BY ANDY GARDNER
North Country This Week

A new survey warns that nearly 40% of New York state school districts could become insolvent if Albany makes mid-year state aid cuts.

The survey is by the Association of School Business Officials of New York, and explained in a report by the New York State School Boards Association titled “A Lost Generation?”

“State aid cuts will have a negative impact on school districts in both the short and long terms. Survey respondents made clear the devastating impact that multi-year aid reductions would have on their schools,” the report says. “In short, the additional costs of operating during a pandemic, coupled with large cuts in state aid, threaten to irreparably harm New York’s public schools.”

The report says aid cuts at the levels proposed could cause 25% of districts to become financially insolvent and 13% to become educationally insolvent.

Educationally insolvent means “they would lack sufficient resources to provide a sound, basic education to their students,” the report says. “An additional 40% of districts would have to make deep staffing cuts, while 14% would scale back programs offered to students.”

“The state has already withheld 20% of the aid schools were due to receive in July and August. While the state recently pledged there would be no withholding from the end of September state aid payments, Gov. Andrew Cuomo has made it clear that only additional federal funding will stave off additional cuts in the 2020-21 school year. A 20% state aid cut this year would amount to more than $5 billion statewide. The state currently projects a $14.5 billion General Fund revenue decline over what had previously been forecast for the current fiscal year, which is part of a $62 billion reduction over the next four years,” according to the report.

In addition to potential aid cuts, North Country school districts are grappling with having to spend on average an extra $113,000, or $113 per pupil, to cover costs related to the pandemic. That includes buying PPE like masks and face shields, plexiglass barriers, cleaning supplies and technology resources to teach remote classes.

The report makes two suggestions to help overcome these hurdles: increase the allowable budget fund balance and eliminate negative tax caps.

Currently the state allows districts to keep 4% of their operating funds as a fund balance, and anything over that is supposed to be used to offset property taxes or be stored in a reserve fund for specific future expenses.

“A higher cap would allow districts to retain more cash on hand to meet their future fiscal obligations. At a time when the economic future is incredibly uncertain, this would be a means of allowing districts to better meet the financial challenges that are on the horizon. If such a change had been implemented during the recovery from the Great Recession (in 2008), school districts would be in a much stronger position today,” the report says.

A negative tax cap means a district isn’t allowed to increase its tax levy. The current tax cap formula allows local governments, such as school districts, to increase taxes each year by 2% or the change of inflation, whichever is less. Overriding the tax cap requires approval of 60% of district voters.

“The negative tax cap is a phenomenon in which a district can actually be allowed only a negative year over year increase. This can occur due to a quirk in the tax cap calculation caused by payment of debt service or an increase in payments in lieu of taxes,” the report says. “Each district has different needs, and the ‘one-size fits all’ approach to the property tax cap places external limits on a budgeting process that is local by its nature. Restoring flexibility to school districts is the best way to meet the needs of students. This is especially true during these challenging economic times.”

The complete report can be read at https://bit.ly/3lnqZnl .