In a recent report by New York State Comptroller Thomas P. DiNapoli, it was revealed that sixteen school districts in the state have been designated as experiencing varying levels of fiscal stress for the school year ending June 30, 2023. This marks a slight increase from the previous year when 14 districts were in fiscal stress. However, the current numbers remain significantly lower than the 33 districts that faced fiscal stress in 2019.
The reduction in the number of school districts facing fiscal stress can be attributed to increased temporary federal aid and growth in state aid. These financial injections provided much-needed support to schools grappling with the economic challenges posed by the COVID-19 pandemic.
“The number of districts designated in fiscal stress remains low after significant increases to both federal and state aid over the past few years,” commented Comptroller DiNapoli. “Although federal relief packages and state aid provided much-needed assistance, school officials should remain diligent and closely monitor their financial condition in the current and future budget cycles as one-time federal funds are depleted and state aid is uncertain.”
To mitigate the economic impact of the pandemic, the federal government passed three major multiyear grants of aid, while New York State substantially increased ongoing state aid in the 2022-23 school year. Furthermore, the state committed to fully funding Foundation Aid for school districts by the 2023-24 school year. As a result, total state aid reported by school districts (excluding New York City and the Big Four) increased from $15.1 billion in the 2021-22 school year to $16.7 billion in 2022-23, representing a noteworthy increase of $1.6 billion, or 10.1%.
Comptroller DiNapoli’s Fiscal Stress Monitoring System is designed to identify budgetary solvency issues faced by school districts, counties, cities, towns, and villages. This system assesses various factors, including year-end fund balances, operating deficits and surpluses, cash positions, and reliance on short-term debt for cash flow. The resulting fiscal stress score determines the severity of financial stress, with higher scores indicating more significant challenges.
In the recent assessment, three school districts were found to be in “significant fiscal stress,” the highest category. These districts include the Amityville Union Free School District and New Suffolk Common School District, both located in Suffolk County, as well as the Mount Vernon School District in Westchester County. Additionally, the Berne-Knox-Westerlo Central School District in Albany County was designated as being in “moderate fiscal stress,” while twelve other districts were labeled as “susceptible to fiscal stress.”
Despite the overall positive trend in reducing fiscal stress among New York State school districts, the report highlights the importance of continued vigilance and prudent financial management as the effects of one-time federal funds wane and state aid remains uncertain in future budget cycles.
