01/13/09
Council agrees to help School Department buffer anticipated revenue loss
By a 4-2 vote, town councilors on Jan. 12, 2009 agreed to transfer $200,000 of the town's undesignated surplus funds to the School Department's undesignated surplus.
The move was made to help the School Department address a $421,572 shortfall in general purpose aid to education from the state that school officials are anticipating due to Gov. John Baldacci's ordered curtailment of school funding.
Included in the governor's supplemental budget submitted to the Legislature last month is a $27 million curtailment of general purpose aid, intended to meet a projected shortfall in state revenue.
For Cape Elizabeth and other school systems around the state, the curtailment comes nearly half-way into the school year. "I think it is a true, urgent need of the School Department," said Councilor Anne Swift-Kayatta, who is also chairman of the council's finance committee. She said in general she did not believe undesignated surplus should be used to fund the operating budget. "However, I think this is an unusual circumstance," she said.
In a meeting Jan. 6, the finance committee, a committee of the whole council, voted 3-1 to recommend to the full council the transfer of undesignated surplus.
Recommended practice is for municipalities to keep one month's worth of operating expenses, or 8.33 percent in an undesignated fund. The fund is typically used to aid cash flow between property tax collection dates, and for tax abatements.
All members of the town council favored helping the School Department by transferring some of the undesignated surplus, but a rider limiting the funding to "not more that 50 percent of the curtailment" prompted two councilors, Sara Lennon and David Sherman, to vote against the transfer. "I was the one member of the finance committee to vote against (the recommendation)," said Sherman. "It seems to me unlikely that the (curtailment) will be less than $421,000," he said. "It seems to me that if the town is prepared to take $200,000 from undesignated surplus, we ought to just be prepared to transfer the $200,000. I would advocate that position again tonight," Sherman said. Lennon said she shared Sherman's support of the transfer, but not the 50-percent limit.
Other councilors, however, said they believed the limit was a reasonable compromise, weighing possible affect on the town's bond rating or not having enough revenue to cover possible tax defaults, against the risk of having school unduly disrupted in the middle of the school year.
State officials expect the Legislature to act on the supplemental budget within the next few weeks, but possibly as late as mid-February. Michael McGovern, the town manager, said the actual transfer would take place when the final amount of the curtailment is decided.
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