Schools Face $2 Billion Shortfall when Stimulus Funding Runs Out

December 22, 2009

ALBANY – School districts across New York state, including New York City, face a potential funding gap of at least $2 billion when the American Recovery and Reinvestment Act funding runs out in 2011-12 u nless federal aid is renewed or replaced by state aid, according to analysis released today by State Comptroller Thomas P. DiNapoli. Property taxpayers could face on average a 7.7-percent tax increase in 2011-12 to make up the loss in ARRA funds, assuming school budgets and state aid remain constant.

“ARRA funding has helped ease some of the budget pain for school districts and taxpayers,” DiNapoli said.  ”But that money stops in 2011-12, and when it does, New York’s schools face a $2 billion funding gap. That’s a big hole to fill.  The time to start thinking about how to fill that hole is now, not when the money is already gone.  It won’t be easy; schools are already facing financial problems.  But this won’t just go away.”

DiNapoli’s analysis found ARRA funds made up on average 5.3 percent of total school budgets in 2009-10. The school budget most reliant on ARRA funds in their 2009-10 budgets are New York City (5.7 percent), the big four districts (5.1 percent) and high-need schools (4.9 percent).  Low-need school districts face the smallest gap as ARRA funds represented just 2.4 percent of their 2009-10 budgets.

In upstate New York, school districts in Central New York, the Capital Region and the Finger Lakes ARRA funds made up 5.5 percent, 5.2 percent and 5.1 percent of their budgets on average in 2009-10 respectively. ARRA funds represented just 3.2 percent of Long Island school districts budgets and 3.3 percent of Mid-Hudson Valley school districts’ budgets.

DiNapoli’s analysis also found ARRA funding helped independent school districts hold tax levy increases to 2.1 percent on average, rather than an estimated 7.7-percent increase had ARRA funds not been available. Alternatively, school districts would have had to cut costs by as much as 3.2 percent with out ARRA funds.

The state projects that foundation aid (the main source of school aid to most districts) will increase by 17 percent over the next three years. To backfill the stimulus funding and meet this commitment, the state would need to increase its share of funding by $4.1 billion, or 31 percent, between 2010-11 and 2012-13, an unlikely scenario given the state’s fiscal difficulties.

To view DiNapoli’s analysis, visit: www.osc.state.ny.us/press/arra-snapshot-121709.pdf.     

To view a district-by-district breakdown of ARRA funding as a percent of school district 2009-10 budgets, visit: www.osc.state.ny.us/press/arra-percent-budget-by-dist-2009-10.xls.