Both the national economy and New York State’s economy have been dramatically impacted by the COVID-19 crisis and the various mitigation efforts that have been undertaken since March 2020. What is still unknown is the extent to which the impact will improve or worsen, how long it will last, and which sectors of the state economy will be most severely impacted.
New York State government operations are funded through a blend of many revenue sources, including the personal income tax, sales tax, corporate taxes, user fees, and federal grants and entitlements. Each of these sources has been impacted in different ways by the changes in economic activity in the state due to COVID-19.
State aid to public education was reduced in the 2020-21 school year by a total of $1.13 billion through a “Pandemic Adjustment,” which reduced school district aid allocations at their bottom line, commensurate with the amount of federal Coronavirus Aid, Relief and Economic Security (CARES Act) funds each district was projected to receive. Districts were then allocated an amount of federal funding through the combination of the CARES Act Elementary and Secondary School Emergency Relief Fund (ESSERF) and the Governors Emergency Education Relief Fund (GEERF). As a result, school districts will experience a decrease in state aid payments, but will be eligible to apply for an amount from these federal grants. However, it should be noted that the CARES Act requires a portion of the funds to be used to provide equitable services to non-public schools.
The 2020-21 New York State Enacted Budget also included provisions that will allow the Director of the Budget, subject to amendment by the Legislature, to reduce appropriations across any and all program areas of the state budget, should actual revenues come in at levels that are below the assumptions made in the Executive Budget. As of April 2020, the total shortfall was projected to be $8.2 billion. Absent additional federal support, the Division of Budget has stated that further reductions to school aid might be necessary to eliminate that projected budget gap.
Another major factor in the fiscal outlook for school districts is the availability of undesignated reserve funds, which districts set aside for times of fiscal hardship. Unrestricted reserves total approximately 4.0% of total proposed spending. Relaxing rules around withdrawals from certain purpose-driven reserves would also provide districts additional flexibility in budgeting for the upcoming years with a diminished prospect of increases in state aid, but such changes would require the enactment of legislation.
When districts consider how much of those reserve funds should be tapped into during any single school year or crisis, they should remember that this situation has the potential to be long-lasting. Governor Cuomo’s Executive Budget proposal in January 2020 initially called for a statewide increase in school aid for the 2020-21 school year of $825 million, or 3 percent. As the COVID-19 crisis emerged prior to the enactment of the final budget, that planned increase did not materialize, resulting in a school aid apportionment that held unrestricted funds flat for districts and maintained reimbursements at statutory levels. A reduction in state-funded aid was partially offset by an increase in emergency federal funds.
It is anticipated that there may be costs in 2020-21 that districts did not necessarily budget for in the correct account codes, in particular, the need for additional equipment. Flexibility for budget transfers in the 2020-21 school year for additional equipment needs only (associated with re-opening and the maintaining of buildings primarily) would help school districts in that position. Historically, school districts have been advised that money cannot be transferred into an equipment account code because equipment is considered a non-contingent expense (generally), and transfers into non-contingent line items are prohibited.
Additional costs for PPE, transportation, food service, and other mitigation needs will likely be necessary. Districts should not assume additional state or federal support will be available beyond what has already been budgeted for and should plan for those needs accordingly.
All existing state aid reporting requirements and deadlines must be maintained; the content of data submissions will largely remain consistent with past practice, except where modified by law, regulation, or executive order.
In particular, school districts report certain enrollment, attendance, and school calendar information through the State Aid Management System (SAMS). While this data submission process differs from other procedures, the underlying data provided should be consistent with all other attendance reporting and requirements.
The minimum annual instructional hour requirement and 180 days of session requirement are also both reported through SAMS. For both the 2019-20 and 2020-21 school years, school districts will be required to continue the same information, based on the schedule provided for the average student, rather than reporting for each individual student. Under regulatory changes adopted as an emergency rule by the Board of Regents on July 13, 2020, school districts may be eligible to apply for a waiver from the minimum instructional hour requirement for both the 2019-20 and 2020-21 school years to the extent that “the district is unable to meet such requirement as a result of an Executive Order(s) of the Governor pursuant to the reopening procedures implemented as a result of the COVID-19 crisis. Successful application of the waiver will shield school districts from a reduction in aid for failure to meet the minimum instructional hour requirement. However, the 180 days of session requirement is in statute, and for the 2020-21 school year there are currently no statutory provisions that would allow a school district to provide fewer than 180 days of instruction over the course of the full school year.
School districts have expressed concerns about the impact that students choosing to stay home during the pandemic will have on their state aid calculations. State Aid formulas use multiple attendance counts in the calculation of aid apportionments for school districts. Statewide over 70 percent, largely in Foundation Aid, is based on Average Daily Membership or district enrollment, which is a measure of student registration in the district and does not take attendance into account. These aid formulas should not be impacted by attendance rates. Some formulas, however, do use Average Daily Attendance in the calculation of reimbursement rates. Changes to those calculations would require the enactment of legislation.
It is important to understand the fundamentals of education finance policy in New York State to develop the most responsible—and flexible—budget plans for reopening schools. The economic demographics of school districts across the state vary widely, from some of the wealthiest districts in the country to some of the poorest. The various state aid formulas work to complement that reality, with the wealthiest district receiving less state aid and the districts with less local fiscal capacity receiving more. Accordingly, state aid cuts to districts more dependent on their state aid allocations are even more devastating and require additional planning.