Last week, Governor Cuomo released his proposed budget for the upcoming fiscal year. As expected, the governor’s budget promises austerity measures in response to the fiscal crisis that has resulted from the COVID-19 pandemic. It also details how the governor plans to use federal funds that New York State has received to provide school districts with financial relief. Based on the proposal, New York’s schools will not be receiving the full $4.3 billion in COVID-19 relief funds that Congress recently authorized; the governor’s budget siphons off a substantial portion of these funds, approximately $2 billion, to offset reductions in state aid to the educator sector.
Rather than target the federal relief funds strictly to the unexpected COVID-19 expenses that schools incurred in 2020 (i.e., increased technology demands, teacher training, online platform purchases, etc.), the governor suggests that the state will only reimburse districts for the cost of transporting learning materials and food to students. While the proposal accounts for technology demands by acknowledging the continued allocation of funds from the Smart Schools Bond Act, this act was approved by voters in 2014, long before the global pandemic. Therefore, its appropriations are not aligned with current district needs and technology expenditures.
The governor’s proposal touts that it will maintain funding levels for certain key elements of the state’s education budget, but it ignores that public school districts, and high-need districts in particular, have been historically underfunded and continue to suffer from inequitable funding practices. Since the pandemic hit New York, high-poverty districts saw a drop in their funding but affluent districts had roughly the same amount as they would expect without a fiscal crisis. Even with the $2 billion in federal aid to replace reductions in state aid, under the governor’s proposal, the amounts received by school districts will not be sufficient to meet inflationary cost increases and pressing student needs resulting from the COVID-19 crisis like major learning gaps and mental health supports. Moreover, the state has yet to make good on the $3.5 billion still owed to the state’s schools as a result of the Campaign for Fiscal Equity lawsuit. Indeed, the failure to fully fund the state’s Foundation Aid Formula has led to another lawsuit.
The governor also would reduce, by almost $400 million, the so-called “formula-based aids” such as transportation and BOCES aid. He would convert the funding for these services, which now are reimbursed on the basis of actual costs incurred each year by school districts, into a new block grant category that presumably will be based on annual budget allocations (and potential cuts) rather than actual annual costs.
Hidden in the governor’s proposed budget are additional cuts for the state’s, and the nation’s, largest school district, New York City. For example, the proposal would eliminate reimbursement to New York City for the cost of charter school rental assistance. This means that the city would be on the hook for the full amounts of the rental costs that charters pay to operate in private facilities. Since most charter schools (including those of large charter networks like KIPP, Achievement First, and Success Academy) are authorized at the state level by the SUNY Charter Institute, this move would be an imposition on the independence of NYC’s public system and its theory of public education. The city would be forced either to help charters move from private spaces to co-locate in public school buildings–an often controversial and contested move–or face greater fiscal demands on its budget than previously expected. In other words, the state, which has authorized the fifth most charters in the country in spite of opposition of many New York City parents to large charter networks, is forcing New York City taxpayers to foot the bill for its decisions.
These cuts and austerity measures needn’t be so severe. New York is often cited as one of the wealthiest places on earth because it houses so many millionaires and billionaires; this means a progressive tax system could greatly improve the economic welfare of the state. In recognition of this fact, Governor Cuomo has proposed short-term marginal tax increases on the richest New Yorkers in the form of a surcharge, but he could do so much more. The proposed budget calls for a 2% increase on taxable incomes over $5 million in order to raise $1.5 billion–below the budget reduction that the education sector would be facing and coming nowhere close to the total budget deficit faced by the state. This raises the question of why the governor would take such a small step toward balancing the books. It seems that the primary reason is the myth of millionaire tax flight.
Cuomo and many fiscal conservatives have argued that wealthy people are highly mobile and would simply pack their bags and flee New York to a lower tax state if there were ever any tax hikes on their wealth. However, there is little evidence to support this notion. Data analysis from Dr. Cristobal Young of Cornell University suggests just the opposite. It turns out very few U.S. millionaires migrate to different states for lower tax rates. Indeed, millionaire taxes are actually taxes on what Dr. Young calls the “late career embedded elite.” Put simply, most of New York’s wealthy elite are people who benefit from and enjoy the business and cultural advantages that New York offers and therefore are highly unlikely to leave where they live and work as a result of tax increases.
The governor’s proposal will now be considered by the state legislature, which must enact a final budget for the next fiscal year by April 1.