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School district revenue growth slows, comptroller’s report finds

ALBANY - New York’s school districts have faced major fluctuations in their federal and state aid over the last decade and revenue growth was nearly flat the last three years, averaging only 1.3 percent, according to a report issued by State Comptroller Thomas DiNapoli. The report is part of DiNapoli’s fiscal stress initiative which is focusing greater attention on the issues that contribute to the financial pressures on local governments and school districts across the state.

“School districts are caught in a financial bind and are struggling for a way out,” said DiNapoli. “State and federal aid have noticeably slowed, local property tax revenues are capped and their rainy day funds are limited. While this combination of factors has forced school districts to tighten their belts, too many high-need school districts are left with limited options. Clearly, there needs to be a broader discussion about the challenges facing school districts and how we balance the impact of fiscal stress against efforts to hold down property taxes.”

From 2007-08 to 2012-13, total school district revenues grew by an average of 2.4 percent annually. But during the previous five-year period, 2002-03 to 2007-08, these revenues increased by nearly 7 percent per year.

For the 2012-13 school year, school district revenues in the state totaled $60.1 billion. Of that total, state aid accounted for 34 percent ($20 billion), federal aid 5 percent ($3 billion) and 48 percent from local property taxes ($29 billion).

By comparison, school district revenues in the state totaled $38.2 billion during the 2002-03 school year. During that year, state aid accounted for 38 percent ($14.6 billion) of revenue, federal aid 7 percent ($2.6 billion) and real property taxes 43 percent ($16.4 billion).

In describing the challenges facing school districts, the report highlights the impact of federal American Recovery and Reinvestment Act (ARRA) funds, and the temporary effect they had in offsetting the impact of the state’s reduction in school aid when it was dealing with its deficit problems.

New York’s schools received nearly $5 billion in ARRA between school years 2009-10 and 2012-13. This included $2.3 billion in fiscal stabilization grants in 2009-10 and 2010-11, $559 million in federal Education Jobs funding in 2010-11 and 2011-12, and nearly $2 billion in increased direct federal school aid programs over the span of the same four-year period.

Even with this influx of federal revenue, total school aid funding dropped by nearly 10 percent between 2009-10 and 2011-12. The total amount of aid appropriated to schools in 2011-12 was $8 billion lower than what had been projected by the state in 2008-09.

DiNapoli’s report also noted:

  • Local school tax levy increases have decreased sharply over the past decade, averaging 2.8 percent increases per year in the past five years;
  • Annual local property tax revenue, including STAR payments, has increased by more than $13 billion since 2002-03;
  • State foundation aid to schools was frozen at 2008-09 levels for four consecutive fiscal years until it was increased in the 2012-13 and 2013-14 state budgets;
  • In addition to freezing foundation aid, the state applied a gap elimination adjustment to school funding in order to help balance the state budget. This totaled $1.6 billion in 2012-13.

For a copy of the report visit: www.osc.state.ny.us/localgov/pubs/research/snapshot/RevenueChallengesSchools0114.pdf