The Rockefeller Institute of Government is proposing several changes to the way state aid to schools is distributed.

Perhaps most controversially is the institute’s suggestion to change what is known as hold harmless aid. The stipulation in the existing Foundation Aid formula guarantees school districts will receive a minimum increase of $500 per pupil in Foundation Aid, with schools given the option to choose that level of funding if other options under the Foundation Aid formula would generate less state aid.

Gov. Kathy Hochul wanted to cut the hold harmless aid as part of her 2024-25 budget, though her $167.9 million cut was opposed by state legislators and eventually removed from the state budget. Her cuts would have primarily hit rural school districts, especially those that have seen the most severe enrollment decreases over the years.

Rockefeller Institute officials found that many of the districts that receive hold harmless state aid are also educating fewer students than they did 10 years ago while also adding money to their reserve funds. Nearly one-fifth of the state’s hold harmless funding goes to low-needs districts, and $136 million in hold harmless payments goes to districts that have unrestricted year-end fund balances greater than the 4% allowed, including $59 million paid to districts that have year-end fund balances greater than 10%. Another 73 districts that currently receive a total of $89 million in hold harmless aid have year end reserve funds greater than 4% and a 10-year drop in enrollment of 15% or greater.

Hold harmless aid is helping prop up school districts that otherwise may not be able to afford to exist. The Rockefeller Institute proposes requiring schools that retain more than 10% of their budget as a year-end fund balance be required to apply the excess local money to offset any hold harmless allocations, while districts with a 10-year reduction in student enrollment of 15% or more and year-end surpluses of more than 4% to apply the extra money as an offset against hold harmless payments. Basically, if schools are raising local taxes to boost their reserves they should use that local tax money instead of state aid. Doing so may create more incentives to merge school districts.

The hold harmless provision won’t be popular – but it is necessary. We pay a lot of lip service to population loss, but don’t want to put our backs behind the hard work necessary to deal with the problem. Last year’s fight over hold harmless aid is just more proof of that. Do we have the will to right-size education in New York state? What happens with the Rockefeller Institute’s hold harmless aid proposal will answer that question.