Ah, the irony (corrected)

The Medicaid reimbursement for schools is falling for FY11 by approximately $3.1 million, as the state government moves from a "bundled" to a "fee for service" plan.
So, do the schools get hit with an additional loss for next year?

No.

The city does.
(see page 3, as, annoyingly, the hyperlink goes only the front page)

Since the city keeps the bulk of the Medicaid reimbursement (as you've heard many times from, particularly, Jack Foley and Brian Allen), the city, not the schools, were planning on this money.
And so it's the city, not the schools, that will take the hit on this.