Relates to establishing a fiscal stabilization reserve fund as part of the tuition reimbursement methodology for school age programs

Section two amends section 4004 of the education law by adding a new subdivision 5 to authorize special act school districts to establish a fiscal stabilization reserve fund.

Section three amends subdivision 4 of section 4405 to provide that the approved tuition methodology for the 2016-17 school year and thereafter shall authorize school age programs operated by in-state approved private schools for the education of students with disabilities and special act school districts to retain funds up to one percent of their annual allowable and reimbursable costs not to exceed a total of four percent total of such costs.

Section four is the effective date.

Statement in support of the bill

Tuition reimbursement for Special Act School Districts and Approved Private Schools Serving Students with Disabilities (853 Schools) is based on a rate methodology that is established by the Department and approved by the Division of Budget (DOB). Following four years of zero growth in tuition reimbursement, the 2013-14 rate methodology included a three percent trend factor for direct care costs of school age providers as recommended by the Department. The 2014-15 rate methodology included a three and eight tenths percent trend factor, which equaled the three year average of state-wide total personal income growth, and the 2015-16 rate methodology included a four percent trend factor. The increases of recent years have provided relief, but have not addressed many of the shortcomings of the current system.

At the November 2012 meeting of the Board of Regents, the Board directed the Department to create a Special Education Financial Advisory Workgroup to allow all interested stakeholders to provide input on the current tuition rate-setting structure for special education providers and discuss recommendations to maximize the efficient and effective use of state and local resources. This workgroup held two meetings in May of 2013. Based on provider testimony at the Special Education Financial Advisory Workgroup meetings, and SED analysis of submitted cost data, a lack of predictable growth to fund increasing costs and many technical aspects of the current rate setting methodology, have endangered the capacity of Special Act School Districts and 853 schools to operate essential special education programs for the some of the most severely disabled school age children.

To assist in the financial recovery of Special Act School Districts and 853 Schools, the Work Group representatives strongly endorsed the need for statutory changes - with particular emphasis on the establishment of an annual tuition rate growth factor as well as the creation of a fiscal stabilization reserve fund. This legislation would create a statutory index for establishing the growth in annual tuition rates based on a three year average of personal income of taxpayers in the state. The current growth in tuition rate is established administratively and is not based on a predetermined index. A statutory growth index based on an average of state personal income growth would establish predictable and timely tuition increases and allow for improved budget planning.

Special Act School Districts and 853 Schools have historically relied on lines of credit to pay for unplanned or emergency expenditures until tuition revenue is received. Authorizing these schools to accumulate a small percentage of tuition revenue in a general reserve fund would reduce the reliance on private borrowing and enable schools to better respond to unanticipated events. Administrative parameters would be developed by the Department to specify the amount that may be deposited and to identify the allowable uses for the funds in addition to corresponding reporting requirements to ensure appropriate oversight.

Budgetary implications of the bill

There is no cost to the state during the 2016-17 school year. Using past data, it is projected that a trend increase for tuition based on a three year average in total personal income growth (3.0%) would provide approximately an additional $22 million in billable tuition for these schools in the 2016-17 school year. This amount would be paid by the placing school district or social service district as part of the annual tuition amount and for the placing school district these costs would be eligible for private excess cost aid and July and August aid under Education Law § 4408.

Prior legislative history

This is a new bill. However, bills containing similar provisions were previously introduced in 2014 and 2015. Specifically, in 2014, the similar bill was introduced by the Senate as S.7638, was referred to the Education Committee and no further action was taken. It was also introduced by the Assembly as A.9767 and was reported from the Education Committee and referred to the Ways and Means Committee and no further action was taken. In 2015 and 2016, the similar bill was introduced in the Senate and Assembly (S. 4215 Flanagan/A.5061 Nolan) and remained in the Education Committees of both houses.

Effective date

The bill would take effect immediately.