BILL NUMBER:  S7134

 TITLE OF BILL :
An act to amend the state finance law, in relation to establishing the
special education short-term revolving loan fund, and in relation to
authorizing the state comptroller to provide special education
short-term revolving loans to certain special act school districts or
approved special education providers


 PURPOSE :
To provide Special Act school districts with an alternative to the
high cost of Revenue Anticipation Notes that are offered by banking
institutions.

 SUMMARY OF PROVISIONS :
Section one amends state finance law by adding a new section 99-t,
which establishes the "Special Education Revolving Loan Fund", under
the joint custody of the Comptroller and the Commissioner of Tax and
Finance.

Section two amends state finance law by adding a new section 179-ff
which authorizes the Comptroller to provide short term loans from the
fund, pending tuition payments from the state.

Section three provides for the effective date, which is immediate.
              

 EXISTING LAW :
Current law provides funding to Special Act Schools through a complex
methodology in which schools are getting reimbursed at rates set in
previous years, for students previously served.  These school
districts currently rely heavily on short-term borrowing from banks in
the form of Revenue Anticipation Notes (RANs), to keep their doors
open. The State does not allow for reimbursement of interest fees that
are paid to banks.

 JUSTIFICATION :
Created by special acts of the New York State Legislature, Special Act
schools provide unique educational and therapeutic opportunities to
students who have experienced failure in previous school settings.
Special Act school districts are located on the grounds of residential
childcare facilities licensed by the Department of Social Services.
Although they primarily serve a residential population, Special Act
schools also accept referrals of day students who are experiencing
similar psychological, educational, or physical disabilities. Because
of the shifting needs of the students served, students can remain at
the schools for as little as one week to as long as a few years.

The Special Act schools annually provide rehabilitative and
educational services to thousands of New York State's most challenging
children - children who have been admitted into the juvenile justice
system, foster care, and the mental healthcare system. For many of
these children, these schools are their last hope. Special Act schools
are held to the same federal and state standards that all public
schools are held to, but without the same financial infrastructure
afforded other public schools. These schools have no taxing authority
and rely heavily on state aid in the form of tuition reimbursement.

Under current law, tuition rates are established each year by the
Commissioner of Education, subject to the approval of the Division of
Budget, with final rates adjusted to reflect the actual approved costs
incurred by each provider. This reconciliation process allows the
state to evaluate and recapture State and local payments that exceed
actual costs. Given the complexity of the methodology as well as the
shifting population of Special Act schools, this process of
reconciliation can take years to sort out.
Mount Pleasant Cottage School provides an example of the problem: they
are required to comply with mandates issued by the State Education
Department's Office of Vocational and Educational Services for
Individuals with Disabilities (VESID), for example, by adding staff,
yet have not received reimbursement for such from NYSED's Rate Setting
Unit or Division of Budget to bill for the school years 2006-2007,
2007-2008, 2008-2009 and 2009-2010. They are currently billing at
2005-2006 levels, a rate that is woefully inadequate to pay for
educational expenses related to mandated services for their students.

This situation has forced the schools to resort to short term
borrowing from banks in the form of Revenue Anticipation Notes (RANs).
State funding does not allow for reimbursement of the cost of
borrowing, leaving these schools with the additional burden of
expensive interest fees.  The average interest rate for RANs has
increased dramatically since the recent collapse of the financial
markets. In fact many Special Act schools are finding in very
difficult to find banks willing to provide these loans at all.

During the 2008-2009 school year Special Act schools borrowed over $27
million at a cost of $1.3 million in interest, in order to meet their
obligations. If the rate setting methodology was a more timely and
efficient process, these loans would be unnecessary, however
legislation that would improve the methodology has been consistently
met with vetoes. (see Veto 156 of 2007; Veto 279 of 2006; and Veto 220
of 2004)

This bill would allow New York State to provide loans to Special Act
schools in anticipation of the school's revenue, which comes from the
State, thereby saving the schools millions in interest payments at no
cost to the State.

 LEGISLATIVE HISTORY :
This is a new bill, however, similar legislation has been enacted in
the past. Chapter 166 of the Laws of 1991 contained a provision which
created the "Not-for-Profit Short-Term Revolving Loan Fund", which
served a similar purpose - to provide loans to not-for-profits
contracting with the State, in anticipation of revenue from the State.

 FISCAL IMPLICATIONS :
There is no cost to the state, however this bill will save Special Act
school districts at least $1.3 million per year.

 EFFECTIVE DATE :
Immediately.