New York begins to withhold 20% of local aid payments, state teachers union files lawsuit

The State Division of the Budget has begun withholding 20% of most local aid payments, forcing reductions in some payments to school districts across the state, according to the New York State Education Department.

In response to the reductions, New York State United Teachers and the union locals at three school districts, including one on Long Island, have filed suit against the governor and the Division of the Budget seeking to block the aid reductions. The plaintiffs in the lawsuit argue that the enacted budget illegally delegated to the state budget director discretionary authority to withhold appropriated aid to localities. The lawsuit was filed in Albany County Sept. 15.

In a “sobering” report to the State Board of Regents last Monday, the State Education Department’s chief financial officer Phyllis Morris outlined spending restrictions imposed by state budget officials following the Division of the Budget’s first quarterly financial plan update issued last month.

The State Division of the Budget is projecting a general fund revenue decline as a result of the COVID pandemic of about $14.5 billion for FY 2021, which commenced April 1. Since there has been no direct federal aid to states and it is not known whether any direct aid will be forthcoming, Morris told the Board of Regents, the Division of the Budget began withholding 20% of most local aid payments in June. All or a portion of the withholdings may be converted to permanent reductions, Morris said.

The State Education Department must submit to the Division of the Budget, on a weekly basis, a list of critical payments for approval, Morris said. These include statutorily required state aid payments to districts, she said. The Division of the Budget DOB has approved paying 80% of some pending state-funded and special revenue-funded claims, Morris said. To date, NYSED has received approval to pay 100% of pending federal claims.

“We do have to request DOB approval prior to obligating appropriated funds,” Morris said. “We can’t advance any contracts, grants or MOUs until we have DOB approval,” she said. “And there are instances where DOB is requiring us to notify recipients that payment of funds could be reduced by a minimum of 20%.”

Riverhead Interim Superintendent Christine Tona said yesterday the state has been “slow in making payments for certain state aid categories.” It is not yet clear whether these will constitute permanent reductions or are just delays in payment, she said.

“We have received an announcement that aid payments for September will not be subject to the 20% withholding, but we are waiting to see the flow of funds from the state to the district,” Tona said.

“The loss of aid to any district is devastating, but is particularly devastating to a district that has so many non-negotiable costs like ours,” Tona said.

Charter school tuition is one of those costs. While state aid may be reduced by 20%, there are no mandated reductions to charter school tuition, according to the NY State Education Department.

“The charter school’s tuition is but one issue we face here,” Tona said, “and we are dealing with the costs of the pandemic all while operating on a contingency budget.”