Education and Social Services Funding at Risk if Federal Aid to State Declines
About 17% of the city’s total revenue for Fiscal Year (FY) 2027, totaling over $21 billion, comes from state aid, including substantial categorical grant funding for essential programs for children, families and vulnerable residents, according to a new report from State Comptroller Thomas P. DiNapoli. Major education and social service programs in New York City could be in jeopardy if federal funding cuts to the state occur.
“New York City depends on state grants to help pay for a multitude of essential programs, including Universal Pre-K, school construction, child welfare services, and other services,” DiNapoli said. “Many of these programs, which serve a broad spectrum of city residents and in particular children, could be at risk if the federal government cuts funding to the state. If that happens, the state and city will face tough choices to maintain core safety net services and preserve vital programs.”
The more than $21 billion in state aid to the city in FY 2027 includes $20.8 billion in categorical aid and $650 million in unrestricted aid. In recent years, over three-quarters of state categorical aid was consistently concentrated in the following programs, reflecting the largest and most critical components of state aid to New York City.
Foundation Aid is the state’s primary public school funding formula. New York City will receive nearly $11 billion in FY 2027, nearly double what it first received in FY 2008. Much of the money is distributed directly to schools through the Fair Student Funding formula to fund recurring costs, such as teacher salaries.
School Building Aid is the second-largest state aid allocation to New York City. These funds have nearly tripled in the past 20 years, growing from $674 million in FY 2008 to $1.8 billion in FY 2027. It is expected to cover 44.6% of the Department of Education’s debt service costs. The city’s 2025-29 capital plan funds construction of school seats for more than 26,000 students and continues efforts to eliminate remaining temporary classroom units.
The $1.1 billion the state is expected to provide to support Pre-K in New York City is the third-largest funding stream the city receives annually from the state, serving approximately 67,000 children every year.
New York State reimburses the city for a significant amount of the costs of transporting students to and from school. The city’s Transportation Aid allocation has grown significantly in recent years, and will reach $880 million for FY 2027. This helps pay for private bus contractors, the city’s own small bus fleet and student transit passes.
Family Services Safety Net Assistance:
The Safety Net Assistance program is one of New York State’s two public assistance programs, which provide cash and non-cash assistance to state residents, including direct payments made to landlords and vouchers sent to utility companies. The program’s budget is based on enrollment, which grew 2.4% from FY 2025 to FY 2026, reaching an average of 439,000 recipients a month in FY 2026. The city expects to receive roughly $623 million from the state in FY 2027, but that could rise if enrollments exceed the city’s projections.
State Child Welfare Services funding, also known as State Preventive Services, supports interventions that prevent extended foster care placements for at-risk children and provides wraparound services for families before, during, and after a child enters foster care. Up to 62% of eligible city expenditures for child protective, preventive, after care, adoption, and independent living services qualify for state reimbursement. The city expects to receive $478 million from the state for these services in FY 2027.
Charter School Tuition and Lease Aid:
The state provides additional aid for every charter school student, called “Supplemental Basic Tuition.” In the 2024-25 school year, there were 281 charter schools operating in New York City, serving 148,083 students in grades Pre-K through 12. The city must also provide new or expanding charter schools with space in a city school building or fund the rental of equivalent space in private buildings. In New York City, 176 charter schools were eligible for this support in FY 2025, with the state covering 60% of the cost of rental space. DiNapoli’s report estimates that state support for city charter schools will reach at least $347 million in FY 2027 and will likely grow over the course of the fiscal year.
In 2017, New York State passed the Raise the Age legislation, increasing the age of criminal responsibility from 16 years of age to 18. This mandated that youth be transferred from adult facilities to those overseen by the Administration for Children’s Services. The state included $300 million in baseline funding for youth justice services specifically for the city in its State Fiscal Year (SFY) 2027 Enacted Budget. The city must submit a plan to the state Division of Budget for approval, which will determine the final allocation of funds.
High Cost Aid, also known as Public Excess Cost, is for public school districts to educate students with disabilities. The City’s allocations have increased slowly over time, but have not varied much over the past decade. In FY 2027, the state allocated $263 million in High-Cost Aid to New York City, making this the city’s ninth-largest stream of state aid.
Medical Assistance Adminstration:
New York State requires localities to provide funds toward the non-federal share of Medicaid funding and provides these localities with support for administration. As of May 2026, more than 3.6 million city residents were enrolled in Medicaid, with 1.4 million enrollments administered by the city. The city expects $251 million in state support for Medicaid administration services in FY 2027.
Child Care Block Grants (CCBG) distribute federal Child Care Development funds; however, as federal funding has waned, the state has taken on an expanded role in ensuring local child service programs remain funded. Total CCBG funding allocated to the city has grown dramatically from $472 million in FY 2012 to $1.37 billion in FY 2026. The enacted SFY 2027 budget adds more than $940 million in baselined state child care funding, bringing total state support to $2.4 billion for FY 2027 and maximum funding from all sources to about $3.1 billion. The city’s Administration for Children’s Services reported average child care voucher enrollment reached 109,967 through the first 11 months of FY 2026.
Report:
Related Reports:
Review of the Financial Plan of the City of New York, June 2026
State Comptroller DiNapoli Remarks to the New York City Financial Control Board
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