Opinion 98 - 12


This opinion represents the views of the Office of the State Comptroller at the time it was rendered. The opinion may no longer represent those views if, among other things, there have been subsequent court cases or statutory amendments that bear on the issues discussed in the opinion.

CITIES -- Powers and Duties (commingling of city and dependent school district moneys); (use of city and dependent school district moneys to temporarily finance operations of the other)

MUNICIPAL FUNDS -- Accounting (commingling of city and dependent school district moneys) -- Inter-fund Advance (use of city and dependent school district moneys to temporarily finance operations of the other)

SCHOOL DISTRICTS -- Finances (commingling of city and dependent school district moneys); (use of city and dependent school district moneys to temporarily finance operations of the other)

EDUCATION LAW, §2580(1), (4); GENERAL MUNICIPAL LAW, §9-a: The moneys of a city with one hundred twenty-five thousand inhabitants or more and the moneys of the city school district of such a city may be commingled in one or more bank accounts. City moneys may be temporarily advanced to the school fund, but school district moneys may not be temporarily advanced to finance city operations.

You ask whether the moneys of a city with one hundred twenty-five thousand inhabitants or more ("city") and the moneys of the city school district of such a city ("school district") may be commingled in one or more bank accounts. You also ask whether the moneys of the city and the school district may be used temporarily to finance the operations of the other during periods of insufficient cash flow.

Insofar as here relevant, section 2580(1) of the Education Law provides that:

Public moneys apportioned to a city by the state and all funds raised or collected by the authorities in a city for school purposes or to be used by the board of education for any purpose authorized in this chapter, or any other funds belonging to a city and received from any source whatsoever for similar purposes, shall be paid into the treasury of such city and shall be credited to the board of education. The funds so received into such treasury shall be kept separate and distinct from any other funds received into the said treasury.

This Office has long expressed the opinion that, where separate bank accounts are not specifically required by State or local legislation, moneys in various funds held by a municipality may be deposited in a single bank account (1991 Opns St Comp No. 91-57, p 158; 1981 Opns St Comp No. 81-341, p 373; 1971 Opns St Comp No. 71-291, unreported). Thus, in the absence of a separate bank account requirement in section 2580(1), we concluded in 1971 Opns St Comp No. 71-987, unreported, that although city and school district moneys must be accounted for separately, there is no requirement to deposit such moneys in different bank accounts. It remains our opinion that city and school district moneys may be commingled in the same bank account (see also General Municipal Law, §11[6]).

As to the temporary use of city and school district moneys to finance the operations of the other, section 9-a of the General Municipal Law authorizes a municipal corporation to advance temporarily moneys held in a fund to any other fund of the municipal corporation (General Municipal Law, §9-a[2]). For this purpose, a "fund" is defined as "a group of accounts set aside for the purpose of accounting for moneys or other resources of a municipal corporation in accordance with the uniform system of accounts prescribed by the state comptroller pursuant to section thirty-six of [the General Municipal Law] " (General Municipal Law, §9-a[1][a]). The term "moneys" is defined as:

moneys of the municipal corporation raised or received from any source which are held in the custody of the chief fiscal officer of the municipal corporation and are not immediately required for the purpose for which they were raised or received, except proceeds from the sale of obligations or other moneys which, by law, may be used only for stated purposes (General Municipal Law, §9-a[1][b]).

Section 9-a also provides that any temporary advance shall be authorized in the same manner prescribed by general, special or local law for making budgetary transfers between appropriations. Moneys advanced pursuant to section 9-a must be repaid no later than the close of the fiscal year in which the advance was made (General Municipal Law, §9-a[3]). When the tax bases of the "lending" and "borrowing" funds are different, the repayment must include an amount reasonably estimated as interest (id.).

We are advised that the Uniform System of Accounts provides for the city to account for the moneys of the city and the moneys of the school district in separate funds. The moneys in the school fund are characterized in section 2580(1) of the Education Law as "moneys apportioned to a city" and as "funds belonging to a city". Similarly, section 2580(4) refers to such moneys as "city funds". Thus, although the school district is a body corporate and generally regarded as separate from the city (see Education Law, §§2550, 2551; Board of Education, Yonkers City School District v De Santis, 136 Misc 2d 636, 518 NYS2d 1014, modified and affirmed 133 AD2d 402, 519 NYS2d 395; see also, e.g., Divisich v Marshall, 281 NY 170; Fuhrmann v Graves, 235 NY 77; Board of Education of City of Syracuse v King, 280 App Div 458, 114 NYS2d 329, lv denied 280 App Div 1033, 117 NYS2d 674, lv dismissed 304 NY 973; cf. McCabe v Gross, 274 NY 39; Spano v City of Middletown, 169 Misc 338, 7 NYS2d 14 [board of education is department of city government]), we believe that the school fund is a "fund" of the city within the meaning of section 9-a.

Ordinarily moneys in a city's general fund are not restricted "by law" as to use. Where this is the case, the moneys in the city's general fund constitute "moneys" within the meaning of section 9-a and may be temporarily advanced to the school fund. Any such advance must be authorized in the same manner in which the city authorizes budgetary transfers between appropriations. The school district must repay the advance by the end of the fiscal year and the repayment must include an amount reasonably estimated as interest because city taxes and school taxes are raised from different tax bases (see Real Property Tax Law, §§458[1][3], 458[2][d][i]; 1973 Opns St Comp Nos. 73-842 and 73-843, unreported).

As to the temporary use of school district moneys to finance city operations, section 2580(4) of the Education Law provides that "[i]t shall be unlawful for a city treasurer or other officer having the custody of such city funds to permit their use for any purpose other than that for which they are lawfully authorized ". The "city funds" referred to in section 2580(4) are the moneys described in section 2580(1). Since these moneys are required "by law" to be used only for educational purposes (see Fleischmann v Graves, 235 NY 84; Fuhrmann v Graves, supra; Board of Education v Dibble, 136 Misc 171, 240 NYS 422), it is our opinion that the money in the school fund are not "moneys" within the meaning of section 9-a and, therefore, may not be used temporarily to finance city operations.

In reaching this conclusion, we are aware that it could be argued that section 2580(1) and (4) should be interpreted as applying to school district budgetary revenues, rather than cash, so that there would be no restriction on the use of the cash received by the city for school purposes. The rationale for this approach is that these provisions are intended to prevent school district funds from being used for any purpose other than education and this purpose is achieved through the Uniform System of Accounts requiring that city and school district revenues be recorded and accounted for in separate funds. In our view, however, section 2580(1) clearly refers to cash because only cash may be "paid into the [city's] treasury".

Accordingly, it is our opinion that city and school district moneys may be deposited in a single bank account. Further, city general fund moneys may be temporarily advanced, in accordance with section 9-a of the General Municipal Law, to the school fund. However, since school district moneys are not "moneys" within the meaning of section 9-a, such moneys may not be used temporarily to finance city operations.

July 2, 1998
Roy Bernardi, Mayor
City of Syracuse