Published Thursday, June 27, 2002
By Erin Remai
Mercer County Common Pleas Court Judge Francis J. Fornelli Wednesday morning told members of the Reynolds Area School Board that he would not grant their request to raise taxes more than 10 percent until he has a fact-based budget.
He also told the six board members at the hearing that an investigation into the district's former administration -- perhaps by the state Auditor General's Office -- may be in order so that history doesn't repeat itself.
The district is facing a $2 million budget deficit and the board owes $1.5 million on last year's tax-anticipation loan. That payment is due June 30.
As a result of Fornelli's ruling, school directors had no choice but to table a 2002-03 spending plan when they met Wednesday evening, even though state law requires balanced school budgets to be in place by June 30.
Superintendent Dr. Anthony Trosan told the public at the evening meeting he believes the board is getting "fair and reasonable treatment" from the court.
The board is requesting a 12-mill increase, or 28 percent, which represents 36 mills under the previous tax assessment ratio. Last year, county commissioners changed the assessment ratio from 33.3 percent to 100 percent of a property's assessed value, reducing millage by a third but leaving dollar amounts intact. School districts must seek court approval to raise taxes more than 10 percent in the year following a change in assessments.
Fornelli said the board submitted three different budgets for his review, and none of them reflects the $1.5 million tax-anticipation loan repayment. He said that should be included as a debt-service line item.
The judge said the budgets contained many discrepancies: reporting expenses that don't exist, failing to list expenses that do exist and numbers in the wrong columns.
"It appears there will have to be a millage increase. But how much, I don't know," he said.
Fornelli appointed Greenville-based Keystone Research Inc. to review the board's proposed budget after its solicitor Mark Longietti filed a petition earlier this month for the tax increase. Keystone prepared a report, which was distributed at the hearing.
Fornelli said the report indicates the district that includes Pymatuning, Delaware and West Salem townships and Fredonia is obviously in financial trouble, and there appears to have been "an absolute dearth of financial management and oversight over the past several years."
The judge said his immediate reaction was bewilderment over how the district could go from having a $2 million surplus in 1999 to needing a 28 percent tax increase.
School director and former Superintendent Maddox Stokes told Fornelli when he retired in June 1999, he left behind a healthy fund balance of $2 million. Stokes also said he had no chance to see the 1999-2000 spending plan.
Stokes was replaced by Dr. Charles M. Cagno, who retired last July and was succeeded by Trosan. According to Keystone's report, the $2 million surplus was depleted during Cagno's tenure.
Repeated attempts to reach Cagno at his last known telephone number were unsuccessful.
Fornelli asked Trosan to review the circumstances that led the board to his courtroom.
Trosan said:
» The board learned of a $1.1 million shortfall on April 17 at a finance committee meeting.
» A few days later, state legislators changed the funding for teacher retirement packages, giving the district an extra $160,000 to work with. The board also decided not to replace three retiring teachers, saving another $450,000.
» On May 1, sizable errors were found in the draft of the spending plan for 2002-03. Former Business Manager John Simon forgot to include $1.2 million in transportation costs and tax collection was estimated at 100 percent, instead of a more realistic 93 percent.
That pushed the deficit to more than $2 million.
Simon later resigned, taking sick days for the rest of his term and leaving the district without a business manager, Trosan said.
» Last year's budget was not entered properly on the state Department of Education's "Your Schools, Your Money" report, which translates school spending plans into laymen's terms. Administrative costs in that report also are inaccurate, Trosan said.
» Previously, board members received little information about the budget from the business office, a practice Trosan said will change with the new business manager. The board will now have monthly budget reports to review and an audit committee was appointed Wednesday night.
After Trosan gave his review, Fornelli told the school directors that it is up to them to formulate a plan to get the district out of its present situation and ensure that it won't happen again. "This is the last time you'll have the right to say, this one wasn't ours primarily, but at this point on, it's our responsibility and we will do it properly," he said.
Trosan told Fornelli the board could submit a fact-based budget to him by next week. Another hearing is scheduled for 9:30 a.m. Tuesday.