02/18/2011 12:24 pm ET Updated May 25, 2011

City Penalizes Principals Who Save Money For The Following Year

With big cuts in education funding expected next year, many principals have tucked away rainy day funds.

Under a new city policy, principals who save money from this year, to help cover next year's budget gaps, will be punished.

The policy states that any money left over from this year's budget will be taxed 50 percent by the city's education department. In other words, if the school saved $50,000 to spend next year, $25,000 would be taken away in taxes.

Principals have until March 4 to spend the money they've saved, or have half of it grabbed by the education department.

As the New York Times points out, that means principals looking to save money to prevent layoffs next year may rather opt to get rid of the money and buy say, new laptops this year, to avoid the penalty.

"We will wind up making purchases frivolously rather than intelligently," said Sari Latto, the principal of P.S. 41 in Bayside, Queens. "I know the department is in dire straits right now, but I don't understand the rationale behind taking away money from those schools that were prudent."

From the New York Times:

City officials said that they wanted to allow principals to roll over funds, as they have in past years, but that the situation made it impossible. "This year, considering the current budget climate, this program is not a prudent option," said Barbara Morgan, a schools spokeswoman.

Yesterday, Mayor Bloomberg announced that, under his proposed budget, the city would have to cut thousands of teachers through layoffs and attrition.

The education department could decide to put the money it collects from principals into a general fund to help offset budget cuts.

That's unlikely to satisfy principals like Ed Tom at the Bronx Center for Science and Mathematics who has saved $250,000 for a year's after-school program.

"I am in shock," Tom said. "This money rightfully belongs to the school community."