EdVANTAGE Blog

There is a tendency to think about schools as though looking through a funnel, missing some bigger picture considerations.

It is often overlooked that school districts operate with more accountability and transparency than other entities, yet also with more limitations on some of their financial practices.

“Funnel vision” toward schools was evident in some of the media coverage of State Comptroller Thomas DiNapoli’s five-year summary of his office’s school fiscal accountability project earlier this week.

Much of the media coverage of the Comptroller’s report focused on its conclusions that school districts have accumulated reserves in excess of what current laws allow.

But there is a tension between the report’s findings (schools have “unnecessary” reserves) and its recommendations (schools need to have more ways to set aside money in reserve).

The implication of recommending changes to laws governing school reserves is that current laws don’t completely make sense.  We agree.

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Yesterday, Governor Paterson released his “21-day” amendments to the state budget he proposed three weeks ago.

As we reported previously, the Governor had already announced that the budget’s projected deficit had grown by 10 percent — from $7.4 billion to $8.2 billion.  Accordingly, it had been anticipated the the 21-day amendments could present another round of spending cuts.

Instead the Governor is counting on $1.06 billion in increased federal funds from President Obama’s proposed budget to avoid major new cuts.

A news release from the Governor’s office cautions, “While there is strong evidence indicating that this aid will be approved, if federal action is not taken, deeper spending reductions would be required across a range of policy areas, including, potentially, education, health care, social services, and others.”

The Governor is also proposing a change in the “mobility tax” adopted to aid the Metropolitan Transportation Authority last year. The Governor’s news release says, “The amended proposal increases the tax rate for New York City businesses to 0.54 percent of payroll, up from 0.34 percent. It also cuts the tax rate in half for businesses outside of New York City to 0.17 percent.”

There are also more technical changes in the 21-day amendments.

Counting on federal funds is a mixed blessing — there are already huge worries about what happens to the state and the schools when federal stimulus funding enacted a year ago runs out in 2011.

But the prospect of further federal aid was one glimmer of hope for reducing or averting the School Aid cuts in Governor Paterson’s proposed state budget.  Now that money — if it ever materializes — may be off the table, swept up by the Governor to fix the imbalance in the budget he proposed just three weeks ago.

The threat that additional education cuts may be needed if the federal aid does not come further complicates school district budgeting.  Should schools assume the level of aid proposed by the Governor, or something less. in case federal aid does not materialize, or count on some restoration by the Legislature?

The threat of further School Aid cuts is one more reason why it is valuable for schools to have reserves to call upon.

Some news on the state budget…

State Deficit Growing
First the bad news:  On Wednesday (February 3), Governor Paterson announced that the state’s projected budget deficit for next year has grown by $750 million – from $7.4 billion to $8.2 billion.

The widening gap is due to a $550 million fall-off in personal income tax collections and a $400 million increase in Medicaid costs, partially offset by $200 million in lower than anticipated spending in other unspecified areas of the budget.

PIT receipts were actually $1 billion lower than anticipated but the Governor’s Budget Division believes some of the fall-off is timing-related and will be partly made up through later payments.

The Governor is permitted to submit amendments to his budget and will do so next Tuesday (February 9).

It should be expected that the Governor will rely overwhelmingly on additional cuts to close the new deficit.  Since School Aid comprises nearly one-third of state General Fund spending, additional proposed cuts to education seem probable.

Legislative leaders expressed skepticism of the Governor’s announcement – that he remains too optimistic.  The Albany Times Union reported,

“These two-week revisions strongly suggest that the governor’s initial budget submission did not present an accurate picture of the state’s finances,” Assembly Speaker Sheldon Silver said.

Moreover, Silver expects the numbers to get even worse as revenue falls short in February and March. He said revenues in those months would need to grow 37 percent over last year to meet the new estimates.

“This level of increase appears to be highly unlikely,” Silver said.

Legislative Budget Hearing
On Tuesday (February 2), the Legislature’s fiscal committees conducted their hearing on the education budget.

I testified for the Council.   I described the choices school leaders made last year to balance competing pressures to hold down tax increases, producing the lowest average increase in seven years, while using federal stimulus aid to save an estimated 18,000 jobs.  I emphasized that the choices for the coming year will be more difficult with more districts expecting to eliminate jobs while still trying to hold down tax increases.  I also discussed mandate relief and the extent of school reserve funds.

Several witnesses warned of job cuts and layoffs.  I was quoted by Gannett papers reporting that some districts fear needing to cut 5 to 10 percent of their staff.  New York City Mayor Michael Bloomberg has said he may need to layoff 8,500 teachers.

You can read our testimony here.

The hearing was the debut of State Education Commissioner David Steiner at these annual rituals.

The Commissioner was strong on advocating for for preservation of the Foundation Aid formula.

Associated Press coverage of the hearing led off, “”New York state Education Commissioner David Steiner told lawmakers Tuesday that if Gov. David Paterson’s proposed cuts in education funding go through, public schools may never fully recover.”

On the Commissioner’s advocacy for the Foundation formula, AP reported,

“Each year the formula is frozen, it adds to the eventual cost of restoring it once the economy turns around,” Steiner said of school aid, now just over $20 billion a year. A long delay could make it “infeasible” to catch up to the track ordered by the court because of decades of the state’s underfunding of New York City schools.

A blog post in the Albany Times Union gives a flavor of the questioning.  In years past, it was common for Legislators from the opposition party to attempt to maneuver witnesses into condemning the Governor for under-funding schools.  I saw none of that and take it as a sign that Legislators are wary of raising expectations that they will be able to significantly reduce cuts.

Instead, there were many questions regarding procedures for removing tenured teachers and proposals to reduce school paperwork mandates.