CITY BUDGET INFO

EPP’s FOUR MAJOR CONCERNS ABOUT THE
PROPOSED NEW SYSTEM FOR FUNDING TEACHERS
 
   The “bold, common-sense plan” issued January 2007 by the New York City Department of Education includes a proposal to change the way schools are funded as an effort to eliminate:

• “arcane funding formulas that often have more to do with long-ago political deals than with meeting our current educational goals” and
  
• differences in the tax-levy funding among different schools.

 
By providing a flat $3,000-$3,750 per-pupil amount to each school, with added per-pupil amounts (called “weights”) for low-income students, English-language learners, and low-achieving students, the proposal sounds like the new funding system will be simpler to understand and fairer.
 
   Although it sounds good on the surface, there are some alarming aspects to this plan, especially in the future when there might be an economic downturn or a different mayor. A per-pupil funding system is no assurance that funding will be adequate. Weights do not ensure that there is sufficient funding for additional instruction and services. More importantly, per-pupil amounts can become an abstract dollar figure with no relationship to the real costs of teachers.
 
            These are EPP’s major concerns:
 
1) Will future per-pupil funding levels have any relationship to actual salary levels and school costs?
 
2) Will successful schools be forced to reduce their teaching staff because of their higher average salary levels?
 
3) Given unexplained decreases in per-pupil funding for out-of-classroom staff in the 2004-05 school year, what is there to prevent decreases in per-pupil funding for instruction at some time in the future?
 
4) Why are the additional funding amounts for low-income students, English-language learners, and low-achieving students so modest?
 
            This is EPP’s major recommendation: Continue the current tax-levy funding formula for providing teaching staff at the school level, but provide weights starting at 1.0 (essentially doubling systemwide per-pupil funding) for low-income students and English Language Learners. Eliminate all monetary incentives for low-achievement.
 
DISCUSSION
 
            Details of this new tax-levy funding system for public schools in New York City, which is very similar to the way charter schools are funded now, are still being slowly unveiled with changing assumptions and numbers every day. Because the proposed funding system would negatively impact successful schools with more experienced teachers, it will be phased in only as new teachers are hired. This, of course, will result in an even more complicated funding system for schools, with newly hired teachers being funded on a fixed, per-pupil dollar basis and incumbent teachers being funded based on the number of classroom positions and actual salary costs. The following discussion points are based on a fully phased-in funding system to show the full consequences of this system. Per-pupil funding, the primary allocation method used at the state level in distributing funds to school districts, if extended to the municipal level, will make teacher funding more vulnerable to cost containment efforts and lead to less stability in staffing.
 
            The January 2007 announcement also contained a plan for site-based management. It would eliminate the top-down, ineffective bureaucracy of Regions and ROC’s, created in the first years of mayoral control. This can be interpreted as a gift to the next mayoral administration. The new mayor elected two years from now will not have to inherit a mid-level bureaucracy that is dysfunctional. Many school districts in Canada, England, and California have functioned for years with site-based management where principals and leadership teams have the ability to contract for services with existing district administrators or outside consultants. None of these schools have experienced a meltdown. It should be recognized, however, that site-based management has not proven to be a powerful tool for improvement in student learning.
 
            The funding proposals, on the other hand, have the potential to do lasting damage for decades to come when they are fully phased in. On the eve of deliberations around a settlement in the Campaign for Fiscal Equity lawsuit, it is discouraging to see the outlines of a plan that essentially provides no additional city investment in school staffing and, worse, introduces a method of funding teachers that will in the long run discourage the retention of experienced teachers. These are EPP's concerns with the funding proposal:
 
1) The new funding system, when fully phased in, will eliminate the direct relationship between tax levy funding for schools and actual teacher salary levels. What is now “reality based” could become an abstract dollar amount. For a forthcoming report, EPP tracked the tax-levy formula for funding teachers at the school level back to the 1978-79 school year. Essentially, the formula has remained the same.
 
            The simplest way to explain the formula is that the number of students at different grade levels or different types of high schools are divided by an estimate of the number of teachers needed to staff classrooms. This results in the total number of teachers that need to be funded for each school. This number is then multiplied by the average teacher salary of the school and the resulting dollar amount is allocated to the school.
 
            The only difference between the pre-mayoral control era and the post-mayoral control era is that this “average teacher salary” used to be computed on the basis of the average for each community school district, but after mayoral control it is computed on the basis of the average for each school.
 
            The main benefit to this “teacher workload” method is that it generates a predictable and objective number for the teachers needed for each school, based on grade level, types of courses, and student registers. The dollar amounts that are allocated to each school reflect the number of teachers needed as well as the teachers’ actual salary levels. This method is neither “arcane” nor the result of a “political deal.” Its logic is that service levels are determined first and then multiplied by the actual salary costs.
 
            The proposed change in tax-levy funding for schools, when fully phased in, would result in a fixed-dollar amount being computed first and then service levels would be determined by that dollar amount. A per-pupil dollar amount may originally be tied to an estimate of real costs, but the sad history of education funding by the city is that over time per-pupil funding levels tend to become arbitrary.
 
2) Improved teacher retention rates by schools may result in their having fewer teachers and larger classes. Successful schools, in particular, will be punished for their ability to retain more experienced teachers at higher salary levels. Currently, differences in average teacher salaries among schools  reflect their ability to retain experienced teachers. These differences tend to reflect the socio-economic profile of the student body. Schools serving stable middle or working class neighborhoods tend to have higher teacher retention rates and higher average teacher salaries. Schools serving the lowest income or distressed neighborhoods tend to have high teacher turnover rates and lower average teacher salaries.
 
            But these are just generalizations. There are, for example, successful elementary schools in some of the lowest income neighborhoods in the city, the “beating the odds” schools.  Two EPP studies of how low-achieving schools turned around also found instances where their reorganization resulted in senior teachers leaving and salary levels actually decreasing. The benefit of the current tax-levy funding system for teachers is that it does not discourage efforts to retain more experienced teachers.
 
            The downside is that on a dollar basis, schools serving better-off communities tend to receive more dollars, while schools serving distressed neighborhoods receive fewer dollars. Better-off schools do not, however, receive more teaching positions. All schools receive tax-levy funding for the same number of teachers based on the numbers of students at different grade levels or, at the  high school level, students taking differing course loads.
 
            The per-pupil funding system being proposed will not redistribute more experienced teachers within the school system, but over time it will have the result of making higher-priced teachers a potential liability to the budgets of their schools. There are two courses of action that schools with too many high-cost teachers could take: 1) they could keep their more expensive teachers but lower their overall staffing levels and increase class sizes or 2) they could try to reduce the number of more expensive teachers. The most successful and the most stable schools will be facing these budget pressures. Why adopt a funding system for teachers that discourages teacher retention? Shouldn’t efforts to focused on helping more schools retain experienced teachers?
 
            It is interesting to note that the tax-levy funding system for charter schools is on a per-pupil basis with no adjustment for the average salary levels of the teachers in each charter school. This is very similar to the new funding system being proposed for public schools. 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. She concluded, “We have to figure out how to stabilize the teaching force in charter schools.” While there are many factors that contribute to the instability in charter school staffing, the per-pupil funding system may be a contributing factor. Why adopt a mechanism that provides a built-in disincentive for teacher retention?
 
3) Schools in the past and now receive many different per-pupil amounts from categorical and tax-levy funding streams and almost all of these per-pupil allocations have no relationship to actual costs. Worse, past administrations and the current administration have reduced per-pupil funding amounts arbitrarily and without explanation. What is to stop a future administration, facing a downturn in the economy, from freezing or cutting per-pupil funding for teachers? A good example of the arbitrary and changeable nature of per-pupil funding methods is the budget actions taken by the NYC Department of Education in its per-pupil allocations for funding out-of-classroom staff, that is, school secretaries, librarians, counselors, deans, and school aides.
 
            In the 2002-03 school year, a year before mayoral control, each elementary school received a flat “school organization” amount of $43,175 and  for each student $454 in “school support per capita.  A school with 840 students could expect to receive $381,864 in this per-pupil funding. Total funding for out-of-classroom staff, including the principal’s salary, came to $425,039 (school organization + support per capita).
 
            In the first year of mayoral control, each elementary school got much more funding for “school organization” (increased from $43,175 to $230,000) but the elementary school per-pupil amount shrunk from $454 for each student to $198 for each student. Smaller schools actually benefited from this change, but mid-sized and larger schools saw significant reductions in total funding for out-of-classroom positions. A school with 840 students could expect to receive $230,000 for “school organization,” but only $166,320 in per-pupil funding. Total funding for out-of-classroom staff, including the principal’s salary, came to $396,320 (school organization + support per capita). The school’s total funding for out-of-classroom staff was reduced by $28,719. Larger schools, such as those with 1,680 student school, saw a decrease of $244,263, equivalent to two assistant principals.
 
            But worse was to come. In the 2004-05 school year, the elementary school per-pupil amount was reduced from $198 to $86. A school with 840 students received the same $230,000 for “school organization,” but only $72,240 in per-pupil funding for additional out-of-classroom staffing. Mid-sized elementary schools lost close to $100,000 in out-of-classroom funding and larger elementary schools lost as much as $400,000 from the tax-levy funding level of the 2002-03 school year. Many principals retained their out-of-classroom staff by simply hiring fewer new teachers and using teacher funding to pay the salaries of out-of-classroom staff. This is why there were so many reports of higher class sizes in elementary schools that year. Many more tax-levy reductions were planned for schools in the 2004-05 school year, but the NYS Legislature exerted pressure to stop them. Why did the Department of Education decide that the tax-levy per-pupil funding level for out-of-classroom staff could be reduced from $198 to $86? EPP received no satisfactory explanation.
 
            Because the New York City public school system has always refused to develop standards for appropriate school staffing levels beyond teachers, basic school staffing has always been funded primarily on a per-pupil basis. This per-pupil amount has been erratic and has changed every few years as far back as the 1978-79 school year. The proposed change in tax-levy funding for teachers essentially replaces a standard for teacher staffing with a per-pupil amount that could be “frozen” for many years or reduced at will.
 
4) The most surprising aspect of the proposed new tax-levy funding system for schools is the low “weights” added for student poverty (ranging from $150 to $750 depending on grade level), for English Language Learners (ranging from $180 to $600), and low academic achievement ($450 to $1,050). These are fractions of what is usually considered a typical adjustment for the additional instruction and services needed by these higher-need students. Even weights of 1.0 (that is, twice the per-pupil funding) are recognized as arbitrary and adopted because of political pressures to keep costs down for these high-need students. At a per-pupil funding level of $3,000,  the proposed additional weight for poverty for students for elementary school ($450) is just a  0.15 weight  or 15 percent above the $3,000 level. If the per-pupil amount were $3,750, the highest proposed weight for poverty would be 0.20 or $750 extra per-pupil. In contrast, the NYS Regents are proposing a new foundation level funding system for students with a weight of 1.0 for high-poverty students. This is typical. The low weights recommended in New York City are atypically low.
 
            Weighting for English Language Learners is even worse. At a per-pupil funding level of $3,000, the highest weight would be 0.12  or $360 more per student at the high school level. If the per-pupil funding level was $3,600, the highest weight would be 0.17 or $600 more per student at the high school level. Weights for low academic achievement, a bad idea if poorly implemented, carries the highest weights, ranging from 0.15 to 0.29 or $450 to $1,050 per student more at the middle and high school levels.
 
            The low and arbitrary nature of these additional funding amounts reveal once again the central flaw of the new tax-levy system for funding schools, that is, the lack of a direct relationship between per-pupil funding levels and actual costs. Classes for English Language Learners, whether bilingual or English as a Second Language, should be smaller and there should be additional extensive staff development. Since classes for ELL students at the elementary school level can be formed for just 15 students, while regular class size maximums from grades to 4-6 are 32 students, the per-pupil cost of a small ELL class can be twice as high. A weight of 1.13 for ELL students would begin to capture the real costs of smaller classes. A weight of 1.13 would for ELL students would translated into $3,390 more on a per-pupil basis, not $360 more as currently proposed by the NYC Department of Education.
 
            The most recent explanation of the proposed new funding system makes it clearer that NYC Department of Education officials have created these weighting factors based on current funding levels. In other words, no new city tax-levy funding is being invested in extra services for high-need students.
 
CONCLUSION
 
            The phase-in of a new funding method for school staffing will actually create more complicated budgeting in the next few years, not less. When fully phased in, the new per-pupil system may have no relationship to real salaries. For all the reasons above, EPP urges the Department of Education to re-think its funding proposal. More importantly, we urge the Mayor and the Chancellor to put forth reforms that they can execute in the few years that remain of their administration which create more equity in funding schools. Weights are not a bad idea if they are not token amounts. On the eve of a possible legislative agreement for CFE funding, a city funding proposal that adds weights for high-need students signals to Albany that any weights created at the state level will be reflected in the city's direct funding system for the schools. State education funding goes to school districts, not schools. Local school disticts then re-allocate these funds. Too often, the extra funding for high-need students from Albany is not reflected in the city's distribution of funds to individual schools. This is why state legislators favor categorical funding streams so they can track the funding and make sure that it follows the student. By creating weights for city tax-levy funding for schools, extra state money will go directly to the schools.
 
            EPP has always assumed that any CFE settlement would involve a greater investment by the city in its own education system. While the proposed teacher staffing system should be rejected, the proposed weights for high-need students should not. Ultimately, these added weights could involve a mix of additional state and city funds. The weights, however, should not be linked to the average teacher salary of each school. Instead, these weights should be determined by a systemwide average per-pupil funding for school staffing. Schools serving more high-need students would ultimately get more dollars than schools serving more affluent areas with higher teacher retention rates. Furthermore, these weights create a budgetary incentive for successful schools to include more low-income children and English Language Learners.
 
            One last note. Federal Title 1 funds used to be distributed based partially on student achievement. It was recognized that school improvement resulted in a decrease of Title 1 funds. In essence, this amounted to “punishment for performance.” Now Title 1 funds are distributed based on student poverty. When high-poverty schools improve, they do not lose funds. Unfortunately, the city’s current Special Needs/Academic Intervention Services funding stream provides continuing incentives for student failure. No weight should be created for low-achievement. The proposed new funding system does include this weight, but only for new students entering middle schools and high schools. Poverty, rather than achievement, should be the basis for added weights.
 

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