Delayed NYS budget creates financial 'guessing game' for local school districts

ALBANY — New York school leaders have until Monday to file their 2026-27 budgets, but for many it’s a guessing game as negotiations over the state budget — including billions of dollars in school aid — continue in Albany.

Public school district leaders say they can only estimate how much state funding they’ll receive as they look to balance the state’s contribution with what they need to raise from taxpayers.

At the same time, many schools are feeling the pinch from the rising cost of everything from health insurance to utilities, and some are having to make cuts based on those estimates, school leaders said.

“When the legislature and governor can’t finalize the budget, it is extremely difficult for us,” Hampton Bays schools Superintendent Lars Clemensen told Newsday. “It keeps a community in limbo for important things that we deliver for our kids during a school year.”

State lawmakers last week passed a sixth budget extender as discussions over the more than $263 billion proposed budget continue nearly a month after the April 1 deadline. A vote for a seventh extender is slated for Monday.

Negotiations between Gov. Kathy Hochul, a Democrat, and Democratic legislative leaders, are still largely divided over policy issues, including Hochul’s plans to push back the state’s climate goals, reduce car insurance costs by targeting fraud, and ease environmental reviews that can delay building projects. They also are discussing ways to increase protections for immigrants from federal Immigration and Customs Enforcement and a tax on second homes in New York City valued at $5 million or more. Hochul and all 213 legislative seats are up for election in November.

More than $39 billion in school aid has yet to be negotiated, according to legislative leaders.

School districts’ budget votes aren’t until May 19, but their budget processes are outlined in state law with strict deadlines. Military ballots had to be mailed out by April 24. And districts must file what’s known as a “property tax report card” with the state Education Department by Monday.

“They’re now locked in basically to a budget that they have to make assumptions as to what they’re getting from the state,” Assembly Minority Leader Edward Ra (R-Garden City South) told Newsday. Ra criticized Democrats for the sixth extender, calling it “the latest embarrassing indictment of Democrats’ flawed and failing budget process.”

Assembly Speaker Carl Heastie (D-Bronx) told reporters he’d like to give schools more certainty, but cited frustration with the process, particularly with policy holding up the budget every year.

“We understand the impact of the state budget on so many things,” Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers) told reporters this week. “The good news is that certainly, nobody is getting less. Everybody is slated to get at least 1% more.”

Hochul’s proposal would guarantee at least a 1% increase in aid for districts, while the Senate and Assembly are pushing for at least a 2% increase. In recent years, the aid number typically ends up higher than what the governor proposes.

Some districts are in good enough financial shape that they can assume it’s going to be 2% and can make up that difference if it’s not, said Brian Cechnicki, executive director of the Association of School Business Officials of New York. “For a lot of districts, that difference between 1 and 2% is the difference between difficult decisions and not.”

A ‘balancing act’

The single largest source of financial support for public schools in the state is through what’s known as Foundation Aid. The complex formula, enacted in 2007-08,  i s based on need and sends billions of dollars to Nassau and Suffolk counties alone.

It also factors in districts’ ability to raise revenue, largely through local taxes, so districts in wealthier areas typically receive less aid and districts in economically disadvantaged communities receive more.

Districts budgeting for their fiscal year, which starts July 1, must take into consideration how much state aid they’ll receive but also how much they plan to levy in taxes.

The state has a 2% cap on property tax increases, and districts looking to override the cap must get approval from a supermajority, or 60%, of voters. Most districts stay under the cap because if an attempt to override the cap fails, they risk having to adopt a contingency budget that keeps spending flat.

“It’s a really delicate balancing act,” New York State School Boards Association spokesman David Albert told Newsday. “School districts don’t really have a lot of revenue sources that they can draw from.”

Meanwhile, expenses are outpacing revenues for some districts this year, Albert said. Health insurance costs for employees are increasing by double digits, he said. And contractual obligations such as employee salaries or benefits, as well as utility costs, are also rising.

Additional proposals in the budget could drive up expenses even further. They include a push to sweeten pension benefits for public employees hired after 2010.

“I think the biggest thing that schools really need is fiscal stability and when there's uncertainty over state aid, that doesn't help,” Albert said.

Risky decisions

Districts have “had some practice” with late state budgets, said Robert Lowry, deputy director for the New York State Council of School Superintendents.

Budgets have been late the last four years under Hochul, though not as late as in 1997 and 1999 when they ran into August.

"It’s already too late for districts to be able to adjust their budgets based on changes in state aid in an enacted state budget," Lowry said. 

Hochul spokeswoman Emma Wallner in an emailed statement said the governor “will continue to negotiate in good faith with the legislature to finalize the budget and ensure all New Yorkers have access to a quality education.”

Each district has its own strategy, with some more reserved and others assuming they’ll get more than Hochul’s proposal. Neither are without risk.

If they go with 1%, they may have assumed cuts to programs or staff that weren’t necessary, education leaders and advocates said. But if they go with 2% and don’t get the windfall, they may have to use reserve funding or make up the difference elsewhere in their budget.

Hampton Bays Public Schools, which has 1,930 students, is staying within its tax cap with a $69 million budget that cuts three teaching positions and downgrades an administration position, all through attrition, Clemensen said.

State aid makes up about 20% of the district’s budget, he said.

"It makes sense to play this conservatively, mitigating how much reserve funding is used because it takes multiple years to build that back,” he said. “You assume a little bit lower so that anything extra, you’re in a better position.”