SCHOOL AID REDUCTIONS BALANCED BY LONG-TERM COMMITMENT TO INCREASED EDUCATION FUNDING ALLOCATED BASED ON STUDENT NEED

The Executive Budget reduces education aid in 2009-10 by $698 million or 3.3 percent from 2008-09 while maintaining a commitment to both long-term increases in educational investments and the formulas created to equitably allocate these funds. Even after these reductions, funding for School Aid would still total $20.7 billion in 2009-10, a 42 percent or $6.2 billion increase compared to 2003-04.

The Executive Budget also proposes a mandate relief package to allow districts to reduce costs and adjust to the changing economic climate and the evolving needs of their communities.

“The decision to recommend a reduction in School Aid is a personally difficult one for me,” said Governor Paterson. “During my time in the Legislature, I was one of the strongest advocates for increased education funding. The grim reality of our current fiscal situation is that all areas of State spending will have to experience reductions. But I am assured in the knowledge that, even after these actions, New York will still have one of the best-funded education systems in the nation.”

Two years ago, the State adopted a new Foundation Aid formula, which has successfully allocated the vast majority of school operational funding based on equitable and objective measures of student need and districts’ financial abilities to meet those needs. The Executive Budget maintains the Foundation Aid formula.

Significant funding increases in Foundation Aid and Universal Prekindergarten were scheduled to be phased-in over a four-year period with a complete phase-in occurring in the 2010-11 school year. Reflecting the need to adapt to plummeting State revenues and a new fiscal environment, this phase-in period will be extended to eight years — with a full phase-in occurring in the 2014-15 school year. When Foundation Aid was originally enacted in 2007-08, the State had a prior year surplus of $1.5 billion. In 2008-09, New York faces a two-year shortfall of $15.4 billion.

Governor Paterson said, “Despite these difficult times, I remain firmly committed to the $7 billion educational investment plan begun in the 2007-08 budget. But we have to take prudent actions to adjust our spending and adapt to unprecedented fiscal difficulties.”

Formula-based School Aid savings are achieved through three main steps. These steps, combined with reductions and eliminations of categorical programs, result in a $698 million or 3.3 percent year-to-year reduction in total School Aid:

• First, certain School Aid funding categories, including Foundation Aid and Universal Prekindergarten (UPK), will be maintained at 2008-09 levels for two years (2009-10 and 2010-11);
• Second, unlike Foundation Aid and UPK, some School Aid allocations such as Building Aid, Transportation Aid, and others will not be limited to 2008-09 levels and will change year-to-year based on existing statutory provisions. Funding for these aid categories is projected to have a net increase of $462 million in 2009-10; and
• Third, in 2009-10, a one-time $1.1 billion Deficit Reduction Assessment (DRA) would be taken against total formula-based aids excluding Building Aid and Universal Prekindergarten. The DRA is structured progressively so that school districts with the greatest needs and least ability to pay receive the smallest percentage reductions in aid. Individual school district reductions will range between 3 and 13 percent.

Finally, a number of categorical grant programs are reduced or eliminated to prevent further reductions in direct aid to schools.

School districts have reported over $1.3 billion of uncommitted reserves for the 2009-10 school year, which have been building up over time. Over 87 percent of districts reported unreserved balances in excess of their proposed year-to-year reduction in School Aid.

Governor Paterson has also proposed mandate relief measures to help school districts manage proposed reductions. These measures include the following:

• Exempting School Districts from the Wicks Law. School Districts will be exempted from Wicks Law requirements for the next five years.
• Modifying the Contract for Excellence. For the 2009-10 school year, all 39 districts currently in the program can reduce Contract for Excellence program expenditures from 2008-09 levels by the same percentage as their deficit reduction assessment, but must remain in the program unless all schools in the district have improved their performance and are found to be in good standing.
• Allowing Districts to Access Certain Reserve Funds. This proposal would allow districts to withdraw limited amounts of excess funds in an employee benefits accrued liability reserve fund (with the approval of the State comptroller) to maintain educational programming in the 2009-10 school year.
• Reforming Pensions. The budget would remove pension enhancements added after the creation of the Tier IV retirement category, which will allow districts to reduce growth in their pension costs – one of the fastest growing local government cost drivers.
• Reforming Procurement. This would allow school districts additional contracting flexibility by increasing existing bidding thresholds and allowing them to piggyback onto existing contracts.
• Reducing Paperwork. This proposal would streamline existing reporting requirements and eliminate required reports that are outdated or no longer serve a public policy purpose.
• Delaying the Effective Date of Mandates. Any new mandate with a cost would not be implemented sooner than the following school year to allow districts the opportunity to build those costs into their budgets.

Other major budget actions in the area of education include:

• Reduce/Eliminate Categorical Programs: Funding for several categorical grant programs would be reduced or eliminated to prevent further reductions in direct aid to schools. These include the elimination of $40 million for the Teacher Centers Program, which provide professional development; the elimination of a $10 million Teacher Mentor Intern Program, which pays for substitute teachers to allow more experienced teachers to leave the classroom to mentor new teachers; a 50 percent reduction from $12 million to $6 million for a special grant for the Roosevelt School District, which has an operating surplus reported by the Office of the State Comptroller; the elimination of a $10 million program to provide summer math and science programs at colleges and universities; and the elimination of $2 million in funding for the Rochester Children’s Zone, which is attempting to introduce the community schools model in that city. While these programs may provide valuable enhancements to core operations and programs, the Governor’s proposal focuses limited school aid resources on direct funding for school operations.
• Preschool Special Education: Although school districts are the primary decision-makers for preschool special education services, they have no financial responsibility for that program. To better align fiscal and programmatic responsibilities, school districts will be responsible for a 15 percent share of preschool special education costs, reducing the State share from 59.5 percent to 47 percent of program costs and the county share from 40.5 percent to 38 percent. After this action, State funding for preschool special education will total $590 million
• Eliminate Comprehensive Attendance Program (CAP) for Non-Public Schools: The current mandate for nonpublic schools to participate in the comprehensive attendance program will be eliminated, as will the State’s financial responsibility ($44 million) to reimburse nonpublic schools for CAP costs incurred in prior school years. Nonpublic schools would continue to receive over $80 million in aid for other mandated services, including traditional attendance-taking, as well as other support for student instructional costs.

A full list of education programs impacted by the Executive Budget can be found at: www.budget.state.ny.us.