Schools Wary of Formula Change

Beacon especially faces uncertain funding

When Superintendent Matt Landahl spoke to the Beacon school board in January, two weeks after Gov. Kathy Hochul’s State of the State address, he reported that funding in the governor’s proposed 2024-25 budget was “not great for a lot of local school districts.”

On the surface, Hochul’s proposal to increase foundation aid — the unrestricted funds for general operations sent annually to each of the state’s 673 public school districts — by $507 million was impressive. But that was only about half of what districts expected for 2024-25.

More important for the long term, Hochul also suggested rethinking the formula used to determine allocations, which could mean the end of a provision that, for many districts, including Beacon, guaranteed they wouldn’t receive less aid than in the previous year.

“We were shocked, especially since the previous year [2023-24] was the first time foundation aid had been fully funded,” i.e., districts received what they had expected to get, said Flora Stadler, the president of the Beacon school board. “This is going to be a challenge across the state moving forward. We have to make it clear that schools aren’t just about academics, that they provide an ecosystem of services to students that need funding to be implemented.”

In Beacon, property taxes cover about 60 percent of the district’s $84 million budget. Foundation aid takes care of about 25 percent. Under Hochul’s proposal, Beacon would have seen its foundation aid cut by 6 percent, or about $1.3 million. By the time the governor and state lawmakers agreed on April 20 to a final budget that raised foundation funding by $935 million, Beacon’s aid had been restored to $21.3 million, the same amount the district received in 2023-24.

Even so, costs rise each year, and the district was forced to implement a policy to determine, case-by-case, whether to replace staff members who resigned or retired.

The state budget also included $2 million for the Rockefeller Institute of Government, a public-policy think tank in Albany, to study whether the foundation aid formula should be revised. The institute is expected to issue its report by Dec. 1 and, as Landahl said this week, “every single superintendent and business official in the state is going to be reading it that night.”

Beacon is one of many districts that could be in trouble if it can no longer count on predictable foundation aid while staying within the state property tax cap, which limits tax-levy growth to 2 percent per year or the rate of inflation, whichever is less.

Because they are smaller and wealthier, the Garrison and Haldane districts receive far less foundation aid than Beacon. Garrison will get about $600,000 in 2024-25, or 4.5 percent of its $13.4 million budget, and Haldane will receive $2.9 million, or 10 percent of its $29.2 million budget.

Although they are less dependent on state aid, budgets are always tight and the superintendents at the two districts are equally concerned about potential changes to the formula. “Any decrease in foundation aid, combined with the tax cap, is problematic,” said Carl Albano, the interim superintendent at Haldane. “It could really negatively impact children.”

Gregory Stowell, the superintendent at Garrison, said the formula needs to better account for the rising costs of special education, mental health services, transportation and building security.

Foundation aid

Foundation aid dates to 2007, when New York State began to distribute funds to districts using a highly complex formula that measures enrollment, regional costs, local taxes and census data on poverty, among other factors (see Page 7). It was meant to add $5.5 billion in additional state funding, with the most aid going to the neediest districts, while providing more stability to everyone.

The timing was terrible. In 2008, the national economy collapsed. By 2021, the state was $4 billion behind in its phased-in increase.

Brian Fessler, the director of governmental relations for the New York State School Boards Association (NYSSBA), said the formula has long needed revision. Specifically, it relies on 20-year-old income data that the U.S. Census Bureau no longer collects and fails to accurately reflect the cost “to educate a successful student,” Fessler said. The formula needs to be “torn down to the studs,” he said.

Since the formula was implemented, school districts have been asked to do much more. They must educate more English-learning students, and special education services have expanded to include nearly one of every five pupils. In addition, public schools began hiring mental-health professionals even before the pandemic multiplied that need, Fessler said.

Schools also must account for state mandates that don’t come with funding, such as the introduction of electric school buses or a bill being considered in the Legislature that would establish a maximum temperature allowed in classrooms.

With the state-aid formula in flux, “long-range planning now for us is holding onto what we’ve gained,” Landahl said, citing full-day pre-K, smaller elementary class sizes and increased afterschool clubs. “We feel like we’ve got some good things going, and we’re clinging to that as much as we can.”

Fixing the formula

NYSSBA argues that foundation aid cannot be repaired without addressing the cap that limits how much districts can raise from property taxes.

The cap was enacted in 2012 and, according to the Rockefeller Institute, had saved taxpayers as much as $25 billion by 2019. By 2018, voter approval of school budgets had increased to nearly 100 percent.

Despite those successes, Fessler told the Rockefeller Institute in August that the relationship between the tax cap and state aid is inefficient as public policy because “it limits the ability of a district to reach the expected local contribution portion of the [foundation aid] formula.” This disconnect “also ignores the fact that districts must lean more on property taxes when foundation aid and other state aid is insufficient,” he said.

Landahl agreed, noting that while Beacon has become wealthier — its median household income in 2022 was $97,000 annually, a $4,000 increase from the year before and more than $14,000 higher than statewide — “we are not allowed to take advantage of that wealth without going over the cap.” He considers the 2024-25 budget “a reality check” for the district. “The state is measuring our wealth [through the formula] without taking the tax cap into consideration,” he said.

Beacon’s growing wealth is reflected by higher-priced development. State law recognizes the impact of new construction and affords districts what’s called a “tax-base growth factor” when calculating the property tax levy, or the total value of the real estate it can tax. Beacon’s is the highest in Dutchess County.

In 2023-24, new construction allowed the Beacon district to add $721,620 to its levy. In 2024-25, it will add $793,795. If the district increased the levy by any more, it would require voters to allow an override of the tax cap — a tall order that requires 60 percent approval. (In 2022 Garrison voters rejected a 9.18 percent increase but a month later approved one for 6.6 percent.)

Over the summer, the Rockefeller Institute hosted public forums to gather feedback for its report. None were scheduled in the Hudson Valley, so state Assembly Member Jonathan Jacobson, a Democrat whose district includes Beacon, held his own in August.

Jacobson said he is concerned that the institute’s report, prepared on a tight deadline at the governor’s request, will be used to justify cuts in foundation aid. He said superintendents who attended his forum in Newburgh shared the same concern. “They don’t want to be left at the last second to make up shortages in their budgets,” he said. “They want fairness and predictability in funding.”