STATE BUDGET INFO

The Nuts and Bolts of the EXCEL Program

   In light of years and years of chronic underfunding by the state for New York City public schools' capital needs, the state Legislature has passed an agreement to establish the "EXpanding our Children's Education and Learning" (EXCEL) program to address school facility needs across the state.

   This EXCEL program provides funding in the form of grants for school facility projects rather than relying on state Building Aid reimbursement of the costs (interest and principal) of borrowing funds for repair and new construction projects.  The program is the result of three converging factors. The Mayor threatened to unleash the fury of New York City parents (as voters) against four State Senators who maintain the slim majority of Republicans in the state Senate.  All New York State legislators are up for election this year. The final straw on the camel's back was the Appellate Court decision in the Governor's appeal to the CFE decision of Justice DeGrasse. In a surprise move by this conservative court, it ordered compliance with the decision in CFE vs. State of New York.  These three factors forced the Legislature, which has been primed to part company with the lame duck Governor and increasingly tired of his challenges to the power of the Legislature, to partner with him on several key education budget initiatives.  The EXCEL program is an example of three-part negotiations by the Assembly and the Senate to resolve a longstanding problem.

  In 2002 EPP released a report, Castles in the Sand, exposing the unfair gimmicks of Building Aid that artificially suppressed the reimbursement rate for capital funding to New York City public schools.  Among a host of gimmicks was the practice of lopping off 15% from available aid to New York City because of the differences in the way New York City reported its school construction plans. The state also used operating capacity in plans submitted by New York City and an inflated "state-rated capacity" for the rest of the state. Operating capacity reflects the proposed enrollment capacity of a project. State-rated capacity reflects "the total number of students assigned by the State Education Department of Facilities Planning to a building for the purpose of determining the maximum cost allowance for a capital construction project.' [It] is the capacity measure multiplied by the cost index for the project that generates the preliminary cost ceiling for a project.  It so happens that using Operating Capacity instead of Rated Capacity has short-changed New York City." [Taken from page 35 of Castles in the Sand]

Complicating the funding issue related to school construction and operating aid is the problem of shares.  Shares is the longstanding practice of the Legislature to divide school aid funding between regions in near rigid proportions so that "every rising tide lifts all boats". New York City inevitably receives 38% of any increase in school aid funding. With the near religious adherence to shares by the Legislature it would have been impossible to address New York City's capital construction needs without ballooning capital construction shares across the state, so in a last minute compromise the Legislature blended the best parts of each one-house bill and developed the EXCEL program appropriated outside of school aid. Now instead of getting 38% of this pot of money New York City will receive up to 67% of this separate pot of money. This is the first major boost of funding for New York City, but only for facilities.

   Since all school construction is done through bond issuance the most notable aspect of the EXCEL program as it was amended during budget adoption is that the EXCEL program would be financed through bonds issued by the Dormitory Authority and the proceeds would be forwarded to eligible school districts,.  Though not interesting by itself, this slight difference takes the debt obligation from the open book ledger of the state, giving the appearance of a reduced debt load, thereby hiding state debt within a public authority. The state is obligated to pay $100 million a year toward the total debt of $2.6 billion issued by DASNY.

   EXCEL funded projects would include:

• acquisition
• design
• planning
• construction
• reconstruction
• rehabilitation
• improvement or modernization of a school facility
• educational technology projects
• health and safety projects
• accessibility projects
• physical capacity
• energy projects 

   In New York City the EXCEL funds could only be used for projects that were listed and contained in the Five-Year Capital Plan, adopted by the City Council as of July 2005.  In the rest of the state EXCEL funds can only be used for school construction projects that have no contract certified by the Commissioner of Education as of April 1, 2006. In   an Article VII clean-up the Commissioner of Education is authorized to deduct from future year apportionment any EXCEL funds that were given to a district in an amount that exceeds their EXCEL allocation.

      New York City and districts in the rest of the state may seek to use the entirety of designated appropriations without need to delay any eligible projects. The maximum EXCEL apportionment to New York City is $1.8 billion.  The maximum apportionment for the rest of the state is $ 800 million.  The $800 million is broken down as follows:

• $400 million for high needs school districts outside of NYC, distributed on a per pupil basis
• $400 million for remaining school districts distributed on a per pupil basis

.   As part of the accountability structure for the program the Dormitory Authority must provide a report to the Legislature on or before November 15th of each year and again February 15th of each year, and is given a guarantee by the state as a covenant to bondholders that annual debt service payments will be maintained as enacted.  Among other things the exact mechanism for claiming bond proceeds has not been completely worked out.  The announcement that the state is providing NYC with $9.6 to $11.4 billion in funding for facilities represents two different state facilities funding programs. EXCEL represents the state’s funding program for FY 2006-07 of $1.8 billion.  From FY 2008 onwards, there is another sate funded program for facilities that uses future payments of Building Aid as “securitization” for capital borrowing by New York City. When more details become available about “securitization” EPP will describe how this funding program will operate.

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