Fear Wall Street Woe Will Cause Downward Trickle in School Aid

Worry is mounting that some of the private-sector organizations that traditionally donate money to the public school system will soon be tapped out as funding sources after the financial meltdown on Wall Street.

With Mayor Bloomberg proposing big cuts to the education budget for the next two years, donations from corporations and banks could be an increasingly essential source of cash for the city's schools. Many of the city's biggest financial institutions are major donors, with Goldman Sachs giving $1.5 million last year, Morgan Stanley more than $1 million, Lehman Brothers more than $500,000, and AIG and Merrill Lynch giving tens of thousands of dollars each.

Now They Need Help

But the Wall Street crash has decimated many of these organizations. AIG was bailed out by the Federal Government, Lehman Brothers declared bankruptcy, Goldman Sachs and Morgan Stanley are to become bank holding companies rather than investment banks, and Merrill Lynch has been bought out by Bank of America.

The Fund for Public Schools, a Department of Education nonprofit that spearheads fundraising for the school system, could not yet predict if fundraising would be affected by the changes on Wall Street. Last year $44 million was raised by the fund for various projects.

"We don't really know what's going to happen at this point," said Maibe Gonzalez Fuentes, a spokesperson at the DOE. "The level of funding at this point in the year is where it's supposed to be, so it hasn't been affected by the financial crisis."

She added that the DOE was "certainly hoping that our donors continue supporting public schools. The Fund for Public Schools has been very successful, and they have a great relationship with donors."

The DOE took another hit on Oct. 2 when the State Education Department did not approve the city's funding plan under the Contracts for Excellence program, saying that the DOE had not reduced class sizes as much as promised and needed to refocus its efforts before the plan would be approved.

The Contracts for Excellence addresses school districts in need of progress that get increased state funding, but need to show marked improvement in specific areas. The SED asked for evidence of how the DOE used its additional funds to address school overcrowding on Sept. 15, but has not re-negotiating a new Contract for Excellence for the 2008-2009 school year for the City district.

This stall in funding also occurred a year ago, when the Contract was not negotiated with the DOE until November because the SED was dissatisfied with the DOE's plan.