The December 8 Board of Finance meeting concluded with officials present picking up the conversation about the Board of Education’s non-lapsing account, which has been the subject of numerous recent discussions and a few differences of opinion among local officials and the town attorney.

The process by which funds are determined and allocated to this relatively new account was scrutinized this year because the school district’s budgetary surplus — from which approved non-lapsing deposits are drawn and transferred — exceeded $1.3 million, or 1.6 percent of the total 2019-20 approved expenditures.

Several years ago, to help state school districts save funds for specific out-of-budget expenses like unanticipated increases in special education student costs or emergency capital projects, the legislature approved districts establishing non-lapsing accounts with a cap of two percent of districts’ overall budgets in any given year.

At the time, the legislation provided for oversight of both the initial surplus transfer and any subsequent expenditures from the account from either municipal boards of finance or boards serving as the finance authority. That legislation was subsequently amended, leaving the finance board with oversight on the initial surplus transfer, but removing any further involvement by municipal finance officials once the money was transferred into the non-lapsing account.

The procedure is governed by Section 10-248a of the Connecticut General Statutes, and locally under Section 6-35 of the charter. A procedure for vetting and authorizing requested BOE surplus transfers to this account was adopted by the finance board in 2014.

Procedural Conflict

However, last October, Town Attorney David Grogins noted after a requested review that the process adopted by the finance board appeared to be in conflict with the non-lapsing transfer procedure originally agreed upon by the finance board.

The Legislative Council requested the process review as its members considered an official policy on how to handle any annual non-lapsing fund requests from district surpluses, Chairman Paul Lundquist said, to get a clear perspective on what role the Legislative Council has, or should have, in these conversations.

Grogins’ written advisory stated, “In the event the BOE has excess funds and wants to retain these funds, the procedure pursuant to Section 6-35 of the Newtown Charter is that the BOE requests to retain the funds, the Legislative Council requests a recommendation from the Board of Finance pursuant to Section 6-35(d) of the Charter...and thereafter the Legislative Council may act.”

Grogins added that recent discussion regarding this procedure set forth in the May 2014 finance board minutes would appear to contradict the position set forth above, and that he recommended going forward with the latest process. He said state statute provides a method of dealing with excess funds of the BOE which, given Newtown’s charter, treats the funds similar to a “special appropriation.”

He affirmed that Section 6-35 of the charter requires the Legislative Council — not the finance board — to make the final decision on how to handle such excess funds. Former finance board chair Sandy Roussas, also an attorney, said she did her own research and disagreed with Grogins.

“From my perspective, the authority to deposit money into that non-lapsing account belongs to the BOF, per this statute,” she said at the board’s October 21 meeting.

Under that premise, finance officials continued focusing on a non-lapsing transfer policy.

Change Of Direction

By the finance board’s December 8 meeting, Roussas, (who earlier that evening was voted to the vice-chair position in place of Keith Alexander, who was elected 2021 chairman) told her fellow board members that information she was previously circulating regarding a non-lapsing policy was null and void.

Roussas said after an informal conversation with school board member Deb Zukowski, she now understood that once the school board had identified a purpose for spending from the fund, that purpose became a “designated” item.

Once that designated item or purpose was approved by both the finance board and the council, Roussas said the school board does not have to return again for permission to make the non-lapsing expenditure. Any other undesignated spending from the non-lapsing fund balance would still need council and finance board approval to become designated.

Town Finance Director Robert Tait concurred that this falls in line with the special appropriations process.

“State statute says once you get permission to transfer into the non-lapsing account, [the school board] can do whatever they want.”

But if there is a policy or some agreement among the parties involving the finance board as part of the process designating the amount — “if it is not all spent, then [district officials] can do whatever they want with it,” Tait said. “But if you want an agreement about coming back for [spending] designated funds, that is doable.”

Roussas clarified that once designated spending is approved, the district does not have to come back to spend any surplus funds once a designated project is completed.

“There has to be an agreement,” Tait said. “It’s almost like they will have to sign off on some common policy.”

Fixed Percentage Option

First Selectman Dan Rosenthal, who serves as an ex-officio on the board, suggested keeping any policy simplified.

“This should be a contingency account for the Board of Education,” the first selectman said. “I think setting it as a percentage of their budget — whatever number you decide — is fair and reasonable. And it takes all the mystery out of it and all the controversy.”

Rosenthal suggested that if the school board knows exactly how much it can transfer every year based on a fixed percentage, it is “taking all the mystery out of how much it will be, and how much they will let go in or not go in.”

Making it a percentage also keeps the allocation constant as future annual budgets develop, he added.

“Everybody has to play nice in the sandbox,” Rosenthal said. “Let’s everybody agree this is a number that’s appropriate and manage their budget accordingly.”

Finance board member Ned Simpson said because of the statute, the only way to manage surplus designated funds is through a formal policy or agreement.

“And if you don’t have trust and transparency, it’s not going to work,” Simpson said, adding there is no current agreement that it is a contingency fund.

While he is willing to explore the contingency option, Simpson said he would also favor some limitations or a cap on spending from the fund if the contingency concept moves forward.

Rosenthal said the community as a whole plans for capital projects using cap-non recur or bonding, and the school board should not use a non-lapsing account to save for capital projects.

“Nowhere in any of our policies does it say, ‘This department is on its own as it pertains to capital projects.’ They have a large budget to manage and there are issues in any given year that may require some extra funds,” he said. “So I think a much cleaner process is having a tactical contingency.”

That gives the district officials some incremental flexibility, Rosenthal said, while issues warranting larger emergency spending from the fund would go to the boards of selectmen and finance, and the council.

The meeting concluded with the finance board’s new chairman recommending bringing members of all the involved boards together to mull the “contingency” language as a means of getting closer to completing a non-lapsing account policy.