MILLS, Commissioner.--Petitioner challenges actions of the Board of Education of Greenburgh Central School District No. 7 ("respondent Board") and Superintendent Mazzullo regarding district finances. Among other things, petitioner alleges that respondents improperly held unexpended surplus funds and improperly included certain expenditures in the district’s contingency budget for 1998-99. The appeal must be sustained in part.

The record of this appeal indicates that the district operated on a contingency budget in the 1997-98 and 1998-99 school years. An Independent Auditor’s Report for the year ending June 30, 1997 stated that the district’s undesignated fund balance exceeded 2% of the projected 1997-98 budget, contrary to State law. The report’s "General Fund Comparative Balance Sheet" showed an undesignated fund balance of $2,277,794. The Tax Warrant for 1997-98, however, did not indicate that the district had any unexpended surplus funds.

During the 1996-97 fiscal year, respondent board made tax certiorari payments from its general fund. It subsequently issued $955,000 in serial bonds on July 15, 1997 and used the proceeds from this sale to reimburse the general fund for these tax refunds.

Respondents’ 1998-99 contingency budget allocated $261,000 for the purchase of computer equipment. Petitioner alleges that this purchase may not be included in a contingency budget. He notes that the district had not included the purchase of computer equipment in contingency budgets for prior years. For example, respondent board sought voter approval for the purchase of computer equipment in September 1997 and the proposal was defeated by district voters.

Petitioner alleges that respondents' financial practices have failed to comply with state laws and regulations and that their improper acts and omissions caused an increase in the school tax for the 1998-99 year. He contends that respondents have consistently failed to include estimated surplus fund balances in the proposed budgets for the following school years and have retained surpluses in excess of the 2% permitted under Real Property Tax Law ("RPTL")"1318 for several years. He claims that the improper retention of unexpended surplus funds from 1996-97 during the 1997-98 school year affected the calculation of the permissible budget for the 1998-99 year, resulting in a budget that is greater than would have been permitted if proper practices were followed.

Petitioner also contends that respondents prepared tax warrants for 1996-97 and 1997-98 that did not state the amount of unexpended surplus funds available for tax reduction or contain other statutorily required language. He further alleges that respondents failed to provide financial information when it was requested at meetings. Petitioner asserts that respondents paid tax certiorari refunds from the general fund and then reimbursed the fund with bond proceeds in order to conceal the true state of the district’s finances from the taxpayers.

Respondents assert that petitioner’s claims concerning actions that occurred before July 1, 1997 are time-barred. They allege that they have followed proper financial practices. Respondents claim that the 1998-99 budget was calculated properly and that it correctly included funds for the purchase of computer equipment necessary to maintain the district’s educational program. Superintendent Mazzullo’s affidavit states that the computers are necessary to the curriculum and includes attachments that reflect the district’s belief that students must have access to up-to-date technology to meet state learning standards.

Respondents also assert that, with the exception of some typographical errors, the challenged tax warrants were prepared properly. Respondents argue that they were within their authority in reserving $1.2 million of the 1996-97 unexpended surplus to fund future environmental cleanup and approximately $350,000 to cover the costs of a new collective bargaining agreement. They therefore contend that there were no significant surplus funds available to reduce the tax levy in 1997-98 and that, consequently, they were not required to report a surplus on the tax warrant.

I will address several procedural issues before discussing the merits of petitioner’s appeal. Petitioner has submitted a reply memorandum of law and additional exhibits. Reply memoranda of law may be accepted only with the prior approval of the Commissioner. (8 NYCRR "276.4). Because petitioner did not seek approval before submitting the reply memorandum, I have not considered it. The Commissioner, in his discretion, may permit the service and filing of additional affidavits, exhibits and other supporting papers (8 NYCRR "276.5). Because the proposed exhibits are extracts of budget documents taken out of context, I have not considered them.

Pursuant to "275.16 of the Commissioner's Regulations, an appeal to the Commissioner of Education must be commenced within 30 days of the making of the decision or the performance of the act complained of. Under RPTL "1318(1), an appeal is timely if it is brought within the fiscal year during which unexpended surplus funds are improperly retained (Appeal of Siver, 37 Ed Dept Rep 498, Decision No. 13,912; Appeal of Astafan, 36 id. 463, Decision No. 13,776; Application of Morris, et al, 35 id. 193, Decision No. 13,512).

This appeal was commenced on June 29, 1998, during the 1997-98 school year, and therefore is timely with respect to allegations that surplus funds from 1996-97 were improperly retained by respondent into the 1997-98 school year. Petitioner’s claims that unexpended surplus funds were retained improperly in 1996-97 and prior years and his claims that the 1996-97 tax warrant did not meet statutory requirements are untimely and must be dismissed.

Under RPTL "1318, at the conclusion of each fiscal year, a board of education must apply any unexpended surplus funds to reduce its tax levy for the upcoming school year. Surplus funds are defined as "any operating funds in excess of two percent of the current school year budget, and shall not include funds properly retained under other sections of law" (RPTL "1318[1]). Accordingly, at the end of each school year, all unexpended operating funds in excess of 2% of the amount of the budget for the upcoming school year must be applied to reduce the upcoming tax levy (Appeal of Clark, 37 Ed Dept Rep 386, Decision No. 13,885; Appeal of Moro, 35 id. 474, Decision No. 13,604).

Applying the statutory formula to its 1997-98 budget, respondent board was authorized to retain unexpended operating funds in the amount of 2% of $36,134,472, or $722,690. Respondents contend that they legitimately retained unexpended operating funds in excess of that amount to cover the cost of environmental cleanup required under the terms of a consent order and the anticipated cost of a new collective bargaining agreement. This argument is without merit. While RPTL "1318(1) does permit a board of education to retain additional unexpended operating funds when authorized to do so under other sections of law, it does not authorize a board to retain such funds by informally deciding to hold them for future expenses. The authority to exceed the 2% limit on retaining unexpended funds applies only to reserve funds specifically authorized by law (Appeal of Simons, 39 Ed Dept Rep , Decision No. 14,367; Appeal of Clark, supra; Appeal of Sumner, et al., 27 Ed Dept Rep 250, Decision No. 11,936). The record does not establish that properly authorized reserve funds were created in this case.

Respondents also failed to comply with RPTL "1318(1), which provides that "[t]he warrant of the collecting officer...shall state the amount of unexpended surplus funds in the custody of the board and shall further state that except as authorized or required by law, such unexpended surplus funds have been applied in determining the amount of the school tax levy." As discussed above, respondents improperly retained unexpended surplus funds in the 1997-98 school year. The tax warrant should have reflected the correct amount of surplus funds to be applied to reducing the tax levy for 1997-98. Moreover, in the future, respondents should indicate the estimated surplus balance in proposed budgets (Appeal of Sumner, et al., supra).

Petitioner’s claim that respondents improperly included equipment purchases in the 1998-99 austerity budget is denied. When the voters of a school district do not approve the budget submitted by the board of education, the board is limited in the amount of money it may raise by tax levy to the amount necessary for teachers’ salaries and for ordinary contingent expenses (Education Law "2023). The responsibility for determining what constitutes an ordinary contingent expense lies in the first instance with the board of education (Appeal of Gallagher, 39 Ed Dept Rep _______, Decision No. 14,353; Appeals of Gorman, 39 id. _______, Decision No. 14,265; Appeal of Johnson, 38 id. 327, Decision No. 14,045). However, any question concerning a board’s determination of such an expense may be referred to the Commissioner of Education (Education Law "2024).

Generally, an expense may be considered contingent if it is a legal obligation of the district or if it is necessary to maintain the educational program, preserve property or assure the health and safety of the students and staff (Appeal of Brousseau, 36 Ed Dept Rep 150, Decision No. 13,685; Formal Opinion of Counsel No. 213, 7 id. 153).

While a board of education does not generally have the authority to replace equipment when operating under a contingency budget, expenditures for items necessary to maintain the educational program are considered ordinary contingent expenses. Appeals of Gorman, supra; Appeal of Mitzner, 31 Ed Dept Rep 142, Decision No. 12,598). Decisions regarding the instructional programs to be offered in the schools of a district are within the discretion of the board of education and are not subject to voter approval (Education Law "1709(3); Appeal of Hebel, 34 Ed Dept Rep 575, Decision No. 13,413). Here, respondent board chose to include technology as a significant element of the curriculum and recognized the value of computer literacy in many areas of study. It replaced obsolete computer equipment with new computers that its superintendent characterized as necessary to the district’s educational mission and ability to meet the new learning standards required by the Board of Regents. Petitioner contests respondents’ need to purchase such computers while the district is on an austerity budget. While this dispute is a somewhat close question, I find that, on balance, the record supports respondents’ determination of the educational necessity of the computer purchase in question.

In an appeal to the Commissioner, the petitioner has the burden of demonstrating a clear legal right to the relief requested and the burden of establishing the facts upon which it seeks relief (8 NYCRR "275.10; Appeal of Greenburgh Eleven Federation of Teachers, 39 Ed Dept Rep 262, Decision No. 14,231; Appeal of Acme Bus Corporation, 37 id. 219, Decision No. 13,484; Appeal of Catherine B., 37 id. 34, Decision No. 13,797). Petitioner has failed to meet this burden with regard to his claim that it was improper for respondents to pay tax refunds from the general fund and later reimburse that fund with the proceeds of bonds issued to finance the refunds. Likewise, for the reason discussed above, I find that petitioner has failed to meet his burden on his allegations regarding respondents’ computer equipment purchase.

I have considered petitioner’s remaining claims and find them to be without merit.

THE APPEAL IS SUSTAINED TO THE EXTENT INDICATED.

IT IS ORDERED that respondents henceforth fully comply with Real Property Tax Law "1318 and approve tax warrants in strict compliance with the statutory requirements.

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