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Tax watchdog urges lawmakers to control school spending

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(The Center Square) — A New York taxpayer watchdog group is urging state lawmakers to approve Gov. Kathy Hochul’s plan to throttle back school spending through a “hold harmless” provision in how districts are funded, calling the move necessary to restrain the budget’s growth.

The report by the Citizens Budget Commission said state spending on schools has increased tremendously in recent years, and spending restraint is needed to close those gaps, which it said can only be accomplished by limiting growth in school aid.

“Slowing school aid growth should be done while better targeting aid to districts with high and growing needs; this will focus resources where they are most needed, while also strengthening the state’s bottom line,” the commission wrote in the nine-page report.

The commission’s report noted a provision included in Hochul’s preliminary budget that calls for phasing out of the hold harmless provision, which ensures no funding reductions for school districts with declining enrollment or increasing local revenue, and the change to the inflation adjustment factor. House and Senate Democrats stripped that provision from their budget versions, unveiled earlier this week.

“These changes would save $413 million in the 2024-25 school year 2024, reducing Foundation Aid growth to a more sustainable 2.1 percent for next year,” the report’s authors wrote.

The commission said it “wholeheartedly” supports a phaseout of the hold harmless provision, which it said “has prevented any annual decrease in a district’s Foundation Aid, even, for example, when enrollment declined.” It called on legislative leaders to restore Hochul’s proposal to the final budget before they send it back to her desk for consideration.

“Billions of dollars are allocated every year to New York school districts that have tremendous local resources,” the report’s authors wrote. “The changes proposed in the Fiscal Year 2025 Executive Budget would yield needed savings and meaningfully improve the current allocation of school aid resources.”

New York State’s budget growth has accelerated in recent years, with state operating funds spending growing 7.9% annually from fiscal year 2021 to fiscal year 2024, according to the report.

State school aid is one of the main contributors to the budgetary growth, increasing 6.7% per year, or $6.6 billion in total, during this period, the report’s authors noted. School districts also received a massive infusion of $11.4 billion in federal pandemic aid.

State lawmakers have pledged to increase education funding over what Hohcul had proposed in her budget, and her proposal to eliminate the hold harmless provision has drawn a sharp rebuke from Senate Majority Leader Andrea Stewart-Cousins, a Democrat, who has called the plan “problematic.”

House and Senate leaders, however, agreed to spend $1 million to study overhauling the state’s school funding formula system.