Revenue Projections and the Funding “Cliff”

INFORMATIONAL LETTER: 91
POLICY CODE: DBE

TO: Superintendents of Schools
FROM: Susan A. Gendron, Commissioner
DATE: April 16, 2009
RE: Revenue Projections and the Funding "Cliff"

As you are in the process of completing your 2009-10 school budgets, I wish to update you on the effect that the anticipated downward revenue projection could have on state subsidies for education.

I have said for some time, including in our most recent conference call earlier this week, that while an influx of federal State Fiscal Stabilization Funds (under ARRA) for education would help restore reduced education funding in the short term, we can expect the funds for only the next two-and-one-half years. After the fiscal year ending June 30, 2011 (FY 11), we can expect a funding "cliff" and should plan accordingly, taking care not to create or preserve programs that will not be sustainable once these temporary additional federal funds stop flowing.

In light of recent economic forecasts for the state which have been reported in the media, the Legislature has delayed final action on the two-year budget in order to hear from the Revenue Forecasting Commission in early May. The only question is how much lower the projections will be, not "if" they will be lower.

As I explained in the conference call, we have set aside some of the State Fiscal Stabilization Funds in anticipation of a possible further reduction of state education funding for FY 10. In the event that state education subsidies are further reduced, my first priority for the State Fiscal Stabilization Funds is to protect state subsidies for FY 09 and FY 10. However, the more we divert from FY 11 to FY 10, the less will be available in FY 11. In other words, the "cliff" that was anticipated for FY 12 could come in FY 11.

These are extremely difficult economic times with very difficult choices for us in the days ahead. I will be reaching out to our partner organizations to jointly sponsor an event where we can collaborate on strategies for budgeting in difficult economic times. I will share additional information with you as soon as I have it.