Published: October 10, 2008 10:58 am            

FALLS SCHOOLS: District faces $6 million budget deficit

The Niagara Falls City School District closed out last year with administrators believing they'd have a $3.8 million surplus this year. Now, it appears they're already stuck in a $1.2 million deficit and next year looks even more ominous with a potential $6 million deficit looming.

"There's a lot of talk on the national scene about Wall Street and Main Street and bailouts and I have to tell you, it's starting to hit Pine Avenue," Superintendent Carmen Granto told the board Thursday.

The news came from the district's new team of auditors who, in reviewing the books for 2007-08, noticed roughly $6 million budgeted from defunct PILOT, or payment-in-lieu-of-taxes, programs. In essence, it was money the school board thought it had but didn't exist.

Some of the PILOTs extended as far back as the 1990s, including some for closed businesses such as Niagara Splash, which owed the district more than $1 million, AquaFalls, which owed $393,000 and Falls Street Faire, which owed more than $1 million. The district never saw any of that money, though it was counted in its budget.

The district's previous auditors — the ones cited in state Comptroller Thomas DiNapoli's district audit for failing to identify major financial mismanagement — had advised the district to "put reserve funds against" the unpaid PILOTs, Granto said.

"Our current auditors told us you cannot do that — you must write them all off this year," Granto said, adding the district will write them off immediately.

The shortfall won't end with the PILOTs though. The district will find itself behind another $6 million by next year, assuming the economy doesn't make a remarkable turnaround.

Faced with a staggering $8 billion budget deficit for next year, the state Legislature is looking at slashing costs anywhere it can — including in education aid. But even if the Niagara Falls City School District receives the exact same aid next year as it got for this year, the district will still face a nearly $6 million shortfall because of growing operating costs.

"We're assuming that the state's going to tell us," Granto said, "because they're in a crunch, 'You're not going to get any increase in state aid. You're going to get the same thing you got this year.' We're hoping they tell us that. If they tell us 'You're not going to get even what you got this year,' that increases (the deficit)."

The school board is charged with making cuts to deal with the $1.2 million shortfall created from the bad PILOTs, but Granto warned with the state's budget difficulties, the district may even face mid-year aid cuts. The board should look at cutting its costs immediately to save the most money possible, Granto said, emphasizing they should "affect the classroom teacher last."

Granto told the board he will present in November a more detailed budget projection and a list of places to cut that will carry the district through 2010 with a balanced budget. In keeping with the past 16 years, Granto said taxes will stay the same.

"Whatever budget I recommend for next year will be real money, in the sense there will be no deficit, and there will be no tax increase," he said.

Contact reporter Caitlin Murray at 282-2311, ext. 2251.

        

• Click to discuss this story with other readers on our forums.