West Islip School District posts 2021/2022 Surplus of $3.0MM

The West Islip School District posted a General Fund operating surplus of $3.0MM for the 2021/2022 fiscal year primarily due to lower expenses associated with Programs for Children w/ Handicap Conditions in the amount of $1.1MM, lower Employee Benefits $1.2MM and lower Pupil Transportation $0.6MM. The District has a history of surpluses resulting from overestimating expenses as cited in the New York State Office of the Comptroller’s audit issued this past July. The impact of this is that over the past 5 years the District has generated surpluses totaling $21.6MM and implies there is a structural surplus in its budgeting process.

The total fund balance and reserve amounts in the General Fund decreased $1.7MM in 2022 from $37.6MM in 2021 to $35.9MM. This is primarily due a reduction in the Workers Compensation and Unemployment Insurance reserves, which were both cited by the Comptroller’s audit as being inappropriate for the year ending 2021, by $2.2MM, (72%), and $1.5MM (98%). The Capital Fund increased $2.7MM to $8.75MM while the Unassigned Fund balance increased from $5.1MM to $5.2MM and remains at the 4.0% statutory limit. An additional $1.9MM reserve is associated with encumbrances awaiting payment and is an increase of $0.6MM versus 2021. A $4.58MM interfund transfer from the General Fund to the Capital Projects Fund reflects the May voter approved usage and was primarily sourced by the aforementioned reduction in Workers Compensation and Unemployment Insurance reserves.

The District’s Total Fund Balance, including all funds, increased $12.5MM from $38.9MM to $51.4MM primarily due to the $17.1MM in Capital Project permanent financing coupled with the General Fund Surplus of $3.0MM less Capital Project Expenditures of $9.3MM. The School Lunch Fund also contributed a surplus of $0.7MM due to federal and state reimbursements exceeding the cost of distributing free meals to all students. The $17.1MM Capital Project proceeds are related to the issuance of $8.1MM for the Serial Bond 2021 and the District entering into a new energy performance contract in the amount of $9.0MM. Both obligations have a maturity date in the year 2036. The $9.3MM in Capital Project Expenditures is associated with $7.2MM in the Energy Performance Contract, $2.0MM for the 2015 Bond Issue and $0.1MM in the May 2021 Capital Reserve Project.

The District often explains that surpluses are used to fund the Capital Reserve for future capital improvements which is clearly true. For example this past month's Buildings and Ground Committee meeting discussed upgrading the Middle and Elementary School fire alarm systems, installing air conditioning units and the replacement of the high school swimming pool, originally built in 1957. as capital improvement priorities which could partially be funded by the Capital Reserve. However it's also misleading to omit that the capital reserve is only 24% of the total $35.9MM General Fund balance while the majority of reserves, and obviously where the majority of surpluses are used, is on employee related reserves that account for 54% of the total.

Note: The above is based on the School District’s Financial Statements for the year ended June 30, 2022 and included in its Independent Auditor’s Report dated October 18,2022.