By Michael Newman
New York State lawmakers last week struggled to resolve a fiscal dilemma that, local education officials warned, could create a budget crisis for schools if not settled quickly.
The problem facing Empire State leaders is similar to that which has ravaged the treasuries of their New England neighbors for the past year: a shortfall in tax revenues produced by a slowdown in economic activity.
The state’s projected deficit currently stands at $1.5 billion, and some say it may reach $1.8 billion, out of a total state budget of $31 billion.
For the sixth straight year, the state began its new fiscal year without the legislature’s having enacted a budget. As a result, the state will miss its scheduled local-aid payment to schools this month, state officials acknowledged.
So the state’s 750-plus school systems--some of which, like New York City’s, have dire budget problems of their own--must either borrow money or dip into reserves to meet costs.
“We could be in deep trouble” by next month, said Harvey Kaufman, superintendent of the Cortland schools in upstate New York. The district just pared $500,000 from its current $18-million budget, he said, and will probably have to ask voters for a tax increase this year.
But Mr. Kaufman and other educators emphasized that their problems would be manageable, provided state leaders were able to reach a budget agreement soon.
Since the legislature rarely approves a budget in time for the April 1 start of the new fiscal year, districts have begun to expect delays in state aid in April, according to Judy Warde, chief lobbyist for the New York State School Boards Association.
“Most school districts try to budget for this,” she said.
Mr. Kaufman said the Cortland schools would be able to cover costs at least through the end of the month. “I don’t think it’s too bad yet,” he said.
An indicator of the severity of New York’s budget woes is its credit rating, which was recently downgraded to the third-lowest in the nation--above only those of Massachusetts and Louisiana.
But state leaders in New York appear to be closer than those in Massachusetts--who learned last week that their deficit could reach $2.3 billion--to an agreement to end their budget impasse.
Negotiations were still going on late last week, and details remained vague. But Gov. Mario M. Cuomo, Speaker of the Assembly Melvin H. Miller, and the Senate majority lead8er, Ralph J. Marino, have “agreed to agree” on a plan to bridge the budget gap, a spokesman for Mr. Cuomo said.
The centerpiece of the tentative plan is a delay in a reduction in the state income tax that had been planned for this year. Instead, the cut would be phased in over a longer period of time, perhaps three years.
Mr. Cuomo has also proposed increases for a variety of state taxes, including the gasoline tax, the corporate tax, and the personal-property tax on cars. He has also suggested expanding the base of the sales tax.
While it is unclear which, if any, of these taxes will become part of a budget accord, Mr. Cuomo and the two legislative leaders are said to have agreed on a package of taxes that will net the state upwards of $500 million.
The three reportedly have also agreed on a total of some $500 million in spending cuts, including a decrease of about $85 million in new aid to schools.
Another part of the Governor’s plan, sources said, is a reduction in the state’s contribution to the state teachers’ retirement fund.
The fund will still be able to pay retirees benefits even if the state lowers its contribution, said Ms. Warde of the n.y.s.s.b.a. Because the fund makes a healthy return on its investments, she noted, the state can reduce its contribution without affecting the fund’s payment schedule.
If the plan becomes a reality, it is expected to save the state between $200 million and $400 million.
Reform in Danger?
In New York City, Mayor David N. Dinkins has asked each city department to submit a plan to reduce spending by 4 percent to help close a potential budget gap of $1.8 billion for the coming fiscal year.
Such cuts--coupled with the flat level of aid expected from the state--would cripple the reform plans of Schools Chancellor Joseph A. Fernandez, city school officials warned.
District officials will not “sit back and assume this is going to happen,” said Stanley S. Litow, deputy chancellor for operations. “Our strategy is to make it clear to [city officials] that you can’t make cuts across the board,” he said.
“We have to convince them that it’s counterproductive to let these reductions take place,” he said. “And we have to convince the community that we’re committed to reform.”
Mr. Litow said the district has already reduced staff at central headquarters by 400. He is due to give his spending plan, which would slice $190 million from the city schools’ $6.4-billion budget, to Mr. Dinkins this week.
Although Robert F. Wagner Jr., the president of the city’s board of education, has said teacher layoffs are possible, Mr. Litow said the district cannot afford to lay off any teachers.
Susan Amlung, a spokesman for the United Federation of Teachers, vowed that the union would “resist layoffs as strongly as we can.” Such resistance could include “protests, demonstrations, whatever,” she added.