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NYT: Paterson Delays School Aid, Citing State’s Lack of Money

March 31, 2010

ALBANY — Gov. David A. Paterson ordered the delay of $2.1 billion in aid payments to local school districts on Tuesday, saying the state did not have enough cash to pay bills and still end the fiscal year with its budget balanced.

Mr. Paterson made the announcement after he and the Legislature failed to agree on a budget deal for the fiscal year that begins on Thursday, a deal that was expected to include provisions to cover the state’s cash crunch for the fiscal year that is ending.

The sheer size of the state’s unpaid bills underscore an unsettling truth: New York is living hand-to-mouth, the state’s solvency at risk day to day.

“The only way our state can put its long-term fiscal house in order is through significant, recurring spending reductions,” Mr. Paterson said in a statement. “In the short term, however, plummeting revenues and record deficits have once again forced me to take extraordinary cash-management actions in order to ensure the continued orderly operation of our government.”

The delayed payments include about $924 million in aid for New York City schools.

Though the payments are not legally due until June 1, the state had planned to send the checks — and school districts expected to receive them — on Wednesday, the final day of the state’s current fiscal year. While most districts keep cash reserves for such emergencies, poorer districts rely on state aid for a larger proportion of their budgets than wealthier ones.

“The state intends to meet the June 1 statutory deadline for making this payment, assuming sufficient cash is available at that time,” Mr. Paterson said.

But there were fears that the delays could force cash shortages down the line, perhaps forcing some districts to leave their own bills unpaid or payrolls unmet.

“Once again the governor — and I’m not saying on purpose — created a scenario that hurts the poorest and neediest New Yorkers worst,” said Richard C. Iannuzzi, president of the New York State United Teachers union.

Mr. Paterson took similar action in December, delaying $750 million in payments to schools and local governments and drawing a legal challenge from teachers unions and school officials, who argued that he lacked the legal authority to do so.

Separately, the Paterson administration moved on Tuesday to withhold payments due after Wednesday on current state construction projects and to delay new ones. The announcement does not affect about $10 million in emergency projects or those being financed with federal stimulus money.

Administration officials said the projects were being delayed as part of the emergency budget measures the Legislature passed on Friday and Monday that restrict spending to essentials.

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From NYTIMES.

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