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Budget Info
Summer 01 (v5#1)

City Council Fails to Shield NYC From Mayor's Biggest Blows to Education
2002 Adopted Budget Jeopardizes NYC Schools and Threatens Future State Funding

By Autumn Barbosa

Mayor Giuliani’s Executive Budget contained a $494 million tax cut and some of the worst education budget proposals that New York City has seen since the 1995-96 school year. The New York City Council rejected his privatization efforts but was eager to deliver a half billion dollar tax cut. The result is an Adopted Expense Budget for 2002 that contains the mayor’s most harmful proposals.

In order to "balance" next year’s budget, the city underfunded the Board of Education’s base budget by $120 million and shifted $182.5 million of the city’s fiscal responsibility to the state.

This is the time for the city to show the state that the NYC is willing and ready to invest in education. Following the favorable CFE decision in January, (see p. 8 to read about the governor’s appeal), NYC should be stepping up to the plate. Does the mayor really think that Albany legislators are going to willingly increase funding to city schools when NYC is not even maintaining its financial contribution to its own students?

Last year, there was no press coverage when the mayor removed $88 million from the public school system. This year, in an unusual move, the members of the Board of Education (BOE) released a written statement denouncing this year’s Executive Budget proposals: "We are very concerned that the Executive Budget does not adequately provide for our school system. The Board believes the school system is underfunded at both the State and City levels, and that without additional resources the school system will not be able to provide services to our children," the statement reads. Chancellor Harold Levy voiced his opposition to this budget on numerous occasions along with other prominent city officials.

Because the City Council did not stand up to the mayor’s worst proposals, parents, teachers, students, and advocates can only hope that the New York State Assembly and Senate will refuse to approve the tax cuts. Perhaps then, the money will be reallocated and New York City will adequately fund its schools in 2002.

Blow #1: Split-Fund Collective Bargaining

The City Council agreed to the mayor’s unprecedented move to split the cost of future collective bargaining agreements between the state and city. Collective bargaining has always been a city obligation, as teachers are city employees. The Adopted Budget makes the state responsible for 40 percent of the cost of future bargaining and shrinks the city’s responsibility to funding only 60 percent.

The United Federation of Teachers still does not have a contract. This budget shifts $182.5 million of city funding to the state for future wage increases in fiscal year 2002, but there is no way of knowing how large this number will be. It is difficult to calculate the impact of how much future collective bargaining agreements will cost, because the city typically provides a phony figure in order to prevent unions from knowing how much it is willing to spend.

During the past few years, increases in state aid to NYC have been concentrated in categorical funding increases for initiatives such as class size reduction, universal pre-kindergarten, and minor maintenance for school facilities, due to the 1997 LADDER legislation. EPP and other activist organizations have stressed the importance of proven educational reforms like reducing class sizes in the early grades, a program that benefits all children but provides the largest gains to the most high-needs students. Because the majority of New York City’s increases in state aid has been in categorical aid, targeted aid that must be spent on specific initiatives, it is not clear how the Board could fund future bargaining contracts.

Split-funding collective bargaining is a no win situation for public school students. It will pit educational activists and labor unions against each other as they fight for the same increases in state funding each year. Supplanting city obligation with state funds and not maintaining the city’s responsibility in funding its own schools are reasons that justify upstate legislators’ reluctance to increase state funding to the large urban school districts.

In trying to evade the city’s responsibility, the mayor and the City Council are jeopardizing NYC students’ chance to benefit from state funded programs. The NYC BOE estimates that over the next four years $1 billion of state aid that would have gone to new programs will go to supplanting city funds for collective bargaining.

Blow #2: Removal of Pay-As-You-Go Funds for Facilities from the Operating Budget

EPP agrees that new construction and major repairs should generally be financed through the capital budget. However, the Board of Education had set aside part of its own operating budget to finance capital projects as a way to quickly create a revolving fund for new construction and repair. In allotting millions of dollars yearly from the operating budget and being reimbursed by state building aid at a rate of 64.7 percent each year, the Board of Education expected to receive almost $500 million in state aid for facilities between the fiscal years of 2001-05. The BOE estimates $500 million to be equivalent to 10 new elementary schools.

This year’s Adopted Budget includes the mayor’s proposal of removing $80 million of pay-as-you-go funding from the Board’s operating budget and placing it in the capital budget. In the capital budget, funds are borrowed to finance major projects. Transferring the pay-as-you-go money drastically reduces the amount of state building aid that New York City will be reimbursed in the next fiscal year. In the capital budget, building aid is provided to the Board on the basis of 30 years of debt and interest payments, which results in a smaller reimbursement each year spread over many years. The Board estimates that it will be reimbursed $42.5 million in building aid over the same five-year period that it expected to be reimbursed almost $500 million.

The situation complicates further when considering that there is a chance that building aid formulas may be changed in Albany this year or in the near future. If that happens, school districts may be ensured past levels of funding, as the new formula will apply only to "new" money. Depending on the outcome of Albany negotiations over building aid, this could mean a loss of hundreds of millions of dollars in state school facilities funding.

Blow # 3: Underfunding the Baseline Budget

At a glance, the Adopted Budget provides a slight increase in funding to the Board, however, after accounting for restrictions in spending, the Board estimates that it has much less in available funding.

The city’s budget provided increases in spending for special education tuition for private schools, leasing, fringe benefits, and transportation. But the city funds other increases for classroom libraries, summer school, various Saturday instructional initiatives, and computer technology without identifying new city funding streams to pay for these programs. Instead, these programs are funded with the money removed last year. In addition, the city neglected to fully account for services that the Board of Education is mandated to fund, such as IEP paraprofessionals, home instruction and related services for special education students.

After the budget was adopted, the NYC BOE Chancellor released a statement stating that the Board of Education budget is still underfunded by $120 million. "At a time when leaders across the country are increasing investments in our schools, this adopted budget asks New York City’s children to make do with less."

According the finance division at the New York City Council, the Board is expected to make up for the budget baseline shortfalls by saving money on administrative costs. If there are still "unmet needs," the Board is expected to report back to the City Council.

The Blow the Council Blocked: Use It for Privatization or Lose It

Most of the headlines covering the city education budget adoption focused on the mayor’s proposal to remove approximately $80 million from units of allocation for instruction and place that money in escrow, forcing the Board of Education to develop a plan for privatizing 12 percent of the Schools Under Registration Review (SURR) budgets before the money would be returned. The Message of the Mayor justified this move, saying "Throughout the country, private management has shown excellent results in improving school performance." EPP has been looking at privatization schemes across the country and has found no evidence of a successful track record in turning around very low-performing schools.

The City Council refused to accept the mayor’s proposal to remove $80 million from the SURR schools for privatization efforts. However, the Adopted Budget does place that $80 million, which was originally unrestricted funding, in an escrow account until a memorandum of understanding (MOU) is signed as to how the funds will be spent. The (MOU) states that SURR schools, low-performing school districts, and low-performing students are prioritized in the allocation of the money directed at programs such as Project Read, Project Science, Project English, In-School Suspension Centers, and for textbooks, supplies, and teacher recruitment.

Schools no longer sit on the SURR list indefinitely. Although there are over 90 schools on the SURR list right now, 99 schools have improved and been removed from the list during the past 10 years.

The NYC Board of Education’s success in removing schools from the SURR list has been a result of dramatically increasing the resources in these schools. If a school is placed in the Chancellor’s district, the Board has increased resources by an average $1 million more per school each year for more staff development, extended time and smaller classes. SURR schools that remain in their community school district also receive additional resources.

This is not the first time the mayor has removed money from the Board of Education’s budget and held it in escrow. Last year, the mayor removed $88 million from the Board’s administrative budget to reduce "head count." To date, according to the Office of Management and Budget, only $44 million has been restored to the Board’s budget.

The Adopted 2002 Budget, if not changed, will not help NYC students. The mayor continues to refuse to invest in public education, especially in those students with the highest needs. The Adopted Budget includes his proposal to allocate $9 million for additional instruction of 38,000 English Language Learners (ELLs) in Saturday classes, a number much below the Chancellor’s $75 million request. There are 160,000 ELLs in NYC, and 90 percent of them live in high-need/low-resource areas.

The mayor’s "miscellaneous fund" was increased to $15.25 million. This fund has been used for voucher related costs in the past, including a field trip for City Council and Board members to look at voucher experiments in Milwaukee and meet with pro-voucher advocates. This year’s Adopted Budget will require a memorandum of understanding stating that this money cannot be spent for voucher purposes. The "miscellaneous fund" will be used for experimentation with school reform including charter schools.

This Adopted Budget is particularly damaging because of the long-term effects that will plague NYC schools after this mayor and most City Council members are out of office. The two proposals that have the potential to create the most harmful and lasting effects are:

• the reneging on the city’s responsibility in funding collective bargaining, and
  
  
• removing the pay-as-you-go funding from the operating budget and impacting the city’s ability to obtain building aid if aid formulas are altered in Albany.

The City Council had the power to reverse the Executive Budget, but the Council has no power to set revenues, and they also wanted to deliver tax cuts to New Yorkers. The City Council made questionable choices in negotiating this budget. We can only hope that the New York State Assembly and Senate refuse to approve the Adopted Budget’s tax cuts until the city finds another way to balance the budget without reducing the city’s contribution to public education.

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