Skip to main content

Decision No. 15,211

Appeal of KEN UY from action of the Board of Education of the Sullivan West Central School District regarding a budget appropriation and expenditure.

Shaw & Perelson, LLP, attorneys for respondent, David S. Shaw, Esq., of counsel

Decision No. 15,211

(April 26, 2005)

MILLS, Commissioner.--Petitioner challenges a transfer of funds by the Board of Education of the Sullivan West Central School District ("respondent") from the unappropriated fund balance during the 2003-2004 school year to an account for the payment of debt service on a capital project and an expenditure from that account. The appeal must be dismissed.

On June 22, 2000, district voters approved a proposition in the amount of $49,938,453 for a capital project to acquire property and construct a building, and authorized respondent to issue obligations to fund the project. In May 2001, respondent adopted a resolution authorizing the issuance of bonds and notes to fund the project. In June 2002, respondent issued bond anticipation notes in anticipation of the issuance of serial bonds for the capital project. These notes came due in June 2003 and June 2004. It is unclear whether and to what extent respondent issued serial bonds to fund the project.

During the 2002-2003 school year, respondent apparently submitted claims for State aid, pursuant to Education Law ��3602 and 3641, on capital project expenditures (capital outlay) made during the 2001-2002 school year. On June 26, 2003, the State Education Department's Office for State Aided Programs notified respondent that the 2001-2002 capital outlay expenditures would generate State aid, but that respondent was required to amend certain financial data submitted in support of its State aid claim. Although the record is unclear, it appears that respondent subsequently received the State aid and included it in the unappropriated fund balance of the previously approved 2003-2004 budget.

On April 15, 2004, respondent decided to transfer money from the unappropriated fund balance to pay for debt service on the capital project.On June 17, 2004, respondent adopted this resolution transferring money from the 2003-2004 unappropriated fund balance to enable such payment:

BE IT RESOLVED, that the Board of Education hereby directs the Superintendent to increase the budgetary item Transfer Debt Service - SW Project A9901.96.0.000 in the amount of $1,500,000 with such funds to be used for the purpose of reducing principle [sic]; and

BE IT FURTHER RESOLVED, that the appropriated fund balance is hereby increased by the amount of $1,500,000 as a result of the reduction in principle [sic].

On June 18, 2004, the district treasurer made the payment.

Petitioner claims that, by increasing the debt service appropriation, the transfer of money from the unappropriated fund balance to the debt service account improperly increased the total 2003-2004 budget appropriation above that approved by the voters. Petitioner contends that respondent's action violates Education Law �1718. Petitioner also contends that the intrafund transfer does not comply with the uniform system of accounts prescribed by the State Comptroller pursuant to General Municipal Law �36.

Petitioner seeks an order nullifying all expenditures that cause respondent to exceed the total 2003-2004 budget appropriation authorized by voters. Petitioner also asks, "[i]n the event that Respondent has made a payment under a debt service agreement... which causes Respondent to exceed authorized expenditures, relief in the form of nullifying said payment and causing Respondent to be in default of said debt service agreement."

As part of his appeal, petitioner sought a stay of the appropriation and expenditure, so that the money could be used to reduce the 2004-2005 tax levy. On June 28, 2004, petitioner's request was denied.

Respondent denies petitioner's allegations and asserts that it has properly complied with applicable provisions of the Education Law in managing the 2003-2004 budget and preparing the 2004-2005 budget. Respondent also argues that the appeal is moot because the contested expenditure was made on June 18, 2004, and that all 2003-2004 budget events have occurred. Respondent also objects to petitioner's verified reply, maintaining that it does not comply with the Commissioner's regulations.

The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR ��275.3 and 275.14). A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of Schildhorn, 44 Ed Dept Rep 212, Decision No. 15,152). Therefore, while I have reviewed petitioner's reply, I have not considered those portions containing new allegations that are not responsive to new material or affirmative defenses set forth in the answer.

The appeal must be dismissed for failure to join necessary parties. A party whose rights will be adversely affected by a determination in an appeal in favor of petitioner is a necessary party and must be joined as such (Appeal of Reshard, 44 Ed Dept Rep 210, Decision No. 15,151; Appeal of K.S., 43 id. 492, Decision No. 15,063). Petitioner specifically seeks to void the June 18, 2004 expenditure to reduce the outstanding principal on the capital project indebtedness. To the extent that such expenditure paid off existing bond anticipation notes or serial bonds, the holders of such obligations to whom payments were made are necessary parties to the appeal. Petitioner's failure to join them requires dismissal.

The appeal is also moot. The Commissioner of Education will only consider matters in actual controversy and will not render a decision on a state of facts which no longer exists or which subsequent events have laid to rest (Appeal of E.M., 44 Ed Dept Rep 156, Decision No. 15,130; Appeal of S.Y., 44 id. 120, Decision No. 15,118). This appeal was initiated on June 18, 2004 - the day respondent's treasurer made the disputed expenditure - and was not received in my Office of Counsel until June 21, 2004. Petitioner's request for a stay of the disputed appropriation and expenditure, so as to permit an offset of the 2004-2005 tax levy, was denied on June 28, 2004. Respondent was required to issue its 2004-2005 tax warrant on or before September 1, 2004 (Real Property Tax Law �1306). Because the disputed appropriation and expenditure has already occurred and cannot be voided, as noted above, and the 2004-2005 warrant for the tax levy has also been issued, petitioner cannot obtain the relief sought. The appeal, therefore, is moot.

Even if the appeal were not dismissed on procedural grounds, I would dismiss it on the merits. In an appeal to the Commissioner, the petitioner has the burden of demonstrating the facts upon which relief is sought and a clear right to the relief requested (8 NYCRR �275.10; Appeal of Smith, 44 Ed Dept Rep 201, Decision No. 15,148; Appeal of Goldin, 43 id. 453, Decision No. 15,048). Petitioner asserts that respondent's transfer of $1,500,000 from the unappropriated fund balance to the debt service account improperly increased the appropriation in that account and, thus, improperly increased the total 2003-2004 budget appropriation authorized by district voters, in contravention of Education Law �1718(1). That section provides:

No board of education shall incur a district liability in excess of the amount appropriated by a district meeting unless such board is specially authorized by law to incur such liability.

Respondent maintains that the $1,500,000 transfer to debt service and subsequent expenditure is permissible under Education Law �1718(1). Respondent asserts that the appropriation and expenditure were authorized by law because the expenditure was applied to debt service previously authorized by the voters.

The petition consists entirely of conclusory allegations. The only documentary evidence submitted by petitioner are copies of respondent's June 17, 2004 resolution and copies of pages setting forth accounting principles and account code numbers from the Uniform System of Accounts for School Districts. Petitioner submits no further evidence to support his conclusory statements.

Respondent's description of the appropriation and expenditure does not provide a clear explanation of exactly what was paid with the money. It is unclear whether respondent used the money to pay off any of the bond anticipation notes due in June 2004 or other "bonded indebtedness." It is also unclear to what degree respondent used the money transferred from the unappropriated fund balance to pay for debt service already included as a line item in the approved 2003-2004 budget. As noted above, petitioner has the burden of proof. On this record, I am unable to determine the appropriateness of respondent's action. Thus, petitioner has failed to meet his burden, and the appeal must be dismissed.

THE APPEAL IS DISMISSED.

END OF FILE