In light of COVID-19, districts brace for potential mid-year aid cuts and “Pandemic Adjustment” reductions
On Thursday, April 2, New York state lawmakers adopted a state budget that keeps Foundation Aid flat for the 2020-21 school year and maintains overall education funding at nearly the same level. Passage of the budget came against the backdrop of the COVID-19 pandemic and its significant impact on state finances.
According to the Governor’s Office, overall education funding for next year is $27.9 billion, about the same as the current year. A $95 million increase in formula-based state aid is attributed to growth in expense-based aids. These are reimbursements for spending in designated categories such as transportation, special education and BOCES services.
However, in light of COVID-19, two new provisions in the budget contribute to significant uncertainty for school districts: the introduction of periodic reviews of state revenue that could result in mid-year school aid cuts and a new “Pandemic Adjustment” state aid reduction that is, at least for now, fully offset by new federal funding.
Main points of this year’s budget are outlined below.
Foundation Aid is flat for 2020-21
Foundation Aid is the primary source of general purpose operating aid for schools. In his executive budget released in January, Gov. Andrew Cuomo proposed a $500 million increase for 2020-21. This was not included in the final agreement, which was negotiated during the COVID-19 pandemic. The state is currently $3.8 billion behind full funding of Foundation Aid.
Expense-based aid and building aid structures remain
A proposal from Gov. Cuomo earlier this year to consolidate expense-based aids within Foundation Aid – effectively doing away with them – was not incorporated in the final state budget for 2020-21. This means the current expense-based structure remains intact and fully funded. A proposal to limit building aid, which helps fund facilities improvements, was also not included in the enacted budget.
“Pandemic Adjustment” offset by federal stimulus funds for now
In an effort to deal with the financial challenges brought on by COVID-19, the state budget includes a state aid reduction, the “Pandemic Adjustment,” that totals $1.1 billion statewide. This is entirely backfilled for each district by federal stimulus funds for 2020-21. Reminiscent of the Gap Elimination Adjustment (GEA) that resulted from the Great Recession a decade ago, each district’s aid is reduced by a Pandemic Adjustment figure. While the federal stimulus offers relief this year, it remains to be seen if and how this will be applied to state funding in future years.
Potential for mid-year aid cuts based on state revenue
The enacted state budget provides for three time periods during the state’s fiscal year when the State Division of Budget will evaluate revenues against projections and potentially withhold or adjust aid to localities, including school districts. This possibility for mid-year aid cuts means that schools may receive even less state funding than it appears at this time. The first of these review periods is April 1-30.
The budget continues investments in state initiatives such as prekindergarten, afterschool programs, community schools and early college high schools, although in many cases not at the levels that Gov. Cuomo had initially proposed in January, prior to the pandemic. The budget includes an additional $10 million for grants to school districts to strengthen mental health services for students.
Budget vote & board elections delayed
Adding to the uncertain landscape for schools is the recent executive order delaying school budget votes and Board member elections until at least June 1 based on ongoing public health concerns. “Any school board, library board, or village election scheduled to take place in April or May of 2020 is hereby postponed until at least June 1, 2020, and subject to further directive as to the timing, location or manner of voting for such elections,” the executive order states.
Additional guidance related to budget timelines and required actions such as the budget notice and budget hearing is not yet available. Portfolio will be releasing updated budget vote and board of education election timelines as soon as possible.