STATE BUDGET INFO

• The Governor’s Sound Basic Education (SBE) Aid program of $325 million is a clearly inadequate response to the courts’ CFE rulings. Another disappointment is the failure of the Governor to honor the New York City Mayor’s request for a 50-50 match for the city’s five-year, $13.1 billion capital plan. The court-appointed CFE referees recommended a state investment of $9.179 billion, or $3 billion above what the Mayor has requested. No matter how protracted the negotiations are in arriving at an agreement on a CFE remedy, it is critical that state capital funding to end student overcrowding become available as soon as possible. No matter what fiscal challenges face the state, there is simply no rational reason for not committing $250 million to $500 million in 2005-06 for payments of interest and principal to create urgently needed classroom space. Teacher retention, class size reduction, science and art education, orderly schools, high school graduation rates, school choice, and special education reform all depend on expanding the number of schools in New York City.

• The Governor proposes to 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 grants would also become available for instances where New York City construction projects exceed the "cost allowances" for new construction projects in recognition of the higher cost of construction in New York City, but the amounts are not specified in the summary material available to us. 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, which it does now ignoring the city’s own capacity standards, the state reimbursement rate for New York City may not improve substantially. Given the extreme overcrowding in some high schools, which has caused serious disciplinary and academic problems in some of the city’s finest schools, the city has been forced to flood new buildings with students.

• The "enhanced" Maintenance of Effort (MOE) requiring New York City to make and sustain a matching contribution to the SBE Aid program has some merit. 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. Hypothetically, if the Governor’s SBE Aid program is adopted 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. This ratio is clearly punitive and may be intended to dissuade the Mayor from seeking a CFE settlement. If the ratio was made more workable, say a 4-to-1 match, an enhanced MOE should be considered, especially since the city would be making a larger contribution towards the capital plan (a 3-to 2 match, $6 billion city capital dollars to $9 billion state dollars).

• Accountability must be structured into any CFE remedy agreement. EPP was shocked to read the NYS Comptroller’s audit of the state class size reduction programs which found that New York City created only 45% of the classes in the early grades that were required. From the inception of this program, we understood that there were different methodologies for accounting for class size creation, especially when student registers were declining. The strength of the state’s program is that it is school and grade specific. EPP agrees with the NYS Comptroller’s methodology, but even if the SED’s method or the DOE’s method is substituted, there is no explanation for why, when state funding for class size reduction to New York City increased from $44 million to $88 million, only 60 additional classes were formed. To do the math for you, this is $733,333 thousand per classroom for those created in the 2000-01 school year.

  The question is what should be done about this flagrant disregard in achieving the stated goals for these additional funds for New York City, Buffalo, and Rochester? The second question is what should be done about the lack of SED oversight? One possibility is to turn it into a grants program for elementary schools that bypasses the LEA altogether with priority given to low-achieving schools that apply and with some thought about maintenance of effort and adjustments for register decreases. Possibly a university should be contracted to administer this grants program and evaluate its effectiveness in raising student achievement and retaining teachers. Another possibility is to leave it up to the three of the five city districts that are out of compliance as to whether they want to discontinue this program (and refund the funds over a period of years) or take corrective action over a period of years so that they meet the minimum number of new classes required by budget language. EPP strongly cautions against allowing the non-complying districts to convert class size reduction into a "push-in" program for remediation, which does not reduce class size and poses even greater challenges for monitoring. Currently, New York City students who have been "included" in general education classrooms and are supposed to be getting "push-in" support are not getting the level of services required by their IEP’s. EPP’s own monitoring of the federal "floating" teacher found that in some schools floating teachers were required to visit thirteen classrooms in a week, sometimes when no small group work was being done.

• Some of the Governor’s "accountability" proposals seem redundant and others 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. EPP has serious questions about merit-pay contracts that would be structured by school districts, as the Governor intends. 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, however, the district was the contracting authority (which is the Governor’s intent) and the resulting tampering with test outcomes and dropout statistics has become a national scandal. New York City schools are already too dominated by test-focused instruction and strategies by administrators trying to exclude lower-achieving students. Since our office is now getting desperate calls from parents who have been unsuccessful in getting their children who previously dropped out of high school back into schools, EPP will be reviewing the issue of merit and performance pay in the near future.

• EPP has serious criticisms of the intended distribution of both SBE Aid, formula aids, and STAR increases:Why distribute $25,000 in SBE Aid to the highest wealth districts in the state? For many of these districts, this amount is pretty close to their expenditure per pupil. Why not, instead, provide monetary incentives for low-need districts to allow high-need students from high-needs districts to transfer into their schools by providing extra funds for these students? This would be an incentive plan that might be attractive to some higher-performing districts.

  There are limits on the increases of SBE 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?

• "Tax Limitation" Aid tends to go overwhelmingly to just two counties. EPP’s study on tax aides found that they do not work well in helping many moderate-income school districts. Why increase this aid from $48 million to $78 million?

  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. EPP’s study of STAR concludes that this is a "reverse Robinhood" approach. In this Executive Budget, the Governor 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. At the same time, it 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.

EPP objects 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. On a rational level, there should be no incentives for districts to make private school placements. Nevertheless, in New York City staff shortages in special education result in a 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 staff shortages are eliminated.

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