Capital Region

New federal money on its way to schools but state aid cuts still pose threat

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New York school districts can expect an infusion of federal money totaling over $4 billion, but the state’s financial outlook still presents the risk that state aid cuts will offset the federal investment.

The stimulus package passed by Congress on Monday night offers school districts about four times the amount of money districts received under the federal CARES act passed in the spring, allocating money to each district based on a formula that distributes federal aid based on school district needs.

But it still remains unclear when the money will be distributed to districts, whether it will be spread over multiple years and how much the federal money will be offset by cuts to state aid.

While state education policy analysts Tuesday cheered the federal package and highlighted the enormity of over $4 billion in federal school aid – the amount dwarfs any single-year increase in state school funding — they also emphasized the still-looming deficits in the state’s budget and the prospect that business restrictions continue to reduce state revenues. While they largely expect some of the federal money to be offset by state aid reductions, it’s not clear how far those cuts will ultimately go.

“This is helpful but it still feels like all the dust hasn’t settled yet,” said Bob Lowry of the state Council of School Superintendents. “For individual districts the uncertainty continues.”

Moreover, the more the state relies on the federal stimulus money to offset state aid funding cuts, the more likely districts face a funding cliff in subsequent years. (For example: If the state cuts education aid by $4 billion, district funding could effectively be kept flat for as long as the federal money is doled out, but the state would then find itself in $4 billion education aid hole after the federal dollars were used up.)

The state already faces a similar fiscal cliff from the first round of federal stimulus in the spring. While districts received a combined $1.1 billion in federal support then, state lawmakers and Gov. Andrew Cuomo reduced state aid by the same amount; that budget maneuver from this year places state education aid in a hole to start next year.

“The one thing we are sure of is there is a $1.1 billion hole in state aid,” said Brian Fessler, director of government relations at the New York School Boards Association.

Some of the latest federal aid could be used to fill back that hole in order to maintain district funding levels.

“Four billion is a ton of money,” Lowry said. “I would expect the state to say we need some of that money to offset reductions in our contribution.”

Crucially, the federal stimulus did not include general support to states and local government, but transportation, healthcare and other funds included in the package will also contribute to mitigating the threats to New York’s overall budget, which will ultimately affect the impact on districts.

Even if state officials are able to get through the remainder of this school year with dramatic new cuts to school aid, financial forecasts project deficits stretching out multiple years.

“The picture is certainly better than now,” Fessler said of the new aid. “My guess is there still is some level of uncertainty, a district may feel more comfortable right now with this package, but they don’t know whether this (federal aid) will supplement or supplant state aid.”

Interim state Education Commissioner Betty Rosa and Board of Regents Vice Chancellor T. Andrew Brown in a statement Tuesday thanked the state’s federal lawmakers and urged other state officials to not allow the money to be offset by other state funding cuts.

“We are once again calling for state operating aid for schools to remain level with 2019-20 funding levels and that any new federal dollars be used to supplement not supplant state aid funds,” they said in the joint statement.

The education officials also called on state budget officials to pay back funds withheld from districts earlier this year and fully fund the remainder of aid payments due to districts this school year.

“Finally, now that we have a clear picture of what federal funds will be available, we ask that districts be provided with all state aid funding that has been withheld and that no further state aid payments are withheld moving forward,” they wrote in the statement.

Division of Budget spokesperson Freeman Klopott in a statement Tuesday responding to questions said the budget office was still “reviewing the nearly 6,000 pages of federal legislation made public just Monday afternoon,” but highlighted the lack of broader state and local government aid, noting that funding was “desperately needed to offset the state’s four-year, $63 billion revenue loss.”

Klopott said without that federal aid the state would not be able to fully fund all of its operations, which includes aid to school districts, highlighting that school districts have received nearly all of their payments so far this school year. He said any future cuts would account for district needs and the latest federal aid, calling for still more federal aid.

“Should we have to make reductions, which would be a last resort, we will take district need and these federal funds into account,” Klopott said in the statement. “The federal government must act responsibly and deliver the funding states need to fund critical services and lead the nation’s recovery.”

 

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