As the East Meadow School District prepares for its 2018-19 budget vote, a local advocacy group has filed a lawsuit against the district, claiming that it overtaxed residents over a three-year period.
Marie Unapanta filed the suit in Nassau County State Supreme Court on Dec. 21, and shortly afterward she was joined by Kyle Strober of the Association for a Better Long Island. The suit highlights a February 2016 state audit in which Comptroller Thomas DiNapoli accused the district of not adequately managing its budget.
According to the audit, the district overestimated expenditures by $29.4 million in the three years leading to the 2014-15 fiscal year. In doing so, it accumulated an unrestricted fund balance — the portion of the fund balance the district is allowed to retain at the end of the year — that varied between 5 and 6 percent. The legal limit, however, is 4 percent.
“We’re of the opinion that an audit should be conclusive evidence of any malfeasance by the school district,” said Richard Cronin, the attorney representing both plaintiffs. “The comptroller is your watchdog. He has the constitutional authority specifically delegated to him . . . to ensure that school districts are not violating any laws.”
Cronin has since added the Plainedge School District as a defendant in the case. He is calling for residents to join in what he called a communitywide class action lawsuit requesting that both districts end the practice of amassing excess funds and returning them to taxpayers.
“This is an issue that we’ve been working on for several years,” Strober said, adding that the suit aims to carry out the mission of the Long Island advocacy group, “to protect the long-term economic viability of our region.”
“Putting money back into taxpayers’ pockets will be a boost to the local economy,” he said, “as residents will have more money to spend at local businesses, like restaurants [and] retail stores, or even pay off personal debt.”
But Brian O’Flaherty, an East Meadow Board of Education trustee, said he believed the suit would quickly be dismissed. According to O’Flaherty, the district must keep excess funds at year’s end in order to account for expenses at the start of the following year.
“When we start our school year, we don’t get one big check from the county or state,” he said. “It comes in dribs and drabs.” He explained that if the district did not carry funds over, it would have to take out a loan from a bondholder, pay interest on it and the burden of replacing it would fall on taxpayers.
“I’m hoping that the judge will see through this [case], because if he understands the process, he’s going say we’re doing a good job,” O’Flaherty said.
The practice of accruing excess reserves is not exclusive to the East Meadow and Plainedge districts. Since 2014, DiNapoli has admonished at least 20 other districts for exceeding the 4 percent cap, according to his office. Cronin said he hoped the case could serve as a precedent to prevent this from happening in other districts — especially amid a Republican tax plan that caps the federal tax deductions for state and local taxes at $10,000.
“The tax act is going to change real estate tremendously,” Cronin said. “And I think it’s going to have people put a microscope to their [property-tax] bill.”
O’Flaherty said that would be unfair to the East Meadow District, because 30 percent of the community is exempt from property taxes — including the Nassau County jail and military homes in Mitchell Manor. He explained that East Meadow must rely on state aid, and like many other county schools, it needs additional funds to increase security in the aftermath of the Feb. 14 shooting in Parkland, Fla.
“Never before have I heard of a school district being financially stressed,” O’Flaherty said. “Districts are now tapping into their reserves to go through their operations on a day-to-day basis.”
While the lawsuit strictly focuses on the 2012 to 2015 fiscal years, O’Flaherty said the district has reduced the amount of reserve funds it stockpiles at the end of each year. Furthermore, next year it hopes to establish a capital reserve fund with the money left over from the 2018-19 budget. Residents will vote on this proposal, along with the budget, on May 15.
The lawsuit, which also names the State Education Department and its commissioner, MaryEllen Elia, will be heard in New York State Supreme Court in Albany at a date yet to be determined.