One day before state school aid was set to be paid to local districts, Gov. David A. Paterson decided that due to a shortfall in the state's cash flow, the aid will be delayed by up to two months.
Paterson released a statement saying $2.1 billion in school aid, which was originally slated to go to school districts last Wednesday, could be held until June 1 — assuming there will be cash available then — to keep the state government operational.
"The only way our state can put its long-term fiscal house in order is through significant, recurring spending reductions," said Paterson. "In the short-term, however, plummeting revenues and record deficits have once again forced me to take to take extraordinary cash management actions in order to ensure the continued operation of our government."
The governor took a similar action last December to keep the state in the black by withholding 10 percent of state aid payments to school districts and local governments, which prompted a lawsuit by the New York State School Boards Association and other education advocates. The state presented the money to the municipalities the next month but the lawsuit is still pending.
Paterson said the budget resolutions presented by the Legislature two weeks ago did not have deep enough cuts and additional reductions may "ultimately be necessary."
"Significant spending reductions must be made if we want to put New York on the road to long-term fiscal and economic recovery," said Paterson.
The announcement came the day after New York lost its bid for up to $700 million in federal education funds in the U.S. Education Department's Race to the Top competition.
The governor said all sides must come together as soon as possible to make the tough decisions to reduce spending.
"These are the types of difficult decisions that New York's taxpayers are demanding of their leaders," he said.
David Albert, a spokesman for the School Boards Association, said the group is disappointed with the decision since it would be so detrimental to schools. "Education should be the state's top spending priority, not the first place we look to cut," he continued, saying education funds have already been decreased by $1.4 billion for next year.
Albert said the previous lawsuit filed against Paterson still continues and arguments are not set to begin until June. The association is discussing with its partners in the lawsuit what legal options they have.
The breakdown of the delayed payments released by the Division of the Budget shows New York City bearing the brunt of the delay in funds. The city will have to wait for $923.2 million in aid. In second place comes Buffalo with a $26.4 million delay and in third Rochester, with a $24.4 million delay.
The New York State Council of School Board Superintendents, another plaintiff in the suit against Paterson, said the group's main concern is the timing of the announcement.
"Imagine the reaction if Washington had delayed a comparably sized payment to the state with so little warning. Or if, with a single day's notice, an employer advised all employees that their next paychecks would be reduced by 10 percent of their annual pay," said Robert Lowry, spokesman for the school superintendents group.
Lowry said school districts are now scrambling to figure out how to make up for such a large sum and the announcement disrupted the preparation of budget proposals for the next year. He said some school are now considering taking out loans to hold them over, which they will have to pay back with added interest.
New York State United Teachers Union President Richard Iannuzzi shared the same views with Lowry, saying the decision is not so much a legal issue as an ethical issue and if districts had been told sooner, they would have had more time to think of alternate options.
"To leave a district with bill to pay April 1, to give no notice that money that was promised to them would not be delivered… I don't know how someone can do that," said Iannuzzi.
Assemblywoman Nancy Calhoun, R-Blooming Grove, said a lack of fiscal restraint in last year's budget led to the delay in December and to the delay now, saying it is sad the governor once again painted himself in a corner.
"The insanity and lack of responsibility must end now," she said. "The governor must stand up to members of his own party, show leadership and work with my conference to adopt cost-cutting measures that he has, thus far, been hesitant to discuss with Democrats for fear of political backlash."
Calhoun said the deficit is at $9.5 billion this fiscal year and $16 billion next year and they will now have to pay off the $2.1 billion delayed to schools. "I would hope Gov. Paterson will think of this budget as his legacy and recognize that he will either be known for driving this state off a cliff or saving us from bankruptcy."
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