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.