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Purpose of Budget Review 

The purpose of our budget review was to determine whether the significant revenue and expenditure projections in the District’s adopted 2024-25 budget were reasonable.

Background

Pursuant to Chapter 89 of the Laws of 2016, as amended, the New York State (NYS) Department of Education (SED) is required to appoint up to two monitors to the East Ramapo Central School District (District) to provide fiscal and academic oversight. SED appointed two monitors, one fiscal and one academic. After voters approved a 1 percent tax levy increase in June 2024, multiple factors led SED to direct the District’s Board of Education (Board) to adopt a budget providing for an additional 4.38 percent increase, or $6.8 million, to the 2024-25 tax levy, which was ultimately approved by the Board in August 2024. SED’s order noted that the District has faced challenges in meeting State educational requirements, including the provision of English Language Learners services and deficiencies in public school facilities due to lack of sufficient investment, including lack of access to clean drinking water, unsatisfactory ventilation systems, and unsatisfactory overall building quality. Despite the monitors’, the Board’s and school officials’ concerns of a potentially significant operating deficit, in November 2024, the District’s financial statement audit for the 2023-24 fiscal year revealed $31.3 million in unassigned fund balance resulting from an operating surplus. Due to concerns related to the District’s significant unanticipated 2023-24 fiscal year operating surplus, we conducted a review of the District’s adopted budget for the current 2024-25 fiscal year. 

Key Findings

• The District’s unassigned fund balance increased from $4.4 million in 2021-22 to $31.3 million in 2023-24 and resulted in unassigned fund balance as a percentage of the ensuing year’s appropriations increasing from 1.7 percent in 2021-22 to 9.2 percent in 2023-24, which exceeds the 4 percent statutory limitation.
• The 2024-25 adopted budget relies on the use of nonrecurring funding of $20.7 million to finance operating expenditures, and relies on at least $5 million of ARPA funding that will no longer be available to fund recurring expenditures.
• The 2024-25 adopted budget did not include any revenue for interest and earnings. We project the District could potentially receive $4.7 million in unbudgeted revenue.
• The budget included the rental of property revenues of approximately $181,000. We project the District could receive approximately $347,000, or approximately $166,000 in additional revenue that was not budgeted.
• The budget included non-resident tuition revenues of $1.4 million. We project the District could potentially face a shortfall of approximately $1.4 million if revenue estimates are not realized.
• Budgeted personal services revenues of approximately $136.2 million may be overestimated by as much as $23.6 million.
• The transportation appropriation of approximately $76.6 million is likely overestimated by as much as $10.9 million.
• The materials and supplies appropriation of approximately $7.9 million may be overestimated by as much as $6.5 million.
• The tuition payments appropriation of approximately $7 million is likely overestimated by as much as $3.4 million.
• The District’s appropriation of approximately $10.5 million for its share of Social Security payments may be overestimated by approximately $1.9 million.   
• The appropriation of approximately $12.6 million for payments of teachers’ retirement is likely overestimated by approximately $1 million.
• The health insurance appropriation of approximately $36 million is likely underestimated by as much as $2.3 million.
• The substitute teachers appropriation of approximately $1.2 million is likely underestimated by as much as $613,000.
• The appropriation of approximately $1.8 million for payments due to the New York State Local Retirement System (NYSLRS) is likely underestimated by as much as $606,000.
• The appropriation of approximately $357,000 for maintenance overtime is likely underestimated by as much as $347,000.
• The appropriation of approximately $255,000 for custodian substitutes is likely underestimated by as much as $179,000.
• Six of the District’s 11 collective bargaining agreements (CBAs) have expired or will expire soon, and three CBAs were settled during fiscal year 2024-25. The District faced additional expenditures when the three contracts were settled and could face potential additional expenditures when the others are settled.
• Our review of District records, as of January 31, 2025, indicates the District will not use the $19.2 million appropriated fund balance and reserves. In addition, the District is projected to have a $25.8 million operating surplus for fiscal year ending 2024-25.

Key Recommendations

1. Provide timely financial information to the Fiscal Monitor throughout the year and work with them to develop structurally balanced budgets that include realistic revenue estimates and appropriations based on historical trends or other known factors, such as recent settlement of contracts.
2. Develop a plan to fund operations and discontinue the practice of relying on one-time revenues to finance recurring expenditures.
3. Closely monitor revenues and expenditures and make budget modifications as necessary in a timely manner to ensure a balanced budget.
4. Ensure supporting documentation and calculations for budgeted revenues and expenditures are maintained when developing future budgets.
5. Review and update the District’s multiyear financial and capital plans, as necessary.