The city and school board may be back in court yet again — but this time it could be the Board of Education filing suit.

The Board of Education, at a special meeting Wednesday, July 31, learned that the city has yet to transfer the special education excess cost grant funds, totaling some $1.5 million, from the city’s general fund to the appropriate school board account, which local educators say must be done by state statute.

“The issue of the special education excess cost grant remains unresolved,” said school Superintendent Dr. Chris Clouet on July 31. “The money has not been credited to the school district, and, as of today, we will be pursuing other action to make sure that money is credited to the Board of Education.”

Clouet told the board that he will continue to work with the state Department of Education, but if the city refuses to transfer the $1,529,000, as per state statute, legal action may be required.

“The Board of Education will incur legal billable hours,” said Clouet. “But so will the city, so taxpayers’ money will be spent on the city side and the Board of Ed side for what I would characterize as a waste of time and money.”

The two sides are already in a legal battle, with the city filing suit in April against the Board of Education, Clouet and two past district finance directors claiming that the board overspent its allocated budget by some $2.7 million over a two-year period. Clouet and Board of Education Chairman Mark Holden said they have been served but no other information has yet been provided to them on this suit.

Clouet said that the district closed its 2018-19 fiscal year books without a deficit, but that is based on receiving the special education excess cost sharing grant money, which by statute, Clouet says, must be moved to the Board of Education accounts.

“The district incurs the costs,” said Clouet. “We apply to the state for reimbursement. We inform them why we need the money, and the city is, by law, supposed to credit the money to the school district. This has not happened.”

School Finance Director Rick Belden told the board that the district submitted the request for the funds transfer to the city on June 26, and, by statute, the city had 30 days to comply. That was not done, according to Belden, adding that his office will be sending a letter to the city treasurer, and other appropriate city offices, to inform them “that the money is not reflected in the appropriate accounts.”

At this point, Belden said not having those funds is not an issue, but if this situation is not resolved or litigated by this time next year, “we will have some cash flow issues.”

The state’s special education excess cost grant, and where that money ends up going if a community receives it, has been the focus of much debate in city circles for months.

But Clouet says the answer is clear, with this specific grant money being required to be credited to the Board of Education to cover high special education expenses. The state offers this special education excess cost grant to communities to help cover high cost special education placements and select regular education placements.

“We did it right,” said Clouet about school administrators’ request for the funding that’s sent to the city from the excess cost grant, and that’s to be moved to the education budget. “It is the same letter we have sent to the city year after year after year. This letter shows we followed the law each year.”

But the city continues to disagree, as the Board of Aldermen voted to sue the Board of Education over what the board termed “deficit spending” in the fiscal years 2016-17 and 2017-18, citing the audit report, which identified some $3.1 million in overspending in that period by school officials .

The city’s audit was completed by CPA David Cappilletti of Clermont and Associates, LLP, and the Board of Education has since openly disagreed with the auditor’s determination. After several unsuccessful attempts to have the auditor adjust his report, the Board of Education filed an ethics complaint against Cappilletti and his firm .

According to the state, “the initial threshold for which a student is eligible for the excess cost grant is referred to as the ‘Basic Contribution or per pupil expenditure.’ For LEA placements or students educated within the district, the threshold is equal to the prior year’s Net Current Expenditures per Pupil (NCEP) (multiplied by) 4.5.” Local school officials say the state pays 70 percent of that calculated number.

In a letter to Clouet dated March 5, the state Department of Education Chief Financial Officer Kathy Demsey states “once the BOE has provided the necessary documentation to the city showing special education costs were higher than anticipated in the BOE budget, the city should credit the revenue received from the state Special Education Excess Cost grant to the BOE’s special education expenditure account. These funds should be transferred no later than 30 days after receipt by the treasurer of the necessary documentation.”

This letter was also sent to Mayor Mark Lauretti, city Finance Director Paul Hiller and Belden.

Dempsey cited state statute Section 10-76g(b), which reads, in part, “Payment by the state for such excess costs shall be made to the local or regional board of education as follows: Seventy-five percent of the cost in February and the balance in May. The amount due each town pursuant to the provisions of this subsection shall be paid to the treasurer of each town entitled to such aid, provided the treasurer shall treat such grant, or a portion of the grant, which relates to special education expenditures incurred in excess of such town’s board of education budgeted estimate of such expenditures, as a reduction in expenditures by crediting such expenditure account, rather than town revenue. Such expenditure account shall be so credited no later than thirty days after receipt by the treasurer of necessary documentation from the board of education indicating the amount of such special education expenditures incurred in excess of such town’s board of education budgeted estimate of such expenditures.”

brian.gioiele@hearstmediact.com