Northport-East Northport school board special meeting heats up over state audit

The contentious issue of school districts' cash surpluses got a rare two-hour airing Wednesday night, as officials in the Northport-East Northport system and their critics hotly debated a state report that blasted the district for overestimating spending by $33.9 million over a five-year period.

More than 100 residents and teachers braved heavy rain to show up at the William J. Brosnan School in Northport, which houses administration offices, and to frequently applaud critical speakers in a session that at one point turned into a shouting match. Complaints against the district grew so heated that the crowd prodded the school board, in a divided vote, to extend speaking time.

The question of whether districts have deliberately overestimated expenses in order to pad budgets and build up cash reserves has been hotly debated for years, not only in Northport but also in many other communities across Long Island.

Local activists contend that cash surpluses, known as reserves or fund balances, should be returned to residents in the form of tax reductions. The practice of squirreling away money makes it difficult for residents to decide if schools really need budget and tax increases, they say.

Superintendent Marylou McDermott kicked off the meeting by defending her administration's expansion of certain reserve funds. McDermott noted the district faced potential future loss of tax revenue from a local LIPA power plant, and said a financial cushion was essential. "We are very, very protective of our district," the superintendent said.

While five board trustees praised her presentation, most residents and teachers who spoke up at the meeting took issue with the district's budgeting and spending practices.

"How many people did you hurt by padding your budget, who had to move out of the district," said Frank Cavagnaro, 75, who runs a lumber company.

McDermott, who has led the 5,500-student district since 2006, announced in July that she will resign in 2015, at the end of this school year.

The state comptroller's office, which released the Northport audit this week, has underlined the issue of schools' cash reserves in recent months, with dozens of reports that detail questionable budgeting practices in districts across the state. State Education Department officials announced last month that they, too, are reviewing the issue of budget surpluses.

In its Northport audit, the comptroller's office found that the district overestimated expenditures by $33.9 million over a five-year period that ended Sept. 30, 2013, and actual revenue exceeded spending by nearly $13 million. The report stated much of the surplus went into a reserve fund to cover pensions of nonprofessional employees, and that the fund totaled $6.2 million -- three times annual pension costs -- in the last full year of the period reviewed. Auditors questioned whether retaining so much money "is in the best interest of district taxpayers."

McDermott, in her response, acknowledged the district had expanded its restricted reserves, including the pension fund, from the equivalent of 3.5 percent of the budget in 2008-09 to 11.6 percent in 2012-13. She added that the level had then dropped to 7.3 percent in 2014-15, and that this was below the average for districts in both Suffolk and Nassau counties.

Jack Dougherty, an audit director for the comptroller's office, said in an interview that districts wishing to build reserves should give residents a chance to vote on that issue.

With Michael R. Ebert

By John Hildebrand

john.hildebrand@newsday.com@johnhnewsday

John Hildebrand is Newsday's senior education writer and has covered school news and policy issues affecting Long Island for more than 40 years.