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Thomas P. DiNapoliReduced Spending in NY Schools

School districts across New York are reacting to current economic conditions by reducing spending, with the number of districts doing so in 2010 rising six-fold from two years earlier, according to a report released at a meeting of the New York State School Boards Association today by New York State Comptroller Thomas P. DiNapoli.

“The cost of education, like everything else, keeps going up, and school district revenues are going down,” DiNapoli said.  “Many school districts have taken steps to align spending with today’s economic realities. But it’s imperative that every school district look at ways to cut costs and plan strategies that help them deal with fiscal stress. The fiscal climate isn’t going to get better overnight.  School districts have to find ways to educate and economize at the same time. Raising taxes should be a last resort. Districts need to take a serious look at streamlining operations, sharing services and using multiyear planning to keep costs in check.”

DiNapoli’s report, “Staying Ahead of the Curve: School Districts Responding to Fiscal Challenges,” used a series of 22 financial indicators to assess the fiscal condition of school districts around New York State. The study found that general fund expenditures declined in 33 percent of New York’s districts in 2010, indicating many are already developing ways to manage financial challenges.

The report notes that school districts on Long Island and in the Mid-Hudson regions showed signs of fiscal stress on 16 of the 22 indicators, the most in the state, largely because those areas have been hit hardest by the collapse of the housing market, and face higher per-pupil costs.

Districts in the Finger Lakes region showed higher than average stress on 10 of the 22 indicators, while those in Central New York, the Southern Tier and Western New York were higher than average on 9 indicators. All of those regions have high rates of pupil need, relatively low property wealth, are highly dependent on state and/or federal revenues, and have higher levels of debt.

Overall, districts in the Capital Region, Mohawk Valley and North Country showed the fewest signs of fiscal stress.

DiNapoli’s office suggests school districts:

• Take advantage of multiyear planning tools developed by the Office of the State Comptroller to understand the impact of today’s decisions over time.
• Identify cost savings opportunities through improved business processes.
  
• Investigate and execute shared service agreements with other districts or local government entities. A 2009 DiNapoli report estimated that sharing of central business office functions could potentially save municipalities and school districts up to $765 million statewide.

The report notes that fiscal stress has already forced the state to reduce its planned aid to school districts by $1 billion in the 2010-2011 fiscal year. According to the governor’s proposed budget, school districts could face additional cuts amounting to $1.5 billion in 2011-12, due in part, to the phase out of federal stimulus funds. These factors come amid continued increases in educational costs.

Most Districts Have Enough For One Year

School districts in central New York and the Finger Lakes would have the least ability to tap reserves to make up for any reduced state education funding, according to an analysis by New York State Comptroller Thomas P. DiNapoli. DiNapoli’s analysis also notes that while most districts could cover the aid cuts with reserve funds, those districts would likely deplete all of their reserves in a single school year. The governor’s 2011-2012 Executive Budget proposed a $1.5 billion (7.3 percent) net cut in state aid to education.

“Most districts have big enough reserves to cover the proposed cuts for one year,” DiNapoli said. “But after that, the reserves would be gone and without other actions, the expenses would still need to be addressed.  And more than 100 districts across the state don’t have enough reserves for even one year.

“If costs increase by even a modest 3 percent, the number of districts with problems would double. Many schools districts are going to have to tighten their belts another notch next year and beyond.”

The median impact of the proposed cuts on district operating aid (which excludes building aid) would be 12.5 percent, though eight districts would see cuts of more than 20 percent.  The proposed reduction would have the greatest impact on average-need districts as wealthier districts rely less on state aid and high-need districts would see smaller drops in state funding.

According to information reported to DiNapoli’s office, school districts outside New York City have $1.77 billion in undesignated reserves and $306 million in excess Employee Benefit Accrued Liability Reserves (EBALR). As of January, districts reported having $354 million in federal funds still available for the 2011-12 school year. The Executive Budget proposes districts use undesignated reserves and unspent federal education jobs funds to help mitigate the cuts.

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