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$3.3-million surplus raises eyebrows

Some welcome the school district's budget windfall. Others say the timing is suspicious.

By ROBERT KING, Times Staff Writer
© St. Petersburg Times
published June 30, 2002

To most people, finding a few dollars in the pocket of a freshly washed pair of blue jeans is cause for celebration.

To the School Board, the discovery of a $3.3-million surplus tucked away in a bond repayment account since 1995 is certainly cause for rejoicing. If any organization could use some good news on the financial front, it's the Hernando County schools.

But this discovery is also forcing the School Board to answer some tough questions about itself and the way it keeps track of public money.

Adding to the significance of the discovery is its timing -- at the conclusion of a crucial budget year, which ends today, and less than three months shy of a School Board election.

For the most part, School Board members are focused on the opportunities the money presents. Already, they are talking about paying off debts, adding to the district's rainy day fund and giving teachers a good pay raise.

The lone exception is board member Gail David, who is suspicious about the origins of the windfall and curious about its "highly opportunistic" timing.

Specifically, David wonders about this "magical number" that seems almost too good to be true. To her, it seems "completely suspicious" that the answer to the board's recent financial woes would come so close to the election, when three members could face the voters.

On a different level, David says she cannot help but wonder if the money was dredged up to make the books balance. After last year's poor financial performance, the school district faces a declaration of a financial emergency without a turnaround this year.

"It looks like a quick fix to the problem," said David, who is not up for re-election this year. "I hate to look a gift horse in the mouth. But it seems kind of odd."

In response to David's skepticism, Carol MacLeod, the district finance director who discovered the $3.3-million, simply says: "I do not share that opinion."

MacLeod said the books will balance without the newly discovered money, if only by a thin margin. As to timing, MacLeod said she noticed the money in March during a review she began when she took the job 18 months ago.

It was only two weeks ago that the state attorney general issued an opinion that clears the way, according to MacLeod, for the money to be withdrawn from the bond repayment fund and pumped into the operating budget.

MacLeod said she doesn't know why the surplus was not discovered before her arrival. But she said it is clearly legal, based on laws in effect when the money was first deposited, to withdraw it and spend it elsewhere.

And even though the School Board will not have a chance to transfer the money for another couple of weeks, MacLeod said it still belongs in the 2001-02 budget because of the date of the attorney general's opinion -- June 18.

Legal issues aside, both David and School Board candidate Jim Polk wonder whether, for the sake of financial prudence, it would be best to leave the money where it is -- in a fund intended to make sure the district has enough cash to meet its debt payments.

But MacLeod said the district's annual property tax revenues are tailored each year to cover the exact amount of debts and interest that the district owes on its bonds. What's more, the bonds are set up so that they cannot be paid back early, MacLeod said.

Chuck Rushe, chief financial officer for the Pasco County schools, is a 28-year veteran of Florida school finance. So long as the surplus money originated the way MacLeod described, her handling of it makes perfect sense, Rushe said.

David Martin, who oversees school district audits for the state auditor general, said transferring the surplus money might be allowable, depending on where it first came from. If a transfer is made, Martin said, you can be sure the auditor general will review it.

Of course, the idea of $3.3-million lying dormant since 1995 has fostered varying degrees of consternation among board members, candidates and people in the finance community.

Martin said such finds "would not be common" around the state.

For Rushe, Hernando County's obvious problem is constant turnover in its finance office. The district has had six finance directors in the past decade, including three during 2000. Rushe said that's the most likely explanation for the forgotten money.

John Sanders, who was Hernando County's school superintendent until September, said he wasn't aware of the surplus. Nor were the financial experts who reviewed the books last year on behalf of the teachers union, Sanders noted.

Still, a spate of recent financial surprises has Polk, the school district's former chief engineer, proposing that the finance department be renamed the "lost and found department."

In November, School Board members were surprised to learn that -- a year earlier -- they hadn't been told about an extra $1.4-million in impact fee revenues that was at their disposal.

In March, board members abruptly postponed a vote to spend $4-million on a variety of small projects after they read in the newspaper that some of the money could be saved and used later for a much-needed elementary school.

In April, board members were shocked to learn that $560,000 set aside over two years for school safety improvements had simply gone unused.

That last discovery led board member Jim Malcolm to wonder if there was other money lying around. "There must obviously be some cash hanging around here," Malcolm said.

Polk said he does not consider this a comedy of errors but a "lapse of attention" that shows a general lack of accountability.

Other candidates, including former School Board member Stephen Galaydick, have made the same charge about the current board. Galaydick, for one, says they meet less frequently than they used to and that they do not ask enough questions when they do.

Of course, Galaydick was a board member from 1994 to 1998 and failed to recognize the surplus, which was there from 1995 onward. He said he asked for, but was denied, a line-by-line review of the budget that might have turned up the surplus.

At the least, Galaydick said, this board should have conducted such a review before making midyear budget cuts in 2000. It's clear now, he said, there was money on hand.

For their part, board members look at the discovery from assorted viewpoints.

David, who rejoined the board in 2000 after serving in the 1990s, said she has concerns about the credibility of the information board members are given.

Malcolm, who has been on the board for nearly 91/2 years, doesn't put things in such stark terms. But he agrees that board members can only function on the information they receive. Malcolm, like eight-year board veteran John Druzbick, chooses to look at the bright side of the windfall rather than dwell on the negative.

Sandra Nicholson, who arrived on the board with Druzbick, said part of the problem lies in a reluctance of staffers to volunteer information. She says it is because past superintendents dealt harshly with people who tipped off board members.

Board member Robert Wiggins, who has an accounting degree, said he assumed the cash in the bond account was needed for debt payments. The bottom line, said Wiggins, who is up for re-election this fall, is that board members cannot be expected to know every detail about the budget or to have every line memorized.

"To say it's a surprise -- I would say that it's a stretch. It was there," Wiggins said. "We just didn't realize we could use it for other purposes. "Surprise' kind of has a shock thing to it. I would call that a pleasant surprise."

-- Robert King covers education in Hernando County and can be reached at 754-6127. Send e-mail to

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