Another school year is over … that’s crazy, it felt like the year just started!
This has been a super eventful year for special education providers with so much happening:
1.) The year ended June 30, 2023 marked the first year that providers are allowed to retain surplus funds, with providers permitted to retain 11% for 2022/23, 2023/24, and 2024/25, 8% for 2025/26, 5% for 2026/27, and 2% per year thereafter. SED clarified that these amounts are not cumulative, they are earned each year and can be carried back or forward. If you carry these funds back, they can be used to offset years where your organization experienced overspending of allowable costs. Surplus funds cannot fund non-allowable costs, including non-direct care screens. SED has not put a limitation on how far back these funds can be carried. This is a major benefit for programs that have experienced losses in the past. Your audited financial statements should contain a footnote that shows how any surplus funds are being utilized each year and the surplus may only be expended pursuant to an authorization of the governing Board of the school for a purpose in accordance with Section 200.9 of the Commissioner’s Regulations and the RCM.
2.) We are hearing that there is a bill kicking around the NYS legislature (Bill # S9107A) that would allow investment income earned on the reserve funds to not be treated as offsetting revenue in the year earned, but instead be used for supplemental spending within the programs where the reserve funds are being held. We will keep you abreast if this bill becomes law.
3.) SED provided guidance as to how PPP and other CARES Act funding should be reflected in the CFR. Providers will need to amend their CFR’s to reflect the PPP offsetting revenue in the year that the salaries and other expenses that gave rise to the funding are reflected. For most providers this will impact their 2020, 2021, and 2022 filed CFR’s. It will not impact prospective rates, it will only potentially impact the three rate years, potentially resulting in funds due back to the counties (4410) or school district (853).
4.) The 2024/25 methodology letters (preschool and school age) have been posted on the SED website (NYSED::Rate Setting Unit:Methodology Letters). The methodology letters include a 4.3% rate increase (this is for tuition rates, 1:1 aides, and SEIT services); interim plus plus (interim rates include two years of rate increases as opposed to just one year as it has in the past); “higher of” reform, whereby the 2024/25 prospective rates will be calculated as the greater of the 2022/23 reconciled rate trended forward or 20223/24 prospective rate trended forward; and a 5% increase to evaluation rates (first increase in years). All other provisions are consistent with the 2023/24 methodology letter, including the non-direct care screen level of 35%.
5.) The 2024/25 RCM has been released. The most significant changes as outlined in SED’s crosswalk are as follows:
a.) Allocation of non-direct care compensation for staff with a PTC in the 100 and 600 series to direct care titles is not allowable; however, compensation for staff in the 500 position title code series may be allocated among various direct care job titles, based on the duties performed, if the staff meet the applicable qualifications for the direct care job title for which they are allocated (e.g., a program director that provides IEP or curriculum coordinator services).
b.) Direct care student to staff ratios shall not exceed the approved staffing levels supported by the school’s approval letter. Any net excess of staff are not allowable costs. The new RCM clarifies that substitute position title codes for Teachers (PTC 224), Teacher – Coverage/Floating (PTC 227) and Teacher Aides/Assistants (PTC 230) are excluded from the calculation. Such additional staff may be deemed reimbursable in the prospective rate upon amendment of the provider’s program approval letter and demonstration to the satisfaction of the Commissioner that such costs were necessary.
c.) While salary paid to staff for lunch is not reimbursable, in accordance with a providers employment agreements or collective bargaining agreements and labor law, 15-minute breaks are reimbursable.
d.) The RCM has added reimbursement for longevity payments to staff. Longevity payments must be made pursuant to a contract or policy which clearly outlines the terms of the organization’s longevity policy, which the requirements for receiving the longevity payments, the criteria to determine eligibility and amount of the award, the timing of the payment, and forfeiture provisions. Longevity payments are available to all staff other than 600 level staff and must be paid out within 2 ½ months after the end of the year.
6.) With the increase in regional need and new classrooms opening, there has been an uptick in waiver requests. DOB continues to modify their approach to waiver requests, so a waiver that was acceptable a year ago may no longer be acceptable. The waiver process is taking longer than it has in the past as RSU is trying to make sure that they cross every “t” and dot every “i” before they remit a waiver. We have found that it is important to establish open communication with your line accountant to ensure they have everything to help make the process as successful as possible.
7.) On the EI front:
a.) A 5% increase for in person services has been approved. This will be effective for services delivered on or after 4/1/2024, but it will probably take 3 to 6 months before you actually see the cash flow from these increases.
b.) A 4% rural/underserved increase is effective 4/1/2025, however at this point we are not sure what areas fit into this modifier. Indications are that it may be zip code based.
c.) There is still discussion regarding the administrative proposals, but it seems that DOB may be open to discussion regarding these. To summarize them again, 1) reduce the maximum size of developmental groups to six; 2) prohibit multiple extended ABA visits in the same day; and 3) reduce the rate of telehealth visits to match the facility-based visit rate. As of now, we are unsure as to when these provisions will go into effect.
d.) The exemption allowing school psychologists to continue to work in EI will expire 4/1/2025. There is separate legislation being considered for new licensure of school psychologists that could potentially resolve this issue.
e.) The Legislature approved a bill (Bill #A1078/S1198) requiring the Commissioner to conduct a comprehensive study and review of the EI program service models and rates for reimbursement. The Bill is awaiting the Governor’s decision.
f.) The NYS DOH Bureau of Early intervention has pushed off the launch date for the EI-Hub to October 15, 2024.
On a separate front, there have also been several new regulations with respect to labor related issues:
1.) Minimum wage increased to $16 per hour effective January 1, 2024 in NYC, LI and Westchester ($15 rest of state) with increases of 50 cents per hour for 2025 and 2026, and cost of living adjustments thereafter.
2.) Unemployment Recession and Readiness Act (1/1/25). This law modernizes the unemployment system after the significant issues encountered during the COVID Pandemic to enhances benefits. From what we are hearing, this could mean as much as 131% increase in unemployment rates. The regulations provide longer periods of unemployment coverage (based upon level of unemployment within the state) and covers 75% of salary instead of 50%. Self-funded nonprofits may want to analyze whether it makes sense to stay self-funded.
3.) The threshold for an employee to be considered exempt is on the rise:
a.) New York City and the rest of “downstate” (Nassau, Suffolk, and Westchester counties):
i.) $1,200 per week ($62,400 per year) on Jan. 1, 2024.
ii.) $1,237.50 per week ($64,350 per year) on Jan. 1, 2025.
iii.) $1,275 per week ($66,300 per year) on Jan. 1, 2026.
b.) The rest of New York State (areas outside of New York City and Nassau, Suffolk and Westchester counties):
i.) $1,124.20 per week ($58,458.40 per year) on Jan. 1, 2024.
ii.) $1,161.65 per week ($60,405.80 per year) on Jan. 1, 2025.
iii.) $1,199.10 per week ($62,353.20 per year) on Jan. 1, 2026.
We know a lot of this can be confusing. Please feel free to reach out with any questions you may have.
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.
