Hudson Valley schools fighting financial 'death spiral'

Social studies teacher Maggie Favretti, of Peekskill, teaches Social studies teacher Maggie Favretti, of Peekskill, teaches World History I at Scarsdale High School in Scarsdale. (March 21, 2013) Photo Credit: Xavier Mascarenas

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Diane Goodman is watching class sizes creep up at the Nyack Middle School her two daughters attend.

Mike Reilly dedicates long hours to a school finance committee in South Orangetown, hoping to keep arts programs alive for his daughter, a student at Tappan High School.

Jacquie Walter, a Scarsdale mother of five, sees the district losing a librarian here and a teaching position there. She fears the cuts will seriously damage her community's crown jewel, its school system.

From the wealthy village of Scarsdale to the middle-class suburban communities of Rockland County, parents are watching the impact a prolonged recession and the pressures unfavorable state policies have had on their schools. At the same time, school communities throughout the Hudson Valley are mapping out where they stand on the path to insolvency.

Although poorer districts make headlines as they close schools and lay off hundreds -- Poughkeepsie, Yonkers and Newburgh are the figurative canaries in the coal mine, educators say -- middle-class and affluent districts are yielding to intense financial pressures in subtler ways.

In a November survey, 41 percent of the New York superintendents said they would be unable to pay the bills within four years. And 77 percent saw insolvency a bit further down the road.

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"Sometimes, when I sit around school board tables, I feel like I'm in a cancer ward," said Bryan Burrell, executive director of the Rockland County School Boards Association. "Everybody is sitting around the table and saying, 'How much time do you have left?'"

THE GOOD, THE BAD AND THE ANXIOUS

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Most affluent Hudson Valley districts have had the financial reserves to forestall serious cuts to basic programs so far, but even in wealthy districts, reserves are running low, educators say.

"What's happening is they're watching the demise of other parts of the state and, based on their own finances, they can see it's just a short time before they are in the drink as well," said Rick Timbs, executive director of the Statewide School Finance Consortium.

To be sure, there is good news occasionally. The state did pony up an additional $1 billion in school aid in the budget compromise reached in Albany last week. Education groups applauded the increase and suggested the additional funds meant "turning the corner" or "stopping the hemorrhaging."

Matthew Wing, a spokesman for Gov. Andrew M. Cuomo, said anxiety about financial instability doesn't make sense, given the big increase in aid. "When you do the math, it's clear the state is showing an unprecedented commitment to our schools," Wing said.

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Meanwhile, Timbs and other educators point to a number of factors that are working against the districts on a scale that they say dwarfs the aid increase.

• Drastic cuts to state school aid in 2010 -- as the worst effects of the recession hit -- set a low base for subsequent increases. The result: At the beginning of the 2012-13 school year, districts statewide were operating with $1.1 billion less in state aid than they received in 2008-09.

• Schools never received an aid increase of $7.1 billion promised in 2007 as part of the settlement of a lawsuit over inadequate school funding. Had that promise been kept, 94 school districts in the Hudson Valley would be getting an additional $680 million for the 2012-13 school year, according to one analysis by Bruce Baker, a professor at the Graduate School of Education at Rutgers.

• Cuomo's tax cap law means districts cannot raise property taxes more than 2 percent unless they win a supermajority of at least 60 percent of voters at the polls.

• At the same time, costs beyond the control of the districts are skyrocketing. According to one professional analysis, increased pension costs alone ate up 94 percent of the allowable tax levy increases for 33 Westchester and Rockland school districts this school year. Health care costs were projected to increase by 7.5 percent for the same period. In the past five years, special education costs in the state have spiraled by $7 billion to $10 billion a year.

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The resulting erosion of school finances has been steady in recent years. Since the Wall Street collapse, nearly 35,000 educator jobs have been eliminated, according to the teachers union. Simultaneously, there have been widespread ballooning in class sizes; districts have eliminated art, music and Advanced Placement classes; many extracurricular activities and sports have been slashed; and dozens of schools have closed.

EXPERT: 'IT'S LIKE A DEATH SPIRAL'

Timbs recently hosted a conference that drew nearly 1,500 school leaders statewide. He shared with Newsday one of several pieces of data that he presented. Timbs said his "reserves indicator" uses recent school budgets and financial statements from boards to estimate how long districts can continue drawing on savings before their financial situations become -- in his view -- untenable.

"What we're saying is that they're going to be fiscally insolvent. They will not have money to pay their bills. They will not have money to pay their liabilities. It's fiscally unworkable. Broke? Insolvency? Fiscal collapse? Call it what you like -- it's like a death spiral," Timbs said.

According to the reserves indicator, 48 percent of the school districts in the Hudson Valley have an above-average risk of fiscal stress this year, meaning they likely will be forced to make substantive cuts to education programs, unless they can win an override vote with a supermajority and enact a property tax hike above the 2 percent cap.

Lakeland Schools Superintendent George Stone said the fiscal pressure has been relentless in recent years. This year, he began his budget presentation in January with a heavy sigh.

"I don't think I even need to say it anymore: This is going to be a tough year," Stone said.

Like many other New York districts, Lakeland has been financing operations with reserve funds.

"The bottom line is declining every year," Stone said. "Every year we cut into reserves by about $3 [million] to $4 million. It can't last indefinitely."

TONY SCARSDALE ON THE EDGE

The well-manicured lawn in front of Scarsdale High School is studded with stone tables and bisected by a pretty brook, an atmosphere that feels a lot like the Ivy League college campuses that welcome many of the district's graduates. Stellar class offerings and a wealth of resources have made Scarsdale a target of envy across the country.

Yet, based on the reserves indicator, Scarsdale schools are at a financial crossroads, with only enough reserves to fund operations for less than a year before the district will need to cut programs or raise taxes significantly.

The budget under discussion would require that the district win a tax cap override vote in a community that is heavily taxed.

"To this point, what our community has seriously supported is a quality education that demonstrated excellent results," said Michael McGill, the superintendent in Scarsdale. "But we're now at a point where we can't continue to make economies without having an impact on the quality of education. We either have to cut programs and services or we can raise taxes."

Jacquie Walter, a Scarsdale mother of five, is worried about the tough choices ahead. She and her husband left Manhattan -- and stratospheric bills for private schools there -- in part because they believed Scarsdale's public schools were a good option. The trade-off, she said, was acceptance of the community's hefty tax rate. Walter says her family pays more than $20,000 a year in property taxes.

"It's hard for us, so I can't even imagine what it's like for districts that don't have the resources," Walter said. "We're not in a position like some other towns, where vital things are being cut, but we're getting really close to making those decisions."

SOUTH ORANGETOWN TAPS WALL STREET EXPERTS

Rockland County's less affluent communities are looking ahead five years, fearful that a fiscal cliff is approaching. As a countermeasure, South Orangetown schools have tapped the expertise of a few Wall Street financial experts who also happen to have children in local schools, like Mike Reilly.

"We sort of help them think outside of the educational channels and perspective," said Reilly, a 55-year-old father of two. "We tell them what's going on in the corporate world and how they really can relate that to the district budget."

Input from Reilly's finance committee and from other forward-thinking sources has staved off drastic budget cuts to this point. Still, South Orangetown is in the middle of the pack in terms of financial strength, according to the reserves indicator. Cuts made during the last five years have eliminated 70 positions. The school system has consolidated and modified its sports program, offered $1.5 million in retirement incentives and restructured facilities and busing.

Superintendent Ken Mitchell maintains a chart that suggests his district is in the second of six stages of what he calls the "Insolvency Continuum."

"I'm sure there are folks out there who absolutely think we're overstating things, but that's why we have to provide them with information," Mitchell said. "The stakes are high. It means people's jobs. It means having the ability to properly educate kids. This is serious business."

NYACK ARTFULLY HOLDING THE LINE

In the airy band room at Nyack High School, trophies line the tops of lockers, including one for excellence at a national festival just last month. While other districts trim arts and music programs, Nyack has preserved these offerings for which it is renowned, even hiring a popular band director whose position was axed from the nearby beleaguered East Ramapo School District.

Superintendent Jim Montesano attributes Nyack's stronger position to sound planning by the school board, which chose not to rely heavily on reserves in the past few years, but to make incremental cuts instead.

Still, Montesano quipped, "Beauty is in the eye of the beholder."

Goodman said parents already notice little changes that make them anxious about the future. Fourth-graders can no longer make the annual trip to Manhattan to see "The Nutcracker" at Lincoln Center. And class sizes are edging higher every year.

"That's a very big concern to myself and other parents," Goodman said.

Montesano forecast that Nyack also will face serious problems before long.

"Based on current trends, we are going to see an increase in deficit annually," he said. "Next year is going to be much more difficult. The following year much more difficult. Right on down the line, we're going to see increases in deficits."

WHAT'S THE LONG-TERM GAME PLAN?

Many homeowners in Rockland and Westchester -- even parents who value education -- say they just can't afford higher taxes. On one rainy Monday in early spring, Scarsdale residents popping in and out of the town's brick public library spoke of "ridiculously" high taxes and suggested the schools may need to cut back.

"The economy is now affecting our affluent enclave," said Dr. Stewart Schwartz, 60, of Scarsdale. Schwartz conceded that his own children received a first-rate education based on high taxes, but now that they have graduated, he would prefer that the district cut services rather than boost taxes further.

Timbs is calling for an overhaul in the state school funding formula to bolster state aid substantially. As for the recent aid hike for the 2013-14 school year, he was skeptical.

"It's going to be too little, too late," he said. "We're going to see layoffs and school districts using up the remainder of their fund balances. What is the long-range game plan of state government to appropriately fund these schools?"

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