Twenty-three school districts statewide were designated in some level of fiscal stress under New York State Comptroller Thomas P. DiNapoli’s Fiscal Stress Monitoring System for the school year (SY) ending on June 30, 2021, down from 31 school districts in fiscal stress the prior year.
“Fewer of New York’s school districts were scored as under fiscal stress in 2021, but the operational issues caused by the pandemic for all school districts were extreme,” DiNapoli said. “School districts must watch their finances closely as the pandemic continues, prices rise and staffing issues mount.”
DiNapoli’s Fiscal Stress Monitoring System was designed to identify issues that school districts, counties, cities (excluding New York City), towns or villages are having with budgetary solvency, or the ability to generate enough revenues to meet expenses. The Comptroller releases fiscal stress scores for the various categories of government three times a year. School districts are given a fiscal stress score based on several factors: year-end fund balance, operating deficits and surpluses, cash position, and reliance on short-term debt for cash-flow.
The monitoring system, which excludes the “Big Four” City School Districts of Buffalo, Rochester, Syracuse and Yonkers, found two school districts were designated as being in “significant fiscal stress,” which is the highest category including: East Ramapo Central School District in Rockland County (76.7 points) and Newfield Central School District in Tompkins County (66.7 points). In SY 2019-20, East Ramapo scored in the lowest category of fiscal stress and Newfield was ranked in moderate fiscal stress. No school districts were in the second level, or moderate fiscal stress, in SY 2020-21.
DiNapoli also released a report that examined the challenges that school districts faced in SY 2020-21, the first full year of operations under pandemic conditions. The report found:
- State Aid Delays: The state withheld 20% of school aid payments early in the school year and indicated more reductions could occur. Some school districts issued short-term debt, which is often used to bridge revenue delays but is also considered when fiscal stress scores are calculated. This had a notable impact on the number of school districts on Long Island that ranked in fiscal stress because they issued an increased amount of short-term debt.
- Federal Aid Delays: The federal government’s Coronavirus Aid, Relief and Economic Security (CARES) Act had many requirements that caused funding delays for many school districts; less than half of eligible school districts (44%) received all their aid by the end of the school year.
- Less Aid: Some districts actually received less aid in SY 2020-21 because the state used CARES funding to replace its own general school aid and the federal aid had to be shared with eligible non-public schools in a district. Although this had little impact on many districts, for a few, this meant they received substantially less aid. For example, East Ramapo, one of the two districts in significant fiscal stress in SY 2020-21, was allocated $22.3 million in CARES Act funding, but had to set aside $15.8 million (71%) of this for non-public schools.
- Staffing Cuts: Facing a bleak fiscal picture, 330 districts made cuts to personal services expenditures (total wages and salaries), with 12 districts making cuts of 10% or more. Staffing reductions were far more common in high-need school districts. Between SY 2018-19 and SY 2020-21, 62% of high-need school districts cut personal services expenditures, compared to 10% of low-need districts.
- Common Issues: School districts in fiscal stress share some similar problems. Nearly all fiscally stressed school districts (91.3%) had low liquidity, also known as “weak cash position,” meaning less cash on hand to cover operating costs. They also had operating deficits (82.6%) and low fund balances (52.2%).
The report also reviewed environmental risk factors, which can often increase the chance of fiscal stress, such as having a high percentage of economically disadvantaged students, a high teacher turnover rate, a decrease in local property values, a low budget vote approval rate, a high percentage of English language learners and a high student-to-teacher ratio.
DiNapoli’s report is based on districts that filed required financial information for the 2020-21 school year: 670 of the 672 school districts in 57 counties. Dryden Central School District in Tompkins County did not file its report in time to receive a score. The recently formed Boquet Valley Central School District in Essex County did not receive a score for SY 2020-21 because it only has two years of data, not the three years of data required.
DiNapoli notes that while federal and state aid for the 2021-22 school year alleviated some of the financial stress caused by the onset of the pandemic, the state’s property tax cap will limit levy growth for school districts at 2% next year. The tax cap, which first applied to local governments and school districts in 2012, limits annual tax levy increases to the lesser of the rate of inflation or 2%, with certain exceptions. School districts may override the cap with 60% voter approval of their budget.
List of School Districts in Stress:
School Districts in Stress Fiscal Years Ending 2021
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