State: LI schools could take hit as stimulus runs out

December 21, 2009 by JOHN HILDEBRAND / john.hildebrand@newsday.com

A new state report warns that many school districts on Long Island and elsewhere may be headed for a financial cliff two years hence, when federal stimulus money is due to stop flowing.

But yesterday's advisory from Albany drew amused snorts of derision from local educators, who note the state has been discouraging school districts from building up the sort of cash reserves that could protect against future aid losses.

The report, titled "School Districts and the Stimulus 'Cliff,' " finds that federal stimulus money now makes up 3.2 percent of the Island's school revenues, or $332.8 million. The money is part of a historic $787-billion stimulus package approved by Congress, largely to make up for cuts in state aid to schools and other local government agencies.

The federal stimulus was originally designed as a two-year commitment through 2010-11, though Congress is considering additional assistance now.

Monday, the state comptroller's office cautioned that any halt in federal aid could require a statewide 7.7 percent average hike in school taxes, deep cuts in school budgets or some combination of the two.

"The time to start thinking about how to fill that hole is now, not when the money is already gone," Comptroller Thomas DiNapoli said.

Aides say, for example, that districts should look for ways to save money through pooled services and multiyear financial planning.

Local school administrators insist they've already taken action on both fronts - for example, by establishing reserve "rainy day" funds to cover unanticipated drops in revenue. Those administrators note, however, that DiNapoli's auditors often criticize them for holding reserves in excess of legal limits, even though many fiscal experts consider those limits inadequate.

Roberta Gerold, superintendent of Middle Country schools, who has clashed with the comptroller's office on this issue, joked that DiNapoli's statement represented "a Christmas gift" to schools. "I'm happy he's finally listening to what schools have been telling him," said Gerold, whose district is one of 11 on Long Island for which stimulus funds account for at least 5 percent of the budget.

How much federal aid will be available in 2011-12 remains an open question. Last week, the House of Representatives approved $23 billion in school aid, on top of the $100 billion included in the stimulus package. The measure still must pass the Senate, where stiffer opposition is expected.

Rep. Tim Bishop (D-Southampton), who sits on the House Education Committee, said DiNapoli's report confirms what supporters of the federal stimulus have said all along - that it prevented a financial crisis.

The report estimates that, without federal aid, school taxes on the Island would have risen 7.5 percent on average this year, rather than the actual 2.7 percent.

"For all the naysayers who say this was ill-advised, I would ask what their alternative was," Bishop said.