State budget details emerging (REVISED)

Sunday, March 29th, 2009 at 3:50 pm by

The Assembly and Senate have printed bills needed to enact a state budget and are expected to begin passing them on Tuesday.  The Governor has issued news releases highlighting aspects of the budget agreement, clearly suggesting that he is on board as well.

School Aid and State Funding Issues
As expected, the Legislature’s budget would eliminate the Deficit Reduction Assessment in School Aid, and reject the Governor’s proposal to shift preschool special education costs on to school districts. Federal stabilization funds for education would be used to pay for these restorations.

Stabilization funds are also to be used to fund changes in aid levels since the November school aid database was compiled.  The Governor proposed freezing aid calculations based on the November data.

As proposed by the Governor, Foundation Aid would be frozen for 2009-10 and 2010-11.

We and others have warned that failing to provide an increase in Foundation Aid, or other general aid increase, may result in school layoffs beyond what has been anticipated in light of the federal stimulus aid.

Also, the federal law governing the stabilization funds appears to require that they be used to (1) restore aid under the state’s primary school aid formulas and public higher education funding levels to the greater of 2007-08 or 2008-09 levels, and (2) to allow formula increases and “adequacy and equity adjustments” enacted before October 2008 to be implemented. The planned use would not address the second set of requirements.

The federal law is not clear on how a state is to reconcile the requirements if its stabilization fund allocation is inadequate to fund all of them over the next three years.

The scheduled full phase-in of the Foundation Aid formula would be postponed for two years, until 2013-14.

Funding for major reimbursement aids (BOCES, Building, Transportation, and Private Excess Cost Aid) would be provided according to current law formulas, as would funding for most categorical programs.

High Tax Aid for each district would be continued at 2008-09 levels.

The media is reporting that School Aid would be flat.  But the net effect of freezing Foundation Aid, eliminating the Deficit reduction Assessment, and allowing reimbursement aid formulas to run would be a $405 million increase in total School Aid.

A news release from the from the Governor’s Office notes that school districts will also receive a total of over $800 million in additional federal Title I aid for disadvantaged students and Individuals with Disabilities Education Act IDEA funds for special education.  Most of this aid comes “with supplement, not supplant” limitations on how it may be used.

Other Issues
STAR property tax rebates: As proposed by the Governor, the Middle Class STAR Rebate program would be repealed.  The Senate is saying that it will continue to seek adoption of a property tax circuit-breaker credit.

Traditional STAR “floor” reduction: The proposal to further raise the maximum allowable one-year decrease in the value of STAR exemptions is not included in the agreed-upon budget.  The Governor’s budget would have raised the maximum decrease from 1 percent to 18 percent.

EBALR reserves: The Legislature does not allow districts to use “surplus” funds in Employee Benefit Accrued Liability Reserve accounts to offset aid cuts.

MTA payroll tax: Agreement on a “bailout” plan for the Metropolitan Transportation Authority has not been reached, but state leaders say they continue to make progress and hope to have an agreement by Tuesday.   News reports have said that a plan is likely to include a payroll tax on employers in the MTA region, including school districts.

State taxes and PILOTs on state property: The agreed-upon budget does not freeze or cut state tax payments and payments in lieu of taxes on state properties as proposed by the Governor.

Contract for Excellence: Districts required to file a Contract for Excellence in 2008-09 would be required to maintain their current C4E expenditure levels into 2009-10, unless all schools are now in good standing.

Charter school tuition payments: School district per pupil tuition payments to charter schools are to be frozen at 2008-09 levels, consistent with the freeze of Foundation Aid.

Cost containment: We don’t see any new efforts to assist schools with cost containment in the education budget bills. If the Legislature does achieve a timely budget, its planned session schedule leaves close to three months to pursue this priority.  A news release says that the houses will continue to negotiate possible mandate relief.

Income Tax Increase
The budget does include an increase in state personal income tax rates on higher income New Yorkers.

The current maximum rate is 6.85 percent on households (joint filers) with income over $40,000. The agreed upon state budget would raise the rate to 7.85 percent on incomes above $300,000 (above $200,000 for single filers). The rate on incomes above $500,000 would rise to 8.97 percent, the same as New Jersey’s current top rate.

The increases are expected to raise $4 billion in additional revenues for the state this year and would expire after three years.

Process more or less on schedule
On Saturday, the Legislature printed seven of the nine bills needed to enact a state budget.  The remaining bills were printed on Sunday.

The Legislature needed to print its bills by midnight Saturday to be able to vote on them on Tuesday (March 31) without obtaining permission from the Governor. The State Constitution requires bills be in print for three days before they may be voted upon, unless the Governor issues “messages of necessity” for immediate votes.

With two budget bills not printed until Sunday, the Legislature will not be able to produce a literally “on-time” budget unless the Governor permits early votes on the two bills.  Since the Governor’s office has issued news releases highlighting elements of the budget, it seems his assent would be forthcoming.

Senate Republican Leader Dean Skelos has threatened to have his members boycott sessions to pass the budget if they feel they have had inadequate opportunity to review details. Without some Republican members, the Senate would not have a quorum, denying state leaders the ability to pass the budget before the start of the fiscal year.

Senator Skelos issued a news release on Sunday condemning the agreed-upon budget and promising to fight against its adoption, but he did not repeat his boycott threat.

We will update this post as more details become available.

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