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SEE YOU IN COURT! - February 2011

February 1, 2011

Authors: Thomas B. Mooney

The Nutmeg Board of Education had been optimistic -- too optimistic -- in preparing its budget for 2010-2011. The Board had underestimated its health insurance and fuel expenses, and these two line items were already in deficit. Mr. Superintendent was sweating gravy, trying to figure out what to do.

At the Board meeting last month, Mr. Superintendent broke the news to the Board in executive session. “We have been squeezing every penny, but if we don’t find more money somewhere, I fear we will over-expend the Board’s appropriation, and then we will all be personally liable. We certainly don’t want that, do we?”

“Good point, Einstein,” barked veteran Board member Bob Bombast. “I didn’t sign up for this unpaid volunteer position for you to put me and my family at risk.”

“Hold on,” said Mr. Chairperson soothingly. “This is a tough time for all of us, but we shouldn’t be rude. Mr. Superintendent, Bob could have said it more nicely, but he has a good point. We can’t have Board members at personal risk. What is your plan for avoiding a deficit this year?”

“I have already implemented a spending freeze, and we may have to lay off some teachers. But frankly I am running out of ideas. Maybe we better ask the Town for a supplemental appropriation.”

“We can ask, but I wouldn’t count on that,” interjected Penny Pincher. “Remember, just last month the Town asked us to give it back $100,000 from our appropriation because they are having problems as well. Can we ask our vendors to hold off billing us until next year?”

Red Cent perked up with Penny’s comment. “That is a great idea! Like the furniture stores, ‘No payments until 2012.’ If our vendors play along, we should be able to get through this year.”

“Well, let’s not get carried away. I still think that we should ask Seymour Dollars and the Board of Finance for a supplemental appropriation,” responded Mr. Superintendent. “But I will ask our vendors if they can hold off on billing us.”

“Actually,” interjected Bob, “It would be better if they could wait until 2013. Next year doesn’t promise to be much better than this year.”

“Well, I think we should do whatever we can,” opined Mrs. Chairperson. “I am happy to ask Seymour Dollars and the Board of Finance for a supplemental appropriation, and Mr. Superintendent should freeze spending and talk vendors into delaying their billing. But I don’t want to cause a panic, at least not yet. So let’s agree to keep this conversation secret until we revisit this strategy in our next executive session. Thank you all for your creative ideas. I think we will get through this.”

Is the Nutmeg Board of Education on the right track?

*        *        *

As usual, the Nutmeg Board of Education is inviting trouble. In these difficult times, it may well be necessary to ask for more money this year, but boards of education must know what they can do, and what they must do.

At the outset, we note that boards of education control their budget throughout the year. Section 10-222 provides that, once a town makes an appropriation for a given fiscal year, that appropriation may be expended “by and in the discretion of the board of education.” Irrespective of any changes in circumstances, the municipality cannot require that the board of education return any funds or expend funds on any specific items. Moreover, the board of education may transfer any “unexpended or uncontracted-for portion of any appropriation” to any other line item. However, any funds that have not been expended by July 1 revert to the municipality, because the authority to expend that appropriation terminates with the end of the fiscal year and is succeeded by the authority to expend the appropriation made for the following year.

With these rights come responsibilities. In 1998, the General Assembly amended Section 10-222 to authorize the board of education to authorize designated personnel to make “limited transfers under emergency circumstances if the urgent need for the transfer prevents the board from meeting in a timely fashion to consider such transfer.” While there is no express prohibition against having any line item in deficit, the very notion of “emergency circumstances” and “urgent need” suggests that transfers are indeed required throughout the year so that no line item is in deficit during the year. It is thus important to define “line item” broadly (perhaps at the object code level) so that such transfers are manageable, and to make such transfers when necessary.

Asking vendors to hold off on billing is no solution, because the statute refers to the “uncontracted-for” portion of the appropriation. Once goods or services are purchased, the funds are considered expended because the amount is “contracted-for,” and the board of education is obligated to expend the funds. School districts appropriately accrue for such expenditures when such contracts are made, and boards may not consider such amounts “unexpended.”

The statute also sets forth a procedure for boards of education to follow when it appears that additional funds will be necessary during a fiscal year. In such cases, the chairperson of the board of education is to notify the municipal body making appropriations, and must make “a request for additional funds in the same manner as is provided for departments, boards or agencies of the municipality.” No expenditures in excess of the appropriation may be made unless there is a supplemental appropriation.

The Nutmeg Board members are right to be concerned about liability, but we should not overstate the case. Section 7-349 provides that public officials who knowingly approve expenditures beyond those authorized can be personally responsible for such expenses. Accordingly, board members must act in good faith to avoid over-expending the appropriation, and in compelling cases board members may even need to seek judicial relief. However, there is no recorded case of a school board member in Connecticut actually being personally liable for such expenditures.

Finally, the Board here is understandably sensitive to public perception. However, the budget is not an appropriate topic for executive session, whether line items are in deficit or not. Discussions about the Board’s budget must occur in open session except where a related topic (such as a special education case) is privileged to executive session. Even then, however, the budgetary implications of such matters must eventually be discussed in open session. 

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