After losing $5 million in state aid during the past five years and using reserve funds to fill the gap — and with aid this year currently anticipated to be a mere $60,000 above last year — the Cazenovia Central School District was recently declared a district “susceptible to fiscal stress,” in the latest Fiscal Stress Monitoring System report released by State Comptroller Thomas P. DiNapoli.

In layman’s terms, this means the district is in danger of running out of money in the near future, said District Superintendent Bob Dubik.

“This the first time we’ve ever been on the distress list,” Dubik said. “We’ve been fortunate, but it was almost a matter of time the way the loss of state aid has been. It’s bleak right now.”

DiNapoli’s annual evaluation of 674 school districts throughout New York state declared that 87 districts — 13 percent of school districts statewide — have been designated as fiscally stressed.

Using financial indicators that include year-end fund balance, cash position and patterns of operating deficits, the system creates an overall fiscal stress score which classifies whether a district is in “significant fiscal stress,” in “moderate fiscal stress,” as “susceptible to fiscal stress,” or “no designation.”

The comptroller’s office analyzed separate environmental indicators to help provide insight into the health of the local economy and other challenges that might affect a school district’s finances. These include such measures as student enrollment, property value, budget vote results and poverty.

To date, 12 school districts have been classified as in “significant fiscal stress,” 23 in “moderate fiscal stress,” and 52 as “susceptible to fiscal stress.”

In addition to Cazenovia’s listing as under the “susceptible” category, other CNY districts on the list included Morrisville-Eaton listed as “susceptible to fiscal stress,” and Skaneateles and DeRuyter listed as being in “moderate fiscal stress,” according to the report.

The report stated that school districts found to be in fiscal stress share a number of common characteristics. Most are operating with low fund balance, operating deficits and limited cash on hand. These districts were also found to have a much higher likelihood of using short-term borrowing to bridge cash flow gaps.

The report also found that the percentage of school districts in fiscal stress exceeded 30 percent in six counties, one of which was Madison. The other counties included Chemung, Clinton, Montgomery, Niagara and Tioga.

“School districts are a critical barometer to the fiscal health of our local communities,” DiNapoli said. “Unfortunately, reductions in state aid, a cap on local revenue and decreased rainy day funds are creating financial challenges that more and more school districts are having trouble overcoming. My office’s fiscal stress scores highlight the need for school district officials to manage their finances carefully with an eye towards long-range planning and how they can operate more efficiently.”

Cazenovia has been aware of its declining financial situation for many years. Last year, the preliminary 2013-14 district budget included an initial projected budget deficit of $650,000 with a nearly 5 percent tax levy increase and the elimination of five or more staff positions in the middle and high schools. The reasons for the bleak proposal were cited as cuts in state aid, increases in employee entitlement costs and a steady drop in enrollment.

The “root of all evil” for Cazenovia — and all state school districts — has been the state’s Gap Elimination Adjustment (GEA), which has cut $5.3 million in state aid from Cazenovia during the past five years, said Assistant Superintendent Bill Furlong. “We’ve been using reserves to partially offset that loss of aid; that’s pretty much why we ended up on the list,” he said. So the comptroller’s report, “wasn’t really a surprise to us,” he said.

Dubik agreed. “It’s that easy. It’s nothing that we’ve done. We’re losing state aid and other income with the [state 2 percent] tax cap,” he said. “We can’t continue to maintain these by taking it out of our reserve funds.”

Governor Andrew Cuomo’s 2014 budget, released last week, slates a 3.8 percent increase in education funding — of that amount, Cazenovia will receive an approximate .37 percent increase in aid, or $59,94, more than last year, Furlong said. Yet Cazenovia will simultaneously lose $1.1 million in 2014 aid due to the GEA, he said.

The governor’s initial budget proposal is therefore “very unfavorable to the [Cazenovia] district,” Dubik said.

He said he and Furlong have already met with district legislators Sen. David Valesky and Assemblyman Bill Magee who have promised to work hard to increase education funding in the state budget, which they have done every year.

Furlong said that if the state legislature can reduce Cazenovia’s GEA by about $600,000, or about half, the district would be “in good shape.” If that does not happen, however, the school board may have to look at cuts this year in anything from staff development money to teacher training money to program and athletics cuts to teacher layoffs, Dubik said.

“Everything will be looked at,” he said. “The school board will have some difficult decisions facing them on how to make up the deficit.”

The district is currently in the beginning stages of planning the 2014-15 budget, and will know more in a few weeks how the financial situation will look, Furlong said.

For more information on the state comptroller’s fiscal stress report, visit osc.state.ny.us/localgov/fiscalmonitoring.

Jason Emerson is editor of the Cazenovia Republican. He can be reached at [email protected].