School districts should be cautious amid big state aid hikes

When Gov. Kathy Hochul announced her budget proposal earlier this month, the allocation of $33.9 billion in state aid to schools capped off a decade of massive increases. In the 2013-2014 budget, state aid to schools totaled $21.2 billion.

The increase of 60% over a decade would double the rate of inflation if Hochul's budget is adopted, and the hike on Long Island would be even more beneficially outsized. Long Island’s state aid would leap from $2.54 billion in the 2013-2014 budget to $4.8 billion next year, an increase of 89%. This year alone, aid on Long Island would leap $775 million, capping three years of huge hikes totaling about $1.6 billion, or 50%.

That spike marks the culmination of a shift in how schools are funded in New York that began with Gov. Andrew M. Cuomo’s property tax cap in 2011. The cap, set at the lesser of 2% or the rate of inflation, has slowed increases in school taxes that had been doubling every decade. 

The shift is generally wise. Deriving too much of school budgets from property taxes places a harsh burden on homeowners whose income hasn't kept up with their properties' value, and on low-wealth districts, and is particularly unfair to districts with little commercial property. Beyond that, funding schools properly is, legally, a state responsibility, and every shift of the burden and the funding to Albany makes it easier to funnel badly needed money to high-needs districts. 

But the shift also has its dangers, as do the big funding increases. That $2.54 billion Long Island schools got from the state a decade ago was about 3% less than what Suffolk and Nassau county schools had received five years earlier. The Great Recession devastated state revenue numbers, and left schools facing draconian cuts.

State income tax is dependent on prosperity. Unemployment and smaller Wall Street bonuses squeeze New York’s budget whenever bad times come. Sales-tax revenue is also vulnerable in downturns because sales of non-necessities drop dramatically. Property tax, comparatively speaking, is stable. Someone always owes it, even if it’s a bank when a home is in foreclosure.

About 70% of school funding goes to personnel. With all this state money flowing in, along with massive federal COVID-19 funding and eye-popping inflation, the pressure to give teachers fat raises will be hard for many districts to resist. But they must be cautious. The bad times will return. When they do, the reality is that the state — which should buttress its obligation to keep these districts afloat with a firm contract to maintain its funding effort — may instead cut the aid on which districts increasingly rely. But the cap will make local taxes far harder to raise, as it should.

Districts would be wise to be cautious with contracts and hiring, because keeping pay raises in check now is a lot easier than cutting costs later.