Last month, Mayor Eric Adams released proposed modifications to the City’s current (Fiscal Year 2024) budget and the financial plan for the following three years. While the plan recognized $670 million in new City revenue for this year, that was more than offset by $1.7 billion in new expenses, particularly for services to migrant families. Already-large budget gaps in the out-years widened, too.

In response, the mayor proposed budget cuts, known in time-honored fashion in and around City Hall as the Program to Eliminate the Gap (PEG). While large, they will not alone close the gaps in the coming years. Significant additional PEGs are expected with the release of the preliminary FY 2025 budget (in January) and Executive budget (later next spring).

The cuts fall heavily on the Department of Education (DOE). Its PEG program amounts to $547 million this fiscal year and over $600 million in each of the out-years. While relying greatly on a hiring freeze and other reductions in personnel spending there are also significant programmatic cuts, particularly affecting early education initiatives.

(Nor are PEGs the only clouds on the school funding horizon. As we’ve previously reported, the City faces a mandate to reduce class sizes by the start of the 2027-28 school year. That will require hiring thousands of new teachers. The updated financial plan does not identify any of the funding required to do that.)

There’s also a more immediate looming shortfall – known in budgetary argot as a “fiscal cliff” – in what's needed to maintain current service levels in some popular programs created or expanded using generous amounts of Federal Covid relief funds. Availability of some of those funds expired as this school year was getting underway and the rest will be unavailable beginning next school year.

To understand the cumulative effects and interrelationship of the PEG and the cliff, a little background is in order.

During the pandemic, two rounds of Federal relief funding provided the DOE with $7.0 billion in temporary assistance: the 2020 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) which brought the City $2.2 billion in emergency funds for education; and the 2021 American Rescue Plan (ARP), which brought the DOE an additional $4.8 billion.

While coming with few strings attached, the intended uses were clear: helping cover the extraordinary needs of schools implementing remote learning; readying schools for reopening in the fall of 2020; providing emotional and mental health support for students, families, and staff as they dealt with the disruptions and losses caused by Covid; and replacing revenue lost to the pandemic-induced recession. The ARP also included a requirement that 20 percent of the money be spent on working with students to overcome learning loss that resulted from the educational disruptions of 2020 and 2021.

Both pieces of legislation included cutoff dates, specifying when money could no longer be accessed by state and local governments. For CRRSA, it was September 30, 2023, and for ARP it’s September 30, 2024. Congress clearly intended that this level of assistance would not continue indefinitely.

New York City did indeed spend most of these funds on temporary programs that will have wrapped up by the start of the next school year. But the administration of Adams’s predecessor, Mayor Bill de Blasio, also used a portion to create or expand other programs that are assumed to remain in place, although no substitute for the expiring Federal assistance has been identified. The budget the City adopted in June for Fiscal Year 2024 included $776 million in such DOE spending using Federal funds that will not be available next year.

Keeping these programs running at current levels in Fiscal Year 2025 (starting next July 1st) will require City Hall to fill the funding gap with new City revenue or increased State school aid, or by reallocating dollars from elsewhere in the budget. Another option is to scale them back or eliminate them entirely.

Some of the major programs we’re talking about are listed in the table below. None received allocation of offsetting City funding in the 2025 to 2027 financial plan; several will lose City funding in the November Modification. The amount shown for each program is the Federal funding used in FY 2024 that will need to be replaced in 2025 – assuming the program is maintained at the 2024 service level.

For example, one of the largest commitments of Federal funds went for a new “Summer Rising” program mixing academic, recreational, and other programming for students up to the 8th grade during the summer months. Backed with Federal funding of $176 million annually, it served roughly 100,000 kids during each of the last two summers. Nevertheless, Mayor Adams’s November budget would cut $20 million in City funds from the budget of DOE’s partner in the program, the Department of Youth and Community Development.

The City has also been using $92 million of temporary Federal funding to continue partial expansion of the 3-K early childhood education program. The de Blasio administration had initially planned to use $568 million of Federal funding to phase in universal citywide 3-K access. In November 2022, however, the Adams administration reallocated those funds to other uses. This year’s November mod includes a new cut of $120 million from planned spending for early childhood programs, both Pre-K (for four-year-olds) and 3-K.

The administration argues that the Summer Rising and early childhood cuts are manageable thanks to more efficient operations, and that with better alignment of supply with demand the programs can operate with less funding. Still, cutting City funds from programs that already face an imminent loss of Federal support will likely make it harder to maintain current service levels.

Other programs faced with a loss of Federal funds include: making pre-K special education services available citywide; expanding restorative justice services; increasing community schools funding (which also lost $10 million in the November Modification); and enlarging bilingual services. Federal funds were also used to restore earlier cuts to arts instruction and to the de Blasio administration’s “Equity and Excellence” program designed to increase on-time graduation and improve college-readiness among secondary school students.

The combination of last month’s cuts, a future two rounds of cuts in early 2024, and the uncertain fate of programs perched on a fiscal cliff (all at a time of modest revenue growth for the City) portends contentious education budget fights in 2024 and beyond.

George Sweeting is a Senior Fellow at the Center for New York City Affairs at The New School. For more than two decades, he managed research, analysis, and economic forecasts at New York City’s Independent Budget Office, ending his tenure earlier this year as IBO’s acting director.

Photo by: InsideSchools

Caught Between a PEG and a Cliff, How Much Will Education Programs Shrink?