TITLE OF BILL:
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
To provide special Act school districts with an alternative to the
high cost of Revenue Anticipation Notes that are offered by banking
SUMMARY OF PROVISIONS:
Section one amends state finance law by adding a new section 99-u,
which establishes the "Special Education Revolving Loan Fund", under
the joint custody of the comptroller and the Commissioner of Tax and
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.
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.
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
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
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.
S.7134/A.10428 of 2009-2010 - Passed Senate.
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.
There is no cost to the state, however this bill will save Special Act
school districts at least $1.3 million per year,