New London, schools battle over state funds
New London - In an attempt to resolve a financial disagreement with City Hall that threatens to create a budget shortfall of almost half a million dollars, New London Public Schools administrators on Tuesday appealed directly to the state Department of Education's chief financial officer.
At the heart of the dispute is approximately $414,700 of a state reimbursement for providing transportation for any student who attends an out-of-district magnet school. Both the Board of Education and the city counted some or all of that money as revenue in their budgets for the current fiscal year.
When the state issues any kind of funding or reimbursement, it goes directly to the city Finance Department, which acts as the financial agent for the entire city. School officials argue that the Finance Department should not hold on to that money, but rather pass it along to the school system.
"We budgeted for some of our transportation expenses to be covered by the reimbursement that the state provides," NLPS Interim Finance Director Melissa Flores-Seijo told the Finance and Audit Committee on Monday night. "But the city is not passing that through, so we will not have sufficient funds to cover that."
The district was also planning to use some of the student transportation money to pay for the renovations it made to Harbor School over the summer, Flores-Seijo said. The district now has a deficit in its budget line for repairs and maintenance.
Flores-Seijo, state-appointed Special Master Steven J. Adamowski and Interim Superintendent Miriam Morales-Taylor were scheduled to meet Tuesday with the state education department's chief financial officer, Kathy Demsey, to try to resolve the issue. Adamowski said Monday the meeting would be the second with state-level officials on the issue.
Through district Communications Manager Julianne Hanckel, Morales-Taylor and Flores-Seijo declined to comment Wednesday on the meeting or the issue in general.
A review of city and school district budgets for the last four fiscal years shows that the transportation funding was not included in the school budget before the current fiscal year. Rather, it had been counted as revenue in the city's general government budget each year.
Because the Board of Education is legally barred from running a budget deficit, the board will have to either find an additional source of revenue or make budget cuts to cover the shortfall if the city keeps the funding.
Similarly, if the city passes the money along to the school system, the City Council will have to account for a similar shortfall in its budget.
The city's finance director, Jeff Smith, said he and Flores-Seijo spoke about the state transportation funding months ago, as budgets for the current fiscal year were being compiled. At the time, Smith said, he was told that Adamowski had instructed Flores-Seijo to add the money to the Board of Education's budget.
"Dr. Adamowski told them to budget it in their budget, not as part of the general fund, but part of a special fund," Smith said Tuesday. "The problem is that that grant has always been a general fund grant in New London and, across the state, that is the way it is handled, to the best of my knowledge."
Smith said he did not remove the revenue from the city budget because he felt he did not have the authority to do so unless a policy-making body made that decision.
"This could have gone to the City Council, it could have gone to the school board and they could have had a political meeting of minds to move this money over to the Board of Education," Smith said. "If it has been handled one way, I think there is an appropriate protocol to go through to change that."
The issue was also briefly a topic of discussion at a joint meeting of the Board of Education's Finance and Audit Committee and the City Council's Finance Committee on Oct. 27, though the bodies did not discuss how to resolve the problem.
"Depending on the resolution of this, this could mean a loss of $415,000 to the Board of Education in fiscal year 2015, funds which would have to be recovered somehow with cuts, and a similar amount in fiscal year 2016," the board's Finance and Audit Committee Chairman Rob Funk said at the meeting.
Smith said he has spoken to officials at the state Department of Education and the Connecticut Council of Municipalities, and that both agencies told him he was correct to count the money as revenue on the city side of the budget.
"I think the city handled this correctly, but I am perfectly willing to change. I'm not trying to withhold any money that belongs to New London schools, we are partners in education," he said. "But I'm surprised that this is being raised as an issue because this is the way this reimbursement has been handled forever and when I asked the state Department of Education if I had been handling it incorrectly, they said no."
Adamowski, though, told the board on Monday that standard practice is for the money to be passed through from the city to the school system.
"There is a theory that the city gave you that (money) last year as part of your general appropriation, so an argument can be made that they should keep it," Adamowski said. "Now, you know they never explicitly did that, and in most cities this is passed through to the Board of Ed and the Board of Ed lists it as a revenue in its budget as you did, and that is a normal practice."
On Wednesday, Smith said he and district administrators have agreed to get together to iron out a solution to the dilemma.
"We are going to have a meeting sometime toward end of the month. We will all be getting together and will try to work this out so we can make sure the schools can do what they have to do," he said. "I think that will solve the problems."
c.young@theday.com
Twitter: @ColinAYoung
Comment threads are monitored for 48 hours after publication and then closed.