some trouble. It’s a predicament, for sure.”

East Quogue Board of Education President Mario Cardaci said Monday that he was not aware of the comptroller report as he has been tending to personal issues in recent weeks. When reached Tuesday, fellow board member Diana Gobler said she needed to confer with other board members before discussing the issue. Board members Patricia Tuzzolo and Katheryn Tureski could not be reached for comment this week.

Board member Carrie Bender said she could not comment on the issue, adding that Mr. Cardaci is the only board member allowed to speak on topics the board has not discussed as a whole.

“Anytime anything is released by the board, it either has to go through the board president or the superintendent,” Ms. Bender said. “I can’t speak on behalf of the school or the board, because we haven’t had a chance to meet about it yet.”

East Quogue Superintendent Les Black said his district has “taken every conceivable measure that we can think of” to keep school taxes low while maintaining as much staff and programming as possible, but the district is running out of options and might have to consider making cuts. In recent years, the district has offered retirement incentives to teachers, but with no more retirement-eligible educators in the wings, additional layoffs might be necessary, Mr. Black said, adding that it’s too early to say anything definitive.

“Unfortunately, at this point, it’s difficult to find any more rabbits to pull out of hats,” he said.

Eastport South Manor Superintendent of Schools Mark Nocero said Tuesday that it is unfair for the state to bestow the label of “susceptible to fiscal stress” on his district because the reason it qualified for the ranking was because district officials were following directives from the state.

Mr. Nocero explained that, in recent years, his district had been making up for losses in state funding by tapping its reserves in lieu of raising taxes, which the governor and comptroller directed all districts to do after the tax cap was put in place. Mr. Nocero added that with policies like the tax cap and the Gap Elimination Adjustment—the latter being a debt-reducing initiative started in 2009 by former-Governor David Paterson—all Long Island schools are suffering from some form of fiscal stress.

“If schools on Long Island weren’t on that list, let me just say that every school district on Long Island is susceptible to fiscal stress,” Mr. Nocero said. “With the cuts we’ve had in state aid in the last five years, there’s no school district on Long Island that’s going to say it isn’t in some kind of fiscal stress.”

Two of the 124 Long Island school districts examined were classified as being in significant fiscal stress, the most severe rating, while seven, including Eastport South Manor, were listed being susceptible to fiscal stress. Most of the districts that were identified as being distressed were upstate, according to the report.

According to a release from Mr. DiNapoli’s office, most of the fiscally stressed districts shared common characteristics, such as having “low fund balance, operating deficits and limited cash on hand.” Many of them also frequently use short-term borrowing to bridge cash flow gaps.

Without an increase in state funding, East Quogue could be in trouble again come this budget cycle, which Mr. Long said is already in its early stages.

“We have a fantastic program here, and this is making it very difficult here to continue that tradition,” the principal said of the district’s financial difficulties.

Mr. Black has joined other Suffolk County superintendents in trying to convince Governor Andrew Cuomo and the State Legislature to end the Gap Elimination Adjustment in an effort to help bring more funding to low-need districts on Long Island. The Gap Elimination Adjustment, or GEA, reduced state funding to schools and other programs to help close the state’s multibillion-dollar spending gap.

Mr. Cuomo has continued the program since taking office in 2010, though there was some speculation that he would pull the plug on it due to a surplus in Albany. However, his tentative 2014 budget released Tuesday makes no mention of eliminating the GEA.

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