School budget may need $6 million more in cuts

New York State comptroller’s office released an audit report on the 2024-2025, 2025-2026, and proposed 2026-2027 budgets of the South Country School District. The proposed budget for next year and actual budget were compared and a budget deficit of approximately $8.7 million would be incurred based on the allocations for 2025-2026.

In addition to this shortage, although not addressed in the audit but by South Country’s superintendent, Antonio Santana, in an email to the district, if state legislation requested by the district to allow school the financing of existing deficits under government oversight, is not enacted, that the district would need to trim the budget for another $6 million on top of the $8.3 million in cuts.

As the school district has no available surplus funds and staffing cuts and spending freezes have not been successful in replenishing the needed funds, the district reported a general fund balance deficit of $1.8 million as of June, 30, 2025. The state estimates a fiscal year-end deficit of $10.5 million. District officials affirmed that the district will need to borrow at least $6 million to balance the 2026-2027 budget.

“While deficit financing can provide immediate relief, any such borrowing would most likely increase the overall deficit and create future funding gaps due to reliance on debt to pay for operating expenses,” read the state audit.

The state’s advised actions were:

• Develop a plan to fund operations and discontinue the practice of relying on one-time revenues to finance recurring expenditures.
• Use trend analysis when developing budget appropriations.
• Closely monitor revenues and expenditures and make budget modifications as necessary in a timely manner to ensure a balanced budget.

The audit characterized the board-adopted 2025-1026 budget as “not reasonable.”

The state was critical in the calculation of the appropriated funds, as they noted the board was aware of an existing $1.8 million deficit in the general funds from the 2024-2025 school year and therefore should have not allocated $5 million from the general funds this year.

For the appropriated restricted funds (e.g., employees’ retirement system, teachers’ retirement system, unemployment insurance, and workers compensation) new funding sources, such as increases in taxes or cuts in expenditures, are required to balance future budgets.

District officials had budgeted $450,000 for workers’ compensation or $717,700 (159 percent) less than actual projected costs of $1.2 million. Stemming from this imbalance, the fund balance was reduced by the shortfall on the appropriation line, as well as the reduction in the reserve account. Similar problems were found by the state for nearly all the appropriated restricted funds category.

The estimated revenue, appropriated reserves and property tax levy in the district’s proposed 2026-27 fiscal year budget were found to be insufficient to finance the $150.9 million in budgeted expenditures.

The state found that the estimated revenue, appropriated reserves and property tax levy in the district’s proposed 2026-27 fiscal year budget were “insufficient” to finance the $150.9 million in budgeted expenditures.

“Although borrowing would provide short-term relief in the 2026-27 budget, it will further increase the district’s deficit. Furthermore, the district’s reliance on borrowing to finance its operating expenditures may cause funding gaps in the future,” said the state.

Following the release of the audit, Santana sent an email to the district to further explain how the deficit situation of the school district occurred.

According to Santana, between 2005-2010, the district undertook capital projects with the anticipation of generous state aid. Santana said the district is still incurring debt service from these projects as the state funding was not sufficient for the length of time needed to complete the projects.

Santana described this situation as “creating a long-term, structural imbalance.”

During the 2022 budget adoption, Santana said that with the tax levy increase of 7.76 percent, reaching the limit would have “largely eliminated the projected gap and potentially created a modest surplus” and lamented the significantly lowered tax levy increase of 1.75 percent. Santana acknowledged the lower tax levy was enacted for the benefit of the South Country tax base.

In addition, Santana said that the misuse of federal COVID relief funds to address staffing levels that did not meet student enrollment as well as salaries and programmatic costs also affected the school district’s financial help.

Santana said that while this “approach allowed the district to maintain programs in the short term, it masked underlying imbalances that became fully evident once those funds expired, leaving ongoing obligations without sustainable revenue to support them.”

Santana said that the external audit and the comptroller’s review were aligned in finding that the current state of the budget was due to “the use of one-time revenues to fund recurring costs, insufficient trend-based budgeting, and a lack of timely monitoring and adjustment of expenditures.”