The New York Times reported yesterday that Governor Paterson is "withholding" some school aid payments. The Newburgh School District can probably weather the immediate effect of this because the utility tax will bring in some income, the general fund has a surplus "fund balance", and the surplus can be spent as the Board wishes because the budget passed. It's unclear what the long term effect of this withholding of aid will be. If the state eventually makes the payments, the current step seems like grandstanding. If this ends up being an true permanent reduction in aid, the effect will be to substantially reduce the Newburgh School District's ability to cope with next year's budget--where "cope" means "minimize layoffs of teachers".

Paterson Trims Aid to Schools and Localities
By Kareem Fahim
Published: December 13, 2009

Gov. David A. Paterson announced on Sunday that he would unilaterally withhold $750 million in scheduled payments to schools and local governments, saying that strong action was necessary to protect New York State from insolvency.

The reductions of 10 to 19 percent in aid will affect schools and social service providers, health insurance payments, cities and counties. Mr. Paterson said the withheld funds were not "a cut" or an "impoundment" -- perhaps drawing a legal distinction because only the Legislature is empowered to make permanent budget cuts.

Some lawmakers called the move illegal, but the governor said "we are well within the bounds of legal authority."

The governor did not indicate when he would restore the funds, except to say, "as sufficient revenues become available."
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The EdVANTAGE Blog covers this issue well