CITY BUDGET INFO

EPP ALERTS
2004

Various Budget Problems Affecting Schools

It is evident from questions that the Educational Priorities Panel received over the last couple of days as well as from statements made at the August 23,2004 meeting of the Panel for Educational Policy that various budget problems affecting schools are being lumped together in a murky stew. Math anxiety is running rampant.

Here is an attempt to tease out and simplify the various issues, though they are interrelated. The bottom line is that many school principals are complaining that they have fewer funds to work with in the 2004-05 school year than last year. They are correct.

Problem #1 Less Funding for Instruction EPP compared all the allocations for instruction (both general education and special education) in the budget adopted in June 2003 (for the 2003-04 school year) to the budget adopted in June 2004 (for the 2004-05 school year). We found that even though the Department of Education’s net budget had increased by $569.5 million from June 2003 to June 2004, there was a net decrease of $80.4 million in funding for all instructional functions.

Q: Other estimates are a $60 million or $65 million decrease in instructional funding. Why does EPP have a different estimate?
A: A budget is a moving target. The Department of Education’s budget is modified as the year progresses. EPP’s comparison of allocations for instruction are based on adopted budgets. Others are based on a comparison of the modified budget to the adopted budget or are citing specific reasons why there is less funding this year for instruction.

Q: Why does this type of comparison of instructional allocations matter?
A: EPP, since its formation, has always held to the belief that the maximum of amount of dollars available to the school system should be directed to instruction and services for children. When there is an increase of more than half a billion dollars to the school system, instructional allocations should not decrease by $80 million. Yes, there were increases in health insurance costs, pension contribution costs, and school bus fuel costs (the "trinity" that affected all school districts in the state), but there should be an effort by school and city officials to maintain the instructional program in the schools. In order to maintain these functions at their current levels, there needs to be a slight increase in allocations for instruction. New initiatives mean that funding should increase more than just slightly.

Under the administration of Chancellors Fernandez, Cortines, and Crew, there was a budget policy that even when there were large cuts to the school system or specific budget problems that emerged that affected instruction, the instructional program would be "made whole" by securing savings in other areas of the school system. Under Chancellor Levy, this policy changed. Decreases due to enrollment reductions or shortfalls in state aid were made up by reductions in allocations to instruction. This policy appears to be continuing. EPP’s point of view is that no matter what the source is of any budget shortfall, efficiencies should be found in other parts of the DOE budget so that there is no net decrease in allocations to instruction. This is the "big picture."

Problem #2: School Budgets The UFT, based on a rough survey of schools, estimated that schools are facing as much as $100 million in cuts. Since the DOE has not released any data that would allow an independent year-to-year comparison of school budgets, there is no way to verify the union’s estimate or the DOE’s assertions that one third of the schools will face cuts, one third will have the same funding, and one third will see increased funding. Both assertions could be correct by the way.

The UFT’s $100 million estimate is probably a good hunch about the impact of cuts in the funding for administrative positions in schools. This under funding of school administration is having an indirect impact because potentially these shortfalls may be made up by reducing student instruction and services. It is larger than EPP’s analysis of the overall decrease in instructional funding, because these are primarily the decreased allocations going to fund schools’ administrative positions and other out-of-the-classroom positions. Principals will be faced with the agonizing choice of reducing teaching staff or losing a school secretary or AP.

Q: What’s the main source of the problem?
A: Essentially, fewer funds are available to fund AP’s, school secretaries, librarians, counselors, school aides, and other critical staff, especially for schools with more than 600 students.

Last year, when the school system was completely restructured, funding for schools was no longer allocated by community schools districts but by the central office. A budget for each school was created through a "Corridor Method" that was based on:

A) fixed administrative costs (for principals, school secretaries, etc.),
B) per-pupil allocation to cover all other administrative needs (additional administrators, aides, supplies, etc.)
C) the numbers of teachers needed
D) per-pupil allocations for special needs (low achieving students, sp. ed., ELL, Magnet, etc.)

Title 1 funds, as well as funding for parent coordinators and instructional coaches, are not part of the "Corridor" school budget.

Since the 2003-2004"Corridor" school budget formula, based on the central budget office criteria, was often at odds with the funding that went to each school in 2002-2003, limits were placed on decreases and increases. (These adjustment factors have changed some, which will affect some schools, but I want to keep this explanation as simple as possible and not review all the possible sources of cuts to the schools.)

Rather than letting school principals adjust to the new school budgeting system, the Corridor Method was changed for the 2004-2005 school year so that it varies by school size. To keep it simple, EPP will compare only allocations for fixed administrative costs and per-pupil allocations to cover all other administrative needs:

September 2003 Elementary Schools
Fixed administrative costs $230,000
Per-pupil for other administrative costs $198
For a school of 600 students this came to a total of $348,800
For a school of 800 students $388,400
For a school of 1200 students $467,600
 
September 2004 Elementary Schools with registers of 600
Fixed administrative costs $230,000
Per-pupil for other administrative costs $86 (for a total of $51,600)
Total $ 281,600

September 2004 Elementary Schools with registers of 800 students
Fixed administrative costs $218,400
Per-pupil for other administrative costs $86 (for a total of $68,800)
Total $287,200

September 2004 Elementary Schools with registers of 1200 students
Fixed administrative costs $195,200
Per-pupil for other administrative costs $86 (for a total of $103,200)
Total $298,400

What is happening here? As the elementary school size increases above 600, there is a reduction of $58 per pupil in the fixed administrative costs allocation to the school until it reaches a low of $195,200. For schools larger than 1,200 students, the fixed administrative costs allocation, thankfully, is not reduced further. But large elementary schools of 1,200 students will only receive $16,800 more than schools of 600 students (when the fixed and per-pupil allocations are combined), not enough to hire a second secretary. Last year, the larger school would have had $237,600 more than the smaller school in funding for secretaries, AP’s and other critical staff.

These lower Corridor allocations for administration affect all schools, but especially larger ones. In September 2003, middle schools received $325,000 in fixed costs. Now middle schools above 600 students will see this amount reduced by $105 per pupil until they reach a floor of $262,200. In 2003, the per-pupil funding for other administrative costs was $198, now it has been slightly increased to $200.

The high schools have seen no increases. Their fixed administrative costs allocation was $430,000 in 2003. It now ranges between $430,000 for schools with 600 or fewer students to a low of $267,200 for schools with 1,200 students or more students. The per-pupil funding for other administrative costs has been reduced from $590 to $450.

(It should be noted that the reduction in per-pupil funding for other administrative costs is not as steep as dollar figures would suggest, because some of the per-pupil funding has been removed and placed in other funding streams that will still go to the schools. But these other funding streams cannot be used for school secretaries or AP’s. In short, schools may be getting more money than they did last year, and still not have sufficient funds for administration.)

Last year, there were allegations that principals were using money intended for special education for other needs. It could be that under last year’s Corridor method of creating school budgets, there was insufficient money to support out-of-classroom staff positions. The "cannibalization" may get worse this year unless funding for the administration of schools becomes more realistic.

So what does this "variable funding" method mean? Because of the reduction in funding for fixed administrative costs, especially for larger schools, principals will be scrambling for funding to pay for the salaries of their assistant principals and additional school secretaries, aides, librarians, and guidance counselors. They will have two primary sources of funds: 1) by increasing class sizes, they can reduce the number of teachers they will need for class coverage and 2) by using categorical funding (such as Title 1) for positions that are now funded through tax levy funding, thereby reducing extra services for children. They can also close the elementary school library, not fill a vacancy for an assistant principal, or have fewer aides.

It is true that there are "economies of scale" when school registers grow from 600 students to 1,200 students, but these funding reductions are far larger than can be absorbed by the administrative units of schools. One interpretation of this change in school budgeting is that it reflects a rigid ideological bias against large schools. Yet another possibility is that this is a tactic to put pressure on the teachers’ union, because the result is that some teaching positions will be eliminated. It may also be possible that this new variable funding method was not thought out.

Whatever the reason for why these changes were made, they need to be reversed. And quickly. This brings us to the last "budget problem."

Problem #3: State School Aid Restorations When the NYS legislature approved healthy increases in funding for education, Mayor Bloomberg assured Assembly Speaker Silver that "there would be no budget cuts to the schools." But what is a cut? Does a change in the methodology for creating school budgets constitute a "cut"? Doesn’t a local school district have the right to develop its own allocation system? Can the state force the city of New York to increase its funding for instruction? Budget definitions and divisions of power are at play here.

From EPP’s perspective, reductions in allocations for instruction and insufficient funding to the school level for basic administrative tasks must be reversed. In June 2003, state school aid decreased by $76.5 million. Nevertheless, cuts to the school level were limited. When the city budget was adopted in June 2004, DOE projected that state aid increases would come to $118.6 above June 2003 levels. Instead, the increases total $300 million. This is more than enough to reverse the decrease in instructional funding and in school funding for basic administration.

Yet school officials, so far, have only asserted that the city has increased its funding for the school system, as though the issue is whether the city has met its obligation for maintenance of fiscal effort. The city needs to do more in the next two weeks, as promised. The bulk of state school aid increases must be directed to instruction and to providing sufficient administrative support at the school level.

Note: It is entirely possible that efforts at simplification have not succeeded or you want to learn more about these issues. Go back to EPP’s home. Go to the green box called "OTHER HELPFUL WEBSITES." Click on the link "more budget info."

For total funding available for instruction, click on the link to the OMB web site and compare the "Expense Revenue Budget" documents for the adopted budgets of the Department of Education FY 2004 and FY 2005.

For a better understanding of the Corridor method, click on the link to the NYC Department of Education web site and then click on "Allocation Memorandum." Section D of SAM #1 describes the Corridor methodology.

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