STATE BUDGET INFO

• A new Sound Basic Education (SBE) Aid program of $325 million would be funded by revenues from Video Lottery Terminals.

• Though it would be targeted to high-needs districts (New York City would receive 60 percent of SBE aid or $195.7 million), every school district would get at least $25,000 from this new funding stream, including high wealth districts.

• There would be an "enhanced" Maintenance of Effort (MOE) requiring New York City to make and sustain a matching contribution to the SBE Aid program. The description of this proposed provision, as presented by the Governor’s Office, lacks details. If the scant description of the Governor’s five-year SBE funding plan from last year is still operative, New York City would have to provide $1.50 for every $2.00 contributed by the state for a CFE remedy and would have to maintain this proportional funding. The other four large cities would not. However, these other cities would, for the first time, have an MOE requirement to ensure that they did not decrease their municipal funding when new SBE Aid funding became available. Hypothetically, if the Governor’s SBE Aid program is adopted (unlikely) and the "enhanced" MOE is imposed, New York City would have to match the $195.7 million in new state dollars with $146.8 million in additional new city dollars.

• Last year, the Governor made vague statements about providing "some" funding to meet the capital needs of New York City. In this year’s proposal, it is clear that the Governor is not honoring the Mayor’s request for $6.5 billion in state funds to support the city’s $13.1 billion capital plan. The Governor’s Executive Budget only provides the city with the authority to borrow an additional $2.8 billion through the Transition Finance Authority. The Governor does, however, alter the state Building Aid "capacity formula" to a simplified student-per-square-foot ratio so that New York City can get a better reimbursement rate from the state for new schools that it builds. Some additional funds would also become available in recognition of the higher cost of construction in New York City, but the amounts are not specified in the summary material. EPP believes that the "simplification" of the capacity formula merits a review, because, if New York City continues to cram a maximum amount of students into new schools thereby ignoring the square foot ratio, its reimbursement rate may not improve substantially.

• This SBE funding would be accompanied by "accountability" proposals, some of which are redundant and others which actually increase bureaucracy. For example, low-achieving districts and schools would have to submit improvement plans, which are already required by the No Child Left Behind federal law and SURR regulations of the SED Commissioner. A new Office of Educational Accountability and Efficiency is created with $2 million in funding, too little to actually accomplish much beyond challenging the authority of the Regents and the State Education Department in various areas. New York City’s school building program would also be subject to review "to promote greater conformity between actual project costs and established State cost allowances" and to streamline the procurement process. Since the Mayor has focused on securing lower construction costs, EPP wonders why this level of state review is necessary. Are there questions about whether the Mayor has succeeded in lowering SCA building costs?

• Other "accountability" proposals are, in reality, calls for changes in school and district governance. For example, principals would no longer have tenure, but would instead be given three-to-five-year performance contracts by school districts. In Chicago, school planning committees were given the authority to choose principals and enter into contracts with them. In Houston, where tampering with test outcomes and dropout statistics have become a national scandal, the district was the contracting authority. The Governor’s other governance proposal is to give large city mayors, including the mayor in Albany, the power to appoint all the members of their respective Boards of Education.
  

• Overall, the "Computerized Aids" would increase from a statewide total of $14.7 billion to $14.9 billion, or a $206.63 million increase. With minor reductions in the grants program, total increases to school districts across the state would be $201.33 million. Under the Governor’s proposal, New York City would gain $83.3 million more in state school formula aid. All of these increases hover around the 1.4 percent mark.
• The formulas would be changed somewhat. Instead of totally restructuring the school aid system, the Governor collapses six formula aids into one, called "Flex Aid." Of those six, five are aides that go mostly to high-needs districts, especially the big five cities: Educationally Related Support Services, Extraordinary Needs Aid, Limited Proficiency Aid, Summer School, and Minor Maintenance and Repair. Flex Aid would count low-income, English Language Learners, and students in rural school districts as 1.3 of a student, thus driving more Flex Aid to high-need districts. There are limits on the increases of this aid, called "caps," based on the wealth of the school district. This once again exemplifies the standard confusion between student needs and district wealth. Why should there be any "cap" on increases of this aid? A Regional cost index, geared to teacher salary costs, would also be included in this new Flex Aid formula.
• Left outside of this Flex Aid block grant would be class size reduction and pre-K for four-year olds. Interestingly, funding for Teacher Support Aid, a salary supplement for teachers in the large cities, has not been eliminated. The Governor has proposed its elimination many times in the past, knowing full well that it would be restored by the UFT. This is why we conclude that this Executive Budget is less provocative than in the past.
• That is not to say that there are some regressive aspects in the Governor’s Executive Budget. For example, "Tax Limitation" Aid which goes to districts with high tax rates, goes overwhelmingly to average or low-need suburban districts in Suffolk and Nassau counties. In the recent past, the Assembly has traded an increase in Extraordinary Needs Aid, which goes to urban school districts, in return for the Senate’s demand for more Tax Limitation Aid. The Governor increases this tax aid from $48 million to $78 million.
• Even more questionable, the Governor continues to increase the state’s school property tax relief program, STAR, so that it would grow from $3.1 billion a year to $3.2 billion. While decrying "Robinhood" approaches to school funding, the Governor does not seem adverse to having the state subsidize homeowners in some of the state’s most affluent school districts who get the largest dollar amount of savings from STAR. As EPP’s study of STAR concludes, this is a "reverse Robinhood" approach. In this Executive Budget the Governor also proposes an additional increase of $48 million in STAR property tax relief for "an efficiency incentive." Homeowners lucky enough to live in districts where the school budget has not increased by more than 4 percent will be rewarded by this additional STAR tax relief. If enacted, EPP predicts that this benefit will go primarily to homeowners in districts with declining enrollments. These districts are already benefiting from "save harmless" policies. One of the most serious structural flaws in the way the state allocates funding to school districts is that it provides insufficient funding to districts with an increase in students and, at the same time, promotes inefficiencies in districts with a decrease in students by always assuring them that funding from the state will remain the same. EPP’s recommendation is that, if "save harmless" policies remain, they should be calculated on a per-student basis. This STAR incentive is a bad idea.
• No doubt, most school districts will object to the Governor’s proposal to reduce the state’s share of funding for private special education programs from 85 percent to 49 percent. In dollar terms, this means that the current school-year funding for "Private Excess Cost" of $211 million would be reduced to $114 million under this plan. Given the influential lobbying of special education private schools, this change will probably not occur. Nevertheless, this attempt at cost containment points to the larger problem of New York City’s staff shortages in special education and its reliance on private school programs to deliver instruction and services to children with disabilities. EPP does not understand why the special education planning process is not working in New York City so that these shortages are eliminated.
• The Governor’s Executive Budget provides a modest increase for Building Aid of $27 million by not recognizing any projects that have not been fully documented as eligible by November 15, 2004. Transportation funding would be increased by $49.2 million, a 4.3 percent increase.

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