Harris Beach is offering a complimentary seminar titled “De-Mystifying the Affordable Care Act: Practical Steps You Should be Taking Now” on Wednesday, May 29th from 2:00 to 3:30 p.m. at The Omni, 333 Earl Ovington Boulevard, Uniondale, NY 1553. The Affordable Care Act’s “employer mandate” has implications for school district employers who should review and address this issue as soon as possible or risk the potential means to avoid or reduce any penalties in 2014. To register, please contact William Sauer at wsauer@harrisbeach.com or 800-685-1429 ext. 1114. Full program details are available by clicking on the following link, “De-Mystifying the Affordable Care Act.”

Warren Richmond, a Harris Beach partner and member of the firm’s Labor and Employment Law Practice Group and Educational Institutions Industry Team, published an article in the New York Law Journal that focuses on the new Annual Professional Performance Review (APPR) plans for teachers and the limitations the statute places on school districts to terminate probationary teachers. The article raises the failure of the law to define “performance” and “significant factor” and the consequences of the legislation in making it more difficult to terminate non-tenured teachers whose performance is inadequate or otherwise problematic. To read the article, click on the following link, “Evaluation Law Could Limit Ability To Terminate Probationary Teachers.”

As we have previously discussed, among the realities faced by southern New York state in aftermath of Hurricane Sandy, none may perhaps be as blunt as the fact that the region rests in a coastal area susceptible to flooding and harsh winds.  Along these lines, lawmakers in New York and New Jersey are fielding calls and making suggestions for the protection of residents and property that Sandy demonstrated could face traumatic consequences in the face of another storm.  Yet the history of the region, including the lack of previous storms like Sandy, pose particular issues to lawmakers seeking to avoid the sort of disaster occasioned by the storm.

Land use, and in particular, the suitability of housing and other construction in the designated flood zones, has been an area of specific consideration, with lawmakers addressing the concern of residents whose homes and businesses were substantially damaged by flooding.  Earlier this year, Governor Cuomo proposed spending around $400 million of federal funds received by New York State to purchase homes destroyed by Sandy, with the goal of clearing the land to leave it in its natural state.

Governor Cuomo’s proposals to purchase homes and tracts of land in flood prone areas faces opposition from long-time residents, including those who have lived in homes passed down through generations.  The New York area’s crowded populace likewise resists efforts to reduce housing in a region where demand can far exceed supply, and where the cost of housing is already among the highest in the nation.  Special designations of areas, whether by FEMA or otherwise, creates additional problems for residents in the form of higher flood insurance premiums and higher insurance costs in general.  Homeowners accustomed to certain expenses may now be forced out due to an increased cost of maintaining their homes.

The severe flooding caused by Sandy is not the only issue.  Policymakers continue to urge that if New York and the surrounding regions do undertake expensive projects to protect the area from harsh weather, due consideration must be given to other potential threats.  While Sandy’s biggest effect came in the form of rising waters, the event proved that tropical storms with high sustained winds could impact the region.  Lasting power outages heighten concerns about the existing electrical infrastructure, as well as the planned responses to restore electricity and other utilities following a severe weather event.

Sandy will undoubtedly affect the region’s future infrastructure and emergency management, but at this point, the breadth and type of measures taken are still under consideration.  With that in mind, we pose the following issues for discussion:

1. How can the New York City Council and New York State Legislature reconcile the issue of residents in highly susceptible areas with the already high population density in the region?
2. What, if anything, do lawmakers propose to do about population shifts occasioned by increased insurance premiums and other increased costs related to re-classification of flood and danger zones in response to Sandy’s damage?
3. What should factor into the cost/benefit analysis of spending public funds to pre-empt future storm damage?
4. Are there measures that residents can take to secure their homes in the event of another storm, and will state, local and federal governments provide assistance to do so?
5. Can lawmakers balance the need to evacuate efficiently given the extreme logistical issues posed by evacuation of the millions of residents in the New York metro area?
6. What other considerations aside from flooding and high winds should lawmakers consider addressing in developing infrastructure changes?
7. Are there other issues in general that lawmakers should consider in the wake of Sandy?

We welcome your thoughts and comments on these issues and others related to the topic, and will attempt to address the prevalent topics in further posts.

The recent administration of the New York State grades 3 – 8 English language arts (ELA) and mathematics assessments created tremendous confusion, parent uproar, and lots of press expressing frustration from all factions within the pro and anti-testing movements.

This test mania and the focus on student achievement data and high-stakes assessment is nothing new and has roots back to 1837 and the time of Horace Mann as examined by Professor William J. Reese in The New York Times. The cause for our most recent rash of test mania, including anxiety, misunderstandings, and public confusion, is part of a “perfect storm” in which multiple conditions came together at just the right time to create an otherwise avoidable problem.

First, the State Education Department (SED) and the commissioner did not provide a simple and coherent message with the proper tone about the new Common Core standards and the revised testing program. Rather than an understandable, consistent, and factual information campaign, the tone from the state was confusing, more complex than it needed to be, and directive in nature rather than promoting a sense of teamwork with cooperation and coordination among our multiple education stakeholders. As a result, a sense of fear and confusion was created surrounding the Common Core standards and the new testing program.

Second, the state is in the middle of implementing the first full year of new Annual Professional Performance Reviews (APPR) for teachers and principals. Unlike teacher reviews in the past, these new provisions include student measures of growth on state tests as part of teacher evaluations that could affect a teacher’s employment. Not only are new APPR plans in place for the first time, but the governor raised the stakes by making implementation a condition for districts to receive increases in state aid funding.

The commissioner further enhanced the frustration by rejecting the concept of making this first full year of APPR implementation a “pilot year” to allow the data and the uncertainty of the new law and regulations to adjust prior to becoming high stakes for teachers and districts. An additional unknown as part of this new initiative overload is the results of this year’s state ELA and mathematics tests based, for the first time, on the Common Core standards.

Finally, New York State United Teachers (NYSUT) has run a very effective and expensive public campaign to rally parents and educators against the tests. NYSUT has taken deliberate steps to leverage this public anxiety and lack of clear messaging from SED to promote its agenda against standardized tests, despite its agreement with state leaders.

An article in the Albany Times Union analyzed the contradictory position of NYSUT in which just last year, after years of fighting standardized tests and teacher evaluations, it was party to a brokered deal with Commissioner King and Governor Cuomo. In a high profile press conference, the union agreed the state tests were a valid method of assessing teacher success when used as just a portion of overall teacher evaluations along with local tests and other measures of teacher performance. Now, however, NYSUT President Richard Iannuzzi acknowledged that the union wants to dampen the emphasis placed on the tests and is seizing on parent anxiety. He stated, “The goal is to continue to ratchet up the response because we need to have an impact on not making these high stakes.” The Albany Times Union reported that Education Commissioner King said he was disappointed in NYSUT’s turn on the tests.

While there will always be anxiety over major new initiatives, much of the misinformation and lack of proper messaging contributed to this current climate of test mania. To clarify some of the facets of the new learning standards and to help debunk test mania, set forth below are some clear explanations to the most commonly asked questions and areas of anxiety and confusion raised by parents and the public.

• Were the tests really harder than previous state tests?
  

 No. The new tests were not “harder” than previous tests. All tests include a wide range of questions or items with varying degrees of difficulty. It is the nature of large-scale testing programs to include a variety of questions in which some students will find certain questions more challenging than others. This is how the testing instrument is able to differentiate between proficiency levels among the many students taking the test. All test items were field-tested which means they are provided to students previously as secure practice tests to gauge performance.

Each respective item is than scored and provided with a “p-value” by psychometricians (testing experts) to indicate the percentage of field testing students who answered the question correctly. A question in which 70 percent of the field-tested students (which is a diverse sample of students selected through a field-testing matrix) answered the item correctly is assigned a .7 p-value. The final test form administered as the “live” test is made of test items with a wide range of p-values. While this is a basic summary of how large-scale tests are developed, this formula is universal for large-scale testing programs. The test items this year may be different in some manners, but the test overall was not any harder or easier. By necessity, the test simply included a wide range of items with varying difficulty levels.

• How do the commissioner and SED know before the tests were even administered that scores will drop by 30 percent? This sounds like test scores are pre-determined.

The statewide testing program is “criterion-referenced” not “norm-referenced.” This means that the scores of the tests are determined by a set standard, not by some pre-established bell curve in which a certain number of students must get an A, B, or C. That would be a typical norm-referenced model in which some students must do more poorly than others. In a criterion-referenced test, all students have an equal chance to score well since there is no ranking of students.

The state tests are based on a set standard of the proficiency level determined through a standard setting process performed by a diverse group of teachers after the tests are administered. Each student’s score is determined by comparing his or her performance to this set standard level, not by comparing students to each other. Therefore, it cannot be pre-determined that test scores will drop by 30 percent.

While all students have the capability to score above the set standard and do well, it is very likely that our previous statewide test proficiency patterns will remain constant. That is, the percentage of students able to reach the determined proficiency level through the standard setting process will most likely be lower for students in our higher need lower income districts as compared to the percentage of students in our low need wealthier districts. This is not new and has been consistent through previous testing programs.

Student scores may also be lower not because there is some type of “fix,” but because overall performance is generally lower for the first year of a new testing program. This was true when New York transitioned from grades 4 and 8 testing to grades 3 – 8 testing under NCLB. The reason for this is that teachers and students are not as familiar with the new test format. In addition, the new standard established by the group of standard setters for a new program is typically set at a relatively higher level. This occurred in the past and is normal for new testing programs to allow the standard setters to account for appropriate growth over time.

In order to compare the test results from year-to-year, the standard set the first year remains fixed. Therefore, there is some policy influence on the standard setting group to set a higher standard to allow sufficient room on the test scoring range for growth in performance as the years go on. In other words, if the standard setting group sets the standard too low and too many students in year one are already able to reach that standard in the upper range of the scoring scale, there will not be sufficient growth left in the scoring range to demonstrate growth over time. While criterion-referenced tests provide an equal chance for all students to meet the proficiency level, as there is no fixed pre-determined drop in scores, it is typical for the independent standard setting group to set a relatively high standard for the onset of a new testing program.

• Why do we need the Common Core standards? Have they been implemented too quickly? Our current New York State learning standards seem to be fine.
  

New York has always periodically reviewed and updated its learning standards. This is nothing new. The learning standards are not curricula chosen by each district, but a list of statewide performance indicators of what students by grade level should know and be able to do. The learning standards are the blueprint for the development of the curriculum. Education groups have rated New York’s learning standards as one of the best in the nation.

As our standards were in the process of being revised and updated, the Common Core standards gained national attention as a high quality set of standards proposed by the National Governors Association and the Council of Chief State School Officers. The Common Core is more aligned with the needs of the workplace and the challenges facing students to compete in a global economy.

Our current learning standards were determined to be too broad and covering too many topics without allowing teachers to focus in-depth on critical areas. The standards were found to be “mile wide and inch deep.” The Common Core was adopted by 45 states as it focuses on critical thinking, integration of technology, problem solving, understanding non-fiction informational text, and application of real life situations. The new standards are a good thing for our students and should not be controversial.

The challenge in this area comes not from the standards themselves, but with the implementation timeframe and transition from the current standards to the Common Core. New York State has over 689 school districts of diverse needs, resources, demographics and geography. With this great diversity, obviously, the degree and timing of implementation of the new standards will vary from region to region, district to district. This phase-in period or transition will be an ongoing process and a matter of teacher professional development and training over a length of time. The actual duration will vary between districts.

While the transition period for the standards is ongoing and varied, the switch from the current standards to the Common Core as the basis for the statewide testing program has to be uniform. The first year of a new testing program based on new standards will naturally be controversial due to the diversity of New York’s many school districts. However, the first year is needed to create a base upon which student growth can be measured and determined from year-to-year. So, while this initial year may have been difficult, it will be a huge benefit next year and in following years.

With this first foundation year completed, the testing program will now be able to enhance its stability and reliability over time. The initial natural challenges in a new large-scale testing program will also make the first year of APPR scores subject to inquiries and appeals. While this initial year of test implementation will result in validity questions as to data and APPR growth scores, having the first testing year completed will establish the needed base to measure growth moving forward. The Commissioner could have certainly delayed the new tests an additional year to allow for greater implementation of the Common Core statewide. However, by implementing the tests this year, SED is better able to set the needed growth base now so as to establish a more reliable APPR measure to resolve these issues and move towards a more valid system starting next year and in the years ahead.

The New York State Education Department has managed to create quite a hullabaloo with its April 26, 2013 memo to school district and BOCES superintendents declaring void all “quiet agreements” between districts and their teachers’ unions that mitigate the use of this year’s student assessments in teachers’ APPR growth scores, particularly when the resulting teacher rating is “ineffective.”  At the heart of the matter are the new Common Core student assessments that began this year, which in turn reflect on teachers’ APPR scores and performance ratings.  The Common Core Standards, which have the laudable goal of making our children better prepared for college and careers, concomitantly dramatically increases the rigor of student assessments.  Teachers unions and school districts expect that student assessment scores based on the new Common Core Standards will be significantly lower, at least for the first couple of years.  That has led to some districts and unions to negotiate what the Commissioner of Education calls “quiet agreements” outside the APPR plans they jointly submitted to SED. The agreements set forth how the student assessments will be mitigated as a factor in a teacher’s APPR rating for the first year of the new APPR implementation.

In one such “quiet agreement” entered into between the Buffalo City School District and its teachers union on January 15, 2013, the District promised not to use the first year of an ineffective rating to base the needed two years of consecutive ineffective evaluations as grounds to bring formal disciplinary charges against a tenured teacher for termination.

That agreement between the Buffalo City School District and its teachers apparently rankled SED and resulted in its April 26 memo which states in part:

As part of the signed certification in each APPR plan, each superintendent (or BOCES District Superintendent) and the presidents of the district’s or BOCES’ board of education and teachers’ and administrators’ union acknowledged that such plan is the sole plan for the APPR of all classroom teachers and principals in the district or BOCES. With respect to all approved APPR plans, the Department considers void any other signed agreements between and among those parties to the extent that such agreements conflict with the approved APPR plan and the requirements of Education Law § 3012-c and Subpart 30-2 of the Rules of the Board of Regents (“regulations”), and does not recognize any such agreements as part of any approved APPR plan. School districts and BOCES must implement the terms of their approved APPR plans consistent with the requirements of Education Law § 3012-c and the regulations. (emphasis added)

In response to SED’s April 26 memo, the New York State United Teachers (NYSUT) union wrote a scathing letter to SED Commissioner John King on April 30, 2013, repudiating SED’s position that it has the authority to void agreements negotiated under the Taylor Law. In that letter, NYSUT President Richard C. Iannuzzi states:

I am writing concerning Dr. Rafal-Baer’s April 26 memorandum to school and district superintendents.

While SED has the authority to approve APPR plans, it has no authority, beyond that limited power, to void or to pass on the legality of any agreement negotiated under the Taylor Law. Further, SED has no authority to issue a general pronouncement about the validity of Taylor Law agreements it has not reviewed and has no legal authority to review. Accordingly, we have advised each of our locals that we will take every appropriate measure to enforce any Taylor Law agreement negotiated in good faith with its Board of Education. If a dispute arises over the legality of any such agreement, the issue will be decided by PERB or the courts, not by SED.  (emphasis added)

Dr. Rafal-Baer’s memo is an unfortunate continuation of SED’s repeated attempts to undermine Education Law 3012-c’s collective bargaining provisions. NYSUT continues to support the proper implementation of the law, but will not allow the rights of educators to be abused or the voice of educators to be silenced by SED’s attempts to take away their collective bargaining rights.

SED’s April 26 memo has created what some would view as strange bedfellows in that many, if not most, School Superintendent and BOCES District Superintendents would wholeheartedly agree with NYSUT on this issue.  Insofar as SED’s memo is concerned, the key word in its pronouncement that “the Department considers void any other signed agreements between and among those parties to the extent that such agreements conflict with the approved APPR plan . . . .”  is CONFLICT.  In order to meet their statutory and regulatory requirements to the Commissioner, school districts and BOCES need only confirm that the provisions of their APPR plan are being implemented as set forth and as approved by SED in accordance with Education Law Section 3012-c and Subpart 30-2 of the Commissioner’s Regulations.  Any side agreement on when a district or BOCES will or will not pursue disciplinary action under the new amended Section 3020-a provisions are separate and apart from the APPR plan.  The agreements are really about Education Law Section 3020-a(3)(c)((i-a) and not 3012-c.  Under the Section 3020-a amendments, it remains in a district’s discretion, not that of SED, to file disciplinary charges at the local level to terminate a teacher.

In a press release also issued on April 30, the Commissioner appeared to somewhat minimize the Department’s definitive position set forth in its April 26 memo. In that press release the Commissioner indicated that while he expected “… roughly the same percentage of teachers to be identified in each performance category (Ineffective, Developing, Effective, Highly Effective) this year as last year.  We have asked districts to be thoughtful in their use of the data from this first year of Common Core assessments when evaluating teacher performance and we have every confidence that they will be.”  The Commissioner has failed to define or even hint at his interpretation of “thoughtful” in this high stakes context.  (emphasis added)

In a postscript to the Buffalo City School District’s “quiet agreement” with its union, The Buffalo News reported that with a $50 million state aide gun to its head, the Superintendent of the Buffalo City School District issued a written statement informing the teachers union that “The state Education Department has determined that the memorandum of understanding dated Jan. 15, 2013, between the Buffalo City School District and the Buffalo Teachers Federation is void.”  Her written statement further clarifies that “The district will proceed in accordance with the department’s determination.”  In response, the union issued its own statement saying, “As far as we’re concerned, the agreement that we reached stands, and we will take whatever action is necessary to enforce that agreement, because it was fair.” BTF President Philip Rumore further stated, “If there has to be a battle, so be it.”

With these ongoing threats of legal challenges over testing, data and teacher evaluations as set forth by the Commissioner and quickly followed by the Teachers’ Unions – Let the Games Begin!

While employers, particularly municipalities and school districts, are getting ready for the Patient Protection and Affordable Care Act to take effect next year, some municipalities, at the urging of coalitions supported by organized labor and other pro-labor groups, are taking their own measures to mandate that employers provide select employment benefits. For example, in New York City, city council Democrats recently proposed a law to provide paid sick leave to employees at companies with 15 or more workers. The law will apply to companies with at least 20 employees starting in 2014, and will expand to cover businesses with at least 15 employees in 2015. New York labor groups envisioned this law to apply to companies with five or more employees. City Council Speaker Christine Quinn originally proposed a 50 employee threshold. With a city council vote scheduled for May 8, Mayor Michael Bloomberg has threatened to veto the bill, but it is widely regarded as veto proof, with over two-thirds of the city council favoring the bill as it stands.

The law will require thousands of businesses to offer workers five paid days off a year. Supporters say allowing sick workers to be paid for time off offers necessary economic security for New York City employees. Beyond the city, advocates see the paid sick leave measure giving momentum to this issue in the hope that other cities follow. Similar measures in Portland, Oregon, San Francisco, and Seattle had previously passed, covering either all companies or those with just five or more workers. The New York City bill could potentially crop up in other localities across the state, and could realistically make its way to the State Assembly in the foreseeable future.

NYMUNIBLOG will continue to monitor and report on this topic.

As municipalities throughout New York continue to deal with the lingering effects of the recession, mounting sources of additional financial distress have placed the long-term fiscal viability of many local governments in jeopardy.  With liabilities continuing to grow and the ability to raise revenues becoming increasingly difficult for municipalities, the path to improved fiscal conditions for many local governments is uncertain.

While not a new concept in New York, the utilization of financial control boards as a potential solution to the much-publicized dire financial standing of some municipalities throughout the state has gained significant attention as of late.  Although a controversial solution, outside of significant increases in state aid—which Governor Andrew Cuomo has made clear will not be forthcoming—many municipalities rapidly approaching a state of fiscal crisis are left with few alternative options.  While relief through municipal bankruptcy under Chapter 9 of the U.S. Bankruptcy Code is technically available to local governments in New York, it seems unlikely that this presents a viable solution, particularly in light of the state’s history of interjecting in municipal financial emergencies and implementing financial control boards when bankruptcy appears imminent.

Much of the discussion regarding the potential role of financial control boards in aiding distressed municipalities was initially sparked by a report issued by State Comptroller Thomas DiNapoli in August 2012.  The report concluded a comprehensive analysis regarding the fiscal health of 4,000 local governments throughout New York, and revealed several pieces of troubling data.  Most notably, the comptroller determined that over 100 local governments have insufficient cash to meet current liabilities, roughly 300 local governments had deficits during 2010 and 2011 or both, and 27 municipalities have seemingly exhausted their reserve funds.  While the report indicated that cities faced the most significant risk, it made clear that all municipalities appear to be vulnerable to future unexpected expenses.  Many factors are to blame for the precarious financial footing on which many local governments find themselves—including population loss, rapidly growing employee health and pension expenses, and deficient budgeting practices and financial systems.  While acknowledging the varying causes, the report specifically highlighted diminished sales tax collections, falling property values, the inability to raise sufficient revenues, cuts in state aid, and constitutional tax limits (both the property tax cap and constitutional tax limit) as significant contributing factors to financial strain on municipalities.

This report and the subsequent claims that Governor Cuomo and/or Comptroller DiNapoli were considering proposals surrounding the use of financial control boards for municipalities in financial distress placed these entities at the forefront of the discussion regarding the financial future of many local governments.  These alleged proposals, including one purportedly calling for the creation of a statewide “super” financial control board with broad authority, have generated significant discussion throughout New York, particularly from mayors from cities like Syracuse, Rochester, Albany and Yonkers who are generally opposed to such state action.  Although plans to move forward with the proposed state-wide financial control board do not appear imminent, notwithstanding some recent comments from Governor Cuomo, all indicators suggest that he continues to view the use of financial control boards as a potential means of resolving the fiscal stress many local governments are facing.

The implementation of financial control boards in response to municipal fiscal crises is not unique to New York, as entities of this nature have been utilized throughout the United States.  The phrase “financial control board” is used broadly in reference to entities states create through legislative action for the purpose of intervening in, and shoring up the finances of, local governments in varying states of fiscal emergency.  The specific authority, powers, and composition of financial control boards are generally established and governed by their enabling legislation.  In most instances, however, such entities are comprised of several appointed directors and are authorized to supervise the financial affairs of the municipality, impose budgetary requirements and guidelines, and eliminate and or restructure existing debt through various methods, including issuing bonds.

The first financial control board implemented in New York, the New York State Financial Control Board, was created in 1975 in response to financial state of emergency existing in New York City at the time.  Created pursuant to the New York State Municipal Assistance Corporation Act, the New York State Financial Control Board, together with the Municipal Assistance Corporation of the City of New York and the Office of Special Deputy Comptroller for New York City, which were created at the same time, were granted broad powers in connection with its mission of staving off financial collapse.  Once the Legislature finally took action, the city was in the midst of a sustained financial crisis that had left it at the brink of bankruptcy, unable to meet its debts.  To achieve its mission of preventing the fiscal issues affecting the city from impacting the state’s finances and restoring fiscal stability to the city, the control board was given significant powers and responsibility regarding the budgetary management and fiscal operations of the city. By 1986, as a result of its actions and oversight, the city had returned to financial solvency, repaying its federally guaranteed debt and balancing its budget.  As directed by the Municipal Assistance Corporation Act, the control board then entered a “sunset” status, relinquishing much of its authority and assuming strictly oversight responsibilities.

The general success of the New York State Financial Control Board during New York City’s economic crisis has made it a blueprint for similar state action in connection with municipalities veering toward insolvency.  Subsequent financial control boards have been appointed by the state in Yonkers, Troy, Buffalo, Erie County, and most recently, Nassau County.  While each financial control board has been specifically tailored to meet the challenges presented by the financial emergencies of each of these local governments, they have universally been granted significant authority to fulfill their purposes.

While the specific authority granted to financial control boards in New York is ultimately dependent on the specific needs of the at-issue municipality, these entities commonly share similar general powers.  Such powers may include, among other things, the authority to review and make recommendations on the operation, management, efficiency and productivity of the relevant municipality and any subsidiary organizations; issue bonds; consult with the locality during the budget-making process, including the authority to approve or reject budgets and required multi-year financial plans; and comment on proposed borrowings and collective bargaining agreements.

These powers may further vary depending on whether the board is in an “advisory period” or “control period.”  A control period may be imposed immediately upon the creation of a financial control board or where a predetermined event occurs, such as where the municipality fails to adopt an on-time balanced budget and financial plan, fails to pay debt service, incurs an operating deficit of more than a specified percentage, or loses access to the market for borrowing.  When in a control period, a financial control board will often have greater authority to act.  The heightened powers that can correspond with these periods may permit a financial control board to take additional actions, such as:  the modification of financial plans, the establishment of spending limits, the imposition of wage and/or hiring freezes, the review of operations, the ability to suspend or reject contracts (including collective bargaining agreements), the recommendation of efficiency and productivity measures, and conduct an assessment of the municipality’s financial condition and needs.

Again, the specific powers bestowed upon each financial control board are enumerated in their respective enabling legislation and are tailored to meet the needs of the subject municipality.  In all circumstances, however, the creation and imposition of a financial control board has the ultimate effect of placing broad powers in the hands of an entity with the ability to take quick and decisive action.

Certain aspects of financial control boards’ structure and general authority suggest that they may present a solution to several of the financial issues facing municipalities throughout New York.  However, the potential benefits presented by these entities do not come without limitations and potentially undesirable consequences.

As they are predominantly comprised of appointed individuals, one of the greatest benefits offered by financial control boards is that they offer a vehicle through which difficult and often unpopular decisions impacting a municipality’s financial health and long-term viability may be made without concern for potential political repercussions.  While the curtailment of traditionally-offered services and reductions in labor-related expenses are often two clear areas for municipalities to achieve savings, many elected officials are hesitant to implement dramatic changes in these areas.  Financial control boards, however, offer a way to take decisive actions in these areas to achieve significant potential savings.  The ability to eliminate or dramatically reduce certain municipal services and programs, implement wage freezes, conduct layoffs, and modify benefits provided to employees without the potential ramifications an elected official may face for making such polarizing decisions.  Additionally, in instances where a municipality finds itself in financial turmoil as a result of failed policies and/or deficient budgeting and general financial practices, financial control boards present a means of removing or placing significant control over the decision-making ability of individuals responsible for such practices and/or policies.  Another significant benefit financial control boards present is the ability to generate new revenue through the issuance of bonds.  Although difficult to quantify the exact financial benefit this may provide, this offers a possible revenue stream otherwise unavailable to municipalities.

While clear arguments can be made regarding the potential benefits the imposition of financial control board can offer, many—particularly elected officials—remain opposed to their use in aiding local governments during times of fiscal distress.  Much of the current opposition to them can be attributed to two primary concerns.  First, many argue that state imposition of powerful control boards, often comprised of unelected individuals; constitute improper or unjustifiable restraints on elected officials’ ability to properly govern.  Many suggest that while the financial control boards may be able to take certain actions to provide short-term fiscal stability, any improvements come at the expense of substantial interference with the political organization of the local government.  Some have gone as far as to claim that their implementation represents a circumvention of the democratic process by taking authority out of the hands of duly elected officials.

The second criticism often brought against financial control boards, is that they are only truly able to offer solutions to locally-created sources of fiscal distress.  Specifically, that they are unable to take action to correct many of the underlying issues specifically causing fiscal distress for local governments in New York, including but not limited to:  changes in demographics, the loss of large employers, pension responsibilities, and complying with state mandates.  Thus, many claim that unless municipalities fall under financial stress as a result of poor budgeting or failed economic initiatives, costly services and programs, or unsustainable labor expenses, financial control boards are unable to make changes that will lead to long-term financial stability.

As we posted before, the solution to this ever increasing problem of fiscal stress throughout New York’s municipalities will require an open dialogue if the most efficient and effective outcome is the goal.  That solution may, or may not, include the use of financial control boards, but their availability and strong historic results demand that they be a part of that open dialogue.

The overall enacted school aid runs were significantly higher than the district-by-district aid runs proposed in the 2013-14 Executive Budget.

While some school districts may have been pleasantly surprised when reviewing the school aid allocations in the enacted 2013-2014 budget, most were likely underwhelmed. In total, districts throughout the state received approximately an additional $936.6 million over the previous school year, bringing the total for school aid up to $21.2 billion. While at first glance this may seem to be good news, further review reveals several troublesome issues with the allocations.

First, the purported school aid increases are actually much lower when the Gap Elimination Adjustment (GEA) is considered. These Adjustments significantly lower the amount some districts may receive, and in some cases, result in net cuts to districts. Some districts have expressed frustration regarding the complex formula used for GEA restoration.

The New York State School Boards Association recently provided an analysis in their OnBoard publication to school board members asking whether the state budget glass is half-full or half-empty? This lack of transparency and understanding is a large factor in NYSSBA’s recent survey finding that two-thirds of responding school board members throughout the state are disappointed in the state aid increases received by their districts. The GEA results in most school districts receiving the same or less state aid at levels prior to 2007-2008.

Also of particular concern is so-called “bullet aid,” additional monies granted to school districts located in legislative districts with State representatives in the legislative majorities. This “bullet aid” amounts to approximately $30 million and is not allocated based on need.  Understandably, this type of allocation has drawn ire from those districts sitting on the wrong side of the legislative district lines.

Districts will yet again be searching for solutions to their on-going financial woes this budget season. These districts will likely wonder if the underlying inequities in the foundation formula will ever be addressed, or if undoubtedly politically-minded allocations such as this year’s “bullet aid” will simply continue.

As previously commented on this blog, it may be up to the governor’s Education Reform Commission to step up to the plate and take on the issue of real education funding reform, including the GEA, inequities in the foundation aid formula and the basis for bullet aid allocation.

New York State Comptroller Thomas DiNapoli’s revised pension smoothing plan for local governments and school districts will be included in the final 2013-14 state budget, according to multiple news outlets. The Enacted Budget establishes an Alternate Contribution Stabilization Program available to cities, counties, towns, villages, BOCES and school districts, as well as four public hospitals operated in Nassau, Westchester and Erie counties. The program allows governments to lessen the cash impact of current increases in pension contributions, while repaying the deferrals with interest as well as contributing to a reserve account to dampen future rate increases.

For municipalities, DiNapoli’s overhaul of the original proposal by Governor Cuomo—which would have included a 25-year amortization period—will feature a 12-year payback period, allowing municipalities to borrow against projected future savings. So far, 137 entities with public employees have already entered Cuomo’s version of the pension smoothing plan, but each entity can opt for the new program if it so chooses. The comptroller touts his plan as giving local governments the flexibility they need while acknowledging that participation in the plan may not be the best choice for each municipality.

For school districts, a different program will permit employers to opt into a 12-year temporary program during the period from July 1, 2013 to June 30, 2014, which will potentially allow the deferral of a portion of pension contributions in each of the next seven year’s bills. The initial contribution rate for participants—beginning with the 2013-14 billing cycle—is 14 percent of payroll, which may be increased in years to come. The board for the New York State Teachers Retirement System (NYSTRS) on Tuesday approved of the district pension smoothing plan, known as the Stable Contribution Option, which notably allows for the smoothing to stop if the NYSTRS fund ever falls below 80 percent of full funding.

Critics of the pension smoothing plans, however, are quick to decry them as potential short-term fixes which will inevitably result in long-term headaches for municipalities. Syracuse Mayor Stephanie Miner, an outspoken critic of Governor Cuomo’s original proposal and champion of fiscal stability for upstate cities, noted in March that merely giving stressed municipalities another means to borrow money is not a viable long-term solution to the problem:

“We cannot solve the fiscal crisis facing the local governments of New York by borrowing. Unfortunately, the new ‘alternate contribution pension stabilization program’ is just that: another mechanism for borrowing. We need fundamental, structural reforms to overcome the impending collapse of our financial structure. Governor Cuomo is a strong leader and has enormous political capital. We are all New Yorkers and we need the governor to bring all parties to the table and lead a discussion on solving the long term fiscal health of our municipalities and our state.”

Moody’s Investor Services has warned of the dangers of the pension smoothing plan, calling it a “stop-gap with long-term risks.” In fact, only the most cash-strapped municipalities may benefit from the program. “The deferral of pension contributions would increase the unfunded pension liabilities of participating local governments, a credit negative,” Moody’s said. “The positive short-term budgetary relief will outweigh the cost of increasing unfunded pension liabilities for only the most financially stressed local governments.”

For example, Moody’s noted that “a local government with $100 million in ERS salaries would have to pay $20.9 million in pension contributions for 2014. If the local government opts into the plan, it will gain $8.9 million in budgetary relief, but also create an unfunded liability of the same amount. This unfunded liability will grow in each successive year that the local government is part of the new deferral program, which will have to be met with future contributions.”

Among all the uncertainty municipalities are facing, however, one thing remains clear: If projected cost savings are not in fact realized, municipalities will find themselves in even further distress.

The Crain’s New York Rebuilding NY Conference, held in Manhattan on April 4, 2013, provided interesting perspectives on ways to help the city move forward in the aftermath of Superstorm Sandy. Howard Glaser, director of state operations and senior policy adviser to the governor, discussed what the state is doing to recover and prepare for future disasters. He emphasized that the recently appropriated $60 billion in federal disaster aid to those affected by the storm covers all affected states, and includes funding for damage caused by Hurricane Irene and Tropical Storm Irene. He indicated that the federal funding spigot has only opened a tiny bit thus far, with money just beginning to trickle down to the state. Mr. Glaser explained that the state, working with the city of New York and other localities, has established Sandy assistance programs for the unreimbursed costs associated with home repairs (Smart Home Repair Program), costs associated with the mitigation of future damage for properties within the 100-year flood plain (Smart Home Reliance Program), as well as a voluntary home buy-back program for homes in targeted, high risk areas within the flood-plain (Recreate NY Home Buyout Program). These programs are detailed at http://nysandyhelp.ny.gov/. He also stated that a significant portion of federal funding would be used to harden our infrastructure, including providing equipment to ensure that electrical generating facilities have adequate emergency generating capacity and that transmission equipment is constructed to withstand hurricane-force winds and storm surges. Funds will also be applied to address shoreline erosion, including marsh and dune re-creation.

Panelists representing the various critical service providers in the areas of power, communications, transportation, food and housing discussed lessons learned and suggestions for the future. An internationally renowned geologist, Dr. William Fitz, calling New York Harbor the most vulnerable point on the eastern seaboard, outlined the various weather-related risks the region faces, which include repeated storm surges and hurricane-force winds, as well as the effects of warmer average temperatures. Dr. Fitz noted that sea level has begun rising at an accelerated rate, from approximately 1 foot per century for the past 5,000 years to 2 to 5 feet over the next century. He suggested a five point plan to combat these future risks, including protecting dunes, marshes and barriers; repairing/restoring existing dunes, marshes and barriers; rezoning of certain vulnerable areas to preclude private uses other than passive or recreational uses; and increased education of the public in climate risk and proper emergency safety protocols. The government representatives and real estate professionals on the panels indicated a strong commitment to continued occupancy of the shoreline, even while acknowledging that the number of buildings within the 100-year flood plain had increased significantly (in New York City, close to 36,000 buildings were in the flood plain before the most-recent federal maps were published – now there are nearly 2,000 buildings in the flood plain). Rather than embracing the notion of restricting development in vulnerable areas, these panelists focused on developing cost-effective methods of mitigating the risks, such as enacting building code provisions requiring elevating buildings, and where appropriate, using submarine-type doors on underground structures in high-rise buildings.

Finally, panelists emphasized the need to guard against “fighting the last war,” or simply attempting to provide future protection against risks previously experienced. It was suggested that future planning address the various climatic risks we face going forward in a comprehensive manner within the limits of available resources, because the next natural disaster to hit the region will most likely not look anything like Sandy.