Federal pandemic relief is ending; provided valuable assistance replacing lost public revenues

It is time for some financial reality. For governments and organizations that have gotten by during the past two years with a large amount of one-time federal money the day of reckoning is arriving.

Among the federal funding included in the 2020 SECURE legislation and the 2021 American Rescue Plan was cash for states, local governments, colleges, and schools. Public reporting about the use of those funds indicates that much of that money has been spent or is being scheduled in 2022 for long-needed public works projects to repair water and sewer lines, streets and bridges, sidewalks, broadband internet, and other necessities that are often deferred.

The laws, however, also permitted the use of the funds to make up revenue deficits that occurred during the height of the pandemic, particularly during the spring and summer of 2020. The Town of Amherst borrowed $5 million to close its 2020 budget. West Seneca borrowed $600,000 for the same purpose and will repay that note in 2022.

The City of Buffalo used the federal money to pay off a $25 million bond for the deficit that occurred in 2019-2020 fiscal year; a portion of that deficit occurred prior to the arrival of the pandemic. The city’s State and Local Fiscal Recovery Funds 2021 Report, issued this past August, indicates that $70 million was used for revenue replacement concerning the 2019-2020 and 2020-2021 fiscal years with $30 million set aside for the same purpose in 2021-2022.

SUNY Erie, like many other colleges, experienced a significant drop in enrollment, which directly led to a significant drop in tuition and fee payments and state aid, which is tied to a community college’s enrollment. Community colleges throughout New York State were all hit hard. The federal money covered a big financial hole in the 2020-2021 year and has been used to maintain operations in the current 2021-2022 FY.

The question now for governments and community colleges that used the 2020 SECURE federal money and 2021 Rescue funds for budget balancing:  what comes next? In some cases, growing sales taxes and other revenues will make up the difference. But in some other cases, how do you fill a budget hole created by the lack of federal funding in 2022-2023? There are no good and simple answers.

The City of Buffalo

The City of Buffalo over the past several years has made its financial situation worse by depleting its unobligated reserves. While a $39 million rainy day break-glass-in-case-of-emergency reserve is still available, the Byron Brown administration and the City Council have repeatedly overestimated certain revenues involving fees and city assets. Those nebulous revenues did not balance budgets. Other governments made cuts in spending to let revenues match expenses. Not Buffalo.

The city needs to get serious about matching operating revenues to operating expenses while simultaneously rebuilding its cash reserves. City financial documents suggest that increased revenues will come from new revenue streams including “marijuana sales tax, opioid settlement money, and higher than previously anticipated sales tax revenues as pent-up economic activity associated with travel, tourism, and large item purchases are released during the recovery.”  The wish list has a familiar ring to it. Past budget messages were equally vague and, as it turned out, overly optimistic. Keep in mind that the administration and Council are averse to any budget cutting, so filling the budget gap that the end of federal relief funding creates is not a simple proposition.

The question of how the city would deal with the impending budget gap was never discussed during the 2021 mayoral election.

SUNY Erie

SUNY Erie has appointed a new president, Dr. David Balkin, following the interim service of William Reuter. The new leadership and the college’s Board of Trustees have a huge challenge in front of them.

The Erie County Fiscal Stability Authority (ECFSA) in October released its annual review of the college’s finances. They reported that “[t]he Erie Community College of today is not equipped to meet the needs of the students and community of tomorrow under its current structure and financing.”

The ECFSA noted:

  • Over the past ten years credit hour enrollment is down 45 percent.
  • Full-time equivalent (FTE) enrollment was up slightly in the current year compared to 2020-2021 but down nearly 11 percent compared to 2019-2020.
  • County government increased its contribution to the school by $1 million.
  • The undesignated fund balance is far below the targeted amount set by Board policy, with the ability to rebuild the fund limited.
  • The college received $11.47 million in federal relief funds in 2020-2021 and has budgeted an additional $12.6 million in one-time federal money in 2021-2022.
  • The college has done a good job of reducing spending; it is down $7.5 million over the past three years.

The ECFSA suggests that “ECC is facing a long-standing, long-term enrollment problem that cannot be addressed solely or primarily through cost cutting. Federal COVID dollars, a retraction in NYS cuts and additional county support have given the College some time to reconfigure its education and business model, but change is necessary.”

Discussion about that need for change centers around the issue of reducing the college’s facilities. Ongoing state aid is tied by formula to enrollment and contributions from the county will not be able to match the shortfalls left as the federal funding concludes. Efforts will be made to increase enrollment and there are plans for some small increases in tuition over the next three years, but the focus will need be on the school’s continued operation of the southtowns campus.

Like it or not, the future of that campus, aside from the College’s overall funding dilemma, appears likely to also be tied to the possibility that a new football stadium may be constructed on county land currently used for Highmark Stadium parking that is immediately adjacent to the campus. Perhaps discussions about peripheral development near the stadium could involve the campus facilities if stadium construction proceeds.

As previously noted, SUNY Erie’s enrollment and financial difficulties are hardly unique to community colleges in New York State and throughout the nation. The other community colleges in Western New York have similar issues.

It is said that “you never let a serious crisis go to waste.”  SUNY Erie and other community colleges in Western New York are in a crisis mode. That should serve as an opportunity to do things that have never been seriously planned or acted upon. It is time to move on to better arrangements for these institutions of higher education that play a key role in the future of the region.

Some facts, observations and heard-on-the-streets

It is good to see most Western New Yorkers doing their part to flatten the COVID-19 curve with social distancing, staying close to home and generally taking proper care to help reduce the spread of the virus. There is plenty of good neighboring going on that hopefully will bring better times a little closer.

The personal tragedies of severe illness and death are difficult to bear, as is the uncertainty of it all. Most everyone will come to personally know someone who has been affected directly or through quarantine. Continue reading