Appeal of CAROLE C. BAKER from action of the Board of Education of the Honeoye Central School District regarding financial practices.

Decision No. 18,495

(September 23, 2024)

Bethany A. Centrone, Esq., attorney for respondent

ROSA., Commissioner.--Petitioner challenges the actions of the Board of Education of the Honeoye Central School District (“respondent”) regarding its budget for the 2023-2024 school year.  The appeal must be dismissed.   

On May 17, 2023, voters approved the district’s proposed 2023-2024 budget.  Thereafter, respondent transferred funds from the 2022-2023 fund balance into its retirement reserve fund and capital reserve funds.  This appeal ensued.

Petitioner argues that respondent improperly retained excess funds by not applying its surplus operating funds to reduce the tax levy in violation of Real Property Tax Law (“RPTL”) § 1318 (1).  Petitioner also contends that respondent provided misleading, subjective information to voters to increase support for the budget.  Finally, petitioner argues that respondent regularly adopts budgets that lack transparency and generate excessive operating surpluses.  For relief, petitioner requests that respondent return any unexpended surplus funds from the 2022-2023 school year that were not lawfully assigned to reserve funds on or before the date of the tax levy; a directive that respondent use public resources to present objective, factual information concerning upcoming votes or elections; and an order directing the Office of State Comptroller to audit the district’s financial management practices and correct any deficiencies.

Respondent argues that petitioner’s claims are untimely, constitute improper requests for advisory opinions, and otherwise fail to state a claim upon which relief may be granted.

Most of petitioner’s claims must be dismissed as untimely.  An appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of, unless any delay is excused by the Commissioner for good cause shown (8 NYCRR § 275.16; Appeal of Lippolt, 48 Ed Dept Rep 457, Decision No. 15,914; Appeal of Williams, 48 id. 343, Decision No. 15,879).  Petitioner commenced the instant appeal on August 31, 2023, well over 30 days after the school district budget vote.  Accordingly, her challenge to voter materials distributed in connection therewith is untimely (Appeal of Bonelli, 62 Ed Dept Rep, Decision No. 18,200).

However, an appeal under RPTL § 1318 (1) is timely if brought within the year during which unexpended surplus funds were allegedly improperly retained (Appeal of Wille, 56 Ed Dept Rep, Decision No. 17,050; Appeal of Schadtle, Jr., 40 id. 60, Decision No. 14,421).  This appeal was commenced in August 2023, during the 2023-2024 fiscal year in which the surplus was allegedly retained.  Therefore, petitioner’s allegation that respondent improperly retained surplus funds during the 2023-2024 school year is addressed below.

At the conclusion of each fiscal year, a board of education must apply “any operating funds in excess of four percent of the current school year budget” to reduce its tax levy for the upcoming school year (RPTL § 1318 [1]).  Surplus funds do not include “funds properly retained under other sections of law” (RPTL § 1318 [1]).  Accordingly, the Commissioner has repeatedly held that, at the end of each school year, all unexpended operating funds in excess of the statutorily permitted four percent of the amount of the budget for the upcoming school year must be applied to reduce the tax levy (Appeal of Uy and Norden, 44 Ed Dept Rep 368, Decision No. 15,201; Appeals of Gorman, 43 id. 32, Decision No. 14,906).  If a board wishes to retain unexpended surplus funds, it must place them in a reserve fund prior to the tax levy (Appeals of Puskuldjian and Romano, 61 Ed Dept Rep, Decision No. 18,090; Appeal of Gorman, 43 id. 32, Decision No. 14,906; Appeal of Simons, 39 id. 744, Decision No. 14,367).

In an appeal to the Commissioner, a petitioner has the burden of demonstrating a clear legal right to the relief requested and establishing the facts upon which he or she seeks relief (8 NYCRR 275.10; Appeal of P.C. and K.C., 57 Ed Dept Rep, Decision No. 17,337; Appeal of Aversa, 48 id. 523, Decision No. 15,936; Appeal of Hansen, 48 id. 354, Decision No. 15,884).

Here, it is undisputed that the board voted to transfer funds into a reserve fund after imposition of the 2023-2024 tax levy.  Respondent explains that it was “unaware of the requirement that surplus be transferred into reserve funds prior to determining the levy” but will ensure that it complies with this requirement going forward.  Therefore, I find that respondent violated RPTL § 1318 (1) by improperly retaining surplus funds prior to the tax levy (Appeals of Gorman, 43 Ed Dept Rep 32, Decision No. 14,906; Application of Mills, 34 id. 92, Decision No. 13,243).  Given respondent’s commitment to comply with RPTL § 1318 (1) in future budget years, however, it is unnecessary to issue any relief in conjunction with this decision.  In this respect, there is no mechanism for returning a pro rata share of funds to the taxpayers after the tax levy (Appeals of Puskuldjian and Romano, 61 Ed Dept Rep, Decision No. 18,090; Appeal of Wood and Grosso, 57 id., Decision No. 17,358; Appeal of Wille, 56 id., Decision No. 17,050).

In light of my decision, I need not address the parties’ remaining contentions.  However, respondent should continue to examine its budget practices and adjust projections to avoid excessive surpluses (Education Law § 2023 [4] [d] [ii]).

THE APPEAL IS DISMISSED.

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