CITY BUDGET INFO

Why Changing the Way Schools Are Funded
Is Not Such a Good Idea

The Mayor and the Chancellor have combined three initiatives in their latest "school reforms" and, on April 9th, have made public a list of noted individuals who endorse these Children First reforms.

The first proposal, to eliminate the poorly functioning mid-level bureaucracy that the Mayor and Chancellor created, is not a bad idea. The downside is that this type of reorganization might create the same chaotic conditions that emerged when they closed down community school district and high school district offices and created these huge, ineffective regional offices. Nevertheless, this proposal is a testament that when mistakes are made, the current Mayor and Chancellor will attempt to correct them. If the reorganization doesn't work, two years from now the new mayor can replace it with another system.

The second proposal, to provide added per-pupil funds (called "weights") to schools for their students who are low-income, learning English, or have disabilities is a good proposal, but so far the minuscule amounts proposed by the city are far smaller than the state-level weights. The New York City school district should at last provide extra funds at the city level that are equivalent to the weights used at the state level to fund the New York City school district. Should these per-pupil weights be based on average funding per pupil? Yes.

The third proposal, to change the funding of schools from their actual-salary levels (average-salary level for each school) to an average-salary level for all teachers in the school system, is not such a good idea for several reasons:

A) Provides a disincentive to retain teachers   Schools that now receive funding based on their teachers' actual-salary levels will begin to get funding based on teachers' systemwide average-salary level. As with any average, many schools will have higher-than-average salaries. Schools with more senior teachers will have to increase class sizes or encourage higher-paid teachers to leave their schools. Will these teachers transfer to schools with more new teachers? Research has found that the New York City teachers tend to quit and take other types of jobs more than they transfer. Another question is whether any school would want to accept a teacher with more than ten years experience. It is, of course, a race to the bottom. As more senior teachers leave the system, the average teacher salary remains the same or even declines.

B) More complicated funding   If school funding is complicated now, it will shortly become far more complicated as schools will be funded 1) on the current system for teachers already on the payroll and 2) on the new system for teachers hired in the 2007-08 school year. Since as far back as EPP has been able to trace school funding methods (1978-79), the city school system like almost every other school district in the nation, funds actual teacher salaries of schools, not through a systemwide average that disadvantages schools with more senior teachers.

C) Delayed impact   The proposal will not substantially change school funding until the current Mayor and Chancellor are long gone. It is one thing to try to correct a mistake (regions) before a new mayor comes into office or to try to adjust city funding to changes in state funding (weights). But the third proposal creates a funding system that treats schools like private contractors and that departs from the funding system for all other municipal services. With only two years left in office, the Mayor and the Chancellor are proposing a funding system that, as intended by its architect, will begin to destabilize teacher staffing during the next Mayor's administration and will come to full fruition by 2017, when most schools will find teachers with more than ten years' seniority to be a budget liability. Right now, a school can hire a teacher (whether just starting out or an experienced teacher) with no consequences to the school budget--her or his salary will be covered. In the future, all teachers with years of experience will put pressure on the school budget.

Let a new mayor and new chancellor campaign for putting public schools into a "corporate funding mode" in that they at least will have to answer for the results. While the first two proposals deserve consideration, the change in the method for funding our schools should be recognized for what it is--a radical departure from how municipal services are funded that will have long-term consequences for the quality of education that our children receive.

Read further as to why this funding proposal is a departure from municipal funding:

The proposal to eliminate actual-salary funding of schools is different from how other municipal services are funded:   The mission of for-profit corporations is to make a profit. The mission of government is to provide services. Budget decision makers in municipal government decide on the services that will be provided to city residents based on the need for these services and whether they are "affordable." To make these decisions, they look at the probable staffing costs to deliver a service, that is, they look at the actual mix of salaries (from the low salaries of the just hired to the high salaries of those close to retirement). Corporations, on the other hand, make decisions about whether the cost of their product or services will result in a profit, either in the short term or in the long term. Municipal budget decision making is not necessarily kinder or gentler than corporate decision making, but its focus is on the affordability of the service under review, not the cost of services needed to make a profit. This municipal decision making is also based on estimates of revenues and other new service needs.

Let's take, as an example, standards for snow removal. Budget decision makers might be contemplating a one-day standard for removing all snow from major roads and minor roads. Putting all sanitation workers to work (even those on their scheduled days off) and giving all workers overtime pay might prove too costly. So they review a two-day standard for removing snow from major roads on the first day and removing snow from minor roads on the second day, thereby not having to use sanitation workers who have a scheduled day off and lessening overtime pay. These decision makers will use a cost-benefit analysis to decide what standard to use. They might even calculate a cost per ton of snow to make a decision as to which standard to use. These decision makers are using salary factors that reflect the full range of salaries of employees to quantify how much snow removal really costs. Every sanitation unit is assured that even if their unit happens to have more employees at higher salary levels (because they have been on the job longer), they will not have to remove snow by meeting an "average cost per ton of snow" target.

Let's make this example a bit more complex. Possibly, municipal budget decision makers decide that they want to contract with private companies to help in snow removal. For-profit companies will seek contracts with enough money to cover their costs and make a profit. Possibly, some not-for-profit companies (such as those helping the homeless) will seek contracts that at least cover their costs. Both types of companies will probably be offered contracts based on an "average cost per ton of snow" target. Why? For legal and policy reasons, the city will not attempt to undercut its unionized workforce and be sued. On the contractor side, however, the incentives are there to hire the lowest-paid workers because the contractors must meet a set standard for cost.

The proposal that is being advocated by Mayor Bloomberg and Chancellor Klein is that schools within the municipal public education system will no longer be funded on the actual teacher costs of each school (with a differing mix of just-hired teachers and near-retirement teachers) but will have to meet an "average cost per teacher" target. (The specifics of their proposal keeps changing, so this is a response to the latest version. Supposedly, current teachers' salaries will be exempted from this new funding system, but any teachers hired after this school year would not be grandfathered.) What's wrong with funding schools on the basis of a systemwide average cost of a teacher? There are plenty of reasons why this proposal will destabilize teacher workforce. This will become readily apparent in the year 2017, when schools will have new teachers hired in the 2007-08 school year who will have been in the system for ten years. The architects of this funding proposal are well aware of the impact in 2017:

1) Planned Teacher Staff Turnover In general, good schools (even those in low-income areas) tend to retain their teachers. Good schools tend to have more teachers at higher salary levels. As the year 2017 approaches, these more senior teachers will become a budget liability to their schools. This result is planned. Here are a few selected statements from the academic credited as the architect of this funding system, Marguerite Roza of the University of Washington's Center on Reinvesting Public Education, in her article Frozen Assets:

"Money spent on seniority-based raises and generous health plans for more veteran teachers might be better used for raising minimum salaries to recruit younger educators who meet high teaching standards."

"Studies show that individual teachers are less effective in their first year of teaching than later in their careers, but improvement tends to plateau after only five years or so, and may even decline as teachers approach retirement."

"Instead of using a defined-benefit pension plan that disproportionately benefits teachers who stay in the system for decades, a school district could choose to provide more generous, portable, upfront retirement benefits as a means of recruiting younger teachers who expect to change professions multiple times throughout their careers."

"And given that redistributing teacher compensation and changing teacher working conditions would likely be controversial within the teaching profession, school administrators who implement such changes would have to take steps to honor commitments on compensation and working conditions that they've made to current teachers."

Click here for a copy of Frozen Assets article. 

Dr. Roza's arguments contain some contradictions--extra funds now "wasted" on higher salaries for more senior teachers could go to higher pay for more skilled teachers, but keeping these skilled teachers much beyond five years is also "wasted." What she seems to be advocating is a highly paid, but transitory workforce now common in for-profit corporations. She does not expect that good teachers would be redistributed in the system by virtue of the new funding system. Instead, she suggests a $10,000 to $25,000 bonus system for teachers willing to work in low-income neighborhoods. She recognizes that senior teachers would become a liability to schools no longer funded on an actual-salary basis, but on average-salary basis. And that's fine in her scenario of a transitory workforce of teachers staying for a few years and then moving on. Is this the policy change New York City should embrace?

2) Public Schools Will be Treated Like Contractors, Not a Municipal Service Charter schools receive an average per-pupil amount. They also have a high teacher turnover rate, according to a report by the NYS Department of Education. At a February 2006 luncheon of CEI-PEA, NYS Department of Education Associate Commissioner Sheila Evans-Tranumn provided a profile of teacher staffing at charter schools: 38 percent had no certification, 50 percent have five or fewer years of experience, and 32 percent turned over last year.

Like private contractors for snow removal, providing contractors with a cost target they have to meet is understandable. The private service, at least, should not be more expensive than the public service. This is why charter schools are funded on an average per-pupil basis. But public schools are a public service and the actual salaries of their teaching staff should be honored, not just the teachers who work in the schools now, but those who are hired in the future. Schools that keep their teachers should not be penalized for doing so by having to increase their class sizes or pushing out more senior teachers. The funding proposal of the Mayor and the Chancellor is essentially putting each public school on the same footing as a contractor in having to meet a price target for services. And putting schools on a contractor basis is pretty much putting them on a "race to the bottom" by encouraging them to turn over their teaching staff so that only a minority of their teachers are at higher salary levels.

Essentially, the Mayor and the Chancellor want the public schools to be more like charter schools, that is, like contractors.  Well, why not revisit how all municipal services are funded? Why not generate average-salary funding systems for police precincts and sanitation units? Why have schools been singled out for removal from funding on an actual-salary basis?

The Mayor and the Chancellor should rethink this proposal for treating public schools like contractors. At a minimum, they should stop combining this proposal with other proposals for change. The public and other elected officials sneed to have an opportunity to fully evaluate whether schools should be treated as contractors and whether they want corporate-style staffing in education. As it stands now, this radical departure from how municipal services are funded has been lumped together with other reform proposals. It deserves a far, far more careful review on its own merits.

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