Monthly Archives: February 2009

Education, Federal and State Aid

Senate Bill Not So Stimulating for Public Schools?

Posted by George Sweeting, February 9, 2009

One of the most eye-popping numbers in the Mayor’s budget presentation last month was the threat of 14,000 teacher layoffs. Unless the state restores school aid that the Governor has proposed cutting to help solve Albany’s own budget woes, the Mayor said the teachers would have to go. The Mayor’s real point to state lawmakers may have been in the context of the federal stimulus bill: pass along our fair share of any assistance the state receives from the bill that’s intended to avoid cuts in local education aid.

This gambit got a lot dicier over the weekend as it emerged that the single biggest change in the Senate leadership’s compromise with Senate moderates was scaling back money to help states maintain their local school aid. Helping states and local school districts cope with sharp declines in tax revenues by providing temporary federal aid helps to avoid layoffs and cutbacks in local school district spending, which would worsen the economic contraction.

The deal, which awaits passage by the full Senate and then reconciliation with the House bill, cuts the state fiscal stabilization fund essentially in half, from $79 billion to $39 billion. Assuming this smaller stabilization amount is maintained, the state will receive less and in turn would have less available to restore the school aid cut to the city. If the Mayor sticks to his guns and does not come up with city dollars to make up the shortfall, the possibility of teacher layoffs may be more real than many observers had assumed.

In December, the Governor’s Executive Budget proposal for the upcoming state fiscal year called for cuts in education aid to local school districts, including postponing increases that had been promised as part of the resolution to the Campaign for Fiscal Equity case. The Bloomberg Administration has estimated that the change amounts to a loss of $771 million in anticipated state aid for the Department of Education.

The stimulus bill that emerged from the House in late January included the $79 billion fiscal stabilization fund along with language that directed states to send much of their stabilization money on to local school districts using each state’s existing school aid formula. Analysis of the House bill by the Congressional Research Service indicated that New York State could expect to receive nearly $2 billion in stabilization aid which—assuming it was distributed according to current state aid formulas—might have brought the city nearly $800 million, almost exactly offsetting the Governor’s proposed cut.

An earlier version of the Senate bill still had a $79 billion stabilization fund, but was less clear as to how the states should distribute the proceeds to local school districts. That lack of certainty may have been what led the Mayor to make it clear that he expected New York State to distribute the anticipated federal dollars under the current state formula—or 14,000 city teachers could get the axe. Arguing that the city didn’t have enough of its own funds to plug the $771 million hole in state school aid, Mayor Bloomberg was placing the responsibility for avoiding the layoffs on Albany’s doorstep.

With the possibility that the stimulus bill may contain less than half the aid to states than what was expected last week, it may be harder for Albany to fully restore the education aid to the city even if the federal dollars are distributed by current state formula. This raises the possibility that the Mayor’s bluff would be called and he, the City Council, and the schools could be confronting the layoff of thousands of teachers.

Social and Community Services

Will Mounting City Job Losses Lead to Soaring Welfare Rolls? Maybe Not.

Posted by Paul Lopatto, February 2, 2009

The New York Times reported this morning that despite rising unemployment, public assistance rolls in 30 states declined or remained flat in 2008, while 20 states had an increase in their welfare caseloads. Does an increase in job losses necessarily lead to an increase in the welfare rolls? Some observers who project increases in the city’s welfare caseload and grant expenditures think so. But evidence from the last two recessions suggests the relationship between job losses and public assistance isn’t so clear. History suggests that the effect on welfare rolls will depend largely on the size of the economic downturn and how government policies treat those applying for and receiving public assistance grants.

From 1989 through 1992, the city experienced a deep recession, with job losses totaling more than 350,000 over four years. The job losses brought about a reversal of a prior downward trend in the welfare caseload. During the years of job losses, the number of welfare recipients increased by 231,000, including a rise of 118,000 in the program for families with children and 113,000 in the program for single adults and childless couples. The link between changes in employment and caseload was quite strong: for every three jobs lost about two more individuals were added to the welfare rolls.

In 1995 the city began to implement new local welfare reform policies that were later reinforced by changes at the state and federal levels. The new initiatives included intensive screening of new applicants, work requirements, and the use of job placement firms to push recipients aggressively into the paid workforce. The changes affected the ability of city residents to access and retain public assistance grants. The new policies helped to bring about a long period of caseload decline, with the total number of welfare recipients dropping by 60 percent between March 1995 and September 2001.

In early 2001, the city once again began to slide into recession. Later in the year, the attacks on the World Trade Center pushed the economy into further decline, leading to heavy job losses. By the end of 2003, the city had suffered a net loss of about 220,000 jobs. Compared to the prior recession, the rise in unemployment had a much smaller effect on the public assistance caseload because of the more restrictive welfare policies. In fact, the caseload of families on welfare continued to decrease. (It leveled off for a while in 2003 before resuming its decline.) Over the same period the caseload of single adults increased by a modest 20,000, but far less than in the prior downturn.

These findings are relevant today, since the more restrictive welfare policies remain largely in place. Although it is likely that large job losses in the next few months or years would lead to an upturn in the city’s public assistance caseload, IBO expects the welfare reform policies that began in the mid-1990s to limit their effect. Any increase in the city’s welfare caseload would likely lead to further increases in the Medicaid and Food Stamp rolls, since eligibility for public assistance generally makes an individual eligible for both of these programs.