Establishes the special education short-term revolving loan fund and authorizes the state comptroller to provide special education short-term revolving loans to certain special act school districts or approved special education providers.
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-u, 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: 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,
EFFECTIVE DATE: Immediately.
STATE OF NEW YORK ________________________________________________________________________ 1582--A 2011-2012 Regular Sessions IN SENATE January 10, 2011 ___________Introduced by Sen. OPPENHEIMER -- read twice and ordered printed, and when printed to be committed to the Committee on Finance -- recommit- ted to the Committee on Finance in accordance with Senate Rule 6, sec. 8 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee 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 THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The state finance law is amended by adding a new section 99-u to read as follows: S 99-U. SPECIAL EDUCATION SHORT-TERM REVOLVING LOAN FUND. 1. THERE IS HEREBY ESTABLISHED IN THE JOINT CUSTODY OF THE COMPTROLLER AND THE COMMISSIONER OF TAXATION AND FINANCE A FUND TO BE KNOWN AS THE SPECIAL EDUCATION SHORT-TERM REVOLVING LOAN FUND. SUCH FUND SHALL CONSIST OF MONEYS MADE AVAILABLE PURSUANT TO APPROPRIATION AND ANY OTHER SOURCES IN ORDER TO PROVIDE SUPPORT FOR PROMPT CONTRACTING WITH AND PAYMENT OF NOT-FOR-PROFIT ORGANIZATIONS. 2. MONEYS OF THE FUND MAY BE EXPENDED PURSUANT TO SECTION ONE HUNDRED SEVENTY-NINE-FF OF THIS CHAPTER. MONEYS SHALL BE PAID OUT OF THE FUND ON THE AUDIT AND WARRANT OF THE STATE COMPTROLLER PURSUANT TO SUCH SECTION. S 2. The state finance law is amended by adding a new section 179-ff to read as follows: S 179-FF. SPECIAL EDUCATION SHORT-TERM REVOLVING LOANS. 1. THE COMP- TROLLER IS AUTHORIZED TO PROVIDE LOANS FROM THE SPECIAL EDUCATION SHORT-TERM REVOLVING LOAN FUND ESTABLISHED BY SECTION NINETY-NINE-U OF THIS CHAPTER TO ANY SPECIAL ACT SCHOOL DISTRICT OR APPROVED SPECIAL EDUCATION PROVIDER SEEKING SHORT-TERM FINANCING FOR OPERATIONS, PENDINGEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD05308-02-2 S. 1582--A 2
TUITION PAYMENTS AS AUTHORIZED UNDER SECTION FORTY-FOUR HUNDRED FIVE OF THE EDUCATION LAW. THE COMPTROLLER MAY PROVIDE SUCH A LOAN TO A SPECIAL ACT SCHOOL DISTRICT OR APPROVED SPECIAL EDUCATION PROVIDER UPON RECEIPT OF A WRITTEN AGREEMENT BETWEEN THE SCHOOL DISTRICT OR PROVIDER AND THE STATE EDUCATION DEPARTMENT OUTLINING THE NEED FOR SUCH LOAN AND THE ANTICIPATED TUITION PAYMENT OR TUITION RECONCILIATION THAT WILL PROVIDE REASONABLE ASSURANCES OF REPAYMENT THAT IS SATISFACTORY TO THE COMP- TROLLER. SUCH LOAN SHALL NOT BEAR INTEREST AND REPAYMENT OF SUCH LOAN MAY BE MADE UPON RECEIPT OF TUITION PAYMENTS AND RECONCILIATIONS, PURSU- ANT TO THE WRITTEN AGREEMENT. 2. THE COMPTROLLER SHALL PROMULGATE RULES AND REGULATIONS WITHIN NINE- TY DAYS OF THE EFFECTIVE DATE OF THIS SECTION FOR THE OPERATION OF THE SPECIAL EDUCATION SHORT-TERM REVOLVING LOAN FUND WHICH SHALL INCLUDE, BUT NOT BE LIMITED TO, THE CRITERIA TO BE USED IN DETERMINING SCHOOLS AND SCHOOL DISTRICTS ELIGIBLE FOR ASSISTANCE; A PROCEDURE AND ANY NECES- SARY INFORMATION THAT SCHOOLS AND SCHOOL DISTRICTS NEED TO SUBMIT APPLI- CATIONS FOR A LOAN FROM THIS FUND; A SCHEDULE FOR REVIEWING SUCH APPLI- CATIONS, NOT TO EXCEED THIRTY DAYS, AND NOTIFICATION TO AN APPLICANT OF APPROVAL OR DISAPPROVAL OF SUCH APPLICATION FOR INTERIM FUNDING; AND ANY OTHER REQUIREMENTS DEEMED NECESSARY BY THE COMPTROLLER. S 3. This act shall take effect immediately.