Establishes the special education short-term revolving loan fund and authorizes the state comptroller to provide special education short-term revolving loans

Summary of specific provisions

Section one amends state finance law by adding a new section 99-t, which establishes the "Special Education Revolving Loan Fund", under the joint custody of the Comptroller and the Commissioner of Tax and Finance. Section two amends state finance law by adding a new section 179-ff which authorizes the Comptroller to provide short term loans from the fund, pending tuition payments from the state. Section three provides for the effective date.

Justification

Special Act School Districts and other not-for-profit special education schools provide unique, specialized educational and therapeutic services to students who cannot successfully learn in public schools. These students are among the state's neediest children who have been admitted into the juvenile justice system, foster care and the mental healthcare system. For many of these children special act and 853 schools are their last hope.

The special act and 853 schools must meet the same federal and state standards as all public schools but without the same financial infras- tructure and support. They have no taxing authority and rely on tuition reimbursement from the state. Under current law, tuition rates are established each year by the Commissioner of Education, subject to the approval of the Division of Budget, with final rates adjusted to reflect the actual approved costs incurred by each provider. This reconciliation process allows the state to evaluate and recapture state and local payments that exceed actual costs; however, given the complexity of the methodology as well as the shifting population of Special Act and 853 schools, this reconciliation process can take years to sort out. For example, Mount Pleasant Cottage School has not received reimbursement from the NYS Education Department or the Division of Budget to bill for the 2006-2007, 2007-2008, 2008-2009 and 2009-2010 school years. The school is therefore now billing at 2005-2006 rates which is woefully inadequate. As a result, this and other special act and 853 schools must borrow money to meet payroll and provide mandated services.

To stay open and operating, special act and 853 schools are forced to borrow funds from banks through Revenue Anticipation Notes (RAMS), During the 2008-2009 school year special acts schools borrowed over 527 million at a cost of $1.3 million in interest in order to settle their obligations, The state, however, does not reimburse the schools for interest fees and other loan costs. The average interest rate for RANs

has increased dramatically since the collapse of the financial markets making such loans prohibitive, In addition, many special act and 853 schools can no longer find banks willing to extend loans at all.

This bill would allow New York State to provide loans to Special Act schools in anticipation of the school's revenue from the state end thereby save the schools millions in interest payments at no cost to the State.

Prior legislative history

This is a new bill. Similar legislation has been enacted in the past: Chapter 166 of the Laws of 1991 contained a provision which created the "Not-for-Profit Short-Term Revolving Loan Fund" to provide loans to not-for-profits contracting with the State in anticipation of revenue from the State.

Fiscal implications

There is no cost to the state and will save the special act and 853 schools significant monies. This year special act schools would save $1.3 million.

Effective date

This act shall take effect immediately.