Every Jericho UFSD audit reports two different totals for what the District spent: Total Expenditures, and Total Expenditures and Other Uses. The difference between them is a single line — Operating Transfers Out — and that line is the laundering mechanism. Not criminal: voter-approved, legally permissible, fully disclosed in every audited financial statement. Structural: money that should have appeared as a $73 million operating surplus available to reduce taxes is instead reclassified as transfers to capital reserves, and then spent on buildings. Across nine post-2016 fiscal years, residents originally approved approximately $22 million in transfers at the May ballot. The actual flows through that line totaled $95 million. The State Comptroller documented this cycle in 2016. It has continued for nine years. This is where the surplus goes.

In "The Six Line Items the State Named, Padded for Nine More Years," we showed the operating-side underspend. This piece shows where it goes.

Open any post-2016 audited financial statement. Find the Schedule of Revenues, Expenditures and Changes in Fund Balance — Budget and Actual. Scroll to the expenditure side.

The schedule reports two distinct totals for what the District spent.

The first is Total Expenditures. It rolls up everything most residents would call "spending": Board of Education, Central administration, Finance, Staff, Central services, Special items, Instruction, Pupil Transportation, Community Services, Employee Benefits, Debt Service. The operating side of running a school district. Every category in this section is reported with an Original Budget, a Final Budget, an Actual, and a Variance.

For nine consecutive audited years, this Total Expenditures line has come in millions under Final Budget. Cumulatively, the operating-side underspend across FY 2017 through FY 2025 is $106.1 million.

Below that line, on a separate row labeled OTHER FINANCING USES, the audit reports a second category called Operating Transfers Out. These are not operating expenditures. They are dollar movements from the General Fund into other funds — most importantly, into the Capital Projects Fund.

The audit then reports a Total Expenditures and Other Uses line — the sum of operating expenditures plus operating transfers out. That is the bottom line a casual reader, or a District spokesperson, can point to and say "the budget was spent."

Both totals are real numbers. They report different things. And they behave differently across the nine post-2016 years.

The Total Expenditures line shows the operating reality: persistent, predictable underspend, year after year, in the categories the State Comptroller named in 2016.

The Operating Transfers Out line shows the laundering: a slow, persistent, year-after-year transfer of cash from the General Fund into restricted capital reserves, in amounts that bear almost no resemblance to what voters originally approved at the May ballot.

That second line is where the surplus goes. The laundering happens not at the moment money is collected from residents, but in the months that follow — reclassified, mid-year, from "operating expenditure that we did not need" to "transfer to capital that we did approve."

When residents go to the polls in May, they vote on the Original Budget — the document the District publishes in advance of the vote. That budget contains a line for Operating Transfers Out, and the number on that line is comparatively small. It is what the District tells voters at the time of the vote will move from operations to capital that year.

Here is what residents have approved each May, going back nine years, on that line:

In aggregate, residents have voted, in May, to approve approximately $22.1 million in Operating Transfers Out across nine years. About $2.5 million per year on average. A small line in the budget.

Now here is what actually flowed through that line:

Cumulatively across nine years: voters approved $22.1 million at the May ballot. The actual flows out of the General Fund through that line totaled $95.3 million.

The difference — about $73 million — was added to the Final Budget mid-year, after the May vote, through separate voter authorizations of capital reserve appropriations, fund balance transfers, and Employee Benefit Accrued Liability Reserve (EBALR) draws.

Read the multiplier column twice. In two of the nine years, the Final Budget for transfers was over six times what residents originally approved. In one year — FY 2021 — it was eight times. Only one year (FY 2020, the COVID year, when no major capital project was put before voters) saw the Final Budget for transfers come in at the originally approved level.

This is not a question of small revisions to a stable line. It is a question of a line whose Final Budget regularly bears no relationship to its Original Budget.

Take FY 2017 as the case study. It is the first full fiscal year following the December 2016 State Comptroller audit. It is also the year that produced the largest single-year manufactured surplus in 22 years — $17.9 million.

Here is what the audit shows:

Operating Side:

Operating Transfers Out:

The Math At The Bottom:

This is exactly where the optical illusion lives.

If a defender of the District's practices wants to claim "we came in only $5.6 million under the budget voters approved," the math technically supports that statement. Five point six million dollars on a $121 million budget is less than 5%. It sounds like a tight, well-managed budget that came in roughly on plan.

But that $5.6 million figure is the net of two much larger movements:

The two movements did not cancel. They are not the same money. The District generated a $15.4 million operating surplus and moved $9.1 million from prior-year reserves into capital projects. Both of those things happened. The fact that they happen to math down to a small net number does not mean the District ran a tight operating budget. It means the operating surplus existed, and was simultaneously partially redirected to capital projects through mid-year ballot approvals.

When the audit reports the manufactured surplus as $17,888,211 for FY 2017, the audit is not lying. The surplus is real. It is just not visible in the bottom-line subtraction unless you read both sides of the schedule and understand what the Operating Transfers Out line is.

The next question — and it is the question that connects the operating surplus to the capital reserve growth — is: where did the $9.3 million mid-year increase to FY 2017's Operating Transfers Out line come from?

The audit is explicit. It came from Appropriated Fund Balance — Capital Reserve. The same audit page that shows Operating Transfers Out being revised from $3.18M to $12.48M shows, on the revenue/sources side, an entry of $9,301,260 under "Appropriated Reserves — Capital." The dollars match exactly.

Translation: the District drew $9.3 million from a pre-existing capital reserve balance and routed it through Operating Transfers Out into the Capital Projects Fund.

That capital reserve balance had been accumulated, over prior years, from operating surplus.

This is the closed loop. The laundering, in three steps:

At no point in this three-step cycle does the surplus appear, in writing, as "money over-collected from residents that should have reduced their tax levy." It enters as an operating underspend (one fund category), passes through capital reserve (a second), exits as a capital project (a third). The dollar amount is the same at every step. The label is different at every step.

This is exactly the maneuver the State Comptroller described in 2016. The cycle has now run for nine more consecutive years.

OSC Report 2016M-328, page 7:

Read the structure carefully. In a single year (2015-16), the District:

OSC named the move. OSC connected it explicitly to the 4% statutory fund balance cap — the District was using mid-year capital transfers to keep the unrestricted fund balance "within the statutory limit" while letting the restricted reserves grow on a parallel track.

The District's response was that this was all done by voter authorization, which was technically true. But OSC's point was structural: the cycle, taken as a whole, kept the unrestricted line at 4% on paper while the District's actual cash position grew through reserves where the cap does not apply.

That is the cycle that has now continued for nine more years.

The District's June 30, 2025 audited balance sheet reports approximately $53 million in restricted reserves, accumulated through this cycle, including multiple Capital Reserves (II, IV, V) carrying simultaneous balances, an Employees' Retirement System reserve being supplemented rather than drawn down, and an Employee Benefit Accrued Liability Reserve carrying tens of millions against an obligation whose annual run rate is a fraction of the balance.

The District also reports approximately $72 million in total fund balance and zero bonded debt.

Zero bonded debt is the destination of this cycle. That is not "zero debt" in any meaningful sense — it is debt prepaid by the present generation of residents, paid for by being structurally over-collected at the property tax line — exactly the dynamic the State Comptroller described in 2016:

OSC's recommendation was specific: surplus funds should be used to fund one-time expenditures, fund needed reserves, or reduce district property taxes. The District has selected the first two of those three options for nine consecutive years. The third option has not been used.

Residents will be asked, in May 2026, to approve another capital reserve — the sixth in a continuing series. The District will frame this in standard language: capital projects need funding, reserves provide a flexible vehicle, voter authorization is legally required.

All of that is true.

What the District will not tell residents, in the workshop slides or the proposition language, is that:

The cycle has worked for nine years, by the State Comptroller's own description. The District has every reason, structural and political, to continue running it. Voters have every right, also structural and political, to evaluate the cycle as a cycle, rather than as nine isolated propositions.

That evaluation requires reading the second bottom line on the audit. The first one will not show it.

Every figure in this article is reproduced in the published workbook. The audit page references for the Operating Transfers Out values are documented on the Audit Comparison tab, which presents Original Budget, Final Budget, and Actual side by side for each post-2016 audit. The reserve cycle described above is not interpreted there — it is left for the article. The workbook simply shows the numbers.

For methodology, see "Show Your Math: A Guide to the Jericho Budget Workbook."

The 9-year totals on Operating Transfers Out:

These figures are subtraction across the nine post-2016 audits' Schedules of Revenues, Expenditures and Changes in Fund Balance. They are public. The audit pages are public. The State Comptroller report that documented this exact laundering cycle is public.

If a number in this article is wrong, name it. Cite the audit page. Show the math. We will publish the correction prominently and credit the source that issued it.

If the District's position is that the mid-year revisions to Operating Transfers Out are routine and unremarkable, the District is welcome to explain why a 4×, 6×, or 8× multiplier on a budget line is routine. If the District's position is that every step in the cycle was voter-authorized, that is correct and not in dispute — the question is whether residents are being asked to authorize the next cycle while having the previous nine summarized for them on a single page.

There has never been such a single page. We have built one.

In December 2016, the State Comptroller documented that Jericho UFSD was using year-end transfers from capital reserves to convert operating surplus into restricted capital cash, and was simultaneously approving new capital reserves to refill the cycle. Across the nine fiscal years since, the District has run the same laundering cycle, at greater scale, every year that voters have authorized it.

The audit shows the surplus on the operating side. The audit also shows the destination in the line below.

Both lines are public. Both lines are quoted above. The cycle that connects them is the one the State Comptroller already named.

This is where the surplus goes.