This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

INSURANCE -- Self-Insurance (transfer from insurance reserve to reserve for property loss and liability claims)
MUNICIPAL FUNDS -- Insurance Reserve (transfer by school district into reserve for property loss and liability claims)
SCHOOL DISTRICTS -- Reserve Fund (no authority to transfer from insurance reserve to reserve for property loss and liability claims)

GENERAL MUNICIPAL LAW, §6-n; EDUCATION LAW, §1709(8-c): A school district may not transfer the unexpended balance of an insurance reserve fund established pursuant to General Municipal Law, §6-n into a reserve for property loss and liability claims established pursuant to Education Law, §1709(8-c).

You ask whether a union free school district which maintains an insurance reserve pursuant to General Municipal Law, §6-n may transfer the moneys in that reserve fund to establish a reserve for property loss and liability claims under Education Law, §1709(8-c).

General Municipal Law, §6-n authorizes the governing board of any "municipal corporation", which is defined to include school districts, to establish an insurance reserve fund. The amount paid into such fund during any fiscal year may not exceed the greater of $33,000 or 5% of the total budget for the fiscal year. With certain exceptions, the municipal corporation may make expenditures from the fund for any loss, claim, action or judgment for which it is authorized or required to purchase or maintain insurance. In the case of expenditures from the fund to pay settled or compromised actions or claims, the settlement or compromise must be judicially approved if in excess of $25,000 (General Municipal Law, §6-n[2][a], [9],[b],[c], [10], [11]).

Education Law, §1709(8-c) authorizes union free school districts to establish and maintain a program of reserves, not to exceed the greater of $15,000 or 3% (exclusive of any authorized planned balance) of the annual budget of the district to cover property loss and liability claims. Section 1709(8-c) contains no requirement that compromised or settled actions or claims to be paid for from the fund be judicially approved.

Section 6-n(2)(b) provides that where a municipal corporation has previously established a reserve fund under another provision of law for a type of risk for which expenditures may be made under section 6-n(2)(a), the municipal corporation, by resolution, may discontinue the other reserve and transfer any unexpended balance, to the extent not subject to incurred or accrued liabilities, to a section 6-n reserve fund. Thus, a school district which has established a reserve fund pursuant to Education Law, §1709(8-c) may abolish that fund and transfer the unexpended balance to a section 6-n reserve fund.

There is no analogous authority, however, for a school district to abolish a section 6-n reserve fund and transfer the unexpended balance to a fund established pursuant to Education Law, §1709(8-c). Section 6-n(13) of the General Municipal Law relates to the procedures for discontinuing an insurance reserve fund. It provides that, if the municipal corporation determines that a section 6-n reserve fund is no longer needed, the moneys remaining in the fund, to the extent they exceed a sum sufficient to pay all liabilities incurred or accrued against the fund, may be transferred to another reserve fund of the municipal corporation authorized by the General Municipal Law, or to a reserve established under Education Law, §3651. Education Law, §1709(8-c), however, is not listed among the reserve funds into which the unexpended balance of a section 6-n fund may be transferred.

Accordingly, it is our opinion that a school district may not transfer the unexpended balance of an insurance reserve fund established pursuant to General Municipal Law, §6-n into a reserve for property loss and liability claims established pursuant to Education Law, §1709(8-c).

April 14, 1992
Donald J. Slover, Ass't Superintendent For Business
Lynbrook Union Free School District