Two north country school districts designated as susceptible to fiscal stress

Jan. 28—COLTON — Two north country school districts have been designated as being susceptible to fiscal stress by the state comptroller.

Colton-Pierrepont in St. Lawrence County and Belleville-Henderson in Jefferson County were among 23 school districts throughout the state that were designated in some level of fiscal stress under State Comptroller Thomas P. DiNapoli's Fiscal Stress Monitoring System for the school year ending on June 30, 2021.

That's down from 31 school districts that had been identified as in fiscal stress the previous year. According to Mr. DiNapoli's report, fewer school districts have been designated in fiscal stress in school year 2020-21 than in any of the previous four years.

He said the level of stress was also lower, with only two districts scoring higher than "susceptible to fiscal stress," compared to between five and nine districts in the two higher categories in each of the prior four years.

"Fewer of New York's school districts were scored as under fiscal stress in 2021, but the operational issues caused by the pandemic for all school districts were extreme," Mr. DiNapoli said in a press release. "School districts must watch their finances closely as the pandemic continues, prices rise and staffing issues mount."

The report is based on the required information that districts submitted for the 2020-21 school year, with reports from 670 of 672 school districts in 57 counties. Schools could be placed in one of three categories of stress level — significant, moderate or susceptible. School districts receive a fiscal stress score based on several factors, including year-end fund balance, operating deficits and surpluses, cash position, and reliance on short-term debt for cash flow.

In his report, Mr. DiNapoli said the COVID-19 pandemic played a role in the fiscal situation for schools.

"The COVID-19 pandemic began in early 2020, a few months before school districts finished SY (School Year) 2019-20. SY 2020-21 was the first full school year of operations under pandemic conditions, affecting everything from the personal lives of students and staff to the fiscal situation of New York state," he said. "The fiscal stress scores for SY 2020-21, therefore, reflect a full year of significant challenges and uncertainty for school districts. The general decline in the number of districts designated in stress reflects, in part, the impact of the local, State and federal responses to the pandemic."

He noted that the state withheld 20% of school aid payments early in the school year and indicated more reductions could occur. Some school districts used short-term debt, which Mr. DiNapoli said is often used to bridge revenue delays, but is also considered when fiscal stress scores are calculated.

Delays in federal funding also had an impact. He said the federal government's Coronavirus Aid, Relief and Economic Security, or CARES Act had requirements that caused funding delays for many school districts, with less than half of eligible school districts receiving all of their aid by the end of the school year.

In addition, he said, some school districts received less aid in the 2020-21 school year because the state used CARES funding to replace its own general school aid, and the federal aid had to be shared with eligible non-public schools in a district.

Faced with less aid, Mr. DiNapoli said 330 districts made cuts to personal services expenditures (total wages and salaries), with 12 districts making cuts of 10% or more. He said staffing reductions were more common in high-need school districts where, between the 2018-19 and 2020-21 school years, 62% cut personal services expenditures, compared to 10% of low-need districts.

His report also noted that 91.3% of fiscally stressed school districts had low liquidity, also known as "weak cash position," meaning they had less cash on hand to cover operating expenses. He said 82.6% also had operating deficits, and 52.2% had low fund balances.

Mr. DiNapoli said other factors that often increase the chance of fiscal stress are having a high number of economically disadvantaged students, a high teacher turnover rate, a decrease in local property values, a low budget approval rate, a high percentage of English language learners and a high student-to-teacher ratio.

"Most school districts entered SY 2020-21 under a cloud of uncertainty. Faced with potential cuts in state aid and other potentially negative outcomes, many high-need districts reliant on state aid made fiscally conservative choices, such as staff reductions," Mr. DiNapoli said in the report. "Ultimately, most school districts received the bulk of the state and federal aid that was originally appropriated, which had the effect of helping the balance their budgets and maintain healthy fund balances. In general, this reduced the number of districts designated in fiscal stress."

"Although school officials may have made these operational decisions in order to avoid fiscal crisis, they had unfortunate negative effects, especially affecting students in the state's highest need districts," he added. "Many of these districts began SY 2021-22 with fewer experienced staff, as well as many students with significant learning deficits that are not likely to be easily addressed."

A copy of the full report can be found at wdt.me/5dR4Yh.