Hochul's budget includes cutting aid for some NYS school districts

ALBANY — With a sharp decline in federal aid, Gov. Kathy Hochul proposed a $233 billion state budget Tuesday that would reduce aid to some school districts and keep overall spending almost flat.

The total size of her budget comes in at just $1 billion (0.5%) above the state's budget for the current fiscal year and reflects fluctuations in the two major components: A $6 billion increase (4.5%) in state operations spending is offset by a nearly $5 billion decline in federal aid as pandemic-driven support winds down. Federal funds account for 36% of the state's budget.

She also proposed earmarking $2.4 billion to help localities with the influx of migrants, a $500 million boost over the current year.

In a budget presentation at the State Capitol, Hochul said lawmakers knew the federal decline was coming. She highlighted the state's outlay and indicated she wants to tap the brakes following generous, pandemic-driven increases over the last several years.

"We're not going to be able to replicate the historic increases of the last three years," Hochul said.

She said long-term deficits loom, given the state's spending trends.

"Our discipline now will keep us out of a deeper hole in the future," the governor said. She referenced the state-financed portion of the budget as she sought to preemptively push back against criticism.

"Some will say by increasing our budget by an extraordinary 4.5% ... is not enough, that this is somehow a cut," Hochul said. "Let me tell you, it's not. A 4.5% increase is not a cut."

The belt-tightening proposal includes a rare reduction in aid to some individual districts — including some on Long Island — as the governor proposes ending a “hold harmless” policy that meant school districts could always count on receiving as much state aid as the previous year.

It's a proposal that gives room for the state Senate and Assembly to fight for more school aid when budget negotiations begin. Boosting school aid is customarily the No. 1 agenda item for all 213 state legislators, who are up for election this fall. The budget is supposed by be adopted by April 1.

Roughly one-third of Long Island school districts – 34 in Suffolk County and 10 in Nassau – would lose some state assistance under the governor’s proposal, Newsday found in a preliminary review. The analysis was based on district-by-district figures released by the state late Tuesday afternoon.

Among districts faced with the biggest potential losses in dollar terms were Three Village, with a decrease of $8.9 million; East Islip, $3.4 million; Long Beach, $3.3 million; Sayville, $2.76 million, and West Islip, $2.4 million. The Island would make modest gains overall, with an aid increase of about $94 million in Nassau County and $53 million in Suffolk.

“I think it’s hitting Long Island hard in terms of losses, particularly in Suffolk County,” said Bob Vecchio, executive director of the Nassau Suffolk School Boards Association, in a phone interview. “And it will be difficult for districts to make up the difference.”

Lawmakers are sure to fight not only for spending increases, but also to maintain the hold harmless policy, Republicans and Democrats said.

"Any cuts to education, obviously, will never go over well, either with the districts themselves or the (State) Legislature," said Assemb. Edward Ra (R-Franklin Square).

Ra said school data and its application to state funding formulas hasn't been adjusted for several years — a pandemic factor — and adjustments for districts were expected. But lawmakers are not likely to give up the hold harmless approach.

"Since the beginning of time, governors like to come in low, legislators like to come in high and we'll see where we end up," Assembly Speaker Carl Heastie (D-Bronx) told reporters. 

Overall, school aid would increase nearly 3% statewide — but that's noticeably smaller than the 7.7% annual increases schools have received over the last four years. The governor pointed out public school enrollment has dropped 10% over the last 10 years while spending continued to grow.

Meanwhile, Hochul said she'd reject legislative efforts to further raise taxes on the wealthy that could be used to avoid any reduced aid to schools.

“I will say, ‘No, no tax increases,’ ” she said.

The governor said the state should continue to help New York City and others provide shelter, legal assistance and other services to migrants while continuing to press Washington for a solution.

“We’re doing this not just because it’s the right thing to do for the migrants and for the city of New York," Hochul said. “We also know that companies won’t do business in New York if there are thousands of people sleeping on the streets, or the quality of life is dramatically impacted because the city is forced to cut essential services."

Assembly Minority Leader Will Barclay (R-Pulaski) said he was pleased Hochul would push Washington, but said he believes New York should reconsider designating itself as a "sanctuary" and added: “I’m not thrilled to have to spend any money on the migrant crisis." 

Among other highlights from Hochul's proposal:

• $2.4 billion would be earmarked to help cope with the influx of migrants, including aid to communities to help with housing, social services and resettlement. This is a slight bump from last year's $1.9 billion outlay and also includes reaching into the state's reserves for $500 million.
• Local governments would have to show efforts to increase housing stock, especially affordable housing, to qualify for a $650 million development fund she controls. Unlike last year, however, Hochul didn't propose to override local zoning.
• $1.5 billion in casino fees would be dedicated to helping fund downstate mass transit. This is predicated on three downstate casino licenses being awarded this year, which is expected. The state also will throw in aid to the Metropolitan Transportation Authority to tamp down a proposed fare increase from 5.5% to 4%.
• Medicaid spending — the single biggest area of state spending — would grow $3 billion as the state's population ages and enrollment grows in state-subsidized health care.
• Cannabis taxes would be changed, basing them on weight rather than potency — responding to loud complaints from cultivators and distributors that the potency tax was too complicated and too high. The change is expected to lower taxes for the industry, allowing legal pot shops to better compete against the black market.
• The state will end the current fiscal year with a $2.2 billion surplus, as tax revenue estimates have improved. Hochul wants to use $1.7 billion to close a looming out-year spending gap and put the rest in reserves. This would keep reserves around $20 billion — an amount fiscal watchdogs have applauded — to help offset economic downturns. Lawmakers might want to use the surplus for programs this year.

Hochul Budget Director Blake Washington told Newsday Monday that after increasing state school aid by $7 billion over the last three years, it’s time for the state to provide a more sustainable level of funding. 

The Hochul administration made the decision based on the amount of reserves and surpluses that many moderate- and lower-needs school districts have. 

Washington said the aid proposals were based on traditional factors of enrollment and community wealth and others — which normally would drive aid to rise or fall but for the hold harmless approach.

“The more and more districts that end up on the hold harmless list, you have less to pay for districts that have high needs or increases in enrollment,” Washington said. “We’re trying to raise a dialogue of what is necessary from the state, what is necessary from the district.”

The state School Boards Association was surprised that Hochul is seeking to end the hold-harmless practice, said Brian C. Fessler, director of governmental relations.

“It’s surprising and somewhat disappointing, especially compared with the progress and commitment that we saw from the governor to finally get to full funding, the idea of immediately stepping backward,” he said.

With John Hildebrand.