Legislation to Allow a District Health Reserve Fund Passes the State Assembly and Senate

New legislation that will allow the Scarsdale School District to maintain a separate reserve fund for its self-insured health insurance plan has passed both the New York State Assembly and the Senate. The bill was authored by NYS Assemblywoman Amy Paulin and will be sent to Governor Cuomo to be signed into law.

A few years ago, the district's auditors had determined that the maintenance of the reserve fund was not in compliance with law. As a consequence the Board voted to drain the Health Care Reserve to all but a token amount in response to the auditors and a few residents who criticized the Board for maintaining the fund.

This bill makes clear that the District can keep its separate reserve fund which will enable it to mitigate the potential negative impact from large unforeseen health care claims. If the bill is signed into law, the district and its taxpayers will continue to obtain the significant stabilizing benefits of maintaining a reserve fund and be in a better position to manage yearly variations in claims against its self-funded health insurance program.

Commenting on the passage of the legislation, Assemblywoman Paulin said, "I know how important maintaining this reserve fund is to the district and its taxpayers. We know the reserve fund has resulted in the district saving millions of dollars since it was established. I'm pleased to have been able to help ensure its continued use."

Assistant Schools Superintendent Linda Purvis who worked with legislators on the new law said, "Our self-insured health care plan for employees has literally saved millions of dollars for taxpayers over the last 20 years. It would have been difficult to continue it without a rate stabilizing insurance reserve, so we are very happy at this outcome. But it's the taxpayers who should be happy, because it's their money. Many many thanks to Assemblywoman Paulin, who has been working on this doggedly for several years, and to Senator Stewart Cousins, who worked so hard to get it through the Senate. These two women are amazing legislators, and we are so lucky to have them representing the District.

Funding the reserve will be obviously difficult. We are basically starting at ground zero again. So we will await the Board's decision on if and how to fund it."

In 2013, Mitchell Gross, a critic of the health reserve fund, called it a "fictitious account" in violation of NYS law and charged the district with violating reserve policies which dictate that a district hold no more than 4% in reserve. He claimed the district had "failed to disclose these reserves" and called it a "material and serious violation" made by the district to "mislead and misrepresent the public to obtain a positive outcome on the budget." He conjectured that this "may constitute securities fraud" and "jeopardize the district's credit rating." He then asked for Dr. McGill's resignation, called for new auditors and asked the district to consider the consequences of a budget that is not in compliance with the law.

Though Scarsdale Schools Superintendent Dr. McGill did announce his retirement shortly afterwards, this new ruling vindicates the superintendent and the district and makes it clear that the reserve is to the benefit, not the detriment of Village taxpayers.