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Guv holding back school aid could mean tax hikes

A first-grade student at Centennial Avenue Elementary in

A first-grade student at Centennial Avenue Elementary in Roosevelt practices spelling. (Oct. 19, 2009) Credit: Newsday File / Danielle Finkelstein

Gov. David A. Paterson's announcement that the state will withhold school aid funds due beginning this week could result in some Long Island school districts raising taxes to cover their losses, officials said Sunday.

A delay in expected state revenue means some districts will have to borrow money to meet current operating expenses, the officials said. And borrowing money - typically by issuing bonds - will saddle districts with unplanned interest payments.

That, in turn, means either eventual cuts in service or property tax increases in next year's school budgets.

"We don't have enough in reserves to cover the end of the year," said Herman Sirois, the Levittown superintendent. "It absolutely is passing the problem onto our local taxpayers. It's just another hidden tax."

The withholdings will amount to 10 percent of direct aid to school districts and 19 percent of STAR payments districts are to receive from the state beginning Dec. 28.

Paterson, speaking at a midday news conference in Manhattan, said he had to take action because the state doesn't have the money, and he expects most school districts to tap their reserve funds to cover the difference.

"Most of these school districts have reserve funds that will absorb these cuts," Paterson said. "Whenever you hear them object, remember only 5 percent of school districts don't have the money."

Even for districts that have enough reserve funds, draining them can harm their credit ratings and increase future borrowing costs, said Wendell Chu, the East Islip superintendent and president of the Suffolk County School Superintendents Association. Also, those funds would need to be replenished next year, said a spokesman for the state school boards association.

"If we have to deplete reserves, that's going to create another problem," Chu said. "It's going to make it more difficult for us to ease the spikes in property tax increases."

Paterson is expected to release an analysis Monday of how much less state aid each district will receive.

Schools officials are certain to file a lawsuit Monday to try to stop Paterson's withholding of funds due not only to schools but also to cities, counties and insurance carriers. Schools have the most at stake, with $582 million of the state's $750 million withholding coming from their funding.

Poorer districts typically rely more on state aid than do wealthier ones, and are likely to be harder-hit by the governor's action.

"A lot of our programs and our children depend on state aid; that's how we function," said Charles Renfroe, the Hempstead school board president. "It's going to hurt."

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