The Windham School Board met with town officials Wednesday night to start discussions on what to do with more than $1 million in school surplus.

While the school board is hoping to put aside money for school maintenance and improvements, some town councilors argue that a portion of the surplus should be used to lessen the tax burden.

Discovery of the surplus, while closing the books on the 2004-2005 fiscal year this past summer, sparked debate as how the school ended up with the money. Revenue from a state renovation fund, increased school tuition and about $350,000 in carryover from fiscal year 2003-2004 contributed to the $1.26 million, school officials say.

The school board had intended to spend the money on school repairs and improvements as part of a 10-year capital improvement plan. However after consultation with school attorney Dick Spencer, the board realized the money could not be spent until it had been approved for such purposes by the Town Council and the voting public through the routine budget process.

“There seems to be some that thought we were holding back information,” school board member Jeff Vermette said of the surplus controversy.

Vermette explained that keeping money in an “undesignated surplus” for school repairs or improvements was no “new idea.” The school board had done so in the past, he said, but the law has since changed.

School board members asked the town councilors if they would be willing to approve a separate “capital reserve fund” specifically for improvements and repairs. The school board currently has a “maintenance fund” for upkeep that includes everything from removal of asbestos to painting classrooms, replacing carpets and boilers or refinishing gym floors. But money has been taken from this fund in recent years to keep operating costs under budget.

“Unfortunately, (maintenance) gets put on the backburner when we get tight on funds,” said School Board Chair Michael Duffy.

When the school board doesn’t have enough money available in the maintenance budget, the school often has to “band-aid” facility problems. Things like textbooks and teachers’ salaries take priority over upkeep, Duffy said.

With $1.26 million in school surplus, the school runs the risk of losing state aid, warned councilor David Tobin. However, Assistant Superintendent Donn Davis said that legal advice given by the school lawyer indicates that putting the money into a reserve fund for the 2006-2007 fiscal budget would prevent this.

Councilors and school board members debated whether a portion of the money should be put toward reducing property taxes. Some talked of a hypothetical 50/50 spilt where roughly $500,000 would be put into reserve and $500,000 put toward tax relief. Others argued that the whole surplus might be needed in case of an emergency.

Councilor Elizabeth Wisecup said that it shouldn’t be up to either town body to decide what happens with the $1.26 million. That should be up to the taxpayers, she said.

“It’s scary to me to loosen that much money up and not have much control over it,” Wisecup said. “I think it should be sent back in tax relief.”

Vermette asserted the money was the result of school savings and prudent budgeting. He also argued that even if they put the money toward tax relief, they might have to request that money again depending on future school budgets.

School board member Mary Wassick advised the board to assess the “school’s needs” before deciding what to do with the money.

The school board plans to develop details for the reserve fund and discuss the issue and what to do with the surplus at a later date.

Windham School Board and Town Council members discuss options for the $1.26 million in school surplus Wednesday night.