EdVANTAGE Blog

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.

Awhile back, it was rumored that the State Education Department would move the statewide school district voting date up a week next spring, from May 18 to May 11, due to a conflict with a religious holiday.

This provoked some consternation, as well as questions — why not move the vote back a week instead?  In fact, the law only allows the Education Commissioner one option in the event of a conflict — to move the vote up to the second Tuesday in May.

However,the Department has now issued this determination:

Any change in the date for the 2010 annual budget vote and board of education elections will occur only for those districts that request such a change by the Commissioner due to a conflict with religious observances. All other districts statewide will still hold their annual budget vote and board of education election on the third Tuesday in May.

The Department’s complete guidance is copied below and available here.  It advises how districts seeking to use the earlier date are to proceed.

Read the rest of this entry »

Yesterday, State Comptroller Thomas DiNapoli issued a short report warning about the funding cliff confronting schools when federal stimulus aid runs out, in 2011-12.

This is something we have been warning about for months (see our testimony on mid-year aid cuts, p.6), and which most school leaders seem to recognize.  But it appears to have come as news to the media.

The Comptroller’s analysis notes that this year stimulus funding enabled school districts outside the Big 5 cities to hold tax increases to 2.1 percent.  It goes on to observe that had state aid reductions been enacted without the stimulus relief, districts would have had to raise local taxes by as much as 7.7 percent, cut spending by 3.2 percent, or some combination of the two.

The analysis takes into account both the State Fiscal Stabilization Funds, used to offset aid reductions proposed by Governor Paterson, and increases in Title I and special education aid. Title I funds extra help for disadvantaged students.

The stabilization funding was intended by Washington to fund ongoing operations by preserving jobs and averting tax increases.  On the other hand, the Title I and special education aid were intended to expand services but were issued with ample warnings from Washington to districts to minimize making multi-year commitments, given the scheduled ending of the aid.

Newsday reported that “yesterday’s advisory from Albany drew amused snorts of derision from local educators, who note the state has been discouraging school districts from building up the sort of cash reserves that could protect against future aid losses.”

We’ve cautioned that the state and the schools are heading for the same cliff, and using up reserves now would send more school systems over the edge sooner.

Comptroller Di Napoli says that the stimulus funding has, “helped ease some of the budget pain for school districts and taxpayers.” He adds,

“But that money stops in 2011-12, and when it does, New York’s schools face a $2 billion funding gap. That’s a big hole to fill. The time to start thinking about how to fill that hole is now, not when the money is already gone. It won’t be easy; schools are already facing financial problems. But this won’t just go away.”

The Comptroller’s report does not offer any thinking on how to fill that hole.

In an interview with a Buffalo talk radio station this morning Governor Paterson lashed out at Council President Oliver Robinson for speaking at a news conference last week announcing a legal challenge to the Governor’s withholding of School Aid and STAR payments.  Dr. Robinson is superintendent at the Shenendehowa Central School District in Saratoga County.

Paterson contrasted Shenendehowa’s reserves with the aid withheld last week and complained, “…the cut, the delayed payments that we are imposing on them amounts to $180,000, 5 percent of the money they have so I don’t know what they are complaining about.”

In fact, at the news conference announcing the lawsuit last week, Dr. Robinson said his district could manage with a delay, but noted there are nearly 700 other districts confronting different scenarios.

But the Governor’s slip — referring to the withholding as a “cut,” points to the core problem his action poses for districts — uncertainty over whether they will ever see the money withheld last week, or the even greater sum of STAR money he plans to withhold next month.

Below is a statement issued in response to the Governor’s remarks.  A “pdf” version is available here.

UPDATE:  Here is a link to the Albany Times Union’s report on the conflict. Read the rest of this entry »

Today the State Education Department released a summary of the state’s plan for federal “Race to the Top” funds.

The summary, an introductory video by State Education Commissioner David Steiner, and other items are available at the  SED Race to the Top website.

As a large state, new York is eligible for a grant of up to $700 million, 50 percent of which would be allocated to participating districts according to the Title I funding formula.

The application is due to the United States Department of Education on January 19, 2010.  A note to superintendents from Commissioner Steiner explains that

a critical action item for districts to be eligible for Race to the Top funding is the completion and submission to NYSED by January 8, 2010 of a Memorandum of Understanding (MOU) to confirm district commitment to implement the Race to the Top strategies.

SED also explains, “The MOU must be signed by the superintendent, and preferably also by the local school board president and the local education union president (if applicable).”

The SED Race to the Top website includes a link to the MOU form.

The Council is seeking input from its leaders and members to formulate an organizational perspective.

Today we are announcing that Louis N. Wool of the Harrison Central School District has been named the 2010 New York State School Superintendent of the Year.

Dr. William Johnson, THE COUNCIL’s Distinguished Service Chair and Superintendent of Rockville Centre Schools, said,

“It is clear that his priorities are to open doors of opportunity for every child in his school district. It is wonderful to have someone represent us who is making a merger of excellence and equity a priority in the system he leads.”

Former State Education Commissioner (and Scarsdale Superintendent) Thomas Sobol said,

“One of his most stunning achievements has been, and is now, to bring together the diverse population within his own school district and beyond as well…As a teacher, a supervisor, a superintendent, a college teacher, and Commissioner of Education, I have worked with hundreds of superintendents and superintendents-to-be. Louis Wool is among the best.”

Read more in our  news release.

After an all-night session, the Assembly passed a deficit reduction plan and the Senate followed this morning.  Governor Paterson has said he will sign the legislation, even though does not think it goes far enough.

The bills do not include a mid-year reduction in School Aid as sought by the Governor.

The Legislature’s plan does include accelerating the use of $391 million in federal stimulus aid to allow the state to reduce its contribution to School Aid without reducing total aid payments received by school districts.  As with the Deficit Reduction Assessment included in the state budget enacted in April, districts will experience a reduction in state funding and a corresponding restoration from federal stimulus aid.

Using more of the stimulus money this year adds to a future state budget deficit.

As we reported yesterday, the Governor intends to unilaterally withhold some scheduled local aid payments, including School Aid payments in December (see Deal or no deal?  Governor threatening to withhold School Aid payments). Read the rest of this entry »

Legislation accompanying Governor Paterson’s revised Deficit Reduction Plan would require school districts to use any unappropriated, unreserved fund balance to mitigate the impact of his proposed mid-year School Aid cuts.

Given the late point in the school year in which the cuts would be inflicted, it can be expected that many districts would choose to use reserves to offset state aid cuts.

But some districts might be able to accommodate cuts without exhausting reserves and literally forcing them to do so now would ensure tougher budget choices — more layoffs, bigger tax increases — in the budgets they assemble for next year, closer to when State Legislators are running for re-election.

Last year, for example, some districts said unanticipated retirements would have helped them manage proposed mid-year cuts.

The Governor’s proposal also directs that,

In addition, any programmatic reductions undertaken by school districts after any unappropriated unreserved fund balance is fully allocated, as a result of the enactment of the gap elimination adjustment shall, to the extent possible, not impact educational services to children.

School districts would be required to report to the Education Commissioner all budgetary actions they take to accommodate the Governor’s cuts.

In a positive move, the Governor proposes to allow schools to withdraw excess funds from Employee Benefits Accrued Liability Reserve Accounts to help offset proposed mid-year cuts.

He would also expand a tool approved with the 1990 mid-year cuts which allows districts to count an amount of future Lottery Aid equivalent to his proposed cut as revenue received in the current year.

There have been  several news reports over the past day suggesting that a potential state deficit reduction plan was likely to include some actions affecting school districts.

The Albany Times Union Capitol Confidential Blog reported that Legislators were asking to see district-by-district “runs” of possible School Aid cuts.

Today’s Times Union reports, “Many observers suggested a final vote on a deficit reduction plan would come no earlier than Thursday — although one legislative source said it will happen by then or not at all. The main sticking point, said this individual, was between $200 million and $300 million of cuts, mostly to school aid.”

There were other reports that some School Aid payments might be delayed to help the state manage through expected cash flow problems in December.

Today’s Buffalo News reports, “the Legislature’s most powerful Democrat said Tuesday he agreed with Paterson that some school districts can afford to take a hit in their state aid funding in the middle of the year.”

“I think that schools can absorb some cuts,” said Assembly Speaker Sheldon Silver. He would not say how deeply he might be willing to reduce school aid to help trim the state’s $3.2 billion deficit, but said poorer school districts would need to be held harmless.

Senate Democrats have continued to speak out against proposed cuts to education and health care.

Today’s Buffalo News includes a story the state leaders meeting on deficit reduction which was conducted yesterday by conference call.

It includes this passage:

The governor also maintains that nearly three-quarters of school budgets are administrative, and that many districts have money in reserves to cover funding cuts from Albany.

Robert Lowry, deputy director of a state association for school superintendents, noted that the most recent U. S. Census data from 2006 found administrative costs for schools amount to about 5.5 percent of a district’s budget.

Lowry said Paterson’s assertion that “administration” and “administrative” costs account for most of school district budgets is “just not true.”

We endured similar claims by the Governor a year ago.  I first noticed this new one in an online story and called the reporter to try to set the record straight.  I said there was no way administrative expenses  could be calculated to comprise so high a share of total school spending.

I also suggested thinking about a typical elementary school — 20 to 30 teachers, maybe some specialists, a nurse, a librarian, custodians, food service workers and one administrator — the principal.

I followed-up with an email message explaining the quirks in computing administrative spending (depending on how districts or  compiling agencies assign positions and costs) but said Census Bureau data indicates that 5.5 percent of 2006-07 spending in New York State went for administration, including both building-level and central office costs.

I added that the State Education Department reported central administration spending to be 2 percent of total expenditures in 2006-07.  SED does not publish data on building-level administration. SED calculated instructional expenses to be 75.5% of total expenses.

In testimony at an Assembly Ways and Means Committee hearing, I said, “We will not minimize the hardship you face in balancing the state’s finances. Please don’t minimize the challenges confronting school leaders.”

That is my concern with outlandish assertions of administrative spending.  It invites the conclusion that schools can manage cuts without hurting instruction.

In some structures, all employee benefits have been deemed an “administrative” expense.  Counting them as such for schools still wouldn’t get close to the 75 percent figure.  But in any event, those benefits for teachers are part of the cost of delivering instruction.  A district cannot reduce pension costs for teachers on its own, for example, except by eliminating teachers’ jobs.

As to the outcome of that leaders’ meeting, the Buffalo News said “The Legislature’s top Democrat and Republican on Thursday squared off in a new format — a telephone conference call — that featured name calling and motive questioning amid stalled efforts to erase the state’s $3.2 billion deficit.”