Senate Bill S5246A

                                 BILL NUMBER:  S5246A

 TITLE OF BILL :  An act to amend the education law, in relation to
establishing a fiscal stabilization reserve fund as part of the
tuition reimbursement methodology for school age programs and
providing an annual growth amount for the tuition reimbursement for
school age programs operated by in-state approved private schools for
the education of students with disabilities and special act school
districts

 PURPOSE OF THE BILL :

To establish a fiscal stabilization reserve fund as part of the
tuition reimbursement methodology for school age programs and to
provide an annual growth amount, correlating with New York State
personal income growth, in the tuition reimbursement rate for school
age programs operated by in-state approved private schools for the
education of students with disabilities and special act school
districts.

 SUMMARY OF THE PROVISIONS OF THE BILL :

Section one amends paragraph c of subdivision 4 of section 4405 of the
education law to provide that for the 2017-18 school year and
thereafter, annual tuition rates for special act school districts and
in-state approved private residential or non-residential schools
              

educating students with disabilities that are located within the state
shall increase by the greater of: (i) a three-year average of
State-wide total personal income; (ii) a percentage recommended by the
Commissioner and approved by the Director of Budget; (iii) or zero.

Section two amends section 4004 of the education law by adding a new
subdivision 5 to provide that special act school districts may
establish a fiscal stabilization reserve fund.

Section three amends subdivision 4 of section 4405 to provide that the
approved tuition methodology for the 2017-18 school year and
thereafter shall authorize school age programs operated by in-state
approved private schools for the education of students with
disabilities and special act school districts to retain funds up to
one percent of their annual allowable and reimbursable costs not to
exceed a total of four percent of such costs.

Section four is the effective date.

 STATEMENT IN SUPPORT OF THE BILL :

Tuition reimbursement for Special Act School Districts and Approved
Private Schools Serving Students with Disabilities (853 Schools) is
based on a rate methodology that is established by the Department and
approved by the Division of Budget (DOB). Following four years of zero
growth in tuition reimbursement, the 2013-14 rate methodology included
a three percent trend factor for direct care costs of school age
providers. The 2014-15 rate methodology included a three and eight
tenths percent trend factor, which equaled the three year average of
state-wide total personal income growth, and the 2015-16 and 2016-17
rate methodology included a four percent trend factor. The increases
of recent years have provided relief, but have not addressed many of
the shortcomings of the current system.

At the November 2012 meeting of the Board of Regents, the Board
directed the Department to create a Special Education Financial
Advisory Workgroup to allow all interested stakeholders to provide
input on the current tuition rate-setting structure for special
education providers and discuss recommendations to maximize the
efficient and effective use of state and local resources. This
workgroup held two meetings in May of 2013. Based on provider
testimony at the Special Education Financial Advisory Workgroup
meetings, and SED analysis of submitted cost data, a lack of
predictable growth to fund increasing costs and many technical aspects
of the current rate setting methodology, have endangered the capacity
of Special Act School Districts and 853 Schools to operate essential
special education programs for some of the most severely disabled
school age children.

To assist in the financial recovery of Special Act School Districts
and 853 Schools, the Work Group representatives strongly endorsed the
need for statutory changes - with particular emphasis on the
establishment of an annual tuition rate growth factor as well as the
creation of a fiscal stabilization reserve fund. This legislation
would create a statutory index for consideration in determining the
growth in annual tuition rates with a protection that rate growth
would be held harmless to zero. As the current growth in tuition rate
is established administratively, and is not based on a predetermined
index, there is potential for an administrative request to exceed a
statutorily-based growth factor. Therefore, the legislation includes
three options for establishing growth in tuition, of which the greater
number would be utilized: a hold harmless, an amount equal to the
three-year average of personal income growth of taxpayers in the
state, or an amount recommended by the Commissioner and approved by
the Division of the Budget. A statutory growth index based on an
average of state personal income growth would set a benchmark for
predictable and timely tuition increases and allow for improved budget
planning.

Special Act School Districts and 853 Schools have historically relied
on lines of credit to pay for unplanned or emergency expenditures
until tuition revenue is received. Authorizing these schools to
accumulate a small percentage of tuition revenue in a general reserve
fund would reduce the reliance on private borrowing and enable schools
to better respond to unanticipated events. Administrative parameters
would be developed by the Department to specify the amount that may be
deposited and to identify the allowable uses for the funds in addition
to corresponding reporting requirements to ensure appropriate
oversight.

 BUDGETARY IMPLICATIONS OF THE BILL :

There is no cost to the state during the 2017-18 school year. Using
past data, it is projected that funding one percent of total annual
allowable and reimbursable costs of the 853 Schools and Special Act
School Districts would equal approximately $7.6 million in additional
reimbursement to the schools. It is also projected that a trend
increase for tuition based on a three-year average in total personal
income growth (3.4%) would provide approximately an additional $26
million in billable tuition for these schools in the 2017-18 school
year. For the 2017-18 school year, the Division of the Budget approved
4% in tuition growth, greater than the three-year average total
personal income growth, which will provide approximately $31 million
in additional funding.

This amount would be paid by the placing school district or social
services district as part of the annual tuition amount and for the
placing school district and these costs would be eligible for private
excess cost aid and July and August aid under Education Law § 4408.

 PRIOR LEGISLATIVE HISTORY :

This is a new bill. However, bills containing similar provisions were
previously introduced in 2014, 2015, and 2016. Specifically, in 2014,
the similar bill was introduced by the Senate as S.7638, was referred
to the Education Committee and no further action was taken. It was
also introduced by the Assembly as A.9767 and was reported from the
Education Committee and referred to the Ways and Means Committee and
no further action was taken. In 2015 and 2016, the similar bill was
introduced in the Senate and Assembly (S. 7916 Flanagan/A.5061-A
Nolan) and remained in the Education Committees of both houses.

 EFFECTIVE DATE :
The bill would take effect immediately.