BILL NUMBER: S8845
SPONSOR: MARTINEZ
 
TITLE OF BILL:
An act to amend the education law, in relation to prior year state aid
adjustments
 
SUMMARY OF PROVISIONS:
Section 1 amends subdivision 5 of section 3604 of the education law to
require that any prior year adjustment in State aid owed to a school
district be paid in full as part of the first State aid payment made in
the following school year. The bill eliminates the current practice of
placing such payments in a queue subject to an annual appropriation. It
provides that the State shall annually appropriate funds to pay school
districts in the queue.
Section 2 establishes the effective date.
 
JUSTIFICATION:
Under current law, when a school district receives more State aid than
it is entitled to, the State recovers those funds by reducing the
district's next State aid payment. The recovered funds are then deposit-
ed directly into the State's general fund. However, when a school
district is underpaid and owed aid due to a prior year adjustment, the
repayment process is significantly more burdensome and unpredictable.
Currently, the State Education Department maintains a queue for prior
year claims, which are paid on a first-come, first-served basis and only
when an appropriation is included in the enacted State budget. This
queue now totals about $309 million as of April 2025, with unpaid claims
dating as far back as February 2012. There has been no appropriation to
pay these claims since the 2020-21 State Fiscal Year, effectively paus-
ing aid payments owed to school districts for more than four years.
This imbalance in how the State treats overpayments versus underpayments
has created an unjust and unpredictable fiscal environment for school
districts. While the State continues to recover overpaid aid with imme-
diacy, it has failed to uphold its financial commitments to districts
that were underpaid-placing strain on district budgets, complicating
financial planning, and potentially damaging the quality of education
for students.
This bill would address the imbalance by requiring that any aid owed to
a school district from a prior year adjustment be paid as part of the
first aid payment of the following school year. This change would allow
districts to accurately budget, plan, and meet the needs of their
students with greater financial certainty. The State must treat its
school. districts equitably, ensuring that repayments are timely, trans-
parent, and consistent.
 
PRIOR HISTORY:
New bill
 
FISCAL IMPLICATIONS:
This bill would require the State to pay all prior year adjustments to
school districts as part of the first State aid payment of the following
school year, rather than deferring payment through a queue subject to an
appropriation. The State would be required to annually appropriate funds
to make payments to school districts in the queue.
 
EFFECTIVE DATE:
This act shall take effect immediately and shall apply to school years
commencing on and after July 1, 2026.