State Report About Surplus Funds Has Area School Heads Seeing Red Districts Were Accused Of Keeping Excessive Sums. The Local Officials Say They're Being Scapegoated.

Posted: March 23, 1995

What surplus funds?

That was the question South Jersey school district heads asked yesterday as they lashed back at a state education report, ordered by Education Commissioner Leo Klagholz, that accused some districts of having excess surplus funds in their school budgets.

"It's all politics," fumed Henry Cram, superintendent of the Rancocas Valley Regional School District. "(Gov. Whitman) is trying to lower income taxes and she can't do it, and so the pressure is on now to find a villain. So the villain will be public education in this state."

The Department of Education report, released Tuesday, said that when they submitted their budgets for approval in April 1994, 173 of the state's 606 districts underestimated the surpluses they would have at the end of that school year. The state allows districts a surplus of as much as 7.5 percent of the general fund budget; any surplus funds above that are to go toward property-tax relief.

That's exactly where Rancocas Valley's surplus went, Cram said.

Rancocas Valley's surplus was reported as $1.3 million, or a whopping 16.9 percent of the general budget.

But Cram said that money was appropriated to the 1995-96 budget to maintain a stable tax base. Over time, the district has been able to reduce taxes in four of the five communities it serves, Cram said.

"And that's despite the fact that our budget has fluctuated dramatically over the past several years," Cram said.

Other districts also reported applying their surpluses to the following year's budget. Some pointed out that the report applies to the school year and does not take into account expenditures that came during the fiscal year, which began one day after the school year ended.

There can be many reasons for having more money left over than estimated, superintendents say. North Hanover's surplus of 24.6 percent, or $2.3 million, topped all Burlington County districts.

But most school districts don't serve children of the military, as does North Hanover, which includes the children of personnel stationed at McGuire Air Force Base.

North Hanover business administrator Craig Wilke explained that North Hanover received a delayed payment of $4 million in federal aid. Such aid goes to districts with students living in federal properties that cannot generate the income that property taxes provide.

"I'm really wondering whether the commissioner is supporting us or not," Wilke said. "To say that I have 25 percent of my budget in surplus? That's ludicrous."

The point, say superintendents in Camden, Burlington and Gloucester Counties, is that they underestimate surpluses out of necessity, as a way of covering costs that were not anticipated - not as a way of undermining the taxpayer.

Klagholz suggested as much when he stated in the report that "it is prudent fiscal management for districts to maintain reasonable surpluses" in order to avoid deficits should emergencies arise. However, the report says, ''intentional underestimation of surpluses is never an appropriate way to fund them."

The effect, said the report, is to "circumvent the public budgeting process and to exclude citizens from these important decisions."

The districts' reply? Hogwash.

"Every year we hold numerous public hearings about the budget," Pine Hill Superintendent Don Falato said. "We have never tried to deceive where the money is and why."

Pine Hill, a small district of two elementary schools in Camden County, increased its enrollment by 150 students over the last two years, Falato said. Special-education costs increased when a family moved to the district a month ago and two out of the three children were classified with special-education needs. Further, a new housing development is in the works, which will add more students to the district.

"So if you err, you err on the plus side because you can't run a deficit district by law," Falato said.

The message given by the state essentially admonishes districts that spend judiciously, which is inconsistent and confusing, districts say.

"One thing I find ironic is that for months we've heard from the state that schools spend too much. Now we're criticized for having money left over," said John Herbst, superintendent of the Logan school district in Gloucester County, which had a 13.4 percent, or $556,000 surplus.

Herbst said the bulk of his district's surplus went toward the 1995-96 budget to stabilize property taxes.

"I think that's an inconsistent message. If school districts are misusing

funds, fine, point the finger at them. But don't paint us all with one broad brush."

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