Sixteen school districts were designated as having some level of fiscal stress under New York State Comptroller Thomas P. DiNapoli’s Fiscal Stress Monitoring System for the school year (SY) ending June 30, 2023, up from 14 districts in fiscal stress the prior year, but still well below the 33 designated in stress in 2019. Increased temporary federal aid and growth in state aid have contributed to the declining number of school districts designated in fiscal stress.
In response to the COVID-19 pandemic, the federal government passed three major multiyear grants of aid and New York state provided a substantial increase in ongoing state aid in SY 2022-23 and committed to fully funding Foundation Aid for school districts by SY 2023-24. Total state aid reported by school districts (excluding New York City and the Big Four) increased from $15.1 billion in SY 2021-22, to $16.7 billion in 2022-23, an increase of $1.6 billion, or 10.1%.
The Fiscal Stress Monitoring System was designed to identify issues that school districts, counties, cities, towns and villages are having with budgetary solvency, or the ability to generate enough revenue to meet expenses. School districts are given a fiscal stress score based on several factors: year-end fund balance, operating deficits and surpluses, cash position, and reliance on short-term debt for cashflow. The higher the score, the more severe the level of stress.
Three school districts are in “significant fiscal stress,” the highest category – Amityville Union Free School District, New Suffolk Common School District, both in Suffolk County, and Mount Vernon School District in Westchester County. One district, Berne-Knox-Westerlo Central School District in Albany County, was designated as being in “moderate fiscal stress.” Twelve districts were designated as “susceptible to fiscal stress.” Regionally, Roscoe Central School was designated susceptible to fiscal stress.
Fiscal stress indicators are: low liquidity, operating deficits, low fund balance, and reliance on short-term debt. The low liquidity indicators measure a district’s available cash at year end, which indicates whether it has enough cash on hand to pay its bills. In SY 2022-23, 81.3% of school districts designated in a level of fiscal stress had low liquidity. However, more than 30% of the districts with no designation also had low liquidity.
The operating deficits indicator measures the difference between gross revenues and gross expenditures for each of the last three years. Operating deficits point to structural imbalances in the budget. In SY 2022-23, 87.5% of the school districts designated in a level of stress reported ending the year with an operating deficit in one or more of the last three years.
The low fund balance indicators measure the accumulated surplus/deficit since operations began. This can indicate the entity’s ability to cover revenue shortfalls and expenditure overruns. As state law limits school district unappropriated fund balance to 4% of the upcoming year’s budget, the indicator threshold for low fund balance is lower than for municipalities.
