TheNumbersDontLie:TheCurrentCrisisof NewYorkStateSchoolDistrictFinances

StateAid:FromDilemmatoPredicamenttoQuagmire

StateSupportofPublicSchoolFundingSince2007ASuccinct Examination

Findings,ConclusionsandRecommendationsfortheFutureofStateAid toSchoolDistrictsBasedon201213StateAidData,Trends&Themes

ImplicationsofthePropertyTaxCapLawforSchoolDistricts

WhatthePropertyTaxReportCardRevealsabouttheFutureofNew YorksPublicSchoolDistricts

BulletAid:PoliticsMasqueradingasCompassion

Dr.RickTimbs ExecutiveDirector

StatewideSchoolFinanceConsortium 6390FlyRoad EastSyracuse,NY13057 www.statewideonline.org

September2012

Contents
Overview .....................................................................................................................................3 .

PartIAnExaminationofStateSupportforPublicSchoolFundingSince2007............7 ThePlanThatStillDoesntWork(AssumingThatThereStillIsanActualPlan).................7 GEACutsTheBudgetImpact201011...............................................................................9 GEACutsTheBudgetImpact201112 .................................................................................12 . GEACutsTheBudgetImpact201213 .................................................................................14 . GEACutsThePropertyTaxLevyImpact201011and201112...........................................16 The201112PartialStateAidRestoration............................................................................18 GEACutsThePropertyTaxLevyImpact201213................................................................18
HowGEACutsandtheLossofFederalEducationJobFunds (EJF)Negated201213EducationAidIncreases..................................................20 TheGEAisEvenMoreInequitablethanistheCurrentand UnacceptableFoundationAidFormula...................................................................23 TheCosttoEradicatetheGEACutsandProvideFullyFundedFoundationAid..................27 ImplicationsoftheCurrentStateAidSituation....................................................................28 FundingtheCurrentFoundationAidFormulavs.FundingaNewand EquitableFoundationAidFormula..........................................................................29 OtherAidIssues:SkimmingOfftheTopContinues..........................................................36 TheGEAStateAidCutsRemain............................................................................................38 ProblemswiththeFoundationAidFormulaChangesMustBeMadeto CreateGreaterEquity..............................................................................................39 BulletAidPoliticsMasqueradesasCompassion................................................................42 MandateReliefIsUnderDiscussion..................................................................................46

PartIIAnalysisoftheCurrentFiscalDilemmasFacedbySchoolDistricts....................47
WhatthePropertyTaxReportCardRevealsabouttheFutureof NewYorksPublicSchools.......................................................................................47 BudgetedSpendingandEnrollment.....................................................................................47 TheTaxCap:TaxLevyLimitsandExclusions........................................................................48 The201213TaxCapExperience..........................................................................................50 CharacteristicsofSchoolDistrictsthatDidNotTakeFullTaxCapLimitorExemptions......53 CharacteristicsofSchoolDistrictsthatPursuedthe60%Supermajority.............................55 HowMuchMoneySchoolDistrictsHaveandWhereTheyHaveIt......................................58 WhattheLongTermFiscalLandscapeLooksLikeBasedonFundBalanceData.................69 ThePaceofFiscalChange.....................................................................................................75 OtherChallengesSchoolDistrictsFace ................................................................................76 . SummaryofImplicationsandChallenges.......................................................................79

SummaryofConclusions..................................................................................................83 AbouttheStatewideSchoolFinanceConsortium............................................................87

Overview:
InDecember2011,theStatewideSchoolFinanceConsortium(SSFC)publishedaresearchpapertitled: StateAidFormulasandNewYorkSenateNotMakingtheGradeforOurSchools,Childrenand Communities.Thisstudyupdatesmuchoftheworkundertakeninlastyearspaper,aswellascovers newgroundonothercriticalpubliceducationfinanceconcerns. Unfortunately,thenarrativeinassessingtheimpactsof201213statesupportforpubliceducationhas hadnosignificantchange. Soagain,lastMayparentsinaverageandlowwealthcommunitiesthroughoutNewYorkvotedontheir schooldistrictsbudgetfor201213.Andagain,manyoncemoreexpresseddeepdisappointmenteven rageattheirschoolboard,administratorsandteachersforcutsinprograms,staffingandopportunities fortheirchildren. Whiletheangerwasunderstandable,itremainedmisplacedespeciallyinschooldistrictsheavily dependentonstateaidforfiscalsupport.Bylaw,stateaidtoschooldistrictswasallowedtoincreaseby 4.1%,roughly$805million.Bythetimetheaidwasdistributed,only$752million(just93.4%)ofthat moneyfounditswaydirectlytoschooldistrictsacrossNewYork.Eventhoughtherewasfinallyanaid increaseafteryearsofstagnation,frustrationstillneedstobedirectedattheGovernorandLegislature whooncemorelargelypuntedwhentheopportunitypresenteditselftoestablishreformstooffset mandatedincreasedcoststoschools,andtosimultaneouslyandfinallyabolishtheinequitybetweenthe educationchildrenreceiveinthehaveandhavenotschooldistrictsinourstate. The$20billionofstateaidthatwillbedistributedtoschooldistrictsthisfiscalyearwillstillleave hundredsofthousandsofourchildrenshortchanged.Yearafteryeartoomuchofthismoneycontinues toflowtothewealthiestcommunities,withthebesteducationalopportunities.Bystatepolicyandlaw thesebenefitsarereservedforthewealthiestchildrenamonguswhohaveonceagainsecuredand preservedthelargesstheyincessantlyenjoyfromNewYorkStateeventhoughmembersoftheofstate governmentchargedbythestateconstitutiontoensurethatallchildrenreceiveasound,basic educationknowthefundingsystemisfaulty. Whilethescenariodepictedabovecontinuestoexist,thelesswealthyandleastabletomaintaintheir schooldistrictsfiscalandeducationalprograms,continuetohemorrhagefinancialreservesand educationalopportunitiesastheyslideclosertoinsolvencyineveryway.Yet,noplanhassurfacedto createequityandsufficiencyoffundingortoeliminateoralleviatethecostescalationssoharmfulto schooldistrictfiscalandeducationalhealth. Formorethanadecadenearlyeveryresearcherwhohasstudiedstateeducationaidformulas,their distributionandschoolfinancerecognizestheinequities,distortions,favoritismandcontrivednatureof schoolstateaidfunding.YettheGovernor,theAssemblyandtheSenatehavebeenunwillingtoaddress it.Thispastyearmayhaveprovidedmoremoney,butthewealthiestschooldistrictscontinuedto receivefundsfromthesamefiniteandsmallpooloffundsfromwhichthepoorestcommunitiesdraw resources. AsSSFCremindsstakeholderseveryyear,itbearsreviewingagaininthisstudy,thatalthoughthe distributionofschoolaidhasalwaysbeencontentious,therootsofthecurrentproblemdatebackto 1988.OnSeptember19ofthatyear,thenSenatorRalphMarino,commentingontheleadershiphold

4 theLongIslanddelegationwascontinuingtoconsolidateintheupperhouse,toldtheNewYorkTimes, Therehasbeenthisshift,andIdontthinktheUpstatershavereallyrealizedthatandacceptedit. SenatorMarinosassertionwasaprecursorofoneparticularlyinsidiousillustrationofthisshiftthe creationofsomethingknownastheSharesAgreement,which,withitsinceptionthefollowingyear, institutedacalculated,methodicalandpoliticalshiftinthedistributionofschoolaidthathascontinued formorethan20years. TheSharesAgreementwasessentiallyestablishedtoreflectthenotionthateducationaidshouldflowto theschooldistrictsthathavethemoststudents.Thisapproach,however,takeslittleornoaccountof othercriticalindicesthatshouldbeconsidered,suchas:thenumberofimpoverishedofchildrenina schooldistrictoracommunityspropertytaxandincomewealth. GiventheacutelyonerousimpactstheSharesAgreementhasondisparitiesinschoolaiddistribution, theSSFCundertookthistwopartanalysisandassessmentthatplacesaspecialfocusonequitable fundingforallstudentsaswecontinuetorepresentthemorethan400schooldistrictsthatcomprise SSFCmembership. Interestingly,researchconductedoverseveralbySSFChasexposedtheSharesAgreementasashameful sourceofinequityformanyLongIslandschooldistricts.Consistentlytheanalysisofstateaiddata supportstheconclusionthatpublicschooldistrictsonLongIslandarenotamonolithicentity,butare similartotherestofthestateinmanyways.Allschooldistrictsthathavethemostpovertyandleast fiscalcapacitygetshortchanged,regardlessofgeographiclocation,asfinitefundsaredistributedtothe wealthiestschooldistrictsinNewYork.SuchdiscoveriesbySSFCandtheircirculationisjustbeginning tobearfruitasmoreschoolleadersreflectonthehowtheirchildrenhavebeenconstantlycheatedout ofthebenefitswealthierschooldistrictsenjoyasthebenefactorsofinequitablestateaid. PartIofthisstudyprovidesadeepexaminationofstatesupportofpublicschoolfundingoverthepast sixyearsstartingwiththecreationofthenewFoundationAidformulaspearheadedbytheSpitzer Administrationin2007.ObservationsofthecontroversialBulletAidprogramandthelackof meaningfulMandateReformarealsoexplored. PartIIisananalysisofthecurrentdilemmafacedbyschooldistrictsdrawnfromschooldistrictreports aboutfundbalances,budgetchangesandtaxlevies.Additionally,ananalysisoftheimpactoftheTax Caplawwasalsoconducted. ConclusionsoftheSSFCresearchappearonpage83.Keyassertionsofthisanalysis: 1. Whilein200708FoundationAidformulawasacclaimedasthestatesanswertothe constitutionalresponsibilityofprovidingameaningfulandsound,basiceducationforall students,ithasbeenincessantlyandundeniablyfoundtobeinequitable,unfair,unreliable andfiscallyunsustainablefromitsinception. 2. Unfairstateaiddistributionisnot,assomesay,ageographicissuethatpitsUpstatevs. Downstate.ThereareoverthreedozenDownstateschooldistrictsthatsharesimilarwealth andpovertyfactorsasthoseUpstateandthesamebleakfutureasSSFCmemberschool districts.TheinequitiesinthedistributionoftheFoundationAidformulaandthemassive stateaidcutsoverthepastseveralyearswereanintentional,politicallymotivated redirectionofmoneytowealthierschooldistrictsattheexpenseofthelesswealthy.Indeed, theneedsoftheseschooldistrictsareasunderrepresentedasSSFCschooldistricts.

5 3. Recenteffortstoprovidefiscalsupporttoschooldistrictsisartificialmisguidedandlacks direction.ThefailureofthestatetorethinktheFoundationAidformula,theimpactofthe GapEliminationAdjustment(GEA)cuts,theTaxCaplawandtheinequitiesinstilledintothe fiscalandeconomicfabricofschooldistrictswillcontinuetodiminish,ifnotdoom,economic recoveryinasignificantportionofthestate. 4. GarneringthefiscalresourcestokeepthepromiseofaFullyFundedFoundationAid formulaasarticulatedin200708aremoreremotethanever.Thestatewillnotcontinueto sendmoneytoinefficient,ineffectiveornonperformingschooldistrictsmuchlongerassuch aneffortisunsustainableandlacksmerit.Ourresearchuncoverstheseshockingrealities: o Itwilltake50yearstofullyfundFoundationAidattherateofimprovement exercisedlastyear. o Itwilltake6yearstoeradicatetheGEAatcurrentlevelsofdecline. o Itwilltakeover$5.5billiontogettofullfundingintheFoundationAidformula. o Itwilltakeover$2.2billiontoeradicatetheGEAcuts. o Itwilltakejustshortof$8billiontofullyfundFoundationAidanderadicatethe GEAcutsandaccountforexpensedrivenaids. 5. Comparatively,evenbyusingallavailablefundbalances,schooldistrictswiththeleastwealth andanappreciableamountofpovertyonaveragehavetheleastcapacitytousetheir AdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalancetoreplenishthe AssignedAppropriatedFundBalance.Additionally,5%ofallschooldistrictsdonthave enoughAdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalanceto replenishtheAssignedAppropriatedFundBalanceforasingleyear;over22%ofschool districtsareinthesamequandaryinlessthan2yearsinthisscenario;andalmost39%of schooldistrictsinlessthanthreeyears.Thesedataraiseasignificantdangersignalthatwarns abouttherealpotentialforaneducationalcalamityinthenottoodistantfuture.The simultaneousandcompleteuseoftheAdjustedRestrictedFundBalanceandAdjusted UnrestrictedFundBalanceforthispurposewouldbeanunmistakabledisasterbecause absentthesefundsadistrictcannotoperate. 6. ThepropertyTaxCaplawguaranteesthatthoseschooldistrictswithlesswealth,fiscal capacityandthegreatestpovertywillnotprospereducationallyorfiscally.Whencoupled withpaststateaidfreezesandcuts,andtherecentinsufficientstateaidreductionofthose cuts,itmakesitnearlyimpossibleformanyschooldistrictstosurvivefiscallyoreducationally overthenextfewyears.Withmanyschooldistrictsinfiscalandeducationaljeopardy,the qualityoflifeinthesecommunitiesaswellaseconomicdevelopmentopportunitieswill beseverelydiminishedastheschooldistrictdiminishes.Newresidentsorbusinessesare attractedtoaschooldistrictthatisinfiscaloreducationaldecay. 7. Absentsignificant,solidandexpansiverecommendationsforanewFoundationAidformula, andaccelerationoftheeradicationofGEAcutsthroughamoreequitabledistributionof thosefundsandsolid,viableinitiativestoadvancecostefficienciesandeffectivenessin schooldistrictsbythecurrentNewNYEducationReformCommissioninitspreliminaryreport forDecemberof2012,thecommissionmustbeimmediatelydisbanded.Areconstituted commissionmustbeformedofthosefamiliarwiththeworkings,successopportunities,and failuresofschooldistrictsfiscally,educationallyandhaveafirmgraspoftheconceptof equity. Thereconstitutedcommissionmustimmediatelyexaminestateaidtoschoolsandschool districtmandatesandmakerecommendationsforlegislativeactionontheircontinuance, modificationorabandonment.Newrecommendationsmustoccurandbeimplementedinto lawbyApril1,2013andthatwilltakeeffectinthe201415schoolyearsothateveryschool districtcanincludethemintheirplanningforthe201415schooldistrictbudget.

6 8. Inanypoliticalsensethestateiscurrentlyincapableofsolvingtheproblemsofschool funding.Aseparatecompletelynonpoliticalcommission,madeupofthosewhostudy schoolfinanceandequityissuesshouldbeimmediatelyconvenedtocreateandforwardfor legislativeactionbyDecember1,2013anewstateaidformulabasedon: o Fiscalcapacityandpovertylevelsofschooldistricts: o Aminimumlocalshareofeducationalcoststobebornebyeveryschooldistrict; o Acomprehensivestateaidformulathataccountsfordemographic,geographicand regionalfactors,and; o Appropriatemeasuresofcosteffectiveness,efficiency,andeconomyofscale requiredtomaintainnewstateaidlevels. 9. Schoolboards,superintendents,andbusinessofficialswillhavetotacklenewrolesas defendersoftherational,thoughtful,efficientandeffectiveschooldistrictoperations, practicesandpoliciesastheyfaceunprecedentedscrutiny.Costeffectiveness,efficiencies andeconomiesofscalewillbeparamounttopublicandpoliticalsupport.Theimmediate selectiveabandonmentofineffectiveandinefficientoperations,practicesandpolicieswillbe requiredforsuchsupport. 10. Stategovernmenthasofferednoformal,recognizableorconstitutionallysuitableplan movingforwardthataddressestheshortandlongtermreformandfiscalsustenanceofthe statesnearly700schooldistricts.Rather,thereisajumbleofvagueandimprovisational strategiesaimedatthesurvivalofhundredsofbatteredandbruisedfiscalandeducational entitieshavinglowfiscalcapacityandhigherlevelsofpoverty. 11. BulletAidisawrongmindedprocessthatisanextensionofpoliticalauthorityatitsmost cynical.SchooldistrictsthatreceiveBulletAidarealwaysgratefulforanynewfunding. However,someareneedyandsomearenot.Ourdatasuggeststhatthedistributionofthese fundsismixedatbest.Itisdistributedtothewealthiestandthepoorestschooldistrictsor, asweseeit,tothehighneedschooldistrictsandtothe"noneedschooldistricts."Wecan identifynostatisticalcorrelationbetweenindicatorsofneed,suchaspovertyorwealthfiscal conditions,oranythingelseintheamountoffundsgiventoschooldistrictsingeneral.The detailsofthedistributionofthesefundsrunthegamutfrompoliticallycalculatedto haphazardatbest.BulletAidisbeyondaflawedsystem;itiswrongandshouldbe redirectedtoprovideanequitabledistributionofsuchfunds.

PartIAnExaminationofStateSupportforPublicSchoolFundingSince2007
StateaidtoschooldistrictsisdeterminedbyaformulathatiscontainedwithinstateEducationLaw.In 200708GovernorElliottSpitzerandtheLegislaturecreatedanewstateaiddistributionsystemthatwas designatedasFoundationAid.TheconceptionbehindthecreationofFoundationAidwastwofold: First,toensurethatmorefundingwouldflowtoschooldistrictstohelpthemmeetrenewed callsbytheBoardofRegentsforincreasedstudentperformanceandhighergraduationrates knownastheContractforExcellence Second,tosatisfytherecentdecisionhandeddownbytheNewYorkCourtofAppealsinthe CampaignforFiscalEquity(CFE)casethatcitedtheconstitutionalmandatethatthestateis obligatedtoprovidesufficientfinancialresourcestoschoolstoprovideallchildrenwitha soundandbasiceducation. WhiletheCFEcasefocusedsolelyontheinequitabledistributionofeducationaidtoNewYorkCity,the creationofFoundationAidwasaimedatprovidingadequatelevelsofaidtoallofthestatesschools, againtohelpthemcomplywiththeRegentsContractforExcellence. Further,thedistributionofthesesufficientresourceswastoreflecttheneedsoftheschooldistrict basedonitswealth.Lowwealthandaveragewealthschooldistrictswouldreceivegreaterperpupilaid supporttoreflectagreaterrelationshipbetweentheirincomeandpropertywealthandstudent populationcomposition(forexample,higherlevelsofchildrenwhowereimpoverished,nonEnglish speakersorevidencedotheratriskindicators). Theplancalledforaphaseinofthenewaidformulaoverfouryearstoallowthestatetogradually reallocatetheresourcesneededtomeetitsobjectives.Inotherwords,FoundationAidallocations wouldincreaseannuallyforschooldistrictsfrom200708throughthe201011schoolyear,atwhich timeschoolswouldarriveatthefullfundinglevelsdefinedunderthenewformula.Itwasnottobe. TheentirehistoryoftheflawedFoundationAidformulathatformsthebaseofallstateaidfrom2007 08to200910,andtheimplementationofconceptoftheblatantlyinequitablesharesagreement,can befoundinourpublisheddocumentfromDecember1,2011entitled,StateAidFormulas&NYSenate NotMakingtheGradeforOurSchools,Children&Communities.Theentiredocumentisavailableon ourwebsiteat:http://www.statewideonline.org/ConfSept2012.html.Itwillprovideadditional backgroundtoenhancereadercontextforthispaperthatpicksupstateaidhistoryat201011.

ThePlanThatStillDoesntWork(AssumingThatThereStillIsanActualPlan)
BythethirdyearoftheFoundationAidphaseinplan,thestatebegantoexperienceaseverefinancial crisis.AsaresultFoundationAidwasfrozeninthethirdyearofimplementation(200910)atonly37.5% ofthefullimplementationtargetandcontinuedtobefrozenintothefourthandoriginalfinaltarget yearforfullimplementation(201011).Offurtherconcern,onthethirdyearoftheplannedphasein, thestateimplementedabackdoorstateaidcutmoreaccuratelydefinedasadefundingsystem thatwasdesignatedastheGapEliminationAdjustment(GEA).AsFoundationAidwasfrozen,total educationaidwassimultaneouslycut. Specifically,thecutinstateaidtoschooldistricts(TheGapEliminationAdjustmentorGEA)was intendedtohelperadicatethestatesownfiscaldeficitwithportionsofthemoniespromisedtoschools redirectedtootheruses.GEAcutstotaledabout$2.14billion(201011).Addinginsulttoinjury, reflectingthetardyreceiptoffederalMedicaidmoney,thestatesbookswerebalancedwithafurther $132millionbeingwithheldfromthelaststateaidallotmentcheckssenttoschooldistrictsinJune2011. Somemodestaidincreaseswereprovidedaspromisedpartialreimbursementsbuildingaid,BOCES aid,transportationaidandsupportofprogramsforstudentswithdisabilities,tonameafewbutthese innowaymitigatedthedamagewroughtbyGEAcuts.

8
Major School Aid Changes 2010-11, 2011-12 and 2012-13 ($ in Billions) Program 2010-11 2011-12 $ Change 2012-13 $ Change % Change Foundation Aid $14.894 $14.894 $0 $15.005 $0.112 0.7% Building Aid $2.489 $2.633 $0.144 $2.721 $0.088 3.3% Other Aids $4.479 $4.288 ($0.191) $4.440 $0.152 3.5% Gap Elimination Adjustment ($2.138) ($2.556) ($0.418) ($2.267) $0.290 -11.3% Restoration of GEA $0 $0.000 $0.000 $0.110 $0.110 Federal Offset to 2010-11 GEA $0.726 $0 ($0.726) $0 $0 Federal Education Jobs Fund $0.608 $0 ($0.608) $0 $0 Reduction to Cover State Medicaid Shortfall ($0.132) $0 $0.132 $0 $0 Total Aids $20.925 $19.258 ($1.667) $20.010 $0.752 3.9% ThesedatasetsarebasedontheactualstateaidrunssummarizedinSA1213andcomponentpartsDSAx1spreadsheetsfrom theStateEducationDepartment.TheydonotincludeaidtheeducationintheenactedbudgethatfundssuchthingsasTeacher ResourceandComputerCenters,nonpublicschoolaidorthenewtransportationfundingforcertainstudentsinNewYorkCity, etc.AbriefbutenlighteninganalysisofthesedataandrelatedmattersisprovidedbytheComptrollerofNewYorkStateon pages4344atthefollowingwebsite:http://www.osc.state.ny.us/reports/budget/2012/201213_Enacted_Budget.pdf

Forthe201112schoolyear,thestateimplementedanother,deeper,GEAcutof$2.79billionof promisedaidtoschooldistricts.Theamountofcutswasreducedbyalastminutepartialrestorationof $229million,whichwillbediscussedlaterinthisexamination. Luckily,overthe201011and201112schoolyearsthefederalgovernment,throughvarioussubsidies, largelytiedtoeconomicstimulusprogramsprovidedalmost$1.3billiontohelpschooldistrictsretain employeesandeducationalprograms.However,thisfederalfundingranoutbytheendofthe201112 schoolyear,creatingadefactobudgetgapforlargenumbersofschooldistrictsthatcontinuetotryto maintainemploymentpositionspreviouslyfinancedbyfederalEducationalJobsFunds(EJF)or StabilizationFunds. VariousotherfederalStimulusmoniesandaidstofosterschoolconstruction,consolidationofservices, transportationandprogramsforstudentswithdisabilitiesaside,thelossofFoundationAidrevenue totaled$4.826billionoverthe201011and201112schoolyears.Thisissignificantbyanymeasure. Althoughschooldistrictshadbeenabletorelyonthenowexhaustedfederalmoniestosupport educationalprogramsandmaintainstaff,theongoingresponsibilitytoprovidefundingtoschool districtsstillrestswiththeLegislatureandGovernor.Todate,nospecificstrategyorplanhasbeen developedbystategovernmenttoreplacethefederalfundsormoreimportantlytofinishthe originalFoundationAidimplementationscheme.TheproofisfoundintheamountofFoundationAid andreductionoftheGEAfor201213.Datacontainedinthechartbelowprovideabackdropofthe impactoflastthreeyearsstateaidcuts(GEA)andillustrateshowdifficultitisandwillcontinuetobe forlowwealthandaveragewealthschooldistrictstomaintainbasicprograms.

School Aid Changes 2010-11, 2011-12 & 2012-13 ($ in Billions) Foundation Aid vs.The Gap Elimination Adjustment Program 2010-11 2011-12 $ Change 2012-13 $ Change % Change Foundation Aid $14.894 $14.894 $0 $15.005 $0.112 0.7%

Gap Elimination Adjustment Restoration of GEA

($2.138) $0

($2.556) $0.000

($0.418) $0.000

($2.267) $0.110

$0.290 $0.110

-11.3%

Reduction to Cover State Medicaid Shortfall ($0.132) $0 Total Aids $12.624 $12.337 Net Difference ($2.270) ($2.556) Total Difference for 2010-11 and 2011-12 Total Difference for 2010-11, 2011-12 & 2012-13 (The LOST PROMISE)

$0.132 ($0.287) ($0.287) ($4.826)

$0 $12.849 ($2.156) ($6.982)

$0 $0.512 $0.400

4.1%

FoundationAidandGEAreductionsneedtobeseparatedfromearnedandincentivizedaidprograms suchasbuildingaid,BOCESAidandothersuchaids.Ofthe$752milliononly$512(68%)ofallaidgoes

9 tothecontinuousbasicoperationsoftheschooldistrict.TheGEAsettlesinatjustbelow$2.2billion. However,thegainsintheGEAreduction(adecreaseofadecrease)offsethadamarginaleffectfor manyschooldistrictsduetothelossof$608millioninEJFfundsattheendof201213 Insummary,FoundationAidwasagainfrozeninthebudgetfor201112whiletheamountofGEAcuts wereincreasedby19.5%overthepreviousyearscutlevels.By201213FoundationAidwasincreased just.7%($112millionstatewide).Concurrently,theGEAcutswerereducedby15.6%($400million statewide).Theresultwasthatstateaiddirectlytoschooldistrictswaslessin201213thanitwasin 201011theyearfullimplementation(commonlyknowninstateaidcirclesasthepromise)ofthe FoundationAidFormulawassupposedtooccur.Asitstandsnowstateaidtoschooldistrictsis$915 millionless(4.4%)thanin201011.That$915millionis$163millionmorethantheentirestateaidthat willbesenttoschooldistrictsin201213.Collectively,thecumulativelossofjusttheGEAoverthelast threeyearshasbeenalmost$7billion.Thats$7billioncutfromanticipatedfunds(withthe acknowledgmentthatFoundationAidwasfrozen).The$1.3billionfederalstimulusfundsofvarious varietiesarealsogone.

GEACutsTheBudgetImpact201011
Thefollowingscatterplotsfocusontherelevantdistributioninthe201011budgetyearofstateaidcuts toschooldistrictsacrossthestate.Thetrendsdisplayedinthesescatterplotsarereflectiveofevery schooldistrictinthestate. ThisscatterplotshowstheincreasedburdenplacedonschooldistrictswithstateaidcutsundertheGap EliminationAdjustmentenactedintolawfor201011.ThehorizontalaxisrepresentstheCombined WealthRatio(CWR).TheCWRisaschooldistrict'sincomeandpropertyvaluescomparedtothestate average.AnaverageCWRequals1.SchooldistrictswithaCWRhigherthan1arewealthierthan average.Theverticalaxisrepresentsthestateaidreductionasapercentofeachschooldistrictsbudget calledTotalGeneralFundExpenditures(TGFE).TheCWRchangesslightlyeachyear,sothescatterplots haveconsideredCWRsupto1.25asbasicallyaveragewealth. ThesescatterplotshavebeentruncatedataCWRof8.0asdatabeyondthatdisplaysthesamepattern asdataforallotherschooldistrictwithaCWRof2.0andhigher.TogobeyondaCWRof8.0addsno greaterunderstandingofthesedataandservesonlytomakedatapointssmallerandmoredifficultto discernastherangeincreases.Additionally,itwouldonlyshowtheenormouswealthofaboutadozen schooldistrictsthatendup withsuchlowimpactstateaid cutswefearthatthefocuson theequityissuesintotal wouldbelostontheshockof thesignificantinequity exemplifiedbytheveryfew andtheaggregatepointabout equitymightbeignored. Therefore,thelimitonthe CWRhasbeensetat8.0. Schooldistrictsintheredbox haveaCWRof1.25orless.In termsofpropertyandincome valuestheyareonlyslightly aboveaveragetowellbelow average.Theseschooldistricts representcommunitiesof averagewealthtothepoorest schooldistrictsinthestate.

10 TheschooldistrictsinthegreenboxrepresentschooldistrictsthathaveaCWRgreaterthan1.5 (propertyandincomevaluesequaltoorgreaterthan1.5timesthestateaverage).Thesearethe wealthieststateschooldistricts. Thepoorestschooldistricts,thoseintheredbox,hadthegreatestnegativeimpactontheirbudgets causedbythelossofstateaidundertheGapEliminationAdjustmentcuts.However,thewealthier schooldistrictsinthegreenboxhavethesmallestnegativeimpactontheirbudgetscausedbytheloss ofstateaidundertheGEAcuts. Asdemonstrated,thisdistributionsystemisclearlyinequitable.Thisisespeciallytrueforaverageand belowaveragewealthschooldistrictswheretheaidcutstheyexperiencecanonlybemadeupbymajor increasesinthelocalpropertytaxlevy(nowessentiallyimpossiblebecauseofthenewlyenacted PropertyTaxCaplaw)orbysignificantstaffcuts,programcutsoruseofreservesorsomecombination ofanyoralloftheseapproaches. Thishascreatedaparticularlyviciouscycleforthepoorestschooldistrictsthosethatareleastableto payhighertaxesandarealreadystrugglingtomaintainevenbasic,mandatededucationalprograms, cuttingstafftotheboneandusingnearlyexhaustedreserves. TodetermineiftherewasapossibilitythataportionoftheCWRcouldskewtheresultoftheGEAcuts, ananalysisofincomeandpropertyvalueswasundertaken.AsbothfactorscomprisetheCWR,and becauseitisknownthattherelationshipsbetweenpropertyvaluesandincomemaybesignificantly differentacrossthestate,scatterplotswerecreatedtoisolateeachvariableindependently. Anexaminationofthe relationshipbetweenthe IncomeWealthofeach schooldistrictandtheir correspondingnegative budgetimpactoftheGEA cutsisnowprovided.This scatterplotdemonstratesthe increasedburdenplacedon schooldistrictswithGEAcuts fortheyearindicatedonthe scatterplot.Thehorizontal axisrepresentstheAlternate PupilWealthRatio(APWR). TheAPWRisaschool district'sincomevalues comparedtothestate average.AnaverageAPWR equals1.Schooldistricts withanAPWRhigherthan1 arewealthierthanaverage. Theverticalaxisrepresents thestateaidcutasapercentageofeachschooldistrictsbudget(TGFE). SchooldistrictsintheredboxhaveanAPWRof1.25orless.Theseschooldistricts,intermsofincome values,areonlyslightlyaboveaveragetowellbelowaverageandrepresentcommunitiesofaverage wealthtothepoorestschooldistrictsinNewYorkState. Thepoorestschooldistricts,theonesintheredbox,havethegreatestdecreaseinstateaidandhadthe greatestnegativeimpactontheirbudgetscausedbythelossofstateaidundertheGEAcuts.However, thewealthierschooldistrictsinthegreenboxhavethesmallestdecreaseinstateaidandasmaller negativeimpactontheirbudgetscausedbythelossofstateaidundertheGEAcuts.Theschooldistricts inthegreenboxrepresentthoseschooldistrictsthathaveanAPWRgreaterthan1.5(incomevalues

11 ``equaltoorgreaterthan1.5timesthestateaverage).Theseschooldistrictsrepresentthewealthiest schooldistrictsinNewYorkState. Thisagaindemonstratesthatthedistributionsystemisclearlyinequitable.Theshiftofburdenfromthe budgettothetaxlevyisincrediblefortheschooldistrictsthataremostdependentonstateaid.The poorestschooldistrictsarerequiredtohavethelargestpercenttaxlevyincreasesifthestateaidcuts beingofferedbytheGovernorareputintoplace.Further,theaverageandbelowaveragewealth schooldistrictspossesstheleastincomecapacitytocreateandmaintainreservesandeducational programswiththecurrenttaxburden. ThePropertyWealthofeachschooldistrictprovidesanothermeasureofnegativeimpacttothebudget basedontheschooldistrictspropertywealthandthusitsfiscalcapacitytohavesomethingtotax. ThisscatterplotshowstheincreasedburdenplacedonschooldistrictswithstateaidcutsundertheGap EliminationAdjustmentenactedintolawforthe201011budgetyear.Thehorizontalaxisrepresents thePupilWealthRatio(PWR).ThePWRisaschooldistrict'spropertyvaluescomparedtothestate average.AnaveragePWR equals1.Schooldistricts withaPWRhigherthan1are wealthierthanaverage.The verticalaxisrepresentsthe stateaidcutasapercentof eachschooldistrictsbudget (TGFE). Schooldistrictsintheredbox haveaPWRof1.25orless. Theseschooldistricts,in termsofpropertyvalues,are onlyslightlyaboveaverageto wellbelowaverage.These schooldistrictsrepresent communitiesofaverage wealthtothepoorestschool districtsinNewYorkState. Thepoorestschooldistricts (redbox)hadthegreatest decreaseinstateaid,which thereforetriggeredadrastic negativeimpactontheirbudgetsthatwasusuallymitigatedbyschooldistrictsthroughcutsinstaff, programmingandtheuseofreserves.ThisconditionwascausedbyacombinationoftheGEAcutsand escalatingcostsofoperation. However,thewealthierschooldistricts(greenbox)havethesmallestdecreaseinstateaidandthe smallestnegativeimpactontheirbudgets(causedbythelossoffundingunderstateaidcuts).These schooldistrictshaveaPWRgreaterthan1.5(propertyvaluesequaltoorgreaterthan1.5timesthe stateaverage)andrepresentthewealthiestschooldistrictsinNewYorkState. Again,thisdistributionisinequitable.Theaverageandbelowaveragewealthschooldistrictshavethe leastpropertywealthandthereforelackthecapacitytocreateandmaintainreservesandeducational programsastheypossesslimitedtomarginaltaxingcapacity.Bycontrast,thepoorestschooldistricts, thoseleastabletopayhighertaxesandalreadystrugglingtomaintaineducationalprograms,endured thebruntoftheGEAcutswiththediminishmentoftheirprograms,staffandsavingsaccounts.

12

GEACutsTheBudgetImpact201112
Thesametrendsthatexistedin201011continuedinto201112exceptthatthenegativeimpacts becamemoreominous.Thisscatterplotshowstheincreasedburdenplacedonschooldistrictswith GEAcutsforthe201112 budgetyear.Thehorizontal axisrepresentstheCombined WealthRatio(CWR).The verticalaxisrepresentsthe stateaidreductionasa percentoftheeachschool districtsbudget(TGFE). Schooldistrictsintheredbox haveaCWRof1.25orless. Theseschooldistricts representcommunitiesof averagewealthtothepoorest schooldistrictsinNewYork State. Thepoorestschooldistricts (redbox),enduredthe greatestnegativeimpacton theiralreadyweakened budgetscausedbythelossofadditionalstateaidwiththeGEAcuts. However,thewealthierschooldistricts(greenbox)havethesmallestpressureontheirbudgetscaused bytheGEAcuts.TheschooldistrictsinthegreenboxdenotethoseschooldistrictsthathaveaCWR greaterthan1.5(propertyandincomevaluesequaltoorgreaterthan1.5timesthestateaverage).They representthewealthiestschooldistrictsinthestate. Theinequityoncemoreshowsthrough.Thecutsaredeeperandthepatternsarethesame.Forthe secondconsecutiveyear,poorandaveragewealthschooldistrictsmuststrugglewiththeimpactofthe GEAontheirbudgetandhencetheirtaxlevy.Thepoorestschooldistricts,thoseleastabletopayhigher taxesandalreadystrugglingtomaintaineducationalprogramsfromthepreviousyearscuts,mustdig deeperintoprogram,staff andintotheirsavingsto offsetadrasticincreaseintax levythatvoterswouldlikely notsupport. Thesametrendthatexisted in201011basedonIncome Wealthdistribution continuedinto201112,but thenegativeeffectwas deeper.Thepoorestschool districts(redbox)hadthe greatestdecreaseinstateaid andpressurestodecrease theirbudgettocontroltheir taxlevyasadirectresultof themassiveGEAcuts. Thewealthierschooldistricts (greenbox)againhadthe

13 smalleststrainontheirbudgetswithminimalifanyimpactontaxleviesaresultoftheconsiderably lowerGEAcutsperstudent.TheschooldistrictsinthegreenboxrepresentthosethathaveanAPWR greaterthan1.5(incomevaluesequaltoorgreaterthan1.5timesthestateaverage)thewealthiest publicschooldistricts. Schooldistrictresidentspaytheirpropertytaxeswiththeirincome.Thoseofmarginalincomefarethe worstundertheGEAcuts. JustliketheIncomeWealthdistributionoftheGEAcuts,PropertyWealthcutsdisplaythesamebasic pattern.ThescatterplotbelowshowstheincreasedburdenplacedonschooldistrictswiththeGEAcuts forbudgetyear201112.ThehorizontalaxisrepresentsthePupilWealthRatio(PWR).ThePWRisa schooldistrict'spropertyvaluescomparedtothestateaverage.AnaveragePWRequals1.School districtswithaPWRhigherthan1arewealthierthanaverage.TheverticalaxisrepresentstheGEAcut asapercentoftheeachschooldistrictsbudget(TGFE). Districtsintheredboxhavea Impact of Proposed State Aid Cuts 2011-12 PWRof1.25orless.These Property Wealth to State Aid Cuts (Gap Elimination Adjustment) districts,intermsofproperty As % of Budget values,areonlyslightlyabove Cuts As % of Budget averagetowellbelow average.Theyrepresent 0.0% -0.5% communitiesofaverage -1.0% -1.5% wealthtothepoorestschool -2.0% districtsinNewYorkState. -2.5% -3.0% Theseschooldistrictshadthe -3.5% -4.0% greatestdecreaseinstateaid -4.5% -5.0% perstudentandgreatest -5.5% negativeimpactontheir -6.0% -6.5% budgetsandtaxleviesdueto -7.0% -7.5% thelossofrevenueunderthe -8.0% GEAcuts. -8.5% -9.0% -9.5% -10.0% Thewealthierschooldistricts -10.5% inthegreenboxhadthe -11.0% -11.5% PWR (Pupil Wealth Ratio (Property) 1.0 = Average Wealth) smallestdecreaseinstateaid -12.0% 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 andthesmallestimpactson theirbudgetsandthuson theirtaxleviescausedbytheGEAcuts.Theschooldistrictsinthegreenboxrepresentthewealthiestin thestatethoseschooldistrictsthathaveaPWRgreaterthan1.5(propertyvaluesequaltoorgreater than1.5timesthestateaverage). Obviously,theshiftinfinancialburdenwouldneedtobebornebythetaxlevyiftheschooldistrict budgetcouldnotabsorbit.Asdemonstratedinpreviousdatathepoorestschooldistricts,thoseleast abletopayhighertaxesandalreadystrugglingtomaintaineducationalprograms,couldhavethelargest percenttaxlevyincreasesduetotheGEAstateaidcuts.Again,intermsofequityandthefiscalhealth oftheseschooldistricts,thecurrentsystemofstateaidcutsisunacceptable,inequitableandwrong. Theaverageandbelowaveragewealthschooldistrictshavecutconsiderablyfromtheirmeager resourcestomerelysurviveasaviablecommunityschooldistrict.Thiswasthesecondorthird successiveyearthattheseschooldistrictswillbeforcedtotrimtheirbudgetsandusereserves.Thisisa financiallyunsustainablesituation.Afterthetwoorthreeyearsofincessantcutstheleastwealthy schooldistrictsweredesperatelytryingtoretainstaffslevelsthatarealreadyinsufficient,classsizesthat aretoolargeandthegrowinginabilitytoassiststudentswithspecialneeds. WhileSSFChadnomemberschooldistrictsinWestchester,Nassau,Suffolk,Orange,Putnamor Rocklandcounties,ourdatahasalwaysanalyzedallschooldistrictsinthestate.Wehaveoftenincluded

14 datainourreports,programs,presentationsandmeetingsfromotherregionsofthestate.Someof thesedataarepresentedinthenextscatterplot. Itisreadilyapparentfromthisscatterplotthatithasthesamepatternasdatafortheentirestate. FurthereachoftheschooldistrictswithintheredboxhasaCWRlessthan1.21andaFreeandReduced PriceLunch(FRPL)percent ofatleast24%meaning thatalmostoneofevery4 childrenareatsomelevelof poverty. Theschooldistrictsinthese counties,asintheentire state,thatareaverageor belowaveragewealth, experiencedamore dramaticnegativeimpacton theirbudgetsasaresultof theGEAcutsthanschool districtsofaboveaverage wealth.Consequently,the impactofthecutsisnotan Upstatevs.Downstate geographicissueitisa wealthanddemographic issue. Theimpactsofstateaidcutsonthebudgetsofaverageandbelowaveragewealthschooldistrictsis clearlyacriticalchallenge.Withcostescalationsanduncertainrevenues,budgetshavebeenseverely strained.Basicaswellaselectiveeducationalprogramshavebeenlosttothepointwherethequality andveracityoftheeducationalprogramisproblematic. Asignificantlossofrevenuelogicallycreatespressureonaschoolsbudget.Butitalsocreatespressure onacommunityspropertytaxlevy.Levyrevenuesareimportanttoaschooldistrictsoverallrevenue picture.Exceptforminormiscellaneoussourcesofrevenue,thetaxlevyalongwithstateaidand appropriatedfundbalancesaretheprimarycounterbalancetobudgetexpenditures. Taxlevyincreasestosupportaschooldistrictsbudgetremaintheleastdesirablealternativeforobvious reasonsschooldistrictresidentsareloathtoincreasetaxesanddosoonlyreluctantly.Nationaldata confirmsthattaxlevelsinNewYorkingeneralandinsomecounties(allofwhicharemembersofthe SSFC)havesomeofthehighestpropertytaxesinthenation.Infact,theenactmenttheTaxCaplawis proofenoughthatNewYorkerswantabrakeappliedtotaxincreases.

ThesecondyearofGEAstateaidcuts(201112)waslargerandworseforaverageandbelowaverage wealthschooldistrictsthantheoriginalGEA.Moreover,itincreasedthepervasiveprocrastinationof thestatetoresolvestateaidissues,madetheproblemsmorepoliticallydifficulttounravel,andhaslead tofrustrationonthepartofschooldistrictofficialsandcommunitiesthathavetolivewiththesewell knownissues.

GEACutsTheBudgetImpact201213
TheGEAcutsof201213providedsomemodicumofrelieftopreviousGEAcuts.Thescatterplotbelow showstheburdenplacedonschooldistrictswithGEAcutsforthebudgetyear201213.Thehorizontal axisrepresentstheCombinedWealthRatio(CWR).Theverticalaxisrepresentsthestateaidreductionas apercentoftheeachschooldistrictsbudget(TGFE).

15 SchooldistrictsintheredboxhaveaCWRof1.25orless.Theseschooldistrictsrepresentcommunities ofaveragewealthtothe State Aid Cuts 2012-13 poorestschooldistrictsin CWR to State Aid Cuts (Gap Elimination Adjustment) Westchester, Nassau, Suffolk, Orange, Putnam and Rockland Counties Only NewYorkState. Cuts As % of Budget As % of 2011-12 Budget (DOES NOT INCLUDE IMPACT OF JOB $ LOSS) 0.0% -0.5% Thepoorestschooldistricts -1.0% (redbox),enduredthe -1.5% greatestnegativeimpacton -2.0% -2.5% theiralreadyweakened -3.0% budgetscausedbythelossof -3.5% -4.0% additionalstateaidwiththe -4.5% GEAcuts. -5.0% -5.5% -6.0% However,thewealthier This chart shows the impact of state aid cuts on Lower Wealth Districts -6.5% compared to High Wealth Districts -7.0% schooldistricts(greenbox) -7.5% havethesmallestpressureon -8.0% State Aid cuts had a great negative impact on Lower Wealth districts -8.5% compared to Wealthier districts. theirbudgetscausedbythe -9.0% GEAcuts.Theschool -9.5% Thisisanimprovementincondition,howeverinsufficient,comparedtothe -10.0% districtsinthegreenbox lasttwoyears. -10.5% denotethoseschooldistricts -11.0% -11.5% thathaveaCWRgreaterthan -12.0% 1.5(propertyandincome 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) valuesequaltoorgreater than1.5timesthestateaverage).Theyrepresentthewealthiestschooldistrictsinthestate. SomeelectedleadersinAlbanycontinuetoraiseadivisiveperspectivethatcharacteristicallyignores whatthesedatarevealabouttheimpactofthedistributionofstateaidcuts.Theseindividualspreferto suggestthattheimpactofthesecutsisanUpstatevs.Downstate(definedasNassau,Orange, Putnam,Rockland,SuffolkandWestchester,counties)geographicissue. Ourresearchhasshownno State Aid Cuts 2012-13 CWR to State Aid Cuts (Gap Elimination Adjustment) datatosupportthis Westchester, Nassau, Suffolk, Orange, Putnam and Rockland Counties Only Cuts As % perspective.Indeed,when of Budget As % of 2011-12 Budget (DOES NOT INCLUDE IMPACT OF JOB $ LOSS) 0.0% onelookscloselyatschool -0.5% districtfiscalcapacityand -1.0% povertyissues,Downstate -1.5% -2.0% isnomoremonolithicthan -2.5% Upstate.Thesedata -3.0% -3.5% continuetorevealtheany -4.0% unifyingforceforreform -4.5% -5.0% shouldbebasedonschool -5.5% districtfiscalcapacityand -6.0% This chart shows the impact of state aid cuts on Lower Wealth Districts -6.5% povertyissuesandnot compared to High Wealth Districts -7.0% geography.Despitethis, -7.5% -8.0% State Aid cuts had a great negative impact on Lower Wealth districts political/regionalalliances -8.5% compared to Wealthier districts. remainfocusedonthe -9.0% -9.5% preservationofmanyschool Thisisanimprovementincondition,howeverinsufficient,comparedtothe -10.0% lasttwoyears. districtsfiscaland -10.5% -11.0% educationalselfinterests -11.5% ratherthananyattemptto -12.0% 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 secureadequateandfair CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) fundinglevelsofstateaidto assistthechildreninattainingstudentachievementlevelsnecessaryforthesuccessmeasuresas articulatedbytheCommissionerofEducationandtheBoardofRegents.

16 WhileSSFCcurrentlyhasonlyonememberschooldistrictintheaforementionedDownstateregion, ourresearchhasalwaysanalyzedallschooldistrictsinthestate.Someofthesedataarepresentedin thenextscatterplot. Itisreadilyapparentfromthisscatterplotthattheschoolsinthesecountiesdemonstratethesame patternasthesedatafortheentirestate.Further,eachoftheschooldistrictswithintheredboxhasa CWRlessthan1.21andaFreeandReducedPriceLunch(FRPL)percentofatleast24%meaningthat almostoneofevery4childrenareatsomelevelofpoverty. Again,theschooldistrictsinthesecounties,asintheentirestate,thatareaverageorbelowaverage wealth,haveexperiencedamoredramaticallynegativeimpactontheirbudgetsasaresultoftheGEA cutsthanschooldistrictsofaboveaveragewealth.Consequently,theimpactofthecutsisnotan Upstatevs.Downstategeographicissueitisawealthanddemographicissue.Regardlessofthe regionofthestateexamined,thetrenddataisalwaysthesamethoseschooldistrictswiththeleast fiscalcapacityandgreatestmeasuresofpovertylosethemostandhavethemosttolose. Further,forthethirdconsecutiveyear,thecutsaredeeperandthepatternsarethesameaspoorand averagewealthschooldistrictsmuststrugglewiththeimpactoftheGEAontheirbudgetand consequentlytheirtaxlevy.Thepoorestschooldistricts,thoseleastabletopayhighertaxesandalready strugglingtomaintaineducationalprogramsfromthepreviousyearscuts,mustdigdeeperinto program,staffandintotheirsavingstooffsetadrasticincreaseintaxlevythatvoterswouldlikelynot support. Alonebrightspottothesedataisthattheimpactofthecutsatapercentofpreviousyearbudgetisless thanthesecondyearoftheGEAcuts.Thisreliefamountofaboutonetotwopercentofbudget,while welcome,isinsufficienttothesurvivalofabudgetespeciallyiftheschooldistricthaslimitedfiscal capacityasevidencedbytheCWR. (Therecognitionthatschooldistrictshavemadesignificanteducationallyandfiscallyharmfulcutsto programandfinancialsuccesstargetsismoreevidentandisillustratedingreaterdetailintheProperty TaxReportCard(PTRC)sectionofthisreportfoundonpage47.)

GEACutsThePropertyTaxLevyImpact201011and201112
TocoverGEAcutsforbudget year201011asindicatedon thescatterplotbelow,some schooldistrictsneededto increasetheirpropertytax leviesin201011.Duetothe unrealisticlevelofincreases calledforinmostcases,these levieswereinfactnotboosted bytheamountshowninthe scatterplots.Insteadhigher taxlevyincreaseswerekeptat modestlevelsbyschool districtsmakingsometimes massivecutstoeducational programs,interscholasticand cocurricularactivities, transportation,deferred equipmentandbuspurchases nottomentionthelossof over10,000schooldistrict employeesstatewideover

17 thelasttwoyears.Asdemonstratedonthescatterplot,poorandaveragewealthschooldistrictsagain borethebruntofthesedraconiancuts.Conversely,wealthyschooldistrictsbarely,ifatall,reachedany discomfortlevel. Thepoorestschooldistrictshadthegreatestimpactontheirincreaseintheirtaxleviescausedbythe lossofstateaidunderthe201011GEAcuts.ThisincludestheFederalJOBSRestorationmoneyof$608 milliontobespentoverthe201011and201112schoolyears.Mostofthefunds,approximately$400 million,wasspentin201112alone.Averageandbelowaveragewealthschooldistrictsandespecially thepoorestschooldistrictssimplydidnothavethecapacitytoshiftthisincredibleburdentothetax levy. Goingforwardschooldistricts intheredboxwillcontinueto cutstaff,programsand servicesandwhatever reservesthatexisttoavoid addingtothetaxburden. Thisisthesamestrategyused byschooldistrictsinthe budgetyear200910when FoundationAidwasfirst frozen.Asnoted,this diminishestheabilitythese schooldistrictswillhaveto provideaviableeducational programandagain underscoresthattheimpacts ofGEAareunacceptable, inequitableandwrong. Tocoverstateaidcutsfor budgetyear201112,thescatterplotataboveshowshowsomeschooldistrictswouldhaveneededto increasetheirlevies.Again,thehighfiguresofuptoalmost45%areunrealistictoputbeforevotersand wereultimatelyavoidedbymorebudget,programandstaffcuts,anduseofanyexistingreserves. Thepoorestschooldistricts(redbox)wereinthegreatestjeopardytoincreasetaxleviescausedbythe lossofstateaidunderGEA.Also,asnoted,thiswasthelastyeartospendthefederalJOBSRestoration moneyifaschooldistricthadnotalreadyexhaustedthesefundsintheschoolyear201011. Thethoroughdemonstration ofunfairnesspermeates thesedata.Thepoorest schooldistrictsagainwere requiredtoendurethe largestpercenttaxlevy increases.Schooldistrictsin theredboxcontinuedtocut staff,programs,servicesand useupeverdwindling reservestoavoidoneroustax increasesintheir communities. Asdepictedinthescatterplot totheleft,SSFCnonmember regionsatthetime,suffered thesameproblemsasSSFC

18 memberschooldistricts.Wealthyschooldistricts,ontheotherhand,hadamucheasiertimeoverthe twoyearsofGEAcuts. Undoubtedly,thecontinuousexistenceofthethencurrentandfrozenstateaidformulaandthecurrent sizeandformulafortheGEAcutswilldiminishthelengthoftimeaverageandlowwealthschool districtswillhavetoprovideaviableeducationalprogram.Thewealthiestschooldistrictsthosewith thegreatestrevenuegenerationcapability,thelargestreserves,andthoselessdependentonstateaid willbeabletomaintaintheirsignificantandqualityprogramsforaconsiderableperiodoftimewith littlemajoraffectonbudgetortaxlevy.

The201112PartialStateAidRestoration
Atthebehestofthestate legislaturetherewasasmall, partialrestorationofstateaid toschooldistricts.This restorationtotaled$229 millionforthe201112school budgetyear.Whilethe distributionofthesefunds appearedonthesurfacetobe basedonneed,thiswasnot theonlycriterion.Thefunds wereonlysomewhattargeted toschooldistrictswhere therewasacriticalneedin favorofapoliticalassurance thateveryonegets something. Onethirdoftherestoration fundswenttotheBig5city schooldistricts(NewYork, Yonkers,Syracuse,Rochester andBuffalo),butover25% wenttothewealthiest countiesinthestate.Lessthan45%wenttotherestofthestate.Theover$19.5millioninrestoration (8.5%ofthetotal)thatwenttothewealthiestschooldistrictswouldhavehadagreaterpositiveimpact iftheyhadbeendistributedtothestatesneediestschooldistricts.Thiswasapoliticallymotivated decisionnotaneducationallysoundfiscaldecision.

GEACutsThePropertyTaxLevyImpact201213
Tocoverstateaidcutsforbudgetyear201213,thescatterplotthatfollowsshowshowsomeschool districtswouldhaveneededtoincreasetheirlevies.Again,thehighendamountsofuptoalmost3040 percentwereunrealistictoputbeforevotersandwerethereforeavoidedbymorebudget,programand staffcuts,aswellastheuseofanyexistingreserves. Thepoorestschooldistricts(redbox)wereinthegreatestjeopardytoincreasetaxleviescausedbythe lossofstateaidunderGEA.Also,asnoted,201112wasthelastyeartospendtheFederalEducation JOBSRestorationmoneyforthoseschooldistrictsthathadnotalreadyexhaustedthesefundsinthe schoolyear201011.

19 Althoughthisconditionis betterthanthatofthe previousyear,itstillposesa Cuts As % of Tax Levy significantburdenonschool 45% districtsastheyfacethefirst 40% yearoftheTaxCap.The This chart shows how much more taxes would need to increase in Lower Wealth completedemonstrationof districts compared to Wealthy ones to replace the porposed state aid cuts. 35% Districts will need to continue to use what reserves they have and make additional unfairnesscontinuesto staff cuts to prevent such tax increases. permeatethesedata.The 30% poorestschooldistrictsagain Little if any reserves will remain. It is unclear how districts will be able to continue with such aid cuts. wouldhavebeenrequiredto 25% endurethelargestpercent taxlevyincreases.Sofor 20% This is an improvement in condition, however insufficient, compared to the thefourthconsecutiveyear last two years. For the the poorest districts this is an unacceptable option. 15% schooldistrictsintheredbox continuedtocutstaff, 10% programsandservicesand depletereserves,ifany 5% existed,toavoidadditionsto thetaxburdenintheir 0% 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 communities. CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) Toagaindemonstratethatthisinequityisnotgeographic,datahasbeencompiledtodisaggregate schooldistrictmetricsinpredominatelynonSSFCgeographicareas.Asdepictedinthescatterplotto theleft,generalSSFCnon Impact of State Aid Cuts 2012-13 memberregionssufferedthe CWR to State Aid Cuts (Gap Elimination Adjustment) As % of 2011-12 sameproblemsasSSFC Tax Levy (DOES NOT INCLUDE IMPACT OF JOBS $ LOSS) Cuts As % memberschooldistricts. of Tax Levy Westchester, Nassau, Suffolk, Orange, Putnam and Rockland Counties Only 45% Wealthyschooldistricts,on theotherhand,havehada 40% mucheasiertimeoverthe This chart shows how much more taxes would need to increase in Lower Wealth districts compared to Wealthy ones to replace the porposed state aid cuts. threeyearsofGEAcuts. 35% Districts will need to continue to use what reserves they have and make additional staff cuts to prevent such tax increases. Althoughthenumericimpact 30% This is an improvement in condition, however insufficient, compared to the oftheGEAonthisportionof last two years. For the the poorest districts this is a very undesireable option. 25% thestateissignificantlyless thanthestateasawhole,itis 20% stillunacceptableforschool districtswithmarginalfiscal 15% capacityandhighpoverty. Theseschooldistrictswill 10% continuetocutprogramsand 5% usefundbalancesastheywill notsustainvotersupportfor 0% taxlevyincreasesof510 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) percentorhigher.Taxlevy suppressionintheseregionsandthroughoutthestatewillcontinuetobeasignificantobjectiveasa resultoftheTaxCaplaw. Undoubtedly,thecontinuedexistenceofthecurrentstateaidformula,aswellasthecurrentsizeand formulafortheGEAcuts,willdiminishthelengthoftimethataverageandlowwealthschooldistricts willhavetoprovideaviableeducationalprogram.Thewealthiestschooldistrictsagain,thosewiththe greatestrevenuegenerationcapacity,lowestlevelsofpoverty,thelargestreserves,andthoseless dependentonstateaidwillbeabletomaintaintheirsignificantandqualityprogramsfora considerableperiodoftimewithlittlemajoraffectonbudgetortaxlevy.
Impact of State Aid Cuts 2012-13 CWR to State Aid Cuts (Gap Elimination Adjustment) As % of 2011-12 Tax Levy (DOES NOT INCLUDE IMPACT OF JOBS $ LOSS)

20

HowGEACutsandtheLossofFederalEducationJobFunds(EJF)Negated201213Education AidIncreases
Lastspring,aselectedleadersinAlbanycelebratedtheontimepassageofthe201213Budget,they appeartohaveneglectedtomentionanoftenoverlookedbutcriticaldetailwhendiscussingwhat theyaccomplishedinpubliceducationfunding.WhiletheExecutiveBudgetincreasedaidtopublic schooldistrictsby$752million,therewaslittleornoattentioncalledtothephaseoutofFederalEJF fundstotaling$608millionthatwouldoccuratthesametime.Theresultwasthatthenetincreaseof stateaidwasthereforeonly$144million. Further,asindicatedearlierinthispaper,ofthe$752millioninneweducationaid,about$240million ofthisamountwasallocatedasnonFoundationAidwhichisusedforsuchitemsasBuilding, Transportation,ExcessCost(educationalprogramsforstudentswithdisabilities)andBOCESaids.The issuewiththisallocationisthatthesefundswerethestatesportionofincentivizedaidsthatarein effectpartialreimbursementsforthealreadyexpendedcostsofprograms.Therefore,whenthese reimbursementaidsarealsosubtractedfromthepurportedincreaseinstateaid,schooldistricts collectivelyareleftintheredintermsofcombinedfiscalsupportfromstateandfederalgovernment sourcesfor201213whencomparedto201112.Itisthereforereasonabletoconcludethattheimpacts onindividualschooldistrictsbasedontheirfiscalcapacityandlevelofpovertywillbedrastically differentduetothedistributionofFoundationAidandcontinuousGEAcuts. ThestatesinabilitytoaddressthelossofFederalEJFrevenuewhichkeptmanyschooldistrictsafloat whentheGEAwasimplementedandotherwiseeviscerateddistrictfinancesandinturntheir educationalprogramsisparamounttothecomprehensionofthefiscaldilemmafacedbyschool districtsfortheforeseeablefuture.FoundationAidhadntchangedforthreeyearspriortothepassage ofthe201213statebudget.OverthistimetheGEAhadnotonlybeencreated,butalsoincreasedfrom itsoriginallevel.ThefocusofourresearchwastostudytheincreaseinFoundationAidandthe reductionoftheGEAcutsasamechanismtomaketheschooldistrictsfiscallywhole. Ifonelooksonlyatthelossofthe$608millionofFederalEducationJobsFunds(EJF)attheendof2011 12andthestatesabilitytooffsetjustthatamount,theresultsoftheireffortsaremixedatbest.Asis thecontinuouscasewitheverystateaidinitiative,thedetailspaintadifferentpicturethanthe aggregate.Thedistributionof$512millionofnewFoundationAidandreductionstotheGEAcutsfor 201213toschooldistrictsmakeupapproximately84%ofthelossofthe$608millioninEJFmonies. However,thecharacteristicsofthedistributionofthatmoneyarecriticaltounderstandhowstateaid continuestobeinequitable. TheCWRisastandardexampleoftheassumptionoffiscalcapacityofaschooldistrict.Thetabletothe leftshowsthattheuseof Impact of the Enacted Budget Relative to the Replenishment Max Min Average % of all FoundationAidandreductions of the Expired Federal Program- Education Jobs Funds (EJF) CWR in CWR in CWR in Districts totheGEAcutsprovided24% and the Combined Wealth Ratio (CWR) Data Set Data Set Data Set ofallschooldistrictswith 100%or more of Total EJF Supplanted 1.05 0.186 0.47 24% enoughormorethanenough Less than100% but 75% or more of Total EJF Supplanted 1.446 0.443 0.74 16% aidtooffsetthelossofEJF monies.TheaverageCWRof Less than 75% but 65% or more of Total EJF Supplanted 1.482 0.516 0.83 13% thisdatasetwas.47(lessthan Less than 65% but 50% or more of Total EJF Supplanted 1.853 0.543 0.83 16% halftheaveragewealthofa Less than 50% of Total EJF Supplanted 44.96 0.626 2.56 32% schooldistrictinNewYork State);theminimumCWRinthisdatasetwas.18(aschoolwithextremelylowfiscalcapacity;lessthan afifthofthestateaverage);butthemaximumCWRis1.05(barelyaverage).Iftheanalysisweretostop atthispoint,itwouldseemthattherightschooldistrictsgotthemoniestheyneedtojustoffsettheloss oftheEJF.Butthatisnotevenaquarteroftheschooldistrictsinthestate.Infactalmost71%ofall schooldistrictshaveaCWRbetween.186and1.05. Thus,anumberofschooldistrictsintheclearlybelowaveragefiscalcapacitytoaveragefiscalcapacity rangemustnothavereceivedenoughfundstooffsettheirlossofEJF.Whynot?Inpartthisisbecause 32%ofallschooldistrictsreceivedbetween49.9%and15%ofequivalentEJFmonies.Theeveryone getssomethingdistributionmethodcontinueswiththeLessthan50%ofTotalEJFSupplanteddatasub

21 setthatcontainsamaximumCWRofalmost45andaverageCWRof2.56.Inequitiesareevident throughoutthisdistribution.TheLessthan50%ofTotalEJFSupplanteddatasubsethastwoproblems. First,itprovidesfundstoaschooldistrictwithaCWRof44.96andsimultaneouslyprovidesan insufficientamountoffundstoaschooldistrictthathasaCWRofonly.626(justslightlyabovehalfof thestatewideaverage).Second,almostathird(32%)oftheseschooldistricts,injustthisdatasubset, haveCWRsat1.0orbelow.Concurrently,withinthesamedataset,53%haveCWRsoveroneandahalf times(CWR>1.5)thestateaverage.Thisdistributionispatentlyinequitablebyanymeasureofschool districtfiscalcapacity. Moreover,fundswerealsodisbursedsoastoprovideschooldistrictswithCWRsashighas1.853(over fourtimesgreaterthanthe100%ormoreofTotalEJFSupplanteddataset)withenoughfundstooffset Lessthan65%but50%ormoreofTotalEJFSupplantedasnotedindatasetabove. ExecutiveProposal RelationshipBetweenthePercentReplacementof Therewasadynamicpolitical FederalJOBS$toCWR201213 moveatplaywhenthe ExecutiveBudgetwasfirst announced.Thenextscatter plot(left)detailsthe distributionoffundsaccording totheExecutiveBudgetand illustratesthedistributionof FoundationAidandthe reductionoftheGEAcuts basedonCWRsupto4.0.The ExecutiveBudgetreallocated $250millionfromtheentire stateaidbudgetofdirect disbursementstoschool districts.Thesefundswere earmarkedforuseby competitivegrants. CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) TheSSFCimmediatelyand EnactedBudget201213 RelationshipBetweenthePercent assertivelynotedtoour ReplacementofFederalJOBS$toCWR membership,legislators,the 180% 170% Governorsofficeandother 160% stakeholdersthatthegrant 150% program,asproposed,while 140% seeminglypositiveintheory, 130% wasunprovenandmiredin 120% implementationandstartup 110% 100% woesfromthepreviousyear. 90% Further,whencomparedtothe 80% criticalprogramandfiscal 70% survivalneedsofschool 60% districts,thegrantprogram 50% wasnotconsideredapriority 40% byschooldistricts.Other 30% 20% organizationsseizedonor 10% discoveredthisrationaleand 0% overtime$200millionwas 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) reallocatedinthefinalbudget toincrease(albeitbyasmallamount)FoundationAidandmorereductionstotheGEA. NotethatthedistributionofthefundsasaproportionoftheEJFfunds(thisscatterplotdistributiononly goesuptoCWRof4.0)remainedbasicallyunchangedbetweentheexecutiveproposalandthefinal legislativeenactment.Thelegislaturesimplythrewthemoneyattheproblemwithonlyminor
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22 improvementstothedistribution.Notethattheschooldistrictsinthebluebox(thewealthiestschool districts)gotmoremoney.Althoughhigherneeddistrictswerethankfulforthefunds,theinequities continuetoexist,unmodifiedanduncorrected. ExecutiveProposalRelationshipBetweenthePercentReplacementof Furtheranalysisofthe FederalJOBS$toCWR201213forHighNeed&Avg.WealthDistricts averageandbelowaverage 180% fiscalcapacityschool 170% districtsiswarranted.The 160% distributioncurveistoo 150% steeptobetruly 140% 5% discriminatingbetweenthe 35SchoolDistricts 130% relativewealthoftheschool 120% districtsbetween.18CWR 110% and1.25inthisinstance. 100% Notethetightluster 90% betweenschooldistricts 80% beginningwithaCWRof 70% about.55andthosewitha 60% CWRofabout.85.Herethe 50% correlationsbreakdownin 40% boththeExecutiveand 30% enactedbudget.Their 20% percentofreplenishments 10% shouldbehigher. 0% 0 0.25 0.5 0.75 1 1.25 Thesameistruewhenthe CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) enactedbudgetisexamined. Moremoneywenttoschool EnactedBudget201213 RelationshipBetweenthePercent districtswithCWRs ReplacementofFederalJOBS$toCWR between.55and.85asit 180% didtoeveryotherCWR 170% level.Buttocreatea 160% greatercorrelationbetween 150% theCWRandthe 24% 140% 162SchoolDistricts distributionofstateaid 130% fundsthe.55to.85CWR 120% range,forexample,should 110% havebeenmorerobustly 100% funded. 90% 80% Itisplausibletoconclude 70% thatwealthyschooldistricts 60% receivedadditionalfunds 50% becausethelesswealthy 40% weredeniedfunds.Thatis, 30% thateveryonegotthenet 20% resultofthestateaidand 10% reductioninGEAcuts 0% 0 0.25 0.5 0.75 1 1.25 becausethereisapolitical CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) stratageminexistencein Albanythatsayseveryonemustgetsomethingwhethertheyneeditmorethanothersornot. CWRsarenottheonlymetricthatcanbeappliedtothesedatasets.FreeandReducedPriceLunch (FRPL)isausefulmeasureofpoverty.Thesedataillustratethesametrendstowardinequityaswere exposedintheCWRdatasets.TheFRPLsofthoseschooldistrictsthatreceivedenoughadditional FoundationAidandGEAcutreductiontooffsettheirEJFaveraged.74(ameasureofhighpoverty). Eventheminimuminthisdatasetissignificantlyhigh.Butthisiswherethemirageofequityevaporates.

23 Eachoftheremainingdatasets % of all showextremelylowpoverty ratesforschooldistrictsthat Districts receivedenoughstateaidto significantlyorconsiderably 24% replacelostEJF. 16% 13% TheLessthan50%ofTotalEJF Supplanteddatasubsetis 16% particularlyproblematic.Of 32% these213schooldistricts(32% ofthetotal),11ofthemhaveFRPLlevelsof0.0,yettheyreceivedbetween42.5%and16.4%(withan averageofover22%)instateaidtosupplantEJF.Alsowithinthissamedatasetare89schooldistricts withFRPLsabove.25toover1.0(duetotheconvolutedwaysuchthingsarecalculated)foranaverage ofFRPLof40%.However,eachoftheseschooldistrictsreceivedlessthan50%ofthelossofEJFinstate aid,(theiraverageamountsupplantedwasonly35%andrangedfrom.15to.499).Thisishardlyan equitabledistributionofstateaidtoschooldistrictswithsuchgreatneeds. Evendeeperanalysisfindsthatthereisno Correlations -The Relationships Between the CWR & FRPL Data and 3 Factors of Fiscal Aid to School Districts: correlationbetweentheCWRandtheEJFinthe The Amount of EJF, the % of EJF Replenished Under the firstplace;anothersignofinequity.Yetthe remedytothisconditionremainedelusiveforthe Executive 2012-13 Proposal,the % of EJF Replenished Executiveandthelegislature.Theycouldhave Under the Enacted 2012-13 Budget addressedtheinequityofthedistributionofthe CWR to EJF (r=) -0.018 EJFanditssubsequentlossbyhighneedand 2 averageneedschooldistricts,butdidnot. r 0.000 CWR to EJF Executive Budget % (r=) -0.281 Whileitisobviousthattherewasnocorrelational 2 r 0.079 relationshipbetweenFRPLandthedistributionof CWR to EJF Enacted Aid (r=) -0.326 EJF,thereisastatisticallysignificantcorrelation r2 0.107 betweentheExecutiveproposalandFRPL.While FRPL to EJF (r=) 0.097 fundingshouldhavebeenhigher,kudosare nonethelessduetotheExecutiveformakingthis r2 0.009 importantconnection.Unfortunatelythat FRPL to EJF Executive Budget % (r=) 0.759 2 correlationlostitsstatisticalsignificancewiththe r 0.575 finalbudgetpassedbythelegislature.The FRPL to EJF Enacted Aid (r=) 0.621 legislatureaddedmorefunds(about$200million) 2 r 0.385 tothefinalstateaidpackagewhilesimultaneously distributingtheseadditionalsumstothelessneedyandthewealthierschooldistrictsasevidencedby dataprovidedherewithregardtotheenactedbudget.
Impact of the Enacted Budget Relative to the Replenishment of the Expired Federal Program- Education Jobs Funds (EJF) and the Free & Reduced Lunch Program (FRPL) 100%or more of Total EJF Supplanted Less than100% but 75% or more of Total EJF Supplanted Less than 75% but 65% or more of Total EJF Supplanted Less than 65% but 50% or more of Total EJF Supplanted Less than 50% of Total EJF Supplanted Max FRPL in Data Set 1.446 0.686 0.7914 0.687 1.036 Min FRPL in Data Set 0.443 0.0045 0.0104 0.033 0 Average FRPL in Data Set 0.74 0.3398 0.314 0.317 0.225

TheGEAisEvenMoreInequitablethanistheCurrentandUnacceptableFoundationAid Formula
Theeducationofstudentsinanyschooldistrictbeginswiththenumberofstudentstobeeducated.The amountoffundsperenrolledstudentadistrictmusteducateiscriticaltoanyanalysis.Schooldistricts arethereforerightfullyconcernedabouttheamountoffundsperenrolleetheyreceivefromthestate. Thisisparticularlytrueofschooldistrictswithlowormarginalfiscalcapacitytoprovidetheirownfiscal resourcestoeducatetheirchildren.Thesameistrueforschooldistrictsthathavelargepercentagesof childrenlivinginpoverty.Andthenthereareschooldistrictsthathaveacombinationofthesetwo criticalattributes:lowtomarginalfiscalcapacityandhigherlevelsofpoverty. ThisanalysisbeginswithdataaboutthecorrelationaldistributionofFoundationAidperenrolled studentandthefiscalcapacityofaschooldistrict(CWR).Thelowerthefiscalcapacityofaschool districtthemoreitwillneedstatefundingtoprovidethesoundbasiceducationrequiredbythestate constitution.Therefore,toensureequity,thedistributionoffundsshouldbehighlycorrelatedtothe

24 CWRofschooldistricts.Tobestatisticallysignificantthecorrelationshouldbeatleast.7andnegative. Thatis,moresignificantFoundationAidshouldbesenttoschooldistrictswiththeleastfiscalcapacity comparedtotheirwealthiercounterparts.However, thesedatadonotreflectthatanticipatedcorrelational 2010-11 2011-12 2012-13 occurrence. FOUNDATION FOUNDATION FOUNDATION AID PER AID PER AID PER Thesedatasupportthenotionthatthecorrelationwhile ENROLLED ENROLLED ENROLLED negativeisnotsignificantintheleastandapproachesan Correlation to Correlation to Correlation to almostrandomdistribution.Infact,littleofthe CWR CWR CWR distributioncanbestatisticallytiedtotheconceptthat r -0.29 -0.24 -0.20 moresignificantFoundationAidshouldbesenttoschool 2 districtswiththeleastfiscalcapacity,ascomparedto 0.09 0.06 0.04 r theirwealthiercounterparts. Thismethoddoesnotevenapproachanequitabledistribution.Alsonotethatthisrepresentsthree yearsofdatawhenstateaidwasfrozenin201011and201112andwhenitwasalteredin201213. Thecorrelationofthedistributionhasweakenedeveryyear,particularlyintheyearwhenthe FoundationAidfundswereincreased.SotheFoundationAidformulafailstheequitytestwithregardto distributionandfiscalcapacity. However,theFoundationAidFormuladoesmuchbetteragainstapovertymeasuresuchasFRPL.Tobe equitable,thedistributionoffundingshouldbehighlycorrelatedtotheFRPLofschooldistricts.Tobe statisticallysignificant,thecorrelationshouldbeatleast.7andpositive.Thatis,moresignificant FoundationAidshouldbesenttoschooldistrictswiththemostmeasureofpovertycomparedtotheir counterpartswithlesspoverty. Thesedatawouldsuggestthatthereisasignificant 2010-11 2011-12 2012-13 correlationbetweenpovertyandthedistributionof FOUNDATION FOUNDATION FOUNDATION FoundationAid.Overhalfofthedistributionseemsto AID PER AID PER AID PER bebasedonthefitbetweenthesetwoattributes.Note ENROLLED ENROLLED ENROLLED thatthisisalsothreeyearsofdatawhenstateaidwas Correlation to Correlation to Correlation to frozenin201011and201112andwhenitwasaltered FRPL FRPL FRPL in201213.Thecautionisthattheinitialhighlevelof correlationhasdrifteddownwardoverthethreeyear r 0.80 0.78 0.75 periodandthedistributionhasweakenedeveryyear, 0.63 0.60 0.56 r2 particularlyintheyearwhentheFoundationAidfunds wereincreased.SotheFoundationAidformulapassedtheequitytestwithregardtodistributionand povertybutislosingthecorrelationalstrengtheveryyear.Athisrateofcorrelationaldeteriorationthe abilitytocallthecorrelationstatisticallysignificantwilloccurinthreeyearsalthoughitwillremain morecorrelatedthattheCWRisnow. TheimpactoftheGEAcutsisclear.Itdevastatesallschooldistricts,butpredominantlyschooldistricts oflowormarginalfiscalcapacityandhigherlevelsofpoverty.Thishasbeenborneoutthroughboth quantitativeandqualitativedata. ThecorrelationbetweentheGEAperenrolledstudentandtheCWRiscriticaltoadeterminationof distributionalequity.Tobeequitable, thedistributionoftheGEAcutsshould 2010-11 GAP 2011-12 GAP 2012-13 GAP 2012-13 GAP ELIMINATION ELIMINATION ELIMINATION ELIMINATION behighlycorrelatedtotheCWRof ADJUSTMENT ADJUSTMENT ADJUST ON ADJMT (LEGISL) schooldistricts.Tobestatistically PER PER BT1213 (EXEC. RESTORATION significant,thecorrelationshouldbeat ENROLLED ENROLLED BUDGET) PER PER ENRLD least.7andpositive.Thatis,lessGEA Correlation to Correlation to ENRLD Correlation Correlation to cutsshouldbeexactedfromschool CWR CWR to CWR CWR districtswiththeleastfiscalcapacity 0.12 0.02 -0.09 -0.15 comparedtotheirwealthier r 2 counterparts.However,thesedatado 0.02 0.00 0.01 0.02 r notreflectthatdesiredcorrelational

25 occurrence. ThedistributionoftheGEAcutsistroublesome.ThechartshowsthreeyearsworthofCWRdatainfour datasets.Displayedarethefirstyearofstateaidcutsin201011,theincreasedGEAcutsin201112 andthereductionoftheGEAcutsintheExecutivebudgetfor201213andthefurtherreductionsinthe enactedbudgetfor201213asproposedbythelegislatureandultimatelyenacted.Noreal measureablecorrelationexistsforanyyearorinanydataset.TheGEAcutsformuladisastrouslyfails theequitytestwithregardtodistributionandfiscalcapacity. ThecorrelationbetweentheGEAperenrolledstudentandapovertymeasuresuchasFRPLiscriticalto adeterminationofdistributionalequity.TobeequitablethedistributionoftheGEAcutsshouldbe highlycorrelatedtotheFRPLofschooldistricts.Tobestatisticallysignificantthecorrelationshouldbe atleast.7andnegative.Thatis,lessGEAcutsshouldbeexactedfromschooldistrictswiththegreatest amountsofpoverty,ascomparedtotheircounterpartswithlesspoverty.However,thesedatadonot reflectthatexpectedcorrelationaloccurrence. ThecorrelationaldistributionoftheGEAcutsisobvious.ThechartillustratesthreeyearsofFRPLdata infourdatasets.Displayedarethefirstyearofstateaidcutsin201011,theincreasedGEAcutsin 201112andthereductionoftheGEAin theExecutiveBudgetfor201213andthe 2010-11 GAP 2011-12 GAP 2012-13 GAP 2012-13 GAP ELIMINATION ELIMINATION ELIMINATION ELIMINATION furtherreductionsasproposedbythe ADJUSTMENT ADJUSTMENT ADJUST ON ADJMT (LEGISL) legislatureultimatelyincludedthe PER PER BT1213 (EXEC. RESTORATION enactedbudgetfor201213.Noreal ENROLLED ENROLLED BUDGET) PER PER ENRLD measureablecorrelationexistsforany Correlation to Correlation to ENRLD Correlation Correlation to yearorinanydataset.Theonlyglimmer FRP FRPL to FRPL FRPL ofhopewasthattheexecutivebudget r -0.38 -0.10 -0.30 -0.01 proposalwasmorecorrelatedtoFRPL 2 (thoughnotevenclosetostatistical 0.15 0.01 0.09 0.00 r significance)thanthepreviousyearand pointedintherightdirection.Thelegislaturecontributiontoequitywastoincreasefundswithlessofa correlationtotheFRPLthanhadexistedinthepast.Thusthesmallimprovementindistribution proposedbytheExecutivewasnotonlyeradicated,theendresultwaslessofacorrelationthanhad existedinpreviousyears.Alsonotethatthe201112increaseinGEAcutswasevenlesscorrelatedto FRPLthanintheinitialyearofGEAcuts. TheGEAcutsformulafailstheequitytestwithregardtoFRPLdistributionandCWRfiscalcapacity. ThesedataalsosuggestthattheGEAismorerandomthanFoundationAid.Thatrandomnessresultsin acuteperstudentlossesofFoundationAidfromtheGEAcutsthatareextremelyharmfultoschool districtsdependentonstateaidasthosewithlowormarginalfiscalcapacityandhigherlevelsof poverty. Asschooldistrictswithlowormarginalfiscalcapacityandhigherlevelsofpovertycountsoheavilyon stateaid,thepercentoftheaidtheyreceivethatislosttotheGEAcutsisimportanttotheirabilityto provideasoundbasiceducation.Again,onewouldhopetoseethatthepercentofstateaidcutsto schooldistrictsthatrelyonstateaidthemostwouldbelessthantheirwealthiercounterparts. AnotherdatasettoexamineistherelativeimpactoftheGEAcutsontheFoundationAidFormula.The GEAtakesawayaportionofwhatFoundationAidgivestoeachschooldistrict.Thenetresultislessaid thananticipated. Toreviewsomekeypoints: ThereadermustrememberthatFoundationAidwassupposedtobephasedinoverafouryear periodbasedona200607aidbaseline. FoundationAidbegantoflowin200708.Bythesecondyearofthephasein200809,each schooldistrictwasprovided37.5%ofthefullphasein.

26 FoundationAidwasfrozenatthe200809levelin200910and201011(thetargetdateforfull phasein)andagainin201112.Itwasincreasedfor201213.However,beginningin201011 thestateinstitutedstateaidcuts(firsttheDeficitReductionPlan,orDRA). ThiswassoonfollowedbytheGEAin201112asthestateaidcutsweredramaticallyincreased. In201213therewasadecreaseinthelevelofstateaidcutsinasdiscussedearlierinthispaper.

OfparticularconcernistheleveltowhichthestateaidreductionshavecutintotheFoundationAid revenuesanticipatedandcountedonbyschooldistricts.Additionally,whatcanthedistributionofthese cutsandtheirimpacttellusaboutthatlackofcontinuedinequitysufferedbyschooldistrictsoflowor marginalfiscalcapacityorhigherlevelsofpoverty? TheexaminationofthenextchartshowsthattheimpactoftheGEAisclearlyamassivediminishmentof FoundationAid.Itisthemagnitudeofthecutsthatmattersmost.Schooldistrictswiththeleastfiscal capacityandthemostdependentonstateaidfaceanextremelydifficulttasktomakeupforstateaid losses.Typicallytheseschooldistrictsareforcedtodooneormoreofthreethings: Districtscanusefundbalancestooffsettherevenueshortfallfromthestateaidcutsand minimizethenegativeimpactontaxes. Theycancutornotreplacestaff.Thiscanbedonethroughrightsizing,iftheopportunity exists.Itcanalsobeaccomplishedthroughattrition(usuallydefinedasnotreplacingemployees thatleaveservicebyretirementorotherpermanentmeans).Theleastdesirableoptionisa reductioninforce(layoffs/RIF/Riffing).Theattritionmethodattimesmasksalayoffand providesthesameresultlessprogram.Forexample,whetheraforeignlanguageteacherislaid offorislostthroughattritionalretirement,theresultisthesamethelossofaforeign languageoffering. Districtscanreallocatestaffandcutprograms.Thesecanbeeitherpartofthestateand/or schooldistrictacceptedcurriculum(courses)byeliminatingthemaltogetherorcombining classesforhigherclasssizes.Otheroptionsinclude,thoughnotalwayslessvolatileinthe communityorwithunions,cutsofsomemagnitudetoremedialand/orenrichmentclassesand programs,cocurricularactivities,interscholasticsports,fieldtrips,eventsandthelike. Thischartsuggeststhatthelossofstateaidonaveragehasbeen,andcontinuestobe,significant.The averagelossforeachoftheyearshasneverbeenlowerthan20%.Itisdifficulttoguesshowabusiness, asopposedtoalowfiscalcapacityand Foundation Aid- Impact of GEA highpovertyschooldistrict,could Based on the Foundation Aid Received operatewiththeannuallossofatleast in Each Year as Indicated 20%ofthechiefsourceofincome. 2010-11 % 2011-12 % 2012-13 % However,someschooldistrictslostas Loss of Loss of Loss of littleof6%andothersashighas45%. Foundation Aid Foundation Aid Foundation Aid Thehigherlevelsofloss,ifsustainedby Due to GEA Due to GEA Due to GEA alowfiscalcapacityandhighpoverty (State Aid Cuts) (State Aid Cuts) (State Aid Cuts) Average 20% 24% 21% schooldistrict,wouldbestaggeringto Median 20% 25% 22% thefiscalandeducationalhealthof Min 6% 7% 5% thatcommunityschooldistrict. Max 45% 48% 45% Theproblemisnotjustthattheimpactofthe201112GEAcutsweremorenegativethantheprevious year.Thecontinued201213lossremainsevengreaterwhencomparedto201011,eventhough FoundationAidwasincreasedandtheGEAcutsdecreasedin201213.TheincreasedFoundationAid anddiminishedGEAcutsdidntmakeadentcomparedtotheGEAcutsofthreeyearsprior.Whilethe changesinthe201213FoundationAidandGEAcutswerecelebratedbytheExecutiveandthe Legislature,theyarefarfromthesufficientsumoffundsrequiredtoprovideanimprovementneeded threeyearsago.Whileitisastepintherightdirection,itistoosmallofastep.Anygaininthetotal schemeofthingsisinsignificant. Apieceofthesedatadoesoffersomeevidencethatameasureofgreaterequitydoesexist.Theweight ofpovertyweighsveryheavyonaschooldistrict.Theimpactofpovertyisacriticalfactorinthecostof educationandtherefore,thefiscalcapacityofaschooldistrict.Thischartdemonstratesthatthereisa

27 correlationbetweentheFRPL(asjustonemeasureofpoverty)andtheimpactoftheGEAupon FoundationAid. Thecorrelationisalmostsignificantintwoofthe 2010-11 % OF 2011-12 % OF 2012-13 % OF yearsshownandreachedsignificanceinoneofthe FOUNDATION FOUNDATION FOUNDATION years.Thereisageneralcorrelationthatreflects AID LOST W AID LOST W AID LOST W GEA PER GEA PER ALL GEA PER thatlessFoundationAidwaslostbyschooldistricts ENROLLED ENROLLED ENROLLED dueinparttoameasureofpoverty.Thisrepresents Correlation to Correlation to Correlation to oneoftheclosestandcontinuouscorrelational FRPL FRPL FRPL themesthatpermeatethispaper.Itappearsthatat -0.69 -0.71 -0.69 r leastonemeasureofpovertyplaysasignificantrole 0.48 0.50 0.48 r2 inthedeterminationoftheFoundationAid/GEAcuts nexus. Asweanalyzethisstepthatgoesintherightdirection,werefertothesumtotalimpactofthelossof FoundationAidduetotheGEAcuts.Whatisnotastepworthyofcelebrationisthecontinuouslackof equityinthedriveforimprovedfiscalreplenishmentprovidedbythe201213increaseinFoundation AidandthereductionoftheGEAcuts.Thequestionofequitycontinuestodogthestatesinitiativesto provideschooldistrictswithfunds. Thisperenrolledstudentchartdemonstrates 2010-11 % OF 2011-12 % OF 2012-13 % OF thataschooldistrictsfiscalcapacitystillhaslittle FOUNDATION FOUNDATION FOUNDATION AID LOST W AID LOST W AID LOST W tonomeasureablecorrelationtotheFoundation GEA PER GEA PER ALL GEA PER Aid/GEAcutspredicamentinwhichtheyfind ENROLLED ENROLLED ENROLLED themselves.Thecorrelationsarenotstatistically Correlation to Correlation to Correlation to CWR CWR CWR significantbyanymeasureotherthantheyexistin therightdirection,thatis,thattoaverysmall 0.35 0.33 0.36 r degreetheimpactoftheGEAcutsupon 2 0.12 0.11 0.13 r FoundationAidisonoccasion,butnotgenerally, smalleronschooldistrictswithlessfiscalcapacityasmeasuredbytheCWR.Equitywillnotbeachieved untilthisisthegeneralconditionratherthananoccasionaloccurrence.Basically,throughsomeother measuresotherthanthefiscalcapacityofaschooldistrictisthenexusofdistributionbetween FoundationAidandtheGEAcuts.Whileanothermeasuremaybenoteworthy,fiscalcapacityofaschool districtisfirstandforemostatthepinnacleofcriteriaparamounttoaschooldistrictssurvival financially,educationallyandpoliticallyandnotnecessarilyinthatorder.

TheCosttoEradicatetheGEACutsandProvideFullyFundedFoundationAid
AsquicklyasthisnewFoundationAidwasinfusedintothefinancialbloodstreamofschooldistrictsthey cametorelymoreonthatcontinuousandmassiveconcoctionofstateaidasamajorsourceofrevenue tooffsetthelargelyuncheckedescalationofdesiredandmandatedexpenses.In200910however,the thirdyearofphaseindidnotoccur.FoundationAidwasfrozenatitssecondyearphaseinamountand wouldstaythereuntil201213.Since200910schooldistrictsappealedforanarticulatedstateaidplan thatcompletedthephaseinprocess.Todate,noarticulatedstateaidplantocompetethephaseinof FoundationAidhasbeenenactedintolaworsurfacedasaplanendorsedbythegovernororeither houseofthestatelegislature.Afterallthistime,theamountofmoneyneededtofulfillthestates promiseofthefullFoundationAidphaseinthatbeganin200708,eliminatetheGEAcutsandalso accountforamodestamountofadditionalexpensedrivenaidsisdaunting. Asthechartshows,the THE FULL "PROMISE" in $ Billions amountofimmediatecash BACK ON TRACK- FULL FOUNDATION AID IMPLEMENTATION W/NO CUTS FULL neededtoinstitutefull KEEP EXPENSE DRIVE AIDS GOING FOR ONE MORE YEAR $0.245 implementationof AMOUNT NEEDED FOR FULL FOUNDATION AID $5.522 FoundationAidbasedon CURRENT GAP ELIMINATION ADJUSTMENT (2012-13) $2.156 201213SEDdataisover GRAND TOTAL -NO CUTS & FULL FOUNDATION AID $7.923 $5.5billion.Thisisahuge

28 sumandbasedontheworkingsofstategovernmentitssustainabilityisquestionable.Calculations bytheSSFC,asfarbackastheinceptionofFoundationAidin200708,arrivedatanextremelysimilar amount.Andsince2007and2008attemptsmadebySSFCtopointoutthisfactandexplainthe implicationsofthesephenomenaweremetwithdisbelief,aversionandadegreeofhostilitybyvarious stategovernmentandpolicyadvocacygroups. Further,theeliminationofthecurrentGEAcutswouldrequiretheimmediateinfusionofalmost$2.2 billionintotheeducationbudget.Thenwithanadditionalannualincreaseofapproximately$245 millioninexpensedrivenaids,thetotalimmediateadditionalcostoffullfundingreachesnearly$8 billion. Thesefiguresmakefullfundingappearstunninglyremote,especiallywhenstatebudgetdeficit projectionsaretakenintoaccount.Moreover,howcouldfullfundingbeaccomplishedand simultaneouslyprovideequityandfairnesstothedistribution?

ImplicationsoftheCurrentStateAidSituation
OfconcerntotheSSFCisnotonlywhathasoccurredvisvisstateaidtoschooldistricts,butwhatis goingtohappeninthefuture.Inshort,doesthestatehaveaplantogetschooldistrictstothe201011 promisedleveloffiscalsupport?Absentaplanthereisnochoicebuttocalculatethecurrentorat leastmostrecentrateofchangeinFoundationAidandthereductionofGEAcuts.Thatcalculationis actuallyrathersimple.Thisyear(201213)FoundationAidincreasedbyabout$112millionand$400 millionwasusedtorestorecutscontainedintheGEA. Usingonlythe RATE OF CHANGE: At the current rate of change (2012-13 Increase in Foundation Aid & 2012-13 GEA 201213direction Rate of Restoration) How long to get to the current calculated 2010-11 "Promised" Levels of State andrateof In $ Billions Needed Rate of Complete change(thefirst Amount Change in Years infouryears)it AMOUNT NEEDED FOR FULL FOUNDATION AID $5.522 $0.112 50 wouldtake50 CURRENT GAP ELIMINATION ADJUSTMENT (2012-13) $2.156 $0.400 6 yearstogetto thepromisedamountofFoundationAid,ascalculatedinthestateaidspreadsheetDBSAD1,Column W(FA0001)00FOUNDATIONAIDBEFOREPHASEIN.Further,itwouldtakesixyearstoeradicatethe GEAcutsascalculatedfromthestateaidspreadsheetDBSAA1columnAA(FL0026)00201213GAP ELIMADJUSTONBT1213andcolumnAB(FL0027)00201213GAPELIMINATIONADJMTRESTORATION. Itisobviouslyabsurdtowait50yearsforfullfundingofFoundationAid(giventhecurrentrateof improvementandwithoutregardtodistribution).Equallyimpracticalisthenotionthatitwilltakesix yearstoeradicatetheGEAcutsatthecurrentlevelofreduction(againwithoutregardtodistribution). Thereisnodoubtthatthesedataunderscoretheextremelackofrealitybeingemployedtoachievefull funding,fulfillingthepromiseofFoundationAid,orevensomedegreeofmovementtowardamore equitableandfairerdistributionofstateaidtoschooldistricts.Thesystemsimplydoesnothavethe moniesneedednordoesaplanexisttoprovidefortheimmediateimplementationofstateactions thatwillresultinasoundfiscalarrangementforstatesupportofpublicschools. ThisresearchidentifiestwocompellingreasonsforthestatetonotfullyfundtheexistingFoundation AidFormula.First:Ifitisfullyfunded,moneywillcontinuetobeskimmedoffthetoptofundthose schooldistrictsthatneeditmuchlessattheexpenseofhigherneedschooldistricts.Thiswould unfortunatelycontinuetobeaccomplishedduetothebasiccongenitalinequitiesoftheFoundationAid formulaandtheabsurditiesofthedistributionofHighTaxaidandAdministrativeEfficiencyAidasnoted laterinthispaper.Second:Itwouldmaintaintheartificiallycreatedandpoliticallymotivatedshares agreementthathasbeenwelldocumentedinpreviousSSFCpublications(SeeStateAidFormulas&NY SenateNotMakingtheGradeforOurSchools,Children&Communitiesat: http://www.statewideonline.org/ConfSept2012.html.)Bothofthesereasonsaregroundedinthe inequityofthecurrentFoundationAidformula.Tofullyfundaseriouslyflawed,inequitableandstate

29 budgetbustingformulamakesnosense.Therefore,anew,equitableandsustainableformulais required.

FundingtheCurrentFoundationAidFormulavs.FundingaNewandEquitableFoundationAid Formula
Therearenumerousproblemsfrombothpolicymakingandpoliticalperspectiveswiththeconcept ofmovingtowardfull(Promised)FoundationAidfundingunderthecurrentformula.Fromacynical viewpoint,acasecanbemadethatthedevelopmentoftheoriginalFoundationAidformulawas purposefullydevelopedtobeexcessivelycomplicated;andthatthestatedgoalsbehindthecreationof theformulasin200708tomakestateaidmoreunderstandable,flexibleandequitablewereactually modifiedatinceptiontobedenseandtherebybeprotectiveofperceivedandcreatedpoliticalturf, powerandinfluence.Powerinthisregardcanbeclearlyidentifiedasselfserving,selfperpetuatingand filledwithunfairness,partialityandexcess.Moreover,suchpowerartificiallycreatesasadisguiseawill ofthepeoplefaade,ratherthanauthenticadvocacyandrepresentationtomeettherealneedsof people.Ironically,thesecharactertraitsareidenticaltotheonesthatschooldistrictsarerequiredto teachstudentstoavoid,exposeandrejectaspartofthestatemandatedStateEducationDepartment CharacterEducationcurriculum. Fromstrictlypolicyandeconomicperspectives,noindependentresearcherhasyetidentifiedorfounda positivecorrelationtostateFoundationAidperstudentthatisgenuinelysignificantstatisticallytobe calledfair,equitable,predictableorappropriatebasedonbothfiscalcapacitywealthandpoverty measuresofschooldistrictsstatewide.Datainthispaperhassuggestedtheoppositetobetrue,ashas dataresearchedbytheNewYorkStateCouncilofSchoolSuperintendents(NYSCOSS),theofRural SchoolsAssociation(RSA),andProf.BruceBakeratRutgersUniversity(seepaperspublishedbyDr. Bakeronlineathttp://schoolfinance101.wordpress.com/),amongotherexperts. TheresultofallofthisresearchclearlydemonstratesthatthecurrentFoundationAidFormulais inequitableasitdoesnotappropriatelydistributeaidtoschooldistrictstomeetthefiscalcapacityand povertyneedsofthecommunitiestheyserve.Rather,thesenumerousstudiesconcurthatGEAcuts actuallymakemattersworseforschooldistrictsoflowerfiscalcapacityandhigherpovertythantheir wealthiercounterparts. Interestingly,inthespringof2012morethanadozenstatesenatorsweresignatoriesofalettertothe GovernorthatacknowledgedtheinequitiesinstateaidtoschooldistrictsandaskedtheGovernorto leadintheenactmentofamoreequitabledistributionofstateaidtoschooldistricts.Theaffirmation bytheselegislatorswasgratifying,aswastheGovernoralsogoingpublicallyontherecordthatstate schoolaiddistributionisinequitable.Thesedevelopmentsresultedfromrelentlessdatadrivenpressure bystakeholdersarmedwithevidencethatunarguablyunmaskstheannualpoliticallymotivatedstate aidscam.TheStatewideSchoolFinanceConsortiumplayedtheleadroleinthisinitiativeandwasjoined byotherpartnersincludingNYSCOSSandRSA. TheamountofmoneyneededtofulfillthestatespromiseoftheFoundationAidphaseinthatbegan in200708,eliminatetheGEAcuts,andalsoaccountforamodestamountofadditionalexpensedriven aidsisdaunting.TheSSFCwasandcontinuestobeconcernedthatschooldistrictsrelyonthepromise offullimplementationwithoutanunderstandingofthestatesperiodicandlongtermfiscalconditions thatinfluencethestatesabilityanddesiretomovetowardafullyfundedFoundationAidformula. Moreover,thereappearstobeamisguidedbeliefbyschooldistrictsthatthemetricsplacedintothe formula,astheyareupdatedtoreconstitutethefullyaidedamount,wouldalwaysyieldtheamountof fullyfundedFoundationAidaswasfirstenvisionedin200708.Thatamountcametobeexpected. Despitethatbelief,datathatmakesuptheactualformulaiscontinuouslyupdatedininternal spreadsheets.Thesedatainputsofenrollment,levelsofpoverty,propertywealth,incomemeasures, andotherareconstantlychanging.Iffacttheyhavebeenchangingsincethe200708inceptionof FoundationAid.Yet,thelegislationthatidentifiedtheamountofFoundationAidtoeachdistrict startingin200910remainedunchanged(frozen)attheactual200809amount.Thatamountignored

30 theupdatedinputsplacedininternalspreadsheetsandintotheformula,andthusremainedunused andunexposedbythestatespolicymakersandlawmakers. Thus,thereisalargegapbetweentheamountsofaidschooldistrictsbelievetheywillsecurewhen FoundationAidisfullyfundedandwhattheupdatedFoundationAidformulastipulatesastheamounts actuallypayabletoeachschooldistrict.Thedifferencebetweenthesetwocalculationsisshocking. ThisisespeciallytrueiftheFoundationAidfullphaseinisbasedonupdated201213SEDdata. Additionally,itwouldappearthatmanyschooldistrictsareoverfunded.Ifso,thequestionofthe statusofsaveharmlessemerges.(SaveHarmlessistheconceptthataschooldistrictwouldnot experienceadiminishmentofstateaidshoulditbefoundtobeoverfundedthroughsome circumstance.Themaintenanceofeffortthatensuesbecomespartoftheoverallstateaidfunds statewideandmakesthecostoftheaidhigherthanifthesaveharmlessprovisionhadnotexistedand hasthepotentialtothenlimitaccesstoaidbyotherschooldistrictsastheamountofstateaidisfinite.) Thecontinuanceofsaveharmlessprovisionsisusuallyexpensiveandmaynotreflectthedesired equitygoalsaformulawascreatedtoprovide.Additionally,thereisaquestionaboutthepossibilityfor futureperiodicincreasestostateaidanditmustbedealtwith.Forinstance,iftherewasaguaranteed 3%minimumincreaseinaidwouldsaveharmlessschooldistrictsbeeligibleforitandfurtherincrease thecostoftheaidboostorperhapsdiminishtheamountoftheoverallincreasetootherschooldistricts tomeetadollartarget? Saveharmlessisalegitimateconcern.Thereasonisthat138schooldistricts(20.4%)havealready achievedorexceededfullfundingundertheFoundationAidformulaaccordingtoStateEducation DepartmentcomputationsbasedonupdateddataandtheFoundationAidformulametrics.Thisis largelyduetoupdatedenrollment,studentdemographicandschooldistrictwealthdata(Asper FoundationAid,ascalculatedinthestateaidspreadsheetDBSAD1,ColumnW(FA0001)00 FOUNDATIONAIDBEFOREPHASEINandcomparedtocurrentFoundationAidamountsinstateaid runs). ThecurrentresultofthistaintedFoundationAidformulaisthatsomeschooldistrictsare hypotheticallyalreadyfullyfundedin201213andthatsomeofthesedistrictswereevenfullyfunded by201112.Consequently,basedonthe200607publishedFoundationAidtargetsfor201011,some schooldistrictsareinfactoverfunded.Thisphenomenonexistsbecausethemetricsforcalculationof FoundationAidhasremainedunchanged,exceptforasmallmodificationin201213.Yettheinputs discussedearlierhavechangedforeveryschooldistrict.Becausetheseinputshavechanged significantlyformanyschooldistrictsthetargetamountfor201011hasbeenreplacedbytheformula updatesbasedonthenewinputs.ItcanbesaidtheoriginalFoundationAid201011targetas movedasinputswereupdated.Thishasnothingtodowiththefactthattheoriginalaidwasfrozen atits200809amountsthatreflected,hypothetically,37.5%ofthe201011targetamountsthatwere payabletoeachschooldistrictbasedon200607data.Northefactthatthatconditionremained,by EducationLawpertheenactedstatebudgets,stagnantuntilminorchangesin201213resultedina paltryincreasethatactuallymadetheequityissueworse. Theissueofoverfundedimpliesthattheseschooldistrictshavealreadybeenheldassaveharmless thatnodiminishmentoftheiraidwasmade.Theseschoolssimplyreceivethesameaidasinthepast whetherornottheyareeligibleforitbasedonthenewinputs.Thissituationpresentsseveral complications.Forinstance,shouldfutureFoundationAidincludeasaveharmlessprovision?Ifso,is thecostsustainable?Orissuchaplanequitable?Wouldthesesamesaveharmlessschooldistricts calculateouttoasaveharmlessstatusiftheFoundationAidformulawasmoreequitable?Whatis thecostofsuchsaveharmlessprovisionsintheimmediateandlongtermfuture?Howwillanysave harmlessprovisionbepaidfor?WouldadditionalmoniesbeallocatedtotheEducationBudgetor wouldanyadditionalcostcomeoutofthesamefiniteinlawEducationBudget? Butlikeallthingsstateaid,theFoundationAidpredicamentiscomplicatedandasolutionremains elusive.Thefollowingscatterplotsillustratethepredicament.Inparticular,schooldistrictshave experiencedenrollmentdeclines,increasedwealthmetricsthatareoftenbasedonnorealchangein schooldistrictwealth,butratherstateaidwealthaveragesincomparisontothewealthmeasuresof

31 individualschooldistrictsoverthemostrecentyears,andtheintroductionofsuchinnovationsas AdministrativeEfficiencyAid(anoteworthymisnomer)andHighTaxAid(agoodideagoneterribly wrong);bothofwhichwillbefurtherscrutinizedlaterinthispaper. Thecontinueddisregardforthesecongenitalandeasilyidentifiableproblemshasestablished,asnoted, evergreaterinequities.Thisleadstoaseriousproblemforwhichnoremedyhasbeenidentifiedbythe legislatureortheexecutive.Whatwillafullyfundedfoundationaidformula"looklike?Whilethe existingequitablyflawedformulacontinuesinplacethisproblemwillremainunsolveduntiltheformula itselfiscorrectedforequityandfundsareredistributedaccordingly. Itmustbeunderstoodthattheremayjustbeanumberofwealthyschooldistrictsforwhichnological FoundationAidformulacanproduceanappropriatedistribution.Thismaybedueingreatpartto significantdifferencesanddisparitiesbetweenatleastthesevariables;incomewealth,propertywealth, measuresofpoverty.Forinstanceassingleschooldistrictmaypossesslowincomeresidents,veryhigh propertyvaluesandahighorlowamountofpovertysimultaneously.Currentlythereareanumberof flatgrantschooldistrictsforwhichtheFoundationAidformuladoesnotwork.Perhapsitmustbe realizedthatasingleunifiedformulawillnotworkundercertaincircumstances. Additionally,itmustalsoberecognizedthataFoundationAidformulathatisequitablemaynotprovide additionalfundstosomeschooldistricts.Thisdoesnotmeanaschooldistrictmustbedeniedall FoundationAid,butthatanyalterationtothecurrentaidamountsmaybeextremelysmallor nonexistent.Tomanipulateaformulaotherwisewouldflyinthefaceofthepurposeofanactual FoundationAidformulabasedonneedandfiscalcapacity. Tobeproperlyconstructed,aFoundationAidformulamustbebasedonthebaselineamountofmoney neededtoeducateeachstudent.Thisamountofmoneymustthereforetakeintoconsiderationnot onlyenrollmentandattendancefigures,butalsotheeducationalandeducationallyrelatedneeds(e.g., numbersandlevelsofdisabilityofstudentseducatedintheschooldistrict).Further,anarrowregional costfactorcanbeappliedanddeferencegiventostudentdemographiccharacteristicsthatincludesuch considerationsasgradelevelmeasuresofpovertyandpopulationdensityandscarcity. Further,priortoanyaidgiventoaschooldistrict,itscapacitytopayschooltaxesneedstobe determinedbasedonincomeandpropertywealthmeasures.Theremustbeasetstandardforeach schooldistrictdetailingitscontributiontotheeducationofitsownchildren.Thisstandardhasalways beenemphasizedbyStatewideSchoolFinanceConsortium.Thecurrentformulaincludesthegeneral principlesofthesestandards,butformulaicallyaltersoptionsforschooldistrictsparticularlyhigher fiscalcapacityandlowerpovertyschooldistrictstomigratetooptionalformulaeandtherebyavoid theappropriateteststhatdeterminetheproperamountofstateaidtheyshouldreceive.(Thisisdone withtheuseofmultipleandmanipulatedsharingaidratiostobediscussedlaterinthispaper).Thisis amajorreasonwhytheFoundationAidandGEAcutsformulaebreakdownwhenmeasuredagainsta reasonableamountofequitabledistribution. FoundationAid,intheend,mustdemonstrateastrongcorrelationbetweenperpupilaidandlocalfiscal capacityandstudentneeds.Thiscanbeaccomplishedandmeasuredusingtwoeasytounderstand correlations:CWRandFoundationAidperstudent;andFRPLandFoundationAidperstudent.The correlationaldistributionofFoundationAidtothesetwoschooldistrictvariablesisimportant.Itshows whogetshowmuch.Theformulaethemselvesanswerthewhy.Theformulaearewrittenunderthe guidanceofandultimatelytheapprovalofstateelectedofficials. ButthedistributionofFoundationAid,whenfullyfunded,isnotcorrelatedtotheCWRorFRPL.It shouldbeclearbynowthatthatdistributionofFoundationAid,asoriginallyplanned,orasupdated inputsreplaceoldinputs,seemstoavoidtwoofthemostcriticalfactorsofschoolfinance:aschool districtsabilitytosustainitsownfiscalbaseintheabsenceofanappropriatedistributionofstatefunds; and,thelevelofpovertypossessedbystudentsandtheirfamilies,whichweighsheavilyontheabilityto financeandsupportavailableandsuccessfuleducationalprograms.Nomatterhowonemeasures FoundationAid,itscurrentamountandportioneddistributionorevenatfulldistributionatitsnew calculatedcostequitydoesntseemtofitin.

32 Thechartatleftdrivesthispointhome.It illustratesthecorrelationbetweenvarious CWRandFRPLdatasetstoafullyfunded FoundationAidformula.Thereis,again,no correlationofanystatisticalsignificance.Any correlationthoughttoexistissimplymarginal atbest.Again,thesedatarevealthatthe 0.24 0.11 -0.16 -0.02 CWR,aschooldistrictsfundamentaltax capacityasameasureofitsincomeandpropertywealth,failstoregisterasamajorfactorofFoundation Aid.AndFoundationAid,forlowwealthandmarginalwealthschooldistrictsdeterminestheirabilityto educatetheirchildrentoNewYorkStatesstandards. Thisisntstatisticalgibberish.Onlytwoscatterplotsareneededtosupporttheconclusionrevealedin thepreviouschart.Thefirstscatterplotdirectlybelowillustratesthevariationanddispersaloffully fundedFoundationAidforallschooldistrictswithaCWRupto1.4.Thiscapturesdataonlow,average andalittleaboveaveragefiscalcapacityschooldistricts.Thepercentagerangeonthescatterplotgoes from0%to300%funded. Clearlytheschooldistrictsonthe TheFullyFoundedFoundationAidPredicament scatterplotformanaccumulation RelationshipBetweentheFOUNDATIONAIDBEFOREPHASEIN201213 andCombinedWealthRatio(CWRto1.4) ofschooldistrictsbetween.20 300% CWRthatstartstodispersearound %"FullyFunded" FoundationAid .75CWR.Theschooldistricts BeforePhase in asof201213 accumulateatthislevelbecause 250% therearesomanyschooldistricts inthatrange. 200% Moreimportantlythe accumulationofschooldistrictsis 150% generallyhorizontalbutitdoes haveheight.Theheightrangeis 100% large,approximately50%(from 50%to100%).Heightmeasures thevariationwithintheCWR 50% variable.Thesearethelevelsof FoundationAidbasedonthefully 0% fundedamountforeachofthose 0 0.2 0.4 0.6 0.8 1 1.2 1.4 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) schooldistricts.IfCWRisso criticaltoFoundationAid,whyistheresuchheighttotheaccumulationofschooldistrictsalongthe rangeoftheCWRcontinuum?Clearly,othervariablesareatworkotherthantheCWR.Somuchsothat theCWRinfluenceispracticallynil. Additionally,itshouldbenotedthatastheaccumulationofschooldistrictsdispersestowardthe1.4 CWRrangetheheightofthedistributionbecomestaller.IflowerCWRschooldistrictsweretoreapthe greaterbenefitofthedistributionofstateaidinthe201213statebudget,thentheschooldistrictsof lowerwealth(theleftsideofthescatterplot)wouldhavehigherpercentagesthanthewealthierschool districts(ontherightside).Theresultofthisvariationanddistributionisacorrelationof.24(shownin thepreviouschart)meaningthatthereispracticallynocorrelation. Moreover,itisimportanttodescribetheattributesoftheschooldistrictsthatareoverfundedbasedon theFoundationAidformula.Asnotedindatapresentedearlierinthispaper,atotalof138school districtsareoverfundedbycurrentformulaandofthatdataset64(9.5%ofallschooldistricts)have CWRsunder1.4;40(6%ofallschooldistricts)ofthedatasetdistrictshaveCWRsof1.0orlessand16 (2.4%ofallschooldistricts)haveCWRsof.75orless.Theseareallaveragetobelowaveragewealth schooldistricts,waitingonthepromisethattheywillbefullyfundedatsomepointinthefuture.The unfortunaterealityis,theyarealreadyfullyfundednoworoverfundedbasedontheformula.The
% of Fully % of Fully % of Fully % of Fully Funded Funded Funded Funded FOUNDATION FOUNDATION FOUNDATION FOUNDATION AID AID AID AID Correlation to Correlation to Correlation to Correlation to CWR <=1.4 CWR >1.4 FRPL <=.25 FRPL >.25

33 increaseinFoundationAidenactedinthe201213budgetignoredthisfactandhasactuallycreateda saveharmlessprovisionwithaguaranteedminimumincreaseregardlessoftheFoundationAid formula.Thus,theFoundationAidformuladoesnotcurrentlyfunction,nordiditeverreallyfunction lastyear.Thisevidencewouldsuggestitneverfullyfunctioned. ThenextscatterplotlooksattheremainingCWRlevels.Thisscatterplotillustratesthevariationand dispersaloffullyfundedFoundationAidforallschooldistrictswithaCWRbeyond1.4.Itcapturesdata onaboveaveragetoverywealthyschooldistrictswithlargetoenormousfiscalcapacity.(Notethatthe CWRrangeisfrom1.4to44.96.) Again,theschooldistrictsonthescatterplotformanaccumulationofschooldistrictsbetween1.40 CWRthatstartstodispersearound3.4CWR.Theschooldistrictsaccumulateherebecausethereareso manyschooldistrictsinthat TheFullyFoundedFoundationAidPredicament range.Alsonotetheincreased RelationshipBetweentheFOUNDATIONAIDBEFOREPHASEIN201213 percentagescale(nowupto andCombinedWealthRatio(CWRfrom1.4) 2100% 2,100%).Thisisdisplayedsothat %"FullyFunded" 2000% FoundationAid allschooldistrictswouldbe 1900% BeforePhase in asof201213 representedbetweendatain 1800% 1700% theselasttwoCWRscatterplots. 1600% 1500% 1400% Thisaccumulationofschool 1300% districtsdoeshaveheight. 1200% 1100% However,theheightrangeis 1000% large,around150%(from49%to 900% 200%).Heightmeasuresthe 800% 700% variationwithintheCWR 600% variable.Thesearethelevelsof 500% 400% FoundationAidbasedonthefully 300% fundedamountforeachofthose 200% 100% schooldistricts.Notehowthe 0% percentageoffullyfundedis 1.4 6.4 11.4 16.4 21.4 26.4 31.4 36.4 41.4 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) significantlyover200%forschool districtsonasizeableportionofthescatterplot.Further,notethatthepercentageofoverfunding seemstoincreasewiththeCWRoncetheCWRpassesabout3.0.Again,othervariablesareatwork thantheCWR;somuchsothattheCWRinfluenceispracticallynilforthesehighwealthschooldistricts. Thissubset(schooldistrictswithCWRsover1.4)ismadeupof126schooldistricts(18.6%ofallschool districts).Ofthese126schooldistricts,71(58.7%ofthissubset)areatorover100%FoundationAid funded,and34(about27%ofthissubset)isbeyond200%overfundedinFoundationAid.Thisleaves only18(about14.3%ofthesubset)underfundedinFoundationAid.Theseareallaboveaverageto verywealthyschooldistricts. ForthesewealthyschooldistrictstherecentincreaseinFoundationAidintheenacted201213budget ignoredthefactofoverfundedwealthyschooldistrictsandhascreatedasaveharmlessprovision withaguaranteedminimumincreaseforwealthyschooldistrictsregardlessoftheFoundationAid formula.Thus,theFoundationAidformuladoesnotcurrentlyfunction,nordiditreallyfunctionlast year.Saveharmlessprovisionsandguaranteedminimumincreasehaveproventobeexpensiveand difficulttocontrolasafiscalpractice. Theimportantquestionsraisedbythesedataare:Whyaresuchwealthyschooldistrictssooverfunded bytheFoundationAidformulainthefirstplace?And,whydoesthispracticecontinue?Statefundsare finiteandlowerwealthschooldistrictshaveenduredmuchoverthelastthreeyears.Nomatterwhat theamountindollarstheoverfundingrepresents,stateaidfundswouldfindamoreequitableand fairerhomeinthehandsofmuchlesswealthyschooldistricts. Perhapsthereisevidenceherethatsomeschooldistricts,duetotheirwealth,mustactuallybeprovided withsomemodicumofstatefundsoutsideofthecommonFoundationAidformulathatwasdesigned

34 foreveryotherschooldistrict.Thebasisandamountofsuchaidisyettoberesearched,discussedand determined. TheuseofFRPLasonemeasureofpovertyisalsoillustrativeinthefullyfundedFoundationAidcontext. ThisscatterplotillustratesthevariationanddispersaloffullyfundedFoundationAidforallschool districtswithaFRPLupto.25.Itcapturesdataonlowpovertyschooldistricts.Notethatthereare11 schooldistrictswith0%FRPLandatotalof20schooldistrictswithFRPLbelow1%inNewYorkState (1.6%and3%ofallschool districtsrespectively).The TheFullyFoundedFoundationAidPredicament RelationshipBetweentheFOUNDATIONAIDBEFOREPHASEIN201213 percentagerangeonthescatter andFree&ReducedPriceLunch(FRPLto.25) plotgoesfrom0%to300% 300% %"FullyFunded" funded. FoundationAid BeforePhase in asof201213 250% Thisscatterplotshowsthatin thissubsetof223school districtswithrelativelylow 200% povertytolowtonopoverty,as evidencedbyaFRPLoflessthan .25(33%ofallschooldistricts), 150% 50(22.4%ofthesubsetand 7.4%ofallschooldistricts)are overfullyfundedifthe 100% FoundationAidformulawereto run.Additionally,18(8.1%of 50% thesubsetand2.7%ofallschool districts)areoverfullyfunded inFoundationAidby150%or 0% more,eventhoughtheyhaveno 0 0.05 0.1 0.15 0.2 0.25 FRPL (.25=25%) ormarginalpoverty. Again,illustratedbythelastchart,thereisnocorrelationbetweenFRPLandfullyfundedFoundation Aid.Thisisanalarmingdevelopmentasoverfullyfundingsomeoftheseschooldistrictsfromafinite amountoffundswillonlyservetodepriveneedierschooldistrictsofsomeamountoffunds.Themore needyschooldistrictsandtheneediestamongthemneedeverypennytheycangettomaintainfiscal stabilityandeducationprograms. Tocompletetheanalysisthe TheFullyFoundedFoundationAidPredicament nextscatterplotillustratesthe RelationshipBetweentheFOUNDATIONAIDBEFOREPHASEIN201213 andFree&ReducedPriceLunch(FRPLfrom.25) predicamentofthehigherto 1450% %"FullyFunded" 1400% highestpovertyschooldistricts. FoundationAid 1350% BeforePhase in Thisscatterplotrepresentsthe 1300% asof201213 1250% restoftheschooldistrictsin 1200% 1150% NewYorkState.Therangeon 1100% 1050% thisscatterplotonlygoesto 1000% 1,400%offullyfunded 950% 900% FoundationAid.Thereare453 850% 800% (67%ofallschooldistricts)in 750% 700% thissubset.Atotalof28school 650% 600% districtsfullyfundedator 550% abovethe150%level.That 500% 450% represents6.2%ofthesubset 400% 350% and4.1%ofallschooldistricts. 300% 250% 200% Additionally,thereare86 150% 100% schooldistricts(19%ofthis 50% 0% subsetand12.6%ofallschool 0.25 0.35 0.45 0.55 0.65 0.75 0.85 FRPL (.55=55%) districts)thatareatthefully

35 fundedFoundationAidleveloraboveit.Theshameisthatthereare17schooldistrictsthatareover fullyfundedandhave50%ormoreoftheirstudenteligibleforFRPL.Thatis3.8%ofthesubsetand2.5% ofallschooldistrictsrespectively. Moreover,thereareanother35schooldistricts(7.7%ofthissubsetand5.2%ofallschooldistricts)that arewithin90%offullfunding.Intotal,forthesubsetthathasaFRPLcountabove.25,thereare121 schooldistricts(26.7%ofthissubsetand17.9%ofallschooldistricts)thatareatorabove90%full FoundationAidfundingbasedonupdatedinputs.Thatsaboutoneoutofevery5.6schooldistrictsin NewYorkState.Therearealsoasignificantnumberinthehigh80%rangeaswell. Alloftheseschooldistrictsareprobablyundertheimpressionthattheyareduesignificantadditional fundsfromFoundationAidinlargepartduetotheirsignificantpovertypercentages.However,thatis notthecase.Againthereisnostatisticallysignificantcorrelationbetweenanyoftheseschooldistricts andtheabilitytogarnermoreFoundationAidduetotheircurrentlevelsofpovertyasmeasuredby FRPL.Itiseasytoseeevenwithouttheuseofstatisticsthatalmostalloftheschooldistrictsinthis subsetareatsimilarpointsoffullyfundedFoundationAidwhethertheyhaveFRPLlevelsof.30or.85. Suchresultsmakenoequitablesense.Thisisanotherdevelopmentthatmustbeviewedwithalarm.As overfullyfundedandlowerpovertylevelschooldistrictsgarnermorefunds,higherpovertylevelschool districtsloseout.Whenfundsarefinitemoniesmustserveneedierschooldistrictsfirstandforemost. Afterthreeyearsofstateaidcuts,thelossoffederalfundsandvariousotherfiscallossesenduredby themoreneedyschooldistricts,theneediestamongthemdeserveandneedeverypennytheycanget tomaintainfiscalstabilityandeducationprograms. Ifthesedataarentenoughtomakethecase,thetablebelowillustratestheoveralldistributionoffully fundedFoundationAid.Itshowsthedistributionofthe201213FoundationAidasapercentofthefully fundedFoundationAidbasedoncurrentformulaandupdatedinputs.
W(FA0001) 00 FOUNDATION AID BEFORE PHASE-IN Currently Currently Currently Currently Currently Currently Currently Currently Currently Currently Currently Currently at 100% or better between 99% & 95% between 94% & 90% between 89% & 85% between 84% & 80% between 79% & 75% between 74% & 70% between 69% & 65% between 64% & 60% between 59% & 55% between 54% & 50% below 50% Number % of All CWR CWR CWR of Districts Average Median Min Districts 138 20% 3.15 1.45 0.42 22 3% 0.79 0.63 0.50 41 6% 0.73 0.71 0.48 64 9% 0.74 0.62 0.36 68 10% 0.73 0.62 0.19 93 14% 0.64 0.57 0.28 95 14% 0.75 0.60 0.32 66 10% 0.68 0.51 0.22 42 6% 1.13 1.04 0.25 25 4% 1.25 1.29 0.30 12 2% 1.44 1.50 0.39 10 1% 1.23 1.19 0.44 CWR FRPL FRPL FRPL FRPL Max Average Median Min Max 44.96 2.45 1.35 2.29 2.33 2.02 2.37 1.90 2.30 2.12 2.19 1.84 0.30 0.40 0.35 0.34 0.37 0.39 0.37 0.40 0.29 0.29 0.16 0.32 0.33 0.41 0.35 0.36 0.39 0.41 0.34 0.45 0.24 0.12 0.10 0.27 0.00 0.00 0.05 0.00 0.01 0.02 0.00 0.01 0.01 0.00 0.00 0.00 1.04 0.58 0.66 0.72 0.70 0.83 0.82 0.89 0.72 0.81 0.68 0.85

ThewidevariationswithineachsubsetarereflectiveofthenoncorrelationalaspectsofFoundationAid tobothCWRandFRPLasmeasuresoftheneedforFoundationAidinthefirstplace.Notethatthereisa consistenttrendoflowCWRs(CWRmin)andLowFRPLs(FRPLmin)ateveryfundinglevel.Sucha circumstanceplainlymakesnosenseintermsofequity.Themorethechartisanalyzedthemorethe inequitiesarerevealed. Noamountofexplanationcanjustifythelargeswingsinthesedescriptivestatisticsotherthantosay thatFoundationAidasaneedsbasedformulausedtocreateandmaintainanequitabledistribution ofstateaidsimplydoesnotwork.AndevenifFoundationAidweretosuddenlybecomefullyfunded andcurrent,manyneedyschooldistrictswouldnonethelessbeextremelyhardpressedtomaintain fiscalandeducationalsolvency.

36

OtherAidIssues:SkimmingOfftheTopContinues
HighTaxAid ThepoliticalmachinationsusedtoaltertheFoundationAidformulaandtherebyreachalegislative consensuswassignificant.Someassessmentsofthe200708andthe200809FoundationAidformula pointtothemaintenanceofthesharesagreementthatwasmentionedintheOverviewand elsewhereourDecember2011report.Modificationstothestateaidplanhavebeenacontinuous processinAlbany.OnecaseinpointwasthecreationofHighTaxAid.HighTaxAidcontinuestoday andispresentinthestateaidbudgetfor201213. Asitsnamewouldimply,HighTaxAidwasintendedtoaddresshighpropertytaxes.Poorerschool districtshavelowincomesandpropertyvaluesandthuslesstaxcapacity.Propertytaxesinthese communitiesareusuallycomparativelyhigheventofundmodesteducationalprograms.However,in manycasesthehightaxespaidbywealthierschooldistrictsaretheresultofacommunitydecisionto fundexpansiveandexpensiveschoolprogramofferings,lowerclasssizes,advancecollegeplacement programsandotherenrichmentsoverandabovewhatthestatemandatesthatlesswealthyschool districtscannotaffordtoprovide.Stateaidtoschooldistrictsisafinitesum.Therefore,forthe wealthiestschooldistrictsHighTaxAidsupplementsthecostsoftheirexpensiveextraprogramswhileit deniesfiscalresourcesthatcouldbereallocatedtotheneediestschooldistricts. AnanalysisofHighTaxAidconductedin2008bySSFCconcludedthatitwasinpartbasicallya workaroundforhighwealthandhightaxschooldistrictsregardlessofthereasonsforprogram costs.Theintentionoftheaid,asadvertised,wastoassistthoseschooldistrictsofaverageandbelow averagewealththatgenerallypossessordinaryprogramswholewithsignificanttaxburdens.Itwas donewiththecreationofathreetieredsystemcappedbyafinalcategorycalleddueminimumthat providedmoreopportunitiesforwealthyschooldistrictstocircumventtheoriginalgoaloftheaid category. The2008analysisofthehigh CWR to High Tax Aid 2012-13 taxaidformularevealsa High Tax Aid $7,500,000 sinisterapproach.Witheach $7,000,000 successivetiernumbersof $6,500,000 schooldistrictsconsidered CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) $6,000,000 wealthybyanymeasurewere $5,500,000 includedasaneligible $5,000,000 recipientoftheaid.For $4,500,000 instance,inthetierthreetest, aschooldistrictneededa $4,000,000 RegionalCostIndex(RCI) $3,500,000 greaterthan1.3tobeeligible. $3,000,000 ThatwouldlimitTierThreeto $2,500,000 wealthierdownstateschool $2,000,000 $25,377,000 in High Tax Aid for Districts districtsasonlydownstate $1,500,000 with a CWR > 1.5 (That's an Average of almost schooldistrictshaveaRCIof $1,000,000 $223,000 for each of these 114 districts) 1.3orhigher.Further,60 $500,000 schooldistrictsnoteligiblefor $0 0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5 7 7.5 8 8.5 9 9.5 10 anyoftheregular"tiers"ofaid CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) receivedhightaxaidunderthe provisionofthedueminimum.Therewere17schooldistrictsthatwereeligiblefor50%ofthe allotmentusingthismechanism;fourhadCWRshigherthan2.20butbelow3.0;sixwerebetween3.0 and4.0;onewasbetween4.0and5.0,onebetween9.5and10.0;onebetween10.5and11.0,three between20.0and30.0andoneabove40.0.Clearlyallofthesearewealthydistricts,whichmakesa compellingcasethatthecreationofaformulalikethiswasntaccidental.Indeed,thisisascheme wheremoneyisdirectedtowealthyschooldistrictsasitisskimmedfromthetotalstateaidfiscal structure.Thesamestructureexistsincurrentaiddistributionsasitdidinthe2008analysis.

37 EventhefirstcriteriaforHighTaxaideligibility,theTaxRatioisflawed.TheTaxRatioisameasureof taxeffortbyfindingtheratiooftheresidentialtaxlevy(withcondominiums)asdividedbygrossincome asasetminimum,butarbitrarylevel.Thismeasureisalsoflawedbecausethenumeratorincludestaxes paidbyvacationhomeownersbutthedenominatordoesnotincludeincomeofvacationhomeowners. Theirincomeisreportedintheschooldistrictwheretheirprimaryresidenceislocated.Thisinflatesthe measureforschooldistrictswithahighconcentrationofvacationhomes(eveniftheactualresidents havelowincomelevels).Italsounderstatesthetaxburdensforschooldistrictswithhighnumbersof renters.Inthiscasethetaxespaidbyresidentsofmultifamilydwellingsarenotincludedinthe numeratorbuttheincomeofrentersisincludedinthedenominator.Suchlogicalflawsareinfusedinto stateaidformulasbydesignnotbymistake. WhilethereismeritinthenotionofHighTaxAid,SSFCquestionswhethersuchaidshouldbegrantedto schooldistrictswithCWRsabove1.5.After1.5themoneyisutilizedforenrichmentnotforasound basiceducation.Statefundswereneverintendedtobeusedforenrichment.Enrichmentissolelya taxpayerresponsibility.Ifaschooldistrictiswealthyenoughtodesiretheseenrichmentitemsthenthey haveanobligationtopayforthem. AdministrativeEfficiencyAid Only Districts with almost 1,800 Students Qualify for Anewerstateaidcreationwas Administrative Efficiency Aid? Adm Efficiency Aid anattempttorewardefficiency. 2012-13 Itdoesntanditwont.Theaid $900,000 formulafortheschoolyear2012 $800,000 13entitledAdministrative EfficiencyAidwasanythingbut. $700,000 $600,000 Currentlythereareschool A $19,882,863 Aid Skim Off the Top for Some Districts Over 1,786 students? districtsinwhichthe $500,000 superintendentisalsotheschool $400,000 businessofficialandthe principal,yetastonishinglythe $300,000 schooldistrictisnoteligiblefor administrativeefficiencyaid. $200,000 Thereareschooldistrictsthat $100,000 havepracticallyjettisonedtheir entireadministrativestaff,yetno $0 0 1 2 3 4 5 6 7 8 aidhasbeenforthcoming. CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) Only Districts with almost 1,800 Students Qualify for Moreover,noschooldistrictwith Administrative Efficiency Aid? Adm Efficiency Aid lessthan1,786studentsreceives 2012-13 $900,000 theaid.Therearefewpoor schooldistrictswithmorethan $800,000 1,786students,althoughtheydo exist.Thisthreshold,whether $700,000 artificiallyoraccidentallycreated $600,000 ignoresasignificantbodyof A $19,882,863 Aid Skim Off the Top for Some Districts Over 1,786 students? researchabouttheproductive $500,000 qualitiesandperformanceof $400,000 smallschoolsthroughoutthe country. $300,000 Further,ouranalysisofthese $200,000 datasuggeststhatAdministrative $100,000 EfficiencyAiddoesnotrewardor punishadministrativeefficiency. $0 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Almostnoschooldistrictswitha # of Students CWRbeyond1.5areeligiblefor

38 AdministrativeEfficiencyAid. Oneislefttowonderwhetherornotthisaidcategorywouldactuallyenticeschooldistrictstobecome moreadministrativelyefficient.Thisisespeciallytrueiftheyenjoywhatwealthyschooldistrictshave:a CWRabove1.5;lessofanimpactonthetheirbudgetsandleviesduetoGEAcutsperstudent; tremendoustaxingcapacityduetoalargeamountofincomeand/orpropertywealth;significant reserves;andconsiderableupperlevelprogramsandofferingsatallgradelevels.Suchdistrictsactually maynotdesiretochangethroughunattractivereductions,decreasethenumberofadministrators, eliminateorsharepositionsanddutiesoralterpayscalestodemonstrategreaterfinancialefficiency. Forthemtheaidthresholdmaybetoohighandthusunattractivetobeanincentiveastowarrantor encourageachange.Besides,thereisnopenaltyforschooldistrictslikethesetoremaininefficient. Further,thenewlawsandregulationsfortheAnnualProfessionalPerformanceReview(APPR)cause schooldistrictstomaintainasmanyadministratorsasneededtoaccomplishthenewhumanresource andbudgetcostlyunfundedmandate.

TheGEAStateAidCutsRemain
Thedistributionofaidcutsperstudentisclearlyvisiblewhenonelooksatthecountyscatterplotbelow. Thescatterplotsarecolorcoded.Thecolumnsinredarethecountieswiththelossofstateaidinthe GEAcutsaboveaverage.Allofthesecountieslostover$800ormoreperstudent(SuffolkCountybeing thelowestintheaboveaveragecategoryat$804)toahighof$1,798inWyomingCounty.The statewideaverageaidcutperstudentis$794,downfromahighof$937for201112.Overthelastfew yearstheareaofthegreatestcutsisinlargelyruralorsuburbanUpstateareasandfouroftheBig5 cities:Buffalo,Rochester,SyracuseandYonkers. Perstudentaidlossesincountiesinbluewerebelowthestateaverage.Westchester,Nassau,Rockland, NYCandPutnamCountieslosttheleastat$456,$566,$653,$662,$664respectively.Clearly,these countiesdidwellwhencomparedtoanyofthoseinred. Historicallythecutsbegantoeffectpartsofthesecountieswithgreaterintensityinthe201112school budgetcycle.Although AverageStateAidCuts(GEA)PerStudent201213 partsofLongIsland,the northernsuburbsand countiesofNewYorkCity $0 havepocketswhere significantcutsexist,the ($200) schooldistrictsinthese ($400) areashavebeenlargely unscathedincomparison ($600) totherestofthestate. ($800) Average$794 Aggregatecountystatistics concealinequitieswithin ($1,000) counties.Asrevealed ($1,200) earlierinthispaper,the countiesthatlosttheleast ($1,400) perstudentinGEAcutsfor 201213containthree ($1,600) dozenormoreschool districtsthatfairedfar ($1,800) worse.Theremustbea ($2,000) recognitionthatthese countiesarenotmonolithicandthatconsiderableequitiesexistwithinthem.Onthispoint,SSFChopes thatthenegativelyaffectedschooldistrictswillcallouttheinequityintheclearestterms.
Westchester Nassau Rockland NYC Putnam Suffolk Dutchess Albany Jefferson Columbia Orange Herkimer Schenectady Cortland Monroe Yates Ulster Montgomery Oswego Warren Chautauqua Franklin Essex St.Lawrence Erie Onondaga Steuben Greene Wayne Chenango Cattaraugus Allegany Chemung Otsego Lewis Orleans Tioga Broome Ontario Niagara Fulton Saratoga Madison Sullivan Tompkins Rensselaer Delaware Oneida Hamilton Livingston Seneca Schuyler Clinton Schoharie Genesee Washington Cayuga Wyoming

39 Thedeterminingfactoronceagainiswealth.Thoseschooldistrictswiththelowestorlowerwealthlose moreperchildinaidandaremorestateaiddependentastheylackthecommunityfiscalcapacityto existwithouttheaid.Thedilemmaariseswhenwealthierschooldistrictsenduremarginalimpactson theiroverallschooldistrictbudgetsandlevieswiththeiraidcutswhilelesswealthyschooldistricts enduresignificantimpactontheirlocalbudgetsandlevies.

ProblemswiththeFoundationAidFormulaChangesMustBeMadetoCreateGreater Equity.
ProblemswiththeFoundationAidformulabeginwiththeuseofsyntheticallyweightedandtruncated metricsthattendtomaintain,createoratleastfosterinequities.AfullyfundedFoundationAid FormulaisnotwhatisdesiredbytheSSFC.AnanalysisoftheFoundationAidformularevealssignificant flawsthatdivertfundstohighwealthschooldistricts.Belowaresomerecommendationsforchangesto thecurrentFoundationAidformulathatwouldcreateandmaintaingreaterdistributionequity.Such discussionsshouldbeginnowbeforemoremoneyisdrainedfromdefactosaveharmlesspractices ratherthanrealreform. The Inequity Continues in the Foundation Formula Scatterplot of Districts with IWI <.65 compared to CWR 1.)IncomeWealthIndex(IWI) 304 Below Average Wealth School Districts Short Changed by Foundation Formula IWIhasafloorof.65inthe 2 FoundationAidformula.This meansthatschooldistricts 1.8 havingIncomeWealthIndex 1.6 below.65(roughlyonlytwo 1.4 thirdsthewealthofan averagewealthschooldistrict) 1.2 1.0 = Average Wealth District aretreatedasiftheirIncome 1 Wealthwere.65(45%ofall 0.8 schooldistricts).Thereare 0.6 304schooldistrictsinthe 201213stateaidrunsthat 0.4 haveanIWIlessthan.65. 0.2 Assistancetotheseneediest 0 oftheneedyistherefore 0.15 0.25 0.35 0.45 0.55 0.65 essentiallytruncatedwithno The Inequity Continues in the Foundation Formula 2012-13 Number of School Districts with IWI < .65 by County deferencetotheirplight.This 304 School Districts seriouslydisadvantagesthe 10 poorestschooldistrictsinthe 9 state.Ifpoorerschool districtsactualIWIwasused 8 intheFoundationAidformula moreaidwouldflowtothe 7 poorestschooldistricts. 6 Additionally,theIWIceilingfor 5 thisformulais2.0.Itis unknownwhyaidshouldbe 4 driventoschooldistrictswith 3 anIWIatthatlevel.One wouldthinkthatifthetarget 2 ofsuchaidwasbelowaverage 1 andaveragewealthschool districts,especiallyin 0 considerationofanincome index,themaximumshouldbe
Combined Wealth
Income Wealth Index

# of Districts

Erie

Franklin

Sullivan

Monroe

Tioga

NYC

Broome

Albany

Clinton

Essex

Schoharie

Schuyler

Wyoming

Madison

Niagara

Orange

Seneca

Columbia

Tompkins

Saratoga

Hamilton

Cortland

Schenectady

Suffolk

Montgomery

Genesee

Orleans

Putnam

Nassau

Greene

Chenango

Ontario

Onondaga

Chemung

Livingston

Dutchess

Oswego

Cayuga

Washington

Rockland

Westchester

Rensselaer

Jefferson

Delaware

Herkimer

Warren

Otsego

Wayne

Lewis

Fulton

Yates

Ulster

40 inthe1.3to1.4rangetoallowforfluctuationovertimeandtoensurethegoaloftheaidisontarget. ThescatterplothighlightsthatthosedeniedaccesstoassistancewiththeIWIportionofthestateaid formulaareamongthepoorestschooldistrictsinthestateasthescatterplotbelowshows.Manyfall farbelowthefloorof.65andfallintothe.20to.60range.Afewcanfallbelow.20andarebasically financiallydestitute.However,basedonthelossoftheIWIfloorandthecurrentthefinancialyieldfor thepoorestamongthemwouldbesignificantbasedontheirneedsandcurrentfiscalcondition. Thecountybarchartpointstothegeneralyetrelativegeopoliticalnatureoftheaidmechanismas comparedtotheneedforamoredemographicegalitarianapproach.Thecountieswiththegreatest numberofschooldistrictscurrentlyineligibleforaidundertheIWIportionoftheFoundationAid formulaarenotedonthescatterplotabove. Thatanyschooldistrictisdeniedthisaidbecausetheyaretoopoorisbeyondbelief.Further,thatthis conditionhasbeenperpetuatedsincethe200708schoolyearbythreegovernors,amajoritystable AssemblyandduringatimeperiodwhenbothpartieshadachancetofixitintheSenateisincredulous andspeaksvolumesaboutpoliticsinNewYorkStatecomparedtotheneedsofchildrenandtaxpayers. Therehavebeenafewlegislativeinitiativestochangethisformula.Nonehaveseenthelightofdayand theproblemremainsunsolved. 2.)LocalTaxEffort ThecurrentFoundationformulacontainsacalculationintendedtorequireaminimumlocaltaxeffort. However,itisnotallowedtoworkasintended.TheintendedLocalTaxEfforttestiscircumventedby foursharingratiotiersthatallowwealthierschooldistrictstoselectthetierthatmostbeneficially generatesaidnotintendedtogotowealthierschooldistrictsintheprecedingportionsofthe FoundationFormula.Further,whilewealthyschooldistrictsmayhave$1millionormorebehindevery studentintaxlevycapacity,lowwealthschooldistrictsmayonlyhaveabout$200,000intaxlevy capacitybehindeachchild.Thecapacitytolevytaxestocreateorsustainprogramandopportunitiesfor studentthereforevariestremendouslybetweenhighwealthandlowwealthschooldistricts. TheLocalTaxEffortsectionoftheFoundationAidformulathatexiststodayisonlyashadowofthe originallyintendedconcept.Whilethe2007FoundationAidproposaladvancedbyGovernorSpitzer includedmanyoftheelementsfromtheBoardofRegentsSuccessfulSchoolsmodelforFoundation Aid,substantialchangesincludingbutnotlimitedtotheinclusionofStateSharingRatiosbecamepart oftheformula.Theseratioswereintendedtodrivefundstoschooldistrictsthatlostsomemeasureof supportunderthenewFoundationAidplan.Moreover,otherformulaswerealteredtoalsoredirect fundstoschooldistrictsthatdidnotdowellunderthenewmechanismsthatoriginallyattemptedto maketheformulamoreequitable. 3.)MeasuresofPoverty TherelativevalueoftheFreeandReducedLunchProgram(FRPL)andExtraOrdinaryNeedsStudents (EONS)countsismutedunderthecurrentFoundationAidformula.Poorerschooldistrictsare disadvantagedbythismetricandthusdonotreceivetheamountofaidneededtoeducatethese childrenwithspecialneeds.Manylowwealthschooldistrictshavesignificantimmigrantpopulations, mostofthesestudentsaredesignatedasEnglishLanguageLearners(ELL).Thesechildrenmustbecome anenhancedmetricusedtodriveaidtotheseschooldistricts.(Asingleshininglightwiththisconcernis thatthesemeasuresweregivenmoreweightundertheRestorationofAidin201112GEA.)These measuresoperatebestwhentheyareinbalancewithothermodificationstotheFoundationAid Formula. 4.)AdministrativeEfficiencyAid TheformulaforAdministrativeEfficiencyAidmakesitimpossibleforsmallerschooldistricts(regardless oftheirdemographics,geographyortopography)tobeeligibleforthisaid.Themeasureofeconomyof

41 scaleistoohighforallbutthelargestschooldistrictstomeet.Thisreporthasalreadydiscussedthe mechanicsanderroneousassumptionsbehindthisimpracticalanduselessaidcategory.Themonies attributedtothisaidwouldbetterbespentelsewheretosupportmoreneedyschooldistricts. 5.)TheRegionalCostIndex ThecurrentRegionalCostIndexistoolargeandinappropriate.Itisusedtosendmoremoneyto wealthierportionsofthestate.WebelievetheGeographicCostofEducationIndex(GCEI,Chambers, 1997)wouldbeabetterandbroadlybasedindextouse. Theuseofanindexincreasesstateaidtoaschooldistrictbymultiplyingtheindexnumberbysome othermetric.Iftheindexislargethepoorestregionsarealways1.0andeveryoneelseissimplyhigher duetosuchthingsashigherstandardoflivingcosts.Ineffect,thelargertheindexthegreaterthe numberusedtomultiplyagainstsomemetric.Iftheindexhasarangeof22points(Forexample,1.0to 1.22;wheretheresultantfigurewouldlooklike1.22timesxfortheregionwiththehighestindex number)itwouldyieldacertainresultforhigherstandard(cost)oflivingregions.Yetiftheindexwas larger,say44points(Forexample1.0to1.44;wheretheresultantfigurewouldlooklike1.44timesx fortheregionwiththehighestindexnumber)theresultantcomputationwouldbeevenhigher; significantlyhigher.Thus,inanefforttomaintainthestandardoflivingofthewealthiestregions moniesareallocatedthroughthispartoftheformula.Thispartoftheformulaworksagainstothersasit ensuresthemaintenanceofahighstandardoflivinginoneregionwhileitmaintainsthelowerstandard oflivinginanother. See:http://apps.olin.wustl.edu/macarthur/papers/Wilson_Lambright_Smeeding_EFP_Submission.pdf 6.)Need/ResourceCapacityComputation TheNeed/ResourceCapacity(N/RC)usesthe2000censusdatawhichistenyearsoldandFreeand Reducedlunchdatafrom200001and200102.Thestateshouldusethemostuptodateindicesof poverty/wealthwhenformulatingastateaiddistributionforeducation.Itisourunderstandingthe N/RCwasneverintendedtobeusedinanystateaidformula.Insteaditwaswaytoclassifyschool districtsintosixcategoriesforusebytheStateEducationDepartment.Thefirsttwocategoriesarejust NewYorkCityandtheBig4.IntheendschooldistrictsotherthanNewYorkCityandtheBig4fallinto justthelastfourcategories.Thisismetricdoesnotprovidethelevelofstatisticaldiscriminationand disaggregationneededtoequitablyandclearlydeterminethedistributionofsomethingsocriticalto schooldistrictsasstateaidortheGEAcuts. However,inanycase,theN/RCisusedwronglyintheGAPEliminationAdjustmentcalculation.For instance,theTotalGeneralFundExpenditure(TGFE)checklimitsaidlostinrelationtotheschool district'sTGFE.Ifaschooldistrictishighneedthentheaidlostislimitedto6.8%ofthe201011TGFE. Averageneedschooldistrictscanloseupto11%.NeedBasedRestorationdifferentiatesthedollar amountrestoredperstudentbasedontheN/RC.(N/RCisalsoinappropriatelyusedtodetermineHigh NeedsBuildingAid) 7.)UpdatedInputsResultinStagnantorMinimalFoundationAidIncreasedSupportintheFuture Asidefromthesignificantinequitiescontainedintheformulathereareadditionalproblems.Theinputs withintheinequitableformulaareconstantlyupdated,butonlyinternally.Decreasesinenrollmentand thenationalrecessionsimpactonrelativewealthmetricswithintheformuladiminishedthe FOUNDATIONAIDBEFOREPHASEINamountsparticularlyforaverageandbelowaverageschool districts.Therefore,oncethoseinputsareupdatedaspercurrentstateaidfilestheywillallowfurther researchintothenewinequitiesthataretheresultoftheoldinequitiesintheformula.Suchresearch byallpartiesmustbegin,andwherebegun,providemeaningful,thoughtfulandequitable recommendationforstateaidformulachangesannually.

42

BulletAidPoliticsMasqueradesasCompassion
PoliticsforthesakeofpoliticshaveservedasaproxyforsoundstateaidfiscalplansinNewYorkState. Ourwebsite(http://www.statewideonline.org/ConfSept2012.html)containsthespreadsheet(PDF)as bestaswewereabletoreconstruct(incorrectordifficulttointerpretschooldistrictorbuildingnames wereusedinthelegislation)thedistributionofBulletAidtopublicschooldistrictsasofthiswriting. PublicschooldistrictswerenottheonlybenefactorsofthelargessofmembersoftheAssemblyand Senate.AdditionalbenefactorsofBulletAidincludedPTAs,charterschools,afterschoolprograms, librariesandothergroups.ItisourunderstandingthattheAssemblystillhasabout$9millionto disperse. SchooldistrictsthatreceiveBulletAidarealwaysgratefulforanynewfunding.However,someare needyandsomearenot.Ourdatasuggeststhatthedistributionofthesefundsismixedatbest.Itis distributedtothewealthiestandthepoorestschooldistrictsor,asweseeit,tothehighneedschool districtsandtothe"noneedschooldistricts."Wecanidentifynostatisticalcorrelationbetween indicatorsofneed,suchaspovertyorwealthfiscalconditions,oranythingofelseintheamountof fundsgiventoschooldistrictsingeneral.Thedetailsofthedistributionofthesefundsrunthegamut frompoliticallycalculatedtohaphazardatbest. AdataanalysisoftheBullet DistributionofBulletAidbytheLegislature&Governor(9/1/12) Aiddoledoutthusfar $Bullet Aid BasedonCWRPerSchoolDistrictfor201213SchoolYear toSchoolDistrict providedcontinued $500,000 evidencethattheshares agreementandthelackof $450,000 equitycontinuetobea commonlegislativetheme. $400,000 Thescatterplotclearly $350,000 showsthathighwealth schooldistrictsgotBulletAid $300,000 (Wealthyschooldistricts withCWR>1.5areinthe $250,000 bluebox).Butnotallschool districtsreceivedBulletAid. $200,000 Manyhighandlowwealth schooldistrictsdidnotget $150,000 BulletAid.Thedistribution $100,000 isnotbasedonwealthas onecanseefromthescatter $50,000 plot. $0 Theschooldistrictsthat 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 4.25 4.5 4.75 5 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) havethemostdifficulttime inthemaintenanceofasolidandlongtermfiscalplanandcomprehensiveeducationalprogramover thelastfewyearsarethosewiththelowestCWRs.TherearemorelowerCWRschooldistrictsthan higherCWRschooldistricts.Butasthescatterplotpointsoutsomewealthyschooldistrictsgotjustas muchBulletAidasadollaramountaslowerwealth(CWR)schooldistricts.Thereisnocorrelation betweenthewealthofaschooldistrictandtheamountofBulletAiditreceived,orinthecaseof some,didntreceive. AsimilarphenomenonexistswhenameasureofpovertyisexaminedandcorrelatedtoBulletAid distributionasshowninthisnextscatterplot.Theschooldistrictsintheblueboxhaveverylittlepoverty asmeasuredbyFRPLdata.YettheseschooldistrictsreceivedeverybitasmuchBulletAidmoneyas thoseintheredboxwithgreatertosignificantlygreateramountsofpoverty.Theschooldistrictsthat tendedtogetthemostbulletaidwereNewYorkCity,Buffalo,Rochester,SyracuseandYonkers. Withoutdoubtpovertyisafactorforeachofthemandthereissubstantialevidencethattheyneedall thefinancialaidtheycanget.ButtheycouldhavereceivedevenmoreBulletAidandotherschool districtsofsimilarFRPLcountsbutlesspopulationdensityineverycornerofthestatehaditnotbeen

43
$Bullet Aid toSchoolDistrict $500,000

DistributionofBulletAidbytheLegislature&Governor(9/1/12) BasedonFRPLPerSchoolDistrictfor201213SchoolYear

$450,000

$400,000

$350,000

$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0
0 0.1 0.2 0.3 0.4

(FRPL .60=60%)

0.5

0.6

0.7

0.8

0.9

$Bullet Aid PerStudent toSchoolDistrict $1,100.00

$1,000.00 $900.00

DistributionofBulletAidbytheLegislature&Governor(9/1/12) BasedonCWRPerStudentPerSchoolDistrictfor201213SchoolYear

$800.00 $700.00 $600.00 $500.00

$400.00 $300.00 $200.00 $100.00

$0.00
0 0.25 0.5

CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth)

0.75

1.25

1.5

1.75

2.25

2.5

2.75

3.25

3.5

3.75

4.25

4.5

4.75

$perStudent Bullet Aid toSchoolDistrict $1,100.00

$1,000.00 $900.00

DistributionofBulletAidbytheLegislature&Governor(9/1/12) BasedonFRPLPerStudentPerSchoolDistrictfor201213SchoolYear

$800.00 $700.00 $600.00 $500.00

$400.00 $300.00 $200.00 $100.00

$0.00
0 0.1 0.2 0.3 0.4

(FRPL .60=60%)

0.5

0.6

0.7

0.8

0.9

skimmedoffthetopfor distributiontothoseschool districtswithhigherCWRs andlowFRPLcounts.And again,someschooldistricts regardlessoftheamountof povertytheyhave,gotno BulletAid.Clearly,forthese fundstoworkinan equitablefashion,BulletAid fundsshouldbewrapped intothereductionofthe GEAwithanewformulato ensureequity. TheBulletAidprovidedtoa schooldistrictisa cumbersomestatistic.To discoverwhattheimpactof thatBulletAidcouldbe requiresanexaminationof BulletAidperstudentper schooldistrict.The distributionofBulletAidper studentperschooldistrict followsaninequitable pattern.Oneneedsto examinetherelationship betweenBulletaidper student,andpoverty.For instance,thisscatterplot illustratesthattherewere higherCWRschooldistricts thatreceivedashighand evenhigheramountsof BulletAidperstudentasthe lowestCWRschooldistricts. Notetheoutliersinthe higherCWRrangethat receivedextremelyhigh sumsperstudentcompared tothepoorestofthepooras indicatedbyCWRslower than.5andlower.There waslittleornothought behindBulletAidandits relationshipbetween povertyandequity. TheBulletAiddistribution patternsareechoedinthe abovescatterplotofthe relationshipbetweenFRPL andperstudentperschool districtallocations.Again, someperstudentamounts ofBulletAidareequaltoor

44 betterforschooldistrictswiththelowestFRPLpovertycountswhencomparedtothosewith significantlyhigherFRPLmeasures.Thisisfurtherevidenceoftheinequitypresentinthedistributionof BulletAid. Disaggregateddataseemstoclarifythephenomenonunderscrutiny.Thechartbelowprovidesinsight intotherandomnessofBulletAidandexposesthepracticeasapurelypoliticalactdevoidofmeritother thansomeschooldistrictsbenefitandothersdont. Hereisasampleoffindingsfromthechart.Therearemanymorebelowaverageandaveragewealth schooldistrictsthansignificantlyaboveaverageones.SchooldistrictsofaveragetobelowaverageCWR makeup71%ofall schooldistrictsin Received Received Received Received Received Received thestate,yetthey Bullet Aid & Bullet Aid & Bullet Aid & Bullet Aid & Bullet Aid & Bullet Aid receivedonly64%of CWR <= 1.5 CWR >= 1.5 CWR <= .5 CWR <= .75 CWR <= 1.00 theBulletAid. 464 406 58 96 242 321 Aid Eligible 676 562 114 137 345 454 Evenifonewereto % of Eligible 69% 72% 51% 70% 70% 71% truncatethewealth measuresofa1.5 Amount of Aid $41,424,502 $36,312,006 $5,112,496 $7,993,238 $18,458,797 $26,662,511 CWRthereare % of Aid 100% 88% 12% 19% 45% 64% glaringdisparities Mean CWR 1.05 0.74 3.22 0.42 0.53 0.62 andinequitiesinthe Median CWR 0.73 0.67 2.11 0.43 0.53 0.59 distributionofBullet 0.35 0.37 0.22 0.53 0.44 0.41 Mean FRPL Aid.Justa 0.36 0.37 0.13 0.52 0.45 0.41 Median FRPL comparisonofthose $89,277 $89,438 $88,146 $83,263 $76,276 $83,061 Mean Aid twovariablesyields $55,000 $50,300 $77,000 $30,000 $45,000 $50,000 significant Median Aid informationfrom $55 $46 $117 $36 $46 $45 Mean Aid Per Student whichtobase $32 $31 $44 $27 $32 $31 Median Aid per Student conclusionsabout thedistributionofBulletAid.Forinstance,thoseschooldistrictsthathaveaCWRoflessthan1.5make up72%ofallschooldistrictsyetreceived88%oftheBulletAid.Atfirstglance,thissoundsequitable. Butnotethatthe12%ofBulletAidthatdidgotoschooldistrictswithaCWRhigherthan1.5was distributedtoschooldistrictswithCWRsonaverageof3.22comparedtoonly.74forthepoorerschool districts.FurtherthemediandifferencewasaCWRof2.11forthewealthierschooldistrictsandonly.67 forthepoorerschooldistricts.Notetheratioshere.Themeanaveragedifferenceisa4.35to1andthe medianaverageratiois3.14to1. NotealsothedifferencesintheperstudentamountsofBulletAiddistributedtothesesameschool districts.Thepoorerportionofthepopulationreceivedmorefundsintotalbutlessperstudent.The meanandmedianperstudentdistributionforthepoorerschooldistrictswas$45and$31respectively. Itwas$117and$44forthewealthierschooldistricts.Infacttheperstudentmeanandmedian distributiontothewealthiestschooldistrictthatreceivedBulletAidarelargerineverycasewhen comparedtoanydatasetshownforpoorerschooldistricts. Interestingly,thetwoschooldistrictswiththehighestperstudentBulletAidhaveeithernomeasureof povertyoranextremelylowFRPLcount.Thedistributionofthetopfiveschooldistrictswiththe greatestamountofperstudentBulletAidrevealsthattwohavenoappreciablepoverty,whichbegsan obviousquestionSowhydidtheygetthesefunds? Bycomparisontherewere212(31%ofalldistricts)thatreceivednoBulletAid.Ofthose,133(almost 63%ofthissubsetand19.7%ofalldistrictshadCWRsof<1.0(averagewealth)and103(48.6%ofthis subsetandabout15%ofalldistricts)hadCWRsof<.75(onlythreequartersofanaveragewealthschool district).Clearlyahugeportionoflowfiscalcapacityandstrugglingschooldistrictsweremissed. ThesameinequitiesareexposedwhenFRPLcountsareusedasadataset.Ofthe212schooldistricts thatdidnotreceiveBulletAid,94(almost14%ofthissubsetandover44%ofalldistrictshadFRPLsof

45 >.40(appreciablepoverty)and53(25%ofthissubsetandabout3.7%ofalldistricts)hadFRPLsof>.75 (significantpoverty).Again,whywasmoneysenttowealthyschooldistrictsfromafinitepooloffunds whenschooldistrictssomuchpoorergotnothing? AnexaminationofthespreadsheetdataofBulletAid(whichistoolargetobeincludedinthispaper,but isavailableathttp://www.statewideonline.org/ConfSept2012.html)sadlyshowsinoneregionofthe statealargenumberofschooldistrictsreceivedtheexactsameamountofBulletAidforeachschool district.AtotalBulletAidamountof$346,632wassharedby39schooldistrictsat$8,888each.Inthis case,theperstudentamountofBulletAidrangedfrom$1.81to$35.13.Thiswasobviouslydone withoutregardtoanymeasuresuchasenrollment,povertyorfiscalcapacity.Itisjustthekindof distributionthatdemonstratesatotallackofregardforfairnessandequity.Thisphenomenonwas repeatedinotherpartsofthestateaswelltoonedegreeoranother. OneSenatorwentsofarastoopenlyacknowledgethatthedistributionwaspoliticallymotivatedand basedonpoliticalpartyaffiliation.ThiswasanhonestandsincereappraisalabouttheefficacyofBullet Aid,butadishearteningfactoflifeinAlbany.Thismethodologymayservelegislatorsbutithardly servestheneediestchildreninthestate. DisaggregationofthesedatayieldnoteworthyconclusionsaboutthehaphazarddistributionofBullet Aid.ItalsoshowsthatBulletAiddoesnothingtopromoteequityorprovidegreatersupportforschool districtsmostinneed.Itissimplyapoliticalgimmicktothrowmoneyatschooldistrictsandothersto obtainpoliticalbenefitthatisallitis. ThespoilssystemofpoliticsisaliveandwellinNewYorkStateandendorsedbythelegislativeand executivebranches.Despiteveiledandnotsoveiledthreatstoeducationalequityadvocatesthat complaintsaboutBulletAidwillresultinthediversionofthesefundselsewherethantoschooldistricts, BulletAidisbeyondaflawedsystem;itiswrong.Atthispoint,evenwhenspeakingwithstudentsin seniorhighschoolgovernmentclasseswhomethodicallyexaminesuchpracticesasthedistributionand rationalegivenforBulletAid,theyconcludethattheentireBulletAidsystemisbogus"whencompared toastateaidformulathatcouldbewrittentoprovideanequitabledistributionofsuchfunds. Whenneedyschooldistrictsaresostrappedforcashthesefundswouldhavebeenbetterdistributedto thestateaidformulatoridschooldistrictsofthecrushingimpactoftheGEA.Thiswayschooldistricts couldplanfortheuseofthesefundsratherthanbesurprisedifluckyenoughtoreceivesuchfunds basedonapurelyselfservinglegislativeinitiativethatcomesoutofnowhereattheendofthe legislativesession. Agoodgovernmentcharacteristicthatstudentsaretaughtisdoingtherightthingwithtransparency andforthrightmotivation.Withallthegovernmentwranglingaboutstatebudgetdeficits,budgetcuts, etc.,themysteryappearanceoftensofmillionsofdollarsofBulletAidforpoliticalpurposesisbeyond thepale.RatherthanspendthefundsallocatedtowardBulletAidsoopaquely,suchavailablefunds needtobeproperlydivertedtotheassistanceofschooldistrictswithinastateaidformulathatreflects apredeterminedrationalneedsapproach.Instead,itwastheplanallalongtoreinstateBulletAidasa rebornspoilssystem. BulletAidunderscoresrecognitionthatsuchfundsdoexist,mayalwaysexistandneedtobereallocated toamelioratetheplightschooldistrictshaveexperiencedfromrecentandseverestateaidcuts.Lookat thelogic.Thestateaidcutswerecausedbecauseofthelackofstatebudgetfundswhilesimultaneously BulletAidisresurrectedfromnowhere.Thisispurepoliticsatitsmostcynicalcutstateaidtoschools claimingnothingcanbedoneandthengivesomeofitbackintheguiseofapoliticalfavorforwhich schooldistrictsareexpectedtobeunbelievablyandvociferouslygrateful. Pleasenotesomeschooldistrictsgotabsolutelynothingandothersgotnexttonothing.Yet,despiteall compassionfortheneedyexpressedinpoliticalrhetoric,alargenumberofwealthyschooldistrictswith excellenttaxbases,highfiscalcapacity,lowpovertylevelsorevenpovertylevelsatnil,stillgotmore moneyfromthisfinitepooloffundsthatwasthoughttonolongerexist.

46

MandateReliefIsUnderDiscussion
CurrentmandatereliefissuesneedtobeaddressedbystategovernmentandtheBoardofRegentsasa waytobringrealcostsavingsthroughgreaterproductivityandefficiency.Withtheadventofthree successiveyearsoffrozenFoundationAidandthisyearsmeagerandinequitableFoundationAid increase,thelastthreeGEAcutsandthedrasticimplicationsoftheTaxCapitiscriticaltotheabilityof schooldistrictstocutcostsbybeingridofunnecessaryandunfundedstatemandates. Theproblemforschooldistrictsistwofold.First,somemandatesaccomplishnothingmorethanjust usingupthestaffresourcesofschooldistricts.Thereisonlysomuchtimeinaday,somethingsare worthdoingandsomethingsarentwhenmissionandtimemustbesubjecttotriage.Oftenmore missioncriticaldutiesareminimizedtomeetmandatesthatrequiresignificantattentionand paperwork.Theeradicationofthesetypesofmandatesdoesntalwayssavesignificantsumsofmoney butitwouldallowforthereallocationofstafftoaccomplishprimarymissiontargets.ThenewAnnual ProfessionalPerformanceReview(APPR)initiativeisanappropriateexample.Humanresourcesto accomplishAPPRgoalsarestretchedverythin.Apossiblereallocationofpersonnelfromsomenon missioncriticalmandatestomoreimportanttaskssuchaseffortstoimprovestudentperformancemay behelpfulinmanyschooldistricts.Second,manyunfundedmandateshaveacost.Asidefromhealth andsafetymandates,almostallarewrappedupinlaborlaw,educationlawandtheregulationsofthe CommissionerofEducation. However,thesealonewillnotamelioratethefiscalproblemsfacedbyschooldistrictsduetothecurrent inequitableFoundationAidformulaorthelastthreeyearsofgrosslyinequitablecutsundertheGEA. Eachoftheseitemsbearsconsiderationandcloserexamination.Itistimetoaddressthesacredcows ofthepubliceducationalsector.ForamoredetailedlistconsulttheNewYorkStateSchoolBoards Association(NYSSBA)orNewYorkStateCouncilofSchoolSuperintendents(NYSCOSS)websites. Recentlypassedlegislationtoutsmajormandatereliefsavingstobehadforbothschooldistrictsand municipalities.AninitialreviewbytheSSFCoftheamountofsavingsattributedtothisnewlegislationis dubiousatbest.Basedonthecurrentsavingsresultantfrommajorcontinuousinitiativesofschool districtsacrossthestatetomitigatethecostsofmanyunfundedmandates,SSFCputsnocredencein thelevelofanticipatedsavingsfromthispurportedmandaterelieflegislation. TheNewNYEducationReformCommissionhasbeenchargedwiththeexaminationofaplethoraof educationinitiativesandtheircostdrivers.Initialrecommendationsforfiscalandregulatoryreliefare dueinDecemberof2012andanexpansivesetofrecommendationsaredueayearlater.Itis imperativethatmandatereliefbeforwardedthisyearforlegislativeaction,andthatthisreliefis massiveandsweepingeventhoughtheyarecharacterizedasinitialrecommendations.School districtsareundermassivestrainfromcostescalationsduetoasignificantnumberofunfunded mandates. Anecdotalinformationismixedfromthosewhohavetestified,triedunsuccessfullytotestify,orthose thatobservedtheworkofthecommission.Criticalcommentsincludethenarrowfocusoftopics,the beliefthatcertainspeakersarerigged,othersarechosenselectivelyforsomereason,andthatthe commissionarticulatesnogenuineinterestinheavylifttopics.Additionally,disappointmentinthe backgroundofthecommissionersthemselvestothelackofattendancefromasignificantnumberof commissionersatsomeofthehearingshasbeenexpressedfromtimetotime. AsidefromtheEducationReformCommissionswork,atothermeetingswithstateofficialsnotdirectly connectedtothecommissionwhoexpressedinterestinmandaterelief,participantshavebeentoldthat anumberpotentialcostsavinglaborrelationslegislativeinitiativeswereoffthetable.Takenasa whole,noneoftheseinitiativessoundliketheyhaveafaithinstillingstarttoamandatereliefsolution. TheSSFCisconcernedwiththepotentialforpoorperformanceresultsofsuchinitiatives,basedonthe trackrecordofpreviousinitiativeswithregardtomandaterelief.Schooldistrictsarenttheonly governmententityforwhichtheremustbeperformancestandards.

47 Mostoftheunfundedmandatesthatareproblematicorexpensiveforschooldistrictsareaprimary productoftwosourceselectedmembersofstategovernmentandtheBoardofRegents.Whilethey arenottheonlysourceofunfundedmandatestheyarethemajorcontributors.

PartIIAnalysisoftheCurrentFiscalDilemmasFacedbySchoolDistricts WhatthePropertyTaxReportCardRevealsabouttheFutureofNewYorksPublicSchools
TofullyunderstandthestateofpublicschooldistrictfinancesinNewYork,itisvitaltoprovideanin depthanalysisofthe201213PropertyTaxReportCarddata.Thesedata,whencoupledwithearlier analysesconductedbyStatewideSchoolFinanceConsortium(SSFC),continuetosupportandreinforce ourpreviouspredictionsaboutthreatstotheeducationalandfiscalhealthoflowandaveragewealth andhighandaverageneedschooldistricts. LimitationsandCaveats ThePropertyTaxReportCardiscomprisedofselfreporteddata.Ananalysisofsuchdataiscontingent upontherigorandaccuracyofthesedata.Indeed,errorscanbemadeandwillultimatelyberevealed yearsfromnowasthesedataundergorigorousauditing.However,historically,thereisnorealevidence thattherehavebeenthetypeofglaringinaccuraciespresentedinpastPropertyTaxReportCardsthat wouldrenderthecontinueddissection,analysisandconclusionscontainedinthefollowingpageswholly inaccurateorincorrect.Thesedataappearinwholetobeasaccurateandrobustasisrequiredfor importantgeneralizationsandthemestosurface. AstheBig4cities(Buffalo,Rochester,SyracuseandYonkers)andNewYorkCitydonotcompletethe PropertyTaxReportCardtheirdatacannotbeincludedinthisanalysis.Recentlongitudinaltrenddata bySSFCwouldsuggesttheirfinancial,operationalandeducationalprogramissueshavefollowedschool districtswithsimilarCombinedWealthRatios(CWR)andFreeandReducedPriceLunch(FRPL)Program percents(andothermeasuresofpoverty),butonagranderscaledueprimarilytotheirsignificantly largerstudentcounts.

BudgetedSpendingandEnrollment
2011-2012 2012-2013 Budgeted Budgeted Spending Spending $32,225,251,745 $32,775,773,785 Year to Year Chg $ $550,522,040 Year to Year Chg % 1.7%

2011-2012 School Enrollment 1,572,855 Year to Year Chg $ Year to Year Chg %

2012-2013 School Enrollment 1,561,748 -$11,107 -0.7%

BasedonPropertyTaxReportCarddatapublishedinMay 2012,budgetedspendingincreasedfromalittleover$32 billionin201112toaprojected$32.775millionfor201213. Thisrepresentsanincreaseofover$550.5million;anoverall percentagespendingincreaseof1.7%.Thisincreaseisalmost halfthemostrecentCPI,whichhoveredatover3%. Asschooldistrictsexperienceddoubledigitmedicaland pensioncostincreases,escalationsoffuelcosts,laborcontract expensesandotherfactorsitcouldbeassumedthatbudgets wouldhaveincreasedmore.Theincreaseinspendingwas mutedbysuchactionsas:unionconcessionsonsalary, medicalcostsharing;reductionsinstaffthroughattritions

48 (wherestaffisnotreplacedastheschooldistrictrightsizesthroughretirementsandresignations)and layoffsand/orprogrameliminations;andtheincreasedsharingofservicesbetweenschooldistricts directlyorthroughaBOCES.Newsreportswererepletewiththesecostreductionmeasuresacrossthe stateasthe201213schooldistrictbudgetsweredevelopedandpublicinformationalmeetingswere held.Statedatawouldsuggestthatschooldistrictswereholdingdowntaxandspendingincreaseseven beforetheTaxCapbecamelaw.Suchactionsarenotnew. Theactionstakenbymostschooldistrictsthougharesimplynotsustainableoverthelonghaul.For instance,staffconcessionssuchaspayfreezeswillnotlastforever;aschooldistrictcannotlayoffthe samepersonmorethanonce;andprogramsthatareintegraltoprovidingstudentswithasound,basic educationaspreparationforcollege,postsecondaryeducationorskillstrainingcanonlybejettisoned uptoacertainpoint.Nottomentionthatpublicattentionofandexpectationsforimprovedstudent performancecontinuestoincrease.

TheTaxCap:TaxLevyLimitsandExclusions
Introduction

AnothernumbersproblemforschooldistrictofficialsappearedastheywrestledwiththenewTax Caplaw.Simplemathmakesitclearthatthelargerataxlevyis,thelargerasinglepercentonthatlevy willraiseinrevenue.Itfollowsthatthesmallerthelevyis,thesmallerasinglepercentwillraisein revenue.Itisalsoevidentthattheschooldistrictswiththelargestlevieshavetheleaststateaidper pupilbecausetheyhave,onaverage,higherincomesand/orpropertyvaluesthanthosedistrictsthat arenotwealthy. Again,onlyabasicunderstandingofmiddleschoollevelmathisrequiredtoappreciatethisnext example.Letssupposethathalfofaschooldistrictsbudgetgoestopayteachingstaffandthatstaffis guaranteedanannual2%increaseinsalarybytheTriboroughAmendment(astatelawthatmaintains thatallscheduledstepincreasespayraisesstayinforceuntilasuccessorcontractisagreeduponby theunionandtheschooldistrict)thenthebudget,allthingsbeingequal,mustincreasebyatleast1%. Thisdoesnotaccountforanyotherexpenseincreasestotheschooldistrictsuchaspensioncosts, medicalinsurance,utilities,fuelforschoolbusesandsoon.Nordoesitcountanynewrevenuesthat canbeleveragedagainstthebudgettoproducealowerlevy. Inthishypotheticalexamplethebudgetmustincreaseby1%.Butwhataboutthelevyifitiscappedat 2%?Cantheschooldistricthaveataxlevywithin2%ifthebudgetincreasesbyonly1%?Itdepends.It dependsonwhetherornottheamountofmoneythatequalsa1%increaseinbudgetisgreaterorless thana2%increaseinlevy. Thechartbelowoffersacomparisonoftherealwealthandpovertymeasuresofschooldistrictsand providessomerealinsightintothisproblem.Inalmosthalf(332or49.5%)ofallschooldistrictsa1% IncreaseinEstimated201213BudgetExceeds2%Estimated201213LevybasedonthecurrentPTRC. Notealsothatthoseschooldistrictswherethisistruepossesslowerwealth(meanandmedian)and higherlevelsofpoverty(meanandmedian)thatdotheircounterpartswherea1%Increasein Estimated201213BudgetDOESNOTExceed2%Estimated201213Levy(PTRC2012).Thusinreality

49 thosedistrictswiththeleastfiscalcapacityandhigherlevelsofpovertyareseriouslydisadvantaged fromthebeginningoftheTaxCapcalculation.
Districts Where 1% Increase in Estimated 2012-13 Budget Exceeds 2% Estimated 2012-13 Levy (PTRC 2012) Total Number of School Disticts 332 Percent of All School Disticts 49.5% Disaggregated Data CWR Min 0.186 CWR Max 4.39 CWR Mean Average 0.56 CWR Median Average 0.537 FRPL Min 0.1196 FRPL Max 1.03 FRPL Mean Average 0.46 FRPL Median Average 0.46 Districts Where 1% Increase in Estimated 2012-13 Budget DOES NOT Exceed 2% Estimated 2012-13 Levy (PTRC 2012) Total Number of School Disticts 339 Percent of All School Disticts 50.5% Disaggregated Data CWR Min 0.48 CWR Max 44.96 CWR Mean Average 1.98 CWR Median Average 1.73 FRPL Min 0 FRPL Max 0.8487 FRPL Mean Average 0.224 FRPL Median Average 0.1767

Itisthereforeobviousthatwealthier,lessstateaiddependentschooldistrictsareabletoraisemore moneyperpercentoflevythanaverageorbelowaveragewealthschooldistricts.Thisscenariocould easilyresultintheneedtocutthebudgettoanincreasebelow1%throughcutstostaff,purchasesand programs;theuseofmorereservesthanthepreviousyear;orbysomehowfindingothersourcesof revenue.Thissituationplacesaverageandbelowaveragewealthschooldistrictsataserious disadvantagecomparedtowealthierschooldistricts. Avisittothewebsitesofwealthyschooldistrictswillprovidemorethanenoughinformationto demonstratetheirwealth.Thesedistrictsaresuccessfulbyeverymeasurestudentperformance, graduationrates,studentofferingsandprogramsofeveryvariety,communityinvolvementandfinancial support,thebesteducatorsandadministrativeteamsthatmoneycanbuyandthelistgoeson.And becauseofthosestrengthstheyhavethecoststhatgowiththem.Buttheyenjoythefinancialcapacity tofundsuchadistrict,asreflectedinthefinancialsupporttheirtaxlevyprovides.Theycontinueto maintaintheseprogramsthroughthefinancialsupportoftheirtaxpayers.ThemiracleoftheTaxCap isthatthesewealthyschooldistrictswillbeabletoraisemuchmoremoneythanpoorerschooldistricts insupportoftheirprograms. Poorer,averagewealthandhigherpovertydistrictsareforcedtoignorecostsduetotheTaxCap.As onecostisignoredanothercostiscreatedastheschooldistrictcutsstaff,program,defers maintenance,buspurchasesandthelike.Asignificantnumberofstudentsfailtomeetperformance standards,oratleastfailtoimprove;thereislessstaffforremediation;andenrichmentactivitiesand otherprogramssuchasAcademicInterventionServicesandSummerSchoolarenotprovenmethodsto helpimprovestudentperformance.Thosecostswillstillbetherebuttheirassociatedexpensesare simplyandtemporarilyremovedfromtheschooldistrictbudget.Tomakethingsevenmore complicated,staffprofessionaldevelopmentlineswerecut,aswellasadministrativeandsupervisory positionsfrommanybudgetsonlytoberestoredattheexpenseofsomethingelseduetothenew APPRandnewCommonCorecurriculumrequirements.

50

The201213TaxCapExperience
TheenactmentoftheTaxCaplawcreatednodirectrestrictionsonschooldistrictbudgetsortaxlevies thatcouldbeputbeforethevoters.Insteaditplacedrequirementsonthedegreeofvotersupport neededtoenactthetaxlevyforthebudgetpresentedtothepublic.Thetaxlevylimithasbeenreferred toasathreshold.Ifthecalculatedtaxlevyfallsatorunderthecalculatedtaxlevellimit,onlyasimple majorityisneededforbudgetapproval.Ifthetaxlevyexceedsthetaxlevylimit,asupermajorityof60% ofthevotersisneededforthebudgettobeapproved. Interestingly,bycontrast,untilthepublicvoteforschoolbudgetsin201213,previousyearsvoteswere legallyonapprovalofthebudgetitself.Itnowappearstomanyvotersthatitisthetaxlevythat ultimatelyneedsvoterapproval.Thisseemstosuggestthatthebudgetmustbemadetofitthe willingnessofvoterstopaythetaxlevy. Thisisadistinctandsignificantchangeinfocusforschooldistrictsandvoters.Priortoschoolbudget votesinMay2012thebudgetwasbasicallysetinstonebyvoterapprovalandthelevywouldbealtered upordownwithoutlimitationaftertheschoolbudgetyearstarted.Thefocushasnowshifted.Now thebudgetisstillvotedon,butthelimitsonthedegreeofsupportofthebudgetistransferredlegallyto theapprovalordisapprovalofthebudgethingeddirectlyonapubliclydisclosedandlegallylimitedtax levythatdirectlysupportsit.WiththeTaxCaplaw,boththebudgetandalevylimitaresetinstonefor districtresidents.Aschooldistrictcanultimatelydecreasethetaxlevyafterthebeginningofthebudget year,butitcannotincreaseitbeyondthetaxlevylimitapprovedbyvoters. ThecalculationoftheschooltaxLevylimitwasamultipartprocessthatdeterminedwhetherornotthe passageofabudgetwithitsproposedtaxlevyamountwouldrequireasimplemajorityorasuper majority.(Thosestepscanbefoundat: http://www.p12.nysed.gov/mgtserv/propertytax/taxcap/home.html) ThemultiplestepsoftheTaxCap(TaxLevyLimit)calculation,ortheirmeritsanddrawbacks,willnotbe examinedinthisportionofthereport.Instead,thefocuswillbetoillustratehowtheTaxCap calculationsplayedout. TheTaxCaplawrequiredchangestothePropertyTaxReportCard.Dueforsubmissionimmediately aftertherequiredresolutionsbyboardsofeducationthatdenotedhistoricallyidentifiedbudget amounts,thenewreportsalsowererequiredtocontainTaxCapinformationrelatedtothetaxlevylimit ofeachschooldistrict,exemptionsavailabletotheschooldistrict(forpermittedpensioncostsbeyonda twopercentagepointincreaseandlocalcostportionsofcapitalexpenses)andthefinaltaxlevyamount tobesoughtfromthevotersinsupportofthatbudget.Furtherinformationaboutwhetherornota schooldistricthasexceededitstaxlevylimitorusedanyorallofitspermissibleexemptionswouldalso benotedorderivedfromthedocumentsubmission.Additionalguidanceforthesubmissionand calculationofthepartsofthetaxlevyandexemptioncalculationswasprovidedbytheOfficeofthe Comptroller. TheStateEducationDepartmentprovidedthefollowingmodelasguidanceandanexplanationforthe itemsrelatedtothetaxlevytobeincludedintherequiredsubmissionforthe201213PropertyTax ReportCard:

51

C
Part II - Tax Levy 2012-2013 School Tax Levy Limit

D
2012-2013 Permissible Exclusions

E
2012-2013 Max w/Excl Levy Limit (A + B)

F
2012-2013 Tax Levy w/o Exclusions (H - D)

G
2011-2012 Proposed Tax Levy

H
2012-2013 Tax Levy w/Exclusions

J
2012-2013

K
2012-2013 Proposed Vs. Max % (J / E) -1.50%

Percent Change [(H-G)/G]

Proposed Vs. Max $ (H - E) -1,659,601

105,197,797 5,181,875 110,379,672 103,538,196 Source:http://www.p12.nysed.gov/mgtserv/propertytax/

107,113,370

108,720,071

1.50

Theactualstatewidetotalslistedbelowarebasedonthepublished201213PropertyTaxReportCard publishedinMayof2012:
Part II - Tax Levy
2012-2013 School Tax Levy Limit 2012-2013 Permissible Exclusions 2012-2013 Max w/Excl Levy Limit7 2012-2013 Tax Levy w/o Exclusions 2011-2012 Proposed Tax Levy 2012-2013 Tax Levy w/Exclusions Percent Change8 2012-2013 Proposed Vs. Max - $ 2012-2013 Proposed Vs. Max - %

19,251,202,241

568,018,706

19,819,220,947

19,154,871,317 19,274,368,786 19,706,320,726 Overall Levy Inc.$ 431,951,940 Overall Levy Inc.% 2.24%

2.24%

(112,900,224)

-0.57%

Usingthechartaboveandbelowitiseasytoseethatthe201213taxlevyis$431.95millionlarger (2.24%)thanitwasin201112.However,itshouldnotbeasurprisetopractitionersthatitisa significantlylowerincreasethanwaspermittedbytheTaxCaplaw.Further,thisincreaseislessthan thealmost3.5%increaseof201112over201011. Inthechartatleft,notethatintheaggregate, 2011-2012 2012-2013 2012-2013 $112.9millionoftaxlevyandallowable Proposed Tax Levy Proposed exemptionswerenotleviedatall(Totalfromthe Tax Levy w/Exclusions Vs. Max - $ $19,274,368,786 $19,706,320,726 ($112,900,224) 201213Proposedvs.Max$column).This Year to Year Chg $ $431,951,940 combinationofunleviedfundsspeaksvolumes Year to Year Chg % 2.24% abouttheanxietyschoolboardsand superintendentshadastheysoughtvoterapprovalfortheirbudgets.Hadthesepossiblelevyand exemptionamountsbeenincludedinleviesforvoterapproval,theaverageincreasewouldhavebeen 2.8%ratherthan2.24%.Aswithallaverages,schooldistrictbyschooldistrictdatawouldexhibithuge variationinpercentageamounts.Insomecases,theuseofallexemptionswouldchangetherequested taxlevyincreasepercentnegligiblyandinotherssignificantly.Inanycase,the2.24%potentialincrease inoveralltaxlevyishigherthantheimaginarybutbelieved2%TaxCapinthemindsofvoters.But eventhatanalysisisshallow. Amoredisaggregatedlookatthesedatasuggeststhatthedeterminationofwhatthepossibleamount andpercentageincreasethatthetaxlevywillbethatwillthengotovotersishighlyunpredictable. Furtherexaminationofthe Tax Cap Levy compositepartsofthe$112.9 Aggregated Data millionoftaxlevyand Total Number of Districts 671 exemptionsunusedis
Disaggregated Data Used Full Limit & Used Full Exemption Levy Range 144 -.19% to +4.73%

52 warranted.Thetotalforallschooldistrictsisanaggregateof$112.9million;butitdoesnotpresentthe entirepicture.Forexample,therewere144schooldistrictsthatusedtheirfulltaxcaplimitandfull numberofexemptionsastheywentbeforethevoters,accordingtothedataprovidedintheMay2012 PropertyTaxReportCard.Thetaxlevyrangedfrom.19%(thatisadecreaseinthelevywithfulltaxlevy limitandfullexemptions)toahighof4.73%.Itiseasytoseethatbyusingthetaxlevylimitformulaand allavailableexemptionsthatthe2%TaxCapisamisnomerfortheseschooldistricts.Thesedistricts usedallavailableparametersofthenewTaxCaplegislationandfoundawaytolivewithinit.Theydid notallprovideproposedlevieslimitedto2%.Indeed,itisactuallypossibletohaveataxlevylimitbelow zeroanegativenumberwithoutexemptions. Statistically,therewere51schooldistrictsthatexceededtheirtaxlevylimitandrequiredthe60% positivevoterpluralitytogainapproval.AccordingtothePropertytaxReportCardtwoofthoseschool districtsrequestedapprovalfor Tax Cap Levy Exceeded Full Limit & Used Full Exemption 51 $1each,(mostprobablydueto Two districts by $1 each; roundinginthecomputation) Noteworthy one by $1,277 anotherfor$1,277andthe Of the 51 Districts: Amount Exceeded $25,948,329 remainderrangedfrom Of the 51 Districts: Average Amount Exceeded $508,791 between$13,289and $2,465,339.Thelattergroupthatrequestedtaxlevyincreasesproducedtaxlevypercentincreasesthat rangedfrom.16%to11.29%.Thecombinedtotalrequestedabovethelimitbyallofthesedistrictswas $25,948,329. Tax Cap Levy Bycontrast,thismeansthat Used Less Than Allowable Exemptions 476 the476schooldistrictsthat Aggregate Amount of Unused Exemption $138,848,553 requestedlesstaxlevywith Average Amount of Unused Exemption All Districts $291,699 exemptionincreasesthanthey 12 disticts Used $1 less, wereentitledtoclaimunder Noteworthy 20 Used less than $1,000 theTaxCaplaw(although20 schooldistrictsrequestswereonlydiminishedby$1,000orless)decidednottorequest$138,848,553 (anaverageof$291,699).Thisisasignificantsum. These476schooldistrictssomehowabsorbedthe$138.85millionofeligibleexemptionsexpensesand thusloweredtheirtaxlevy.Itwasaccomplishedthewayallschooldistrictsultimatelybalancetheir budgetsindifficultfinancialtimesbydoingoneormoreofthreethings:usingfundbalancesor reserves,cuttingstaffand/orcuttingprogramsoralteringoperations.Absenthugeandsustainable unusedfundbalancesitseemsunlikelythatlowtoaveragewealthandhightoaverageneedschool districtswouldbeabletosustainsuchastrategyintothefuture.Fundbalancesareexhaustedwhen theysupplantataxlevyandreductionsinstaffandprogramsoroperationsdonotcontinuetomultiply withoutanegativeimpacttothemissionoftheschooldistrict. Schooldistrictsfinditdifficulttoaskresidentstofilltherevenuegaptosustainprojectedbudgetsfor tworeasons.First,thereistheTaxCapthatlegally,politicallyandpsychologicallyrestrainstaxlevy increases.Second,inmuchofthestate,TaxCapornoTaxCap,residentsareunwillingorunableto continuetosustaindemandsforgreaterfinancialsupportfortheirschooldistrict.Soschooldistricts simplyusewhatfundstheyhaveincashandreservesandcutstaff,programsandoperations.Allthe whileoftenrequestedtaxleviesoftentendedtoebbatorclosetothe2%TaxCapexpectation generallyheldbyschooldistrictresidents.

53 Insuchcircumstancesschooldistrictsinflictfinancialandeducationaldisadvantageuponthemselves beforeresidentsvoteonthebudgetratherthanriskthenoincreaseinlevy/noexemptionsrulesofa contingentbudget.ThisphenomenoncouldbeanunintendedoutcomeoftheTaxCap.Why?Clearly,it isbecauseschooldistrictoptionsafterabudgetisdefeatedtwicearefinancially,operationallyand particularlyeducationallydevastatingundertherequirementsoftheTaxCaplaw. Thereasoningusedbymostschoolboardsandschoolleadersisthattheimpactofacontingentbudget mustbeavoided.Schooldistrictswithlittlefinancialoreducationalprogramresourcesremainingafter yearsoffrozenstateFoundationAidandstateaidcuts(GapEliminationAdjustments)wereespecially hithardbythisnewreality.Manyschooldistrictshavebeencuttingtheirreserves,fundbalances, operations,servicesandprogramsforthelasttwoorthreeyears.Therulesforcontingentbudgetlevies undertheTaxCapareclearcut:noincreaseinthetaxlevyoverthepreviousyearstaxlevyandno allowableexemptions.Thus,thedesiredtaxlevyincreaseandeveryattemptedexemptionmustnowbe absorbedintothebudgetandnonmandatedexpensesmustberemoveduntilthesameorlowerlevy levelisachievedcomparedtothepreviousyearslevy.(Asanaside,fromastrategicperspective,many schooldistrictsbelievedthattheycouldattemptthetwopermittedvotesonabudgetand,ifallelse failed,thensimplylayoffstaffandadoptacontingentbudget.Thisisnottruebecausethelawforbids thisactivity.) Therearealsosignificantrequirementsconcerningthecompositionofacontingentbudgetitself.The administrativecomponentofthebudgetmustnotbehigherascomparedtotheprogramcomponent whencomparedtothelastdefeatedbudget.(Themostcurrentinformationfoundonthetopicof administrativetoprogramrequirementsinacontingentbudgetisavailableat: http://www.p12.nysed.gov/mgtserv/budgeting/.FocusyourattentiononAPPENDIXIIonthewebsite. ItdoesnotmentiontheTapCapchangesforthelevyasthecomponentsofthelawneedstobeupdated intothedocument.)Thus,aschooldistrictcannotlayoffstaffasitmovesintothecontingentbudget unlessitremovesadministrativecoststomaintainthesameratioorlevel(asdefinedasthepercentof administrativecostsandthepercentofprogramcosts)aswaspresentatthetimeofthelastdefeated budgetvote.Thisrequirementisextremelyproblematiceducationallyandpolitically.Italsopresents alaborrelationsnightmare. ThereisaprovisionintheTaxCaplawthatpermitsschooldistrictstocarryoverintofuturetaxlevies smallportionsofunderutilizedlevyamountsorexemptions.Thedesiretousesuchaprovisionis unknown,untestedandisgenerallythoughttobealessthanperfectideainlightoftheperceived unpredictabilityofvoters.Additionally,thereisthedifficultyandfrustrationexpressedby superintendents,schoolbusinessofficialsandboardsofeducationwhohadtoexplaintheactualTax Capcalculationsandhowthe2%TaxCapwasnotreallya2%TaxCap.

CharacteristicsofSchoolDistrictsthatDidNotTakeFullTaxCapLimitorExemptions
Asnotedintheprevioussection,asignificantnumberofschooldistrictschosenottotaketheirfull permittedexemptionssothattheycouldpresenttheircommunitieswithtaxlevylevelsbelowwhat couldbedefinedastaxlevylimitplusallowableexemptions.Thisiscolloquiallyknownasleaving moneyonthetable.TheTaxCapLawdoespermittheuseofcarryoverfundsforthedevelopment ofthebudgetsfor201314andbeyond.(Theavailablecarryoverisequaltotheprioryeartaxlevylimit

54 prioryeartaxlevybutnogreaterthan1.5%timestheprioryeartaxlevylimit.)However,theanalysis providedinthispaperdoesnotsuggestthatitwillbeusedbymany,ifany,schooldistricts. Thebreakdownofthe71%of Under The Tax Cap (Lowered Levy and/or Absorbed Exemptions) schooldistricts(476)that Disaggregated Data chosenottotaketheirallotted CWR <.50 110 CWR<1.0 336 fullTaxLevyLimitor CWR<=1.36 389 exemptionsrepresentsa CWR>1.36 87 diversepopulation.Asmaller CWR>2.0 51 numberofthesedistrictswere generallyorslightlyabove FRPL=0 6 averagewealth,butbyfar,of FRPL<.25 145 theremainingdistricts,most FRPL>.25<.50 212 werewellbelowaverage FRPL>.50 119 wealth.Fromthislattergroup, 389(82%)hadCWRslessthan1.36;336(71%)hadCWRslessthan1.0.Additionally,331(70%)ofthe grouphadFRPLsgreaterthan.25;119(25%)hadFRPLsgreaterthan.50.Theschooldistrictsthat absorbedexemptionshadmoreoftenmoderatetosignificantlevelsofpoverty. ThedemographicsoftheschooldistrictsthatchosenottoseekfullamountspermittedundertheTax Caprepresentonelevelofanalysis.Theotherlevelofanalysisconcernswhattheexemptionsmeanto thefinancesandeducationalprogramoftheseschooldistricts.Failuretorequestvoterapprovalfor suchsumsindicatesthattheschooldistricthadtomakedifficultchoices.Theyhadtoeitherdecrease expensesorfindotherrevenuesthatwouldmakethecollectionofthesesumsunnecessary.Another optionwastocreateacombinationofbothofthesetacticssimultaneously.Regardless,eachchoicehad seriousimplicationsfortheshortandlongtermeducationalandfiscalhealthoftheschooldistrict. Whatisitthatmakeslesswealthyschooldistrictsthatarealsoburdenedwithcomparativelymore povertynotrequestvoterapprovalforataxlevytheyarelegallyentitledto?Itmaybethatwhilethis approachdoesntservetheschooldistrictasalongtermfiscaloreducationalstrategy,itmaywork politicallyintheshortterm.Schooldistrictsrunningoutoffundsmayavoidfiscalinsolvencyovera givenperiodoftimebasedonthehopethatthefiscalpicturewillbrightenduetosomecombinationof increasedstateaidorexpenserelief.Intheshorttermtheschooldistrictmaygarnervotersupportthat couldtranslateintoapositivebudgetvotebecausetaxeswerekeptlowerthantheycouldhavebeenor thatthecutstheschooldistrictswereforcedtomaketoaccommodatethenewtaxlevyamountstrucka positivechordwithvoters. Thesedatasuggestthatschool Under The Tax Cap (Lowered Levy and/or Absorbed Exemptions) districtswerereticentto To Go to Cap or Use all Exemptions would result in: # Districts increasetheirproposedlevies No Additional Percentage Change ($ amount was marginal) 29 anyhigherthantheythought An additional percentage increase in Levy under 1% 284 voterswouldacceptgiven An additional percentage increase in Levy over 1% 192 generallyheldconceptions An additional percentage increase in Levy over 2% 115 abouttheanticipated2%Tax Cap.Forthoseschooldistrictsthatchosetostayunderthetaxlevylimitand/ornotusetheirfull permittedamountofexemptions,theobjectivewastonotcreatelevyproposalswithlargepercentage increases.Intheend,forasignificantnumberofthesedistricts,theuseoftheirfulltaxlevylimitorallof theirpermissibleexemptionswouldnotcreateataxlevyincreaseconsiderablyhigherthanthosethey ultimatelyproposed.However,foranumberoftheseschooldistricts,hadthefulltaxlevylimitor

55 exemptionsbeenused,percentageincreasescouldhaveraisedpublicconcernandgreaterscrutiny aboutschooldistrictspending,butonlyyieldedasmallamountoffundsforthedistrictincomparisonto theirbudgets. Theconcernwiththisstrategyinthelongtermisthatstateaiddoesnotappeartobeincreasingbya sufficientamounttooffsetescalatingcostsortocoverpermissibleexemptions.Heightenedcostcurves showlittleindicationthattheywillebb.Legislatively,andinanyrealimmediatesense,meaningfuland costsavingmandatereliefremainsasonlyapoliticaltalkingpoint. Ifanything,mandateshaveescalated.Forexample,thenewteacherandprincipalevaluationsystem (APPR)willrequiresignificanttrainingcostsandislaborintensiveatatimewhenmostschooldistricts haverecentlyclearedtheirranksofadministratorsneededtoevaluateteachers.Asnoted,these reductionsweredrivenbyaneedtomitigateexpenseescalations,aswellastoquellpoliticalandpublic pressurethatsuggestedthatschooldistrictshavetoomanyadministrators.Laborrelationsforschools havegenerallybeenchallengingandconcessionsfromunionsforthosedistrictsthathavesecured themdonotappeartobesustainableforanylengthoftime.Further,callsbystategovernmentfor greaterefficiencyandimprovedstudentperformancearenotsupportedbyfundstohelpprovidethe typeofprofessionaldevelopmenttrainingthatteachersneedtobemoreeffective.Lastly,therearealso nocurrentmeanstoremoveineffectiveteachersthataregenuinelyinexpensiveandtimesensitive.(The newteacherevaluationsystemcouldmakethatbetter,butnotinanypracticalsenseforatleastthe nexttwoyears.)

CharacteristicsofSchoolDistrictsthatPursuedthe60%Supermajority Challenge Average Average # Districts Tax Levy CWR FRPL Per County Schooldistrictsaretheonlymunicipalentitiesin
Albany Broome Cayuga Chautauqua Chemung Chenango Clinton Columbia Delaware Erie Essex Fulton Herkimer Montgomery Nassau Niagara Onondaga Orange Saratoga Schoharie Seneca St. Lawrence Steuben Suffolk Ulster Westchester Wyoming Grand Total 1.01 0.44 0.64 0.95 0.44 0.44 0.62 1.38 3.37 0.78 3.93 0.52 0.54 0.58 1.17 0.63 0.67 4.39 0.77 0.58 0.65 0.60 0.40 3.06 0.93 3.11 0.54 1.63 0.07 0.74 0.41 0.15 0.59 0.66 0.50 0.30 0.47 0.27 0.31 0.54 0.40 0.36 0.29 0.28 0.23 1.04 0.26 0.37 0.53 0.44 0.48 0.17 0.34 0.13 0.36 0.33 2 1 2 1 1 1 2 1 1 1 1 1 1 1 2 1 1 1 2 1 1 1 4 14 3 2 1 51

NewYorkStatethatelectsagoverningbodythat doesnothavethepowertoapproveataxlevyof anykind.Schooldistrictbudgetelectionsrequire anannualvoteofdistrictresidentsnomatter howmeagertheamountorthechangefromthe previousyearsbudgetisevenifinthe negative.Additionally,undertheTaxCaplaw,a votetooverridethedistrictsestablishedtax levylimitrequirestheapprovalofa60% supermajorityofvotersanotherpeculiaritythat noothermunicipalgovernmentinthestatehas toperform. Atfacevalue,thenotionthataminorityofvoters canforcetheirwilloveramajorityofvotersis patentlyundemocratic.And,inactuality,the needtoattainasupermajorityespeciallyin NewYorkStategovernanceisrare,reservedfor suchmomentousdeterminationsasoverturning anexecutivevetooflegislation,impeachmentof theexecutive,orratifyingamendmentstothe stateconstitution.Afterall,suchdecisionsasthe

56 electionofallpublicofficialsinNewYorkandthepassageofnearlyalllegislationrequireasimple majorityofvoters.TheconceptionoftheTaxCapsupermajorityrequirementthereforehasthestrong taintofpoliticsattachedtoitratherthanfairmindedandcustomarydemocraticprincipleand processes. Schooldistrictsinonly27ofthe57countiesandmunicipalitiesthatvoteonpublicschoolbudgets(the countiescomprisingthefiveboroughsofNewYorkCityandthecitiesofBuffalo,Rochester,Syracuse andWhitePlainsdonotvoteontheirschoolbudgets)attemptedtoobtainasupermajority.The characteristicsofthesedistrictsweremixed. BasedontheinitialPTRCreportandasidefromthestatisticalanomalyoftwoschooldistrictsbeingonly $1overtheirTaxCaplimit,49schooldistrictsmadetheattempt.(Note:Subsequenttothefinalissuance ofthepropertyTaxReportCard,itbecameknownthatadditionalschooldistrictsalsochallengedthe TaxCapbutduetoreportingerrorstheyarenotincludedinthesedata.)Ofthesedistricts,the averageCombinedWealthRatio(CWR)was1.63 Unsuccessful Average Average # Districts andthemedianwas.82.TheaverageFreeand Over-Ride of CWR of FRPL Per County ReducedPriceLunchpercent(FRPL)was.33and Chemung 0.44 0.59 1 themedianwas.29. Chenango 0.44 0.66 1 Clinton 0.72 0.49 1 Whenthesedataaredisaggregatedthe Columbia 1.38 0.30 1 demographicdistributioniseasiertosee.The Fulton 0.52 0.54 1 CWRof11oftheschooldistrictsthatchallenged Montgomery 0.58 0.36 1 theTaxCapwasabove1.375(22%oftheschool Nassau 1.17 0.29 2 districtswerewealthybySSFCstandards);34had Niagara 0.63 0.28 1 CWRsoflessthan1.0(69%werelessthan Saratoga 0.74 0.29 1 averagewealthbystatestandards)and17had Schoharie 0.58 0.37 1 CWRslessthan.65(35%wereconsideredlow Suffolk 1.13 0.12 5 Ulster 1.02 0.23 2 wealthbyalmosteveryonesstandards).The Wyoming 0.54 0.36 1 FRPLof20oftheschooldistrictswaslessthan Grand Total 0.87 0.31 19 .25.Thus,41%wereconsideredtohavenoor,at best,moderatepoverty;8schooldistrictshaveFRPLlevelsofpovertylistedaszero.Ofthisgroup,39 schooldistrictshaveFRPLsoflessthan.5,while10schooldistrictshadFRPLsgreaterthat.5(or20%of theseschooldistrictsexhibitsignificantlevelsofpoverty). Abouthalf(24;49%)haveCWRslessthan1.andFRPLsgreaterthan.25.Roughly18%(9school districts)hadCWRslessthan1.0,butFRPLsgreaterthan.5.Thesedatasuggestthatwealthy,average wealthandpoorschooldistrictswithamixtureofallwealthandpovertylevelstookactionstooverride theTaxCap.Thevalueofdisaggregateddataisrevealedastheaggregateaverageswouldleadoneto believethat,onaverage,schooldistrictsthatchallengedthetaxcapweresignificantlyaboveaverage wealth(1.63)andexperiencemoderatepovertylevels(.33).Onaverage,schooldistrictsinNassau, SuffolkandWestchestercountiesthatchallengedtheTaxCapwerebydefinitionhighwealthandlow povertybutmanyotherschooldistrictsofsignificantlylowerwealthandhigherlevelsofpoverty decidedtochallengetheTaxCapaswell.Thereadercandeterminewhichschooldistrictschallenged thetaxlevylimittomaintaintheirsignificantandsuccessfulprogramsandwhichschooldistrictstheir moderate,dwindlingormeagerprograms. TheinitialresultsofbudgetvotesfortheschooldistrictsthatattemptedtooverridetheTaxCapwere alsomixed.Inall,19(37%)ofthoseschooldistrictsthatchallengedthetaxlevylimitfailedtopasstheir

57 budgetonthefirstattempt.Thecharacteristicsoftheseschooldistrictsintheaggregateindicateon averagebelowaveragewealth(.87CWR)andverymoderatepovertylevels(.31FRPL).Disaggregated datarevealthattheseaveragesareskewedbydatafromColumbia,NassauandSuffolkcounties.Here theschooldistrictaveragesforthedefeatedoverridebudgetswereallaboveaveragewealth(CWRsof 1.381.17,1.13respectively)andmoderatetoverylowpovertylevels(FRPLsof.30,.29,.12 respectively).Allareaboveaveragewealthandlowtomoderatelevelsofpoverty. Bycontrast,theremainingschooldistrictsthatfailedintheirattempttooverridetheTaxCapwere almostallbelowaveragewealth(somesignificantly)andpossessmoderatetosignificantlevelsof poverty.Fortheseschooldistrictsthechallengesofeducationalandfiscalsolvencyaremoredifficult whenthelastthreeyearsofGapEliminationAid(GEA)cutsarefactoredintotheirfinancesandthe abilitytomaintainprogram,staffandoperations. Inthefinaltallyallbuttwoschooldistrictspassedtheirbudgetafterthesecondvote.Thiswas accomplishedonlyafterfurthercutstostaff,programs,operation,andtheuseofadditionalfund balancewereundertakentolowertheoriginallyproposedtaxlevy. TheTaxCapcontinuestobeafactorinschooldistrictfinance.Theinflationrateusedinthecurrent yearTaxCapcomputationwas2%(allowablelevygrowthfactor).Thatisthemaximumlevelthata taxlevycan.Itwas2%becauseinflationwasrunningcloseto3.2%forthetimeperiodusedinthe calculation.Currentlythelatestcalculationoftheinflationfactor,accordingtotheNewYorkState Comptroller,is2.93%(http://www.osc.state.ny.us/localgov/realprop/pdf/growthfactors.pdf).That meansthattheallowablelevygrowthfactorfortheTaxCapcomputationwillagainbe2%.Thisbegsa logicalquestion:Howisaschooldistrictsupposedtousetwoconsecutiveyearsof2%allowablelevy growthfactoreachwheninflationintherestoftheworldiscalculatedat3.2%and2.93% respectively?Inessence,theschooldistricttrendisthattheTaxCapcalculationactuallycontributesto themlosingground. TheuseofPaymentsinLieuofTaxes(PILOTs)inthecomputationoftheTaxCap(TaxLevyLimit) significantlymoreoftenthannotleavesmanyschooldistrictsdazedbytheimpactPILOTsleaveontheir abilitytoraisetheirtaxlevywithinlegal,reasonableandvoteracceptablelimits.RoutinelyPILOTs offerlittleornolevyrelieftoschooldistrictsandaremainlyviewedascounterproductivetothefiscal capacityoftheschooldistrictunderTaxCaplegislation.Theabilityofaschooldistricttolevyneeded taxesishamperedbythePILOT.ThisisbecausethePILOTdoesnothingtoaddrevenuestotheschool districtbecausenothingisaddedtothetaxrolluponwhichtheTaxLevyLimitisbroughttobear. Additionally,ithasbeenshownthatinmanycases,thepromisedjobsthatledtothegrantofthe PILOTfromthelocalgrantingagenciesandtheirmunicipalpartnersnevermaterialize.Andoftenwhen theydo,fewifanyactuallygotothecurrenttaxpayerresidentsoftheschooldistrictinwhichthePILOT businessislocated.BusinesseswithPILOTshireregionallyandnotinrigidaccordancewithschool districtboundaries.AstrongcasecanthereforebemadethattheuseofPILOTagreementsintheTax CapformulaisbadforbusinessandbadforschooldistrictsasPILOTScontributetoincreasingfiscaland educationsdecayofschooldistricts,whichcontradictsoneofthebedrockprinciplesofeconomic developmentthatbusinessesareattractedtocommunitiesthathavestrongpublicschools. Further,asoutlinedinthesectionCharacteristicsofSchoolDistrictsthatDidNotTakeFullTaxCapLimit orExemptions,thewillingnessofmanyschooldistrictstoclaimlegalexemptionslikeEmployee RetirementSystemcostsandthelocalshareofcapitalexpenditureshasnotbeenutilizedandwill likelyneverbeutilizedbythesedistricts.Moreover,additionalcapitalexpensesareabouttocomeon

58 lineinschooldistrictsafterthemassiveuseoftheEXCELaidincentives(fundingenticementsprovided tosupportbuildingrenovationprojectworkanddiminishlocaltaxpayercosts)forcapitalprojects. UndertheTaxCaplawwealthierschooldistrictsthatarelessdependentonstateaidwillbeabletoraise moremoneyperpercentoftaxlevythanaverageorbelowaveragewealthschooldistricts.Clearly, attainingthemandated60%supermajoritytogoabovethetaxlevylimitwillbeanunrealistic outcomeinmostothercommunities.Averageandbelowaveragewealthschooldistrictsthosethat relymuchmoreheavilyonstateaidwillbeforcedtocontinuetocutstaffandprogramsanduse reservestostayinoperationanunsustainableprocess. Insummary,thePropertyTaxCapguaranteesthatthoseschooldistrictswithlesswealth,fiscalcapacity andthegreatestpovertywillnotprospereducationallyorfiscally.Whencoupledwithpaststateaid freezesandcutsandthemostrecentinsufficientstateaidreductionofthosecutsitmakesitnearly impossibleformanyschooldistrictstosurvivefiscallyoreducationallyoverthenextfewyears.With manyschooldistrictsinfiscalandeducationaljeopardythehistoricalcornerstoneofcommunityidentity andprideinmanylocalitieswilldiminishalongwiththeschooldistrict.Againnoperson,familyor businessisattractedtoacommunitywithschoolsthatareinfiscaloreducationaldecay.

HowMuchMoneySchoolDistrictsHaveandWhereTheyHaveIt
Thereappearstobeabeliefbyschooldistrictresidentsandpolicymakersthatschooldistrictshavea significantamountofcashthatcouldbeusedtocontinuouslyabsorbcostincreasesandthusbluntthe needfortaxlevyincreases.Infact,someschooldistrictsdoindeedhaveasignificantamountofcash, othershaveamoderateamountandtoomanyhavepracticallynoneatall.Thequestionis,regardless ofhowmuchmoneyaschooldistricthas,cantheyreallyusethosefundstodampentaxlevyincreases and,ifso,forhowlong?Theanswertothatquestionisbasedonfivevariables:theamountofcashthe schooldistricthasonhandandinreserves,theintendedpurposeforthosefunds,expensesovertime, stateaidinthefuture,andcashflowneeds. Anexaminationoffundbalancesisnotaseasyasitmayseem.ThePropertyTaxReportCard summarizesfundbalancesforeachschooldistrict.GeneralfundbalancedefinitionsfromtheState EducationDepartmentarefoundat:http://www.p12.nysed.gov/mgtserv/propertytax/.)Fundbalances comeinvariousformsandmanyhaverestricteduse.Somefillrevenueholesinthebudgetandare usedtooffsettaxes;otherscontainschooldistrictliabilities;andtherestareforemergencies,school districtoperationsandcashflow. TheAssignedAppropriatedFundBalanceisspecificallyusedto 2011-2012 2012-2013 Asgnd Approp Asgnd Approp fillarevenueholeinthebudgetandoffsettaxlevyincreases.In Fund Balance Fund Balance the201112schoolyear$1.42billionofschooldistrictcashwas $1,421,313,234 $1,305,870,663 usedtooffsettaxlevyincreases.Inthe201213schoolyear Year to Year Chg $ ($115,442,571) $1.31billionofschooldistrictcashisanticipatedtobeusedto Year to Year Chg % -8.1% offsettaxlevyincreases.Thisisayeartoyearreductionof $115.4million(8.1%).However,thetotalmoneyusedtooffsettaxesforthelasttwoyearswouldbe roughly$2.73billion.ButthataggregatereductionmaskswhatisreallyhappeningtotheAssigned AppropriatedFundBalance.Inactuality,someschooldistrictsincreasedtheirAssignedAppropriated FundBalance,otherskeptitthesameandstillothersreducedit.

59 ReductionsofAssigned AppropriatedFundBalanceuse 671 occurredwith324school ($115,442,571) districts.Inall,theyreduced -8.1% thisappropriationbyasumof Disaggregated Data $212.96million,bringingthe Reduced from 2011-12 to 2012-13 324 totalamountusedbythisgroup Of the 324 That Reduced: Amount Reduced ($212,962,968) to$545.37million.Theyused, Of the 324 That Reduced: Average Amount Reduced ($657,293) onaverage,$1.68millionof Of the 324 That Reduced: Amount Used $545,365,425 reservesoffsettaxlevies. Of the 324 That Reduced: Average Amount Used $1,683,227 Thisstrategyisoftenemployedintwotypesofsituationsrevenuesmayhaveincreasedatagreater ratethanexpenditures,orrevenuesdecreasedorstayedthesame,yetexpensesfelltoagreaterdegree. Eithercircumstanceisconceivablegiventhe201213stateaidamounts.However,thelatterstrategy mayhaveoccurredmoreoftenasschooldistrictscutstaff,programsandoperationalcomponentsof theirbudgetstodiminishtheimpactofescalatingcostscompoundedbythelossof$605millionin federalEducationJobsFunds(EJF),otherincreasedexpenses,insufficientrevenuestooffsetsuch expenditurechanges,orsomecombinationofalloftheabove. Tomaintainthisstrategy,onaverage,eachoftheseschooldistrictsmustsomehowannuallycomeup with$1.68milliontomerelystartatthesameplacewiththeTaxCap,hypothetically,inperpetuity. Bycontrast,therewere129 Assigned Appropriated Fund Balance schooldistrictsthatmaintained Stayed the Same 129 theircurrentlevelofAssigned Of the 129 Districts: Amount Used $248,700,369 AppropriatedFundBalance. Of the 129 Districts: Average Amount Used $1,927,910 Fromthisgroupalmostaquarter Noteworthy: Districts Used $0 2011-12 and 2012-13 5 ofabilliondollars($248.7 Noteworthy: Districts Used $0 2012-13 9 million)wasusedtooffsettaxes. Theaverageamountfortheseschooldistrictswasalmost$2millioneach,significantlyhigherthanthose whodecreasedtheiruseoffundbalance.(Itisinterestingtopointoutthatfiveschooldistrictshave usednoAssignedAppropriatedFundBalanceoverthelasttwoyearsandthatnineschooldistricts usednoAssignedAppropriatedFundBalanceforthecomingyearsbudget.) ThelargestamountofAssigned Assigned Appropriated Fund Balance AppropriatedFundBalance Increased from 2011-12 to 2012-13 213 Of the 213 That Increased: Amount Increased $97,520,397 expendedwasbythe213school Of the 213 That Increased: Average Amount Increased $457,842 districtsthatincreasedtheiruse Of the 213 That Increased: Amount Used $511,804,869 ofappropriatedfundbalance. Of the 213 That Increased: Average Amount Used $2,402,840 Thisisdonetomitigatethe impactofanincreasedtaxlevyduetosomecombinationofrevenueandexpenditures.Ifrevenuesfail tokeepupwithexpendituresthenmorefundbalanceispushedintothecalculationsothattaxlevies alonedonotcarrytheentireburden.ThisgroupofschooldistrictsincreasedtheuseofAssigned AppropriatedFundBalancebyover$95.5million;theyaveragedalmost$500,000increaseseach.In total,over$511.8million,anaverageof$2.4millionwasusedbytheseschooldistrictstoholdtaxlevy increasesdown.
Assigned Appropriated Fund Balance Aggregated Data Total Number of Districts Total Change from 2011-12 to 2012-13

60 Anappropriaterhetoricalquestionwouldbe,wherecouldthesefundscomefrom?Oftentheyarethe delta(differenceorchange)betweenbudgetedrevenuesandexpensesandactualrevenuesand expenses.Forexample,ifrevenueswerehigherthananticipatedandexpenditureswerelowerthan expected,adistrictwouldhavefundsleftover(afundbalanceifyouwill)fromthatbudgetcycle. Thesefundscouldbeusedforanappropriationoverthenextyearstooffsettaxes,ortoreinforce reservesand/orgotounassignedfundsasneededordesiredwithinlegallimits.Couldunanticipated revenuesthereforeovercomeunanticipatedexpenses,orviceversa,toaccomplishthesameresult? Thisproblemariseswhen,asbudgetsgettighter,thatis,thatbudgetedrevenueandexpenditure amountscomeclosertoactualamounts,theabilitytocreateadeltanarrows.Insomecasesschool districtshaveanecdotallyreportedthattheirdeltasareevaporatingquicklyparticularlyoverthelastfew yearsastheirbudgetsbecometighter. TheAdjustedUnrestrictedFundBalanceservestwopurposes.Thefirstistoaccountforencumbered expensesoftheschooldistrictthatwerecreatedinonefiscalyear,butareduetobepaidinthenext. Theotheristoprovidecashonhandforschooldistrictemergencies,operationsandcashflow.InReal PropertyTaxLawSection1318(RPTL1318)alimitissetontheamountofunrestrictedfundbalancea schooldistrictmayhave.Currently4%ofaschooldistrictssubsequentyearsbudgetmaybe unrestrictedfundbalance.Othermunicipalitiesdonothavesuchrestrictionsoncashandunrestricted fundbalances.Additionally,itisrarethata4%unrestrictedfundbalanceissufficienttomeetaschool districtscashflowandoperationalneeds.Oftenfundsaretemporarilyborrowedfromotherschool districtaccounts(reservesandfunds)tooffsetcashflowandoperationalfundshortages. AccordingtothePropertyTaxReport 2011-2012 2011-2012 2012-2013 2012-2013 Cardtheaverageamountoffundsin Adj Unrstrctd Percent of Adj Unrstrctd Percent of Fund Balance Total Budget Fund Balance Total Budget AdjustedUnrestrictedFundBalance $1,405,403,484 4.4% $1,210,153,163 3.7% decreasedby$195.3million(13.9%) Year to Year Chg $ ($195,250,321) between201112and201213.The Year to Year Chg % -13.9% fundingleveldroppedfroman averageof4.4%(inexcessoftheRPTL1318limit)to3.7%belowthelimit.Onemightconcludethat whentheaverageofunrestrictedfundsfallbelowthe4%limititisapotentialsymptomoffiscalstress andrequiresfurtheranalysis.Tothatendthedatamustbefurtherdisaggregatedtorevealtrendsand patternsthatmayshedlightonthedemographicsofschooldistrictsthathavelittleornounrestricted cashfundbalance,comparedtothosethathavesignificantfundbalancesumsthatmayexceedlegal limits.(Inthecaseofthelatter,furtherinvestigationthanthatconductedinthisstudymayprovide additionalinformationintothefiscal,operationalandeducationalnuancesofthatpractice.) ThesenexttwoscatterplotsshowthedistributionofschooldistrictsacrossNewYorkStatewithCWRs of.18to4.0.Notethelargeconcentrationofschooldistrictsalongthe4%lineinaccordancewithRPTL 1318.Thisisanormallyanticipatedoccurrence.Whatisnotanticipated,ordesired,isthelarge concentrationofschooldistrictsofbelowaveragetoslightlyaboveaverageCWRsthathavelessthan the4%ofAdjustedUnrestrictedFundBalance.Moreover,thereisaconcentrationoflowtoslightly aboveaveragewealthschooldistrictswithbelowaverageperstudent($775)amountsofAdjusted UnrestrictedFundBalance.

61 Theseschooldistrictswillface twocomplicationsasthey %ofBudget 25% moveforward.Onethey 24% mayexperienceperiodicor 23% 22% significantlongertermcash 21% 20% flowissuesduringor 19% throughouttheentireschool 18% 17% year.Inturn,thiswouldlead 16% theschooldistricttofour 15% 14% possibleactions:First,they 13% 12% couldcutexpensesduringthe 11% schoolyeartolessenthe 10% 9% impactofexpenditureson 8% 7% theircashflow.Thishasthe 6% effectofcuttingordeferring 5% 4% critical,highorlowpriorityor 3% 2% marginalinfrastructure 1% initiatives.Thesekindsof 0% 0 0.5 1 1.5 2 2.5 3 3.5 4 CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) actionspotentiallydoomsuch UnrestrictedFundBalance201213Estimated(PTRC) effortsortheoriginal UnrestrictedFB AmountperStudent(Averageis$775) strategiestofailure.Such PerStudent $13,000 measurescouldrangefrom $12,000 maintenanceorpurchases $11,000 plans,tootheritemslike $10,000 electives,staffdevelopment $9,000 andthelike.Second,aschool $8,000 districtcoulddelaypayments $7,000 tovendorsorotherexpense $6,000 outputs.Thisdoesnot reinforcetheschooldistricts $5,000 creditratingifitisalegal $4,000 obligationordealingswith $3,000 vendorsifitinvolveslatebill $2,000 payments,Third,theschool $1,000 districtcouldborrow(asina $0 0 0.5 1 1.5 2 2.5 3 3.5 4 dueto;duefromaccount method)fromrestricted reservesiftheyhavethem.Thisisariskypracticethatcouldbringthescrutinyofauditorsand consternationfromanumberofothergroups.However,thishasactuallybecomeanalltoocommon practice.Fourth,thedistrictcouldborrowmoneyfromthepublicmarketintheformofaRevenue AnticipationNote(RAN)orTaxAnticipationNote(TAN),iflegallyapplicable.However,suchanactionis consideredtobeonlyashorttermandtemporarysolutionuntilthedistrictcanrightitsfinances. Inanycase,aninsufficientAdjustedUnrestrictedFundBalanceisundesirableandproblematic. However,asignificantnumberofschooldistrictsfindthemselvesinsuchadepletedandpotentially destructivefinancialsituation.
UnrestrictedFundBalance201213Estimated(PTRC) PercentofBudget
CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth)

62 Asnoted,withreferencetotheAdjustedUnrestrictedFundBalance,schooldistrictscharacteristicsfall intothreecategoriestheAdjustedUnrestrictedFundBalancewaseitherreduced,increasedorstayed thesame.Wewillnowdisaggregatethedatainsuchawayastodisclosethedemographicpatternsthat mayexistineachcategory. AccordingtothePropertyTax Adjusted Unrestricted Fund Balance ReportCardtheAdjusted Aggregated Data UnrestrictedFundBalancein Total Number of Districts 671 201213isreportedtobe$195.3 Total $ Change from 2011-12 to 2012-13 ($195,250,321) millionlessthanin201112.This Total % Change from 2011-12 to 2012-13 -13.9% 13.9%declinewillbringthese Average Amount Per Student $775 cashbalancesto$775onaverageperstudentstatewide. Disaggregateddatashowsthat347(52%)schooldistrictsloweredtheirUnrestrictedFundBalancebya totalof$242.6millionfor201213whencomparedto201112.Thisisadiminishmentofanenormous 31.2%or$699,189onaverage.Thatbroughtthisfundbalancedowntojust$700perstudentforthese schooldistrictsonaverage9.6%lessthantheaverageschooldistrictstatewide.Thereasonforthis Adjusted Unrestricted Fund Balance declineisunknown,butmost Disaggregated Data likelydependson Reduced from 2011-12 to 2012-13 347 circumstancesineachschool Of the 347 That Reduced: Amount Reduced ($242,618,414) district. Of the 347 That Reduced: Percent Reduced -31.2% Of the 347 That Reduced: Average Amount Reduced ($699,189) Possiblecausesmayincludea Of the 347 That Reduced: Amount Retained $535,392,932 numberofpossibilities.Some Of the 347 That Reduced: Average Amount Retained $1,542,919 schooldistricts,inpartor Of the 347 That Reduced: # of Students 764,565 completely,mayhavealready Of the 347 That Reduced: Amount per Student $700 createdbudgetssotight Of the 347 That Reduced: Amount per Student to Average -9.6% overthelastfewyearsthat theysimplyhavelesscashleftannually.Otherschooldistrictsexperiencedtosomedegreethe increasedneedformoniestocoverAssignedAppropriatedFundBalancesduetosomeamalgamationof increasedexpenseswithinsufficientsourceofrevenuetocoverthem.Forstillothersitcouldbethe needtoincreasefundsintheAdjustedRestrictedFundBalanceduetoincreasedliabilitiesincurredby theschooldistrictforamultitudeofreasonsfromtaxcertiorariclaims,unemploymentinsurance demands,terminationorseverancepayouts,orunderbudgeteditemssuchaspensioncostsor employeemedicalinsurance Adjusted Unrestricted Fund Balance premiums.Inactuality,it Stayed the Same 33 couldbeallofthese Of the 33 Districts: Amount Retained $62,009,899 possibilitiesormore. Of the 33 Districts: Average Amount Retained $1,879,088 Increased from 2011-12 to 2012-13 291 Only33districts(5%ofall Of the 291 That Increased: Amount Increased $47,368,123 schooldistricts)maintained Of the 291 That Increased: Average Amount Increased $162,777 theirpreviousbalancesof$1.9 Of the 291 That Increased: Amount Retained $612,750,332 milliononaverage.Another Of the 291 That Increased: Average Amount Retained $2,105,671 291(38%)districtsincreased Of the 291 That Increased: # of Students $723,191 theirbalancesfor201213. Of the 291 That Increased: Amount per Student $847 However,ofthose291school Of the 291 That Increased: Amount per Student to Average 9.3% districts,57%reducedtheir Of the 291 That Increased: Also Reduced Restricted Fund Balance 57% AdjustedRestrictedFund

63 Balancessimultaneously.Schooldistrictsthatincreasedtheircashbalancesmakeavailable,onaverage, $847perstudent,and9.3%abovethestatewideaverage. ThemaximumallowableamountofAdjustedUnrestrictedFundBalanceisthebasiclifebloodofaschool districtscashflow.Thegreatertheamount,thebettertheschooldistrictsabilitytomaintainneeded cashflow.Absentcashflowtheseschooldistrictsexperienceperiodicorcontinuedstructuraldeficits duringasinglefiscalyearorlonger.Suchsituationsareoftenremediedwiththeuseofborrowingssuch asaRevenueAnticipationNote(RAN)orTaxAnticipationNote(TAN).Theuseoftheseborrowing mechanismsarenotpermittedlongtermwhenlendersseenorealisticendtorootcausecashflow issues.Theuseofeitherofthesemechanismscoststheseschooldistrictsmoneyininterestpayments andissuancecostsandisasymptomofatenuousfiscalconditioninneedoflongtermremedy. Thetenuousnessofthecashflowofschooldistrictscanbeidentifiedinpartbyanexaminationintothe amountofAdjustedUnrestrictedFundBalance.
Adjusted Unrestricted Fund Balance Noteworthy: Districts Retained $0 Adj. Unrestricted Fund Balance Noteworthy: Districts Retained <4% Adj. Unrestricted Fund Balance Noteworthy: Districts Retained <3% Adj. Unrestricted Fund Balance Noteworthy: Districts Retained <2% Adj. Unrestricted Fund Balance Noteworthy: Districts Retained <1% Adj. Unrestricted Fund Balance Noteworthy: Districts Retained >=4% Adj. Unrestricted Fund Balance Noteworthy: Districts Retained >4% Adj. Unrestricted Fund Balance 7 450 (67.1%) Avg. % of Budget= 3.0% 129 (28.6%) Avg. % of Budget= 1.7% 75 (11.2%) Avg. % of Budget= 1.1% 28 (4.2%) Avg. % of Budget= .38% 221 (32.9%) Avg. % of Budget= 6.76% 115 (17.1%) Avg. % of Budget= 9.3%

AnalysisofthesedatashowthatsevenschooldistrictsdeclarednoAdjustedUnrestrictedFundBalance atall.Intotal,28schooldistricts(4.2%)havelessthan1%cashonhand;cumulatively,75school districts(11.2%)havelessthan2%.Thosewithlessthan1%,theaverageamountisonly.38%ofbudget andthosewithlessthan2%,theaverageamountisjustabout1%cashonhandasaratiotobudget. The129schooldistricts(28.6%)withlessthan3%AdjustedUnrestrictedFundBalancemaintainonly 1.7%ofbudgetasacashflowsourcewhile450(67.1%)havelessthanthepermitted4%ofbudgetasa cashsource.Thelattergroupaveragesonly3%ofbudget.Asreported,lessthanathird(32.9%)ofall schooldistrictshasanAdjustedUnrestrictedFundBalanceequaltoorgreaterthanthe4%permitted. Theyaverageabout5.7%ofbudgetforcashonhand. The115schooldistricts(17.1%)thatreportedanAdjustedUnrestrictedFundBalanceinexcessof4% maintainanaverageof8.2%ofbudgetascash.Thereasonsforthisamountofcashareunknown.For aboutaquarterofthese115schooldistrictstheamountoverthe4%limitisonlyafewtenthsofa percentatbest,withaboutathirdoftheseschooldistrictsstillunder5%.Noneofwhichcouldbe typifiedasarealissue.Manyothershavelittlededicatedtorestrictedfundreserves.Perhapsthe constantuseofcashtooffsetcashflowandlossofcashasappropriatedfundbalancesdueto continuousstateaidcutsandescalatingcostshavemadethecreation,tappingorrelocationoffunds constantlyaninefficientuseoftimeandresources. Inmanycases,theamountsofmoneyabove4%aresimplynotasignificantsum.Forinstance,some schooldistrictshavewhatappearstobesignificantcashonhandaspercentofbudget,but,inactuality, asmallamountofmoneymaylooklikeabigpercentofbudgetwhenthebudgetissmallduetothesize oftheschooldistrictand,asthisstudymakespainfullyclear,therearemanysmallschooldistricts.

64 Therehasalsobeenaquick,butshortlivedinfusionofcashintosomeschooldistrictsduetosuchthings asWindmillFarms,housingPILOTs(PaymentsInLieuofTaxes),orothereconomicdevelopmentin certainpartsofthestate.Thisphenomenonyieldsasignificantamountofcashtotheschooldistrict thatisdifficulttoabsorbinstantly,yetmaybeneededtosustaintheschooldistrictlongaftertheshort termPILOTsrunout. TheAdjustedRestrictedFundBalanceismadeupofanumberofreserves.Eachreserveisdedicatedto somefuturecosttobebornebytheschooldistrict.Forexample,theEmployeeBenefitAccruedLiability Reserve(EBALR)isusedtopayemployeeswhentheyleaveschooldistrictemploymentforsuchthings asunusedsickorvacationdays.(FormoreinformationandanauditsamplefromtheOfficeofthe Comptrollerseehttp://www.osc.state.ny.us/localgov/audits/swr/ebalr.pdf)Obviouslyeachschool districthassuchaliabilityanditmustbedeterminedbyanactuarialstudy.However,notallschool districtshavecreatedsuchareserve. Whetheraschooldistricthassuchareserveornot,theywillmostcertainlyhavealiability.Permissible usesofthereserveareprovidedundertheGeneralMunicipalLaw(GML6p).Thosethathavesucha reservehave,overthepasttwoyears,beenabletoremoveportionsofthereserveamountwith approvaloftheComptrollerifthereserveisdeterminedtobeoverfunded.Tobeclear,aschool districtcannotsimplyremovemoniesfromtheEBALRfundstosupplantaschooldistrictbudgetrevenue shortfallandthenredirectedtoanappropriatedfundbalancetooffsettaxincreasesatthewillofthe boardofeducation.Theuseofthefundisspecificallyrestricted.TheOfficeoftheComptrollerhas providedsignificantguidanceonthereallocationmechanismsrequiredfor201213.Shouldaschool districtwishtoreallocatesuchfundsuponreassessmentofactuarialneeds,theamountstobeleftin andremovedfromthefundaresubjecttotheapprovaloftheOfficeoftheComptroller. Otherreservesinclude,butarenotlimitedto,forEmployeesRetirementSystem(ERS)payments,tax certiorariclaimsagainsttheschooldistrict,andunemploymentinsurance.Suchreservesalsoserveto fundschooldistrictliabilitiesthatarebelievedtoexistandintothefuture.Thesetendtobemorefluid innatureastheschooldistrictcontinuouslyexaminesliabilitiesandexposuretofinancialissuesrelated toeachreserve.TheRepair,CapitalandMandatoryReserveforDebthavespecificfunctionsand restrictionswithregardtotheircreation,funding,useandtransferthatmakealteringtheiruseasan appropriatedfundbalancetooffsettaxes,forexample,extremelymoredifficultandinsomecases subjecttovoterapproval. Despitethefactthatadistrictcannotmovetheserestrictedreservesaroundtomerelyreduceor eliminatetaxincreases,forthepurposesofthisresearch,suchanexercisehasnonethelessbeen undertaken.Thiswillillustratethepointthatnomatterhowmuchmoneysomeschooldistrictshave orwheretheyhaveittherewillnotbeenoughtosustaintheirfiscalandeducationalprograms. AccordingtothePropertyTaxReportCardtheamountof 2011-2012 2012-2013 Adj Restricted Adj Restricted AdjustedRestrictedFundBalancehasdroppedby$286.5million Fund Balance Fund Balance (7.9%)inasingleyear.Thereasonforthisdecreaseisunknown. $3,619,967,841 $3,333,506,277 Year to Year Chg $ ($286,461,564) Alogicalpresumptionforthedecreaseisthatschooldistricts Year to Year Chg % -7.9% actuallymaybeusingthesefundsfortheirintendedpurpose tocovercertiorariclaims,paydowndebtonbuildingssoldbytheschooldistrict,coverERScost increasesandthelike.Theremaybeanotherexplanationuponfurtherreflectionandanalysis.Funds

65 designatedinsomeoftheseaccountsdonotneedtobefundedatcurrentlevelsandthemonieswere transferredtothegeneralfundtobeusedasanAdjustedUnrestrictedFundBalancetoassistwithcash flow.Yetanotherpossiblereasonforthedecreaseisthatregardlessofthecoverageaffordedbythese funds,thatwerecreatedtooffsetlongtermliabilities,theschooldistrict,aftercarefulanalysis,has madethechoicethatthefundswouldbetterservetheschooldistrictasanoffsettothetaxlevy(asan AssignedAppropriatedFundBalance).Thiscouldthenassisttheschooldistrictinitsattempttofillthe gapcreatedbetweenrevenues(stateaidbeingamongthelargestotherthatthelocaltaxlevy,especially inlowwealthschooldistricts)andexpensestheschooldistrictbelievesitwillincurinthenextfiscal year.Oritcouldbesomecombinationofallofthesestrategies. Thelaststrategythatmanydistrictshaveemployedisthemostproblematic.Iffundsaretakenfrom reserveswhereliabilitiesareknowntoexist,theschooldistrictwillsoonerorlaterhavetofundthose liabilities.Incurringadditionaldebtwouldgainsomerelieffromsuchadifficulty,butwhenaschool districtincursdebt,asinpersonalfinance,thereisacostforschooldistricts,thatcostincludes issuancefeesandinterestcharges,whichthenwillbecomeanadditionalcosttotheschooldistricts expenseburden.Granted,thesecostsintheshorttermwillhavelessofaneffectonschooldistrict finances,operationsandtheeducationalprogramthantheimmediatelossofalargesumofcash,but theywillbecomealongterm,albeitsmaller,costtotheschooldistrict.Thetradeoffsandchoicesare notgoodwhentheschooldistrictexperiencessignificantdifferencesbetweenitsrevenuesand expendituresandsimultaneouslyeitherdesirestoorbelievesitmustholddowntheimpacton taxpayerswithlittleimmediaterelieftotheexpenseescalationproblemsinsight. Whenonelooksatdisaggregateddata,certainthemesemerge.Therewere412(61.4%)schooldistricts thatreducedtheirAdjustedRestrictedFundBalancebetween201112and201213basedonschool districtsubmissionsforthePropertyTaxReportcard.Thisreductionwassignificant.Theseschool districtsreducedfundsby Adjusted Restricted Fund Balance $394.5million(areduction Disaggregated Data of16.1%)toanaverage Reduced from 2011-12 to 2012-13 412 reductionofalmost Of the 412 That Reduced: Amount Reduced ($394,523,111) $957,000each.Onaper Of the 412 That Reduced: Percent Reduced -16.1% studentbasis,theseschool Of the 412 That Reduced: Average Amount Reduced ($957,580) districtsreducedtheamount Of the 412 That Reduced: Amount Retained $2,061,382,472 ofAdjustedRestrictedFund Of the 412 That Reduced: Average Amount Retained $5,003,356 Of the 412 That Reduced: # of Students 1,017,159 Balanceby$2,027(a5% Of the 412 That Reduced: Amount per Student $2,027 reduction).Simultaneously Of the 412 That Reduced: Amount per Student to Average -5.0% theAdjustedUnrestricted FundBalancefor201213wasreducedover13%fromthepreviousyear.Clearlythedepletionof differentfundbalancesishittingasignificantsum.(Seedataprovidedaboveinthefirstportionof AdjustedUnrestrictedFundBalancesection.)Inparticular,these412schooldistrictsplantodepletea considerableamountofcash. ApossiblecauseforareductionoftheAdjustedRestrictedFundBalanceisthattheschooldistrict,in partorcompletely,paiddownsomeoftheirliabilities.Forinstance,theymayhavepaidataxcertiorari claim,orpaidaportionoftheirERSliabilityorunemploymentinsuranceliabilitywiththesereserves. Further,someofthefundscouldhavebeenusedinconjunctionwithEXCELbuildingaidfundsforcapital constructionprojects.Or,ashasbeenarticulatedanecdotally,fundsmayhavebeenusedtorecreate thesameorincreasedamountofAssignedAppropriatedFundBalance.Theresultofthisactionisthatit wouldoffsettaxleviesasregularexpensescontinuetooutstripchangestostateaidand/orother

66 revenues.Additionally,thesefundscouldassistintheabsorptionofitemsthatareeligibleas exemptionsundertheTaxCapinordertomoderatethelevyincreaseortomutetheaffectofthe portionofthetaxlevylimitcalculationthatcandecreasetheeligibletaxlevylimitduetocertainPILOT agreements. TherearetwocautionswiththeAssignedAppropriatedFundBalancestrategy.First,theschooldistrict mustunderstandthatoncethismoneyisusedasanAssignedAppropriatedFundBalance,themoney thentakestheplaceofaportionofthelevyandisnowgone.TheAssignedAppropriatedFundBalance willneedtobereplenishedtosomedegreewithadditionalfundsovertime.Second,ifthefundswere securedfromtheproperlyfundedorunderfundedAdjustedRestrictedFundBalance,theliabilitiesfor whichtheAdjustedRestrictedFundBalancewerecreatedstillexistandwillcomedueatsomepointand willneedtobepaidwhichwillfurtherexacerbatetheschooldistrictsfinancialsituation.Regardless ofwhichofthesestrategiesaschooldistrictmightuse,ifexpensescontinuetooutstriprevenues,the schooldistrictwillfallclosertostructuraldeficit. Bycontrast190schooldistrictsincreasetheoverallamountintheirAdjustedRestrictedFundBalance. Thisreflectsatotalandnot Adjusted Restricted Fund Balance anaccountofeachreserve Increased from 2011-12 to 2012-13 190 fundwithintheAdjusted Of the 190 That Increased: Amount Increased $108,061,547 RestrictedFundBalance.It Of the 190 That Increased: Average Amount Increased $568,745 isverypossiblethatevery Of the 190 That Increased: Amount Retained $1,038,124,011 currentlyfundedreserve Of the 190 That Increased: Average Amount Retained $5,463,811 couldhaveremainedexactly Of the 190 That Increased: # of Students 394,549 thesamebutadditional Of the 190 That Increased: Amount per Student $2,631 reserveswerecreatedto Of the 190 That Increased: Amount per Student to Average 23.3% protecttheschooldistrict againstneworpreviouslyunfundedliabilities.Moreover,therecouldbechangesinsomeorallofthe reservefundsasincreasesand/ordecreasesintotalrepresentareallocationofthereservesbasedupon anewassessmentofliabilityexposure. Again,thereasonsforsuchchangesareunclearandnoextensivedataexistsfromwhichtodiscern themesorgeneralizations.However,therearepossibilities.Perhapsliabilitiesagainsttheschooldistrict grewandcautionwastakentoreservemoneytocoveraninevitablepayout.Conceivably,aschool districtmayhavehadtheopportunitytofullyfund,ormoreappropriatelyfund,liabilitiesthatalready existed,butwereunderfundedcomparedtothosealreadycreatedtocovertheknownliability.Itisalso possiblethatreserveswerebolsteredtoensuregreateramountsofrainydayfundsand/ortoshield theschooldistrictfromcriticismforanAdjustedUnrestrictedFundBalanceinexcessof4%. Theselatterstrategieswouldhavebeenanattempttomaintainthefiscalintegrityoftheschooldistrict longtermanddrawattentiontotheskepticismwhichmanyhaveaboutpractitionersviewthe inadequatelimitsRPTL1318placesonaschooldistrictsAdjustedUnrestrictedFundBalance.School districtoperationalexpensescontinuetoescalateatgreaterratesthanstateaidincreasesortheability ofschooldistrictstosecureenoughtaxrevenuetofillintheexpensetorevenuegapsthatcontinueto grow.Additionally,asbudgetsgettighterduetoexpenseescalationsandrevenuediminishments,the abilitytorecoupmoneytorecreatetheAdjustedUnrestrictedFundBalancebecomesmoredifficult. Anecdotally,manyschooldistrictshavereportedthatsuchstrategieswillbeshortlivedinanycaseas theirfiscalconditionworsensdespitesignificantstaff,educationalprogramandoperationalcutsover thelastfewyears.Inmanycasesithasbeenreportedthatthereissolittlelefttocut,solittletobe

67 gainedthroughconsolidationofbackofficefunctionsorotherattemptsassharedservices,thatthe schooldistrictwillsimplyceasetofunctionasintended,requiredordesired. Anotherphenomenoncouldbeatwork.Itispossiblethatasaschooldistrictchoosestomorefullyfund theirAdjustedRestrictedFundBalanceliabilitiesattheexpenseoftheAdjustedUnrestrictedFund Balance.Itisequally Adjusted Restricted Fund Balance possiblethatsomeschool Of the 190 That Increased: Also Reduced Unrestricted Fund Balance 43% districtshaveinsufficient Noteworthy: # Districts Retained $0 Adjusted Restricted Fund Balance 5 fundstodoeitherwell orwellenoughtocontinueasaviableeducationalandfiscalentityoverthelongterm.Ofthe190 districtsthatincreasedtheirAdjustedRestrictedFundBalance,43%(82)alsosimultaneouslyreduced theirAdjustedUnrestrictedFundBalance.Thisisanindicationoffiscalpressureandmustbetaken seriously. Thereareschooldistrictsthat Adjusted Unrestricted & Restricted Fund Balance havelessAdjustedRestricted Disaggregated Data Both Reduced from 2011-12 to 2012-13 225 FundBalanceandless Both Reduced from 2011-12 to 2012-13; % All Districts 33.5% AssignedAppropriatedFund Of the 225 That Reduced Both: Amount Reduced ($333,948,195) Balancefrom201112to Of the 225 That Reduced Both: Average Amount Reduced ($1,484,214) 201213.Alittleoverathird (33.5%)ofallschooldistrictscontainedinthePropertyTaxReportCardreportedthattheywillreduce theirAdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalancesimultaneously.These 225schoolsdistrictsreflectatotalreductionoftheirschooldistrictfundsby$333.95millionbetween 201112and201213.Thisisanaverageof$1.48millionperschooldistrictforthisdataset.The amountissignificantwhenconsiderablestaffandoperationalcutsweremadebytheseschooldistricts inalmosteverycase. Adjusted Unrestricted & Restricted Fund Balance Thedisaggregationofthese Of the 225 That Reduced Both: # Reduced over $3 million 30 datasuggeststhata Of the 225 That Reduced Both: % Reduced over $3 million 13% substantialamountoffunds Of the 225 That Reduced Both: # per Student >$500 128 werejettisonedbythe Of the 225 That Reduced Both: % per Student >$500 57% affectedschooldistricts.For Of the 225 That Reduced Both: # per Student >$1,000 40 Of the 225 That Reduced Both: % per Student >$1,000 18% 30(13%),thesetwofund balanceswerereducedbyover$3million.Putanotherway,128(57%)ofthesedistrictsjettisonedover $500infundbalancesperstudent,While40districts(18%ofthe225;31%ofthe128)reducedfund balancesbyover$1,000perstudent.Insomecasesthelossoffundbalanceistheabsolutevalueofthe totalamountofadditionalaidrealizedbytheseschooldistrictsintheenacted201213educationaid budget.Insuchcasesthe Adjusted Unrestricted & Restricted Fund Balance implicationisthattheir Of the 225 That Reduced Both: Average CWR 0.98 increaseinaidwasonlyhalf Of the 225 That Reduced Both: # CWR<1.0 160 ofwhatsuchschooldistricts Of the 225 That Reduced Both: % CWR<1.0 71% neededtomaintaintheir Of the 225 That Reduced Both: # CWR>2.0 19 budgets. Of the 225 That Reduced Both: % CWR>2.0 8% Of the 225 That Reduced Both: Average FRPL 0.38 Of the 225 That Reduced Both: # FRPL >=.35 133 Thewealthdistributionof Of the 225 That Reduced Both: % FRPL >=.35 59% these225schooldistricts pointstoanumberofbelowaveragewealth/highpovertyschooldistrictsforwhichsuchacontinued practicemovesthemclosertoeducationalandfiscalinsolvency.TheaverageCWRforthese225school

68 districtsis.98thisisbelowaverage.Further,ofthe225schooldistrictisthisgroup,160(71%)are belowaverageCWR;only19(8%)haveaCWRgreaterthan2.0.Additionally,theaverageFRPLaverage forthisgroupis.38,with133schooldistricts(59%)havingFRPLsequaltoorhigherthan.35.Thus,of theschooldistrictsthatreducedboththeirAdjustedRestrictedFundBalanceandAdjustedUnrestricted FundBalancesimultaneously,thisgroupwasoflowerwealththanaverageandexperienced considerablemeasuresofpoverty. Ontheotherhand,there Adjusted Unrestricted & Restricted Fund Balance were85schooldistricts Disaggregated Data (12.7%)thatincreasedboth Both Increased from 2011-12 to 2012-13 85 theirAdjustedRestricted Of the 85 That Increased Both: Amount Increased $74,213 FundBalanceandAdjusted Of the 85 That Increased Both: Average Amount Increased $873 UnrestrictedFundBalance from201112to201213.These85schooldistrictsreflectatotalincreaseoftheirschooldistrictfunds byamere$74,213between201112and201213.Thisisanaverageof$873perstudentforthisgroup. Onaveragetheamountaddedtoschooldistrictcoffersappearsinsignificantbutisacuriousanomaly consideringincreasesinstateaidandescalationintheexpensesofmostschooldistrictsthatcaused themtocutprograms,serviceandoperations. Adjusted Unrestricted & Restricted Fund Balance Of the 85 That Increased Both: Average CWR 2.12 However,the Of the 85 That Increased Both: # CWR<1.0 44 disaggregationofthese Of the 85 That Increased Both: % CWR<1.0 52% datasuggeststhatgenerally Of the 85 That Increased Both: # CWR>2.0 18 thispopulationofschool Of the 85 That Increased Both: % CWR>2.0 21% districtsaremuch Of the 85 That Increased Both: Average FRPL 0.29 wealthierandhaveless Of the 85 That Increased Both: # FRPL >=.35 37 povertythanthoseschool Of the 85 That Increased Both: % FRPL >=.35 44% districtsthatsimultaneously UnrestrictedFundBalance201213Estimated experiencedlossesinboth UnrestrictedFB 303DistrictsBelowAverageof$775perStudent theirAdjustedRestricted PerStudent $800 FundBalanceandAdjusted UnrestrictedFundBalance $700 from201112to201213. TheaverageCWRforthese $600 85schooldistrictsis2.12; thisisovertwicethe $500 averagewealthofaschool $400 districtinNewYorkState. Further,ofthe85school $300 districtsinthisgroup,44 (52%)areaboveaverage Fora500studentschooldistrictx$775=$387,500 $200 CWR;18(21%)haveaCWR Fora1,000studentschooldistrictx$775=$775,000 IT'SINSUFFICIENT! above2.0.Additionally,the $100 FRPLaverageforthisgroup is.29with37school $0 0 0.25 0.5 0.75 1 1.25 1.5 1.75 2 2.25 2.5 2.75 3 3.25 3.5 3.75 4 districts(44%)havingFRPLs CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) equaltoorhigherthan.35.Thus,oftheschooldistrictsthatincreasedboththeirAdjustedRestricted FundBalanceandAdjustedUnrestrictedFundBalancesimultaneously,asagrouptheywereofhigher wealththanaverageandexperienced,bycomparison,moderatemeasuresofpoverty.

69 Alarmingly,whilesome RestrictedFB schooldistrictsincreased PerStudent $15,000 and/ordecreasedtheir $14,000 AdjustedRestrictedFund $13,000 Balance,fiveschooldistricts $12,000 reportedNOAdjusted $11,000 RestrictedFundBalanceat $10,000 all. $9,000 $8,000 Thesescatterplotsexamine $7,000 theamountofperstudent $6,000 AdjustedRestrictedFund $5,000 Balance.Note,AGAIN,the $4,000 largeconcentrationof $3,000 schooldistrictswithlowto $2,000 slightlyaboveaverage $1,000 CWRs.Thosewiththe $0 0 0.5 1 1.5 2 2.5 3 3.5 4 lowestperpupilamounts CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth) (303schooldistrictsor about45%ofthe671thatfilethePTRC)arebelowaverage.Theseschooldistrictsareclearlythosewith theleastfiscalcapacitytorecoupsuchfunds. Asallschooldistrictshaveliabilitiesforemployeebenefitsuponseverancefromthedistrict,workers compensationcosts,ERScostsandmanyalsohavetaxcertiorariliabilitiespendingthatasingleyears budgetcannotabsorb,itisreasonabletoassumethatthesenumberswouldbemorerobust.Clearly, thisisanexceedinglydifficultconditionforthoseschooldistrictsthatpossesstheleastfiscalcapacityin thestate.
RestrictedFundBalance201213Estimated(PTRC) AmountperStudent

WhattheLongTermFiscalLandscapeLooksLikeBasedonFundBalanceData
Itisimportanttokeepinmindthateachofthethreefundbalancecategorieshasaspecificpurpose.As discussedearlier,theroleoftheAssignedAppropriatedFundBalanceistobridgethegapbetween revenuesandexpendituresandmitigatetheimpactofbothonthetaxlevy.ThetaxlevyisboundbyTax Capstatutethatdefinestherulesfortaxlevyincreases.Thefirstpartofthecomputationofthecurrent yearstaxlevylimitbeginswiththepreviousyearstaxlevy.Thepreviousyearstaxlevyisdirectly relatedtoanAssignedAppropriatedFundBalanceforthatbudgetyear.Themostrecentapprovedtax levywasthusproppedupbytheAssignedAppropriatedFundBalance.Asthiscyclewillcontinueunder currentcircumstances,theAssignedAppropriatedFundBalancethereforemustberecreatedinwhole orinpart. ItisequallyimportanttorememberthatthemissiontorecreatetheAssignedAppropriatedFund Balanceamountmustbemaintainedyearafteryearifexpensescontinuetooutstriprevenues.Without thefundsallocatedintheAssignedAppropriatedFundBalance,thelevywouldbe,inalmosteverycase, significantlyhigherandunacceptabletovoters.ThismeansthatastheTaxCapcomputationforthe 201314taxlevybeginsandstateaidrevenuesagainareinsufficienttomeettheescalationofexpenses

70 tomaintainstaff,programsandoperations,schooldistrictsmustfindawaytoreplenishtheAssigned AppropriatedFundBalanceamountfrom201213,ormorecutswillbeneededtomeetthetaxlevylimit ortocreateabudgetandlevyvoterswillaccept. ThereconstitutionoftheAssignedAppropriatedFundBalanceisusuallyaccomplishedwiththedelta betweenactualrevenuesandexpendituresandbudgetedrevenuesandexpenditures.Thecreationof appreciableamountsoffundsfromthatdeltaismademoredifficultasbudgetingismoreaccurateor tight.(Thereisadifferenceabudgetisconsideredaccurateifintheendthebudgetedamountsare closetotheactualexpenditureandrevenueamountsleavinglittleornoresidualfundsforfutureuse,by contrastabudgetistightiswhen,inoperation,thereisnoplanforvariances,withlittleroomfor emergencyexpenses,unforeseenorunknowncostsandrevenuedisappointmentsthattradeoffsmaybe necessarythroughtriagethatmaylowereducationalorfiscalgoals,drainfuturecashreservesandso on.)TheabsenceofanAdjustedUnrestrictedFundBalanceinparticularandanAdjustedRestricted FundBalancealsohinderscashflowtosuchanextentthatsomedistrictsmustperiodicallyborrowto paybills.Increasingly,schooldistrictsmakeinterfundtransfersfromtheAdjustedUnrestrictedFund Balancetooffsetbudgetshortfallsastheyoccurthusmorecashislost.Overtimetherehasbeena greatrelianceontheAdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalanceas sourcesoffundsforthereplenishmentoftheAssignedAppropriatedFundBalance. TotesttheabilityofschooldistrictstoreplenishtheirAssignedAppropriatedFundBalancewithmonies fromeithertheirAdjustedRestrictedFundBalanceorAdjustedUnrestrictedFundBalanceorboth,the followingdatascenarioshavebeendevelopedforanalysis.Theimplicationsofthesedatascenariosare ominous. ThefirstdatasetscenariousestheAdjustedUnrestrictedFundBalancetoreplenishtheAssigned AppropriatedFundBalance.Thesedataaredisaggregatedsoastodeterminehowmanyyearsthe AdjustedUnrestrictedFundBalancecouldreplenishtheAssignedAppropriatedFundBalanceasbothare currentlyfundedbyeachschooldistrict.Additionally,theaverageCWRsandFRPLpercentsare providedtodetermineifthereareanywealthand/orpovertythemesthatemerge. BasedondatacontainedinthePropertyTaxReport Adjusted Unrestricted Fund Balance to Replenish Carditcanbedeterminedthat317(47.2%)ofallschool Assigned (Appropriated) Fund Balance districtshaveonlyenoughAdjustedUnrestrictedFund Disaggregated Data Balancetoreplenishthe201213Assigned # Under 1 Year 317 AppropriatedFundBalanceforlessthanonemoreyear. % Under 1 Year 47.2% SchooldistrictsinthisgrouphaveanaverageCWRof CWR Average 1.00 1.0(atthestateaverage)andaFRPLof.36(enoughto FRPL Average 0.36 putastrainonbelowaverageandaveragewealth CWR Median 0.71 FRPL Median 0.40 schooldistricts). CWR <.5 57 CWR <.6 120 Deeperdisaggregationyieldsadimpictureforthe FRPL >.5 75 neediestschooldistricts,asnoted.Theneediestschool FRPL >.6 27 districtshavetheleastcapacitytorecoverfromstate aidlosses,revenuelossesandcostescalations.ThemedianCWRforthese317schooldistrictsiswell belowaverageat.71.ThemedianFRPLiswellaboveaverageat.40.(Again,thestateaverageforFRPL isabout.345.)Fromthisdataset,57schooldistricts(18%)haveCWRslessthan.5(lessthanhalfthe stateaveragewealth)and120(38%ofthisdataset)haveCWRslessthan.60.Furthermore,75school

71 districts(23.7%)haveaFRPLpercenthigherthan.5and27(8.5%)higherthan.6(thesearehighpoverty schooldistricts). Adjusted Unrestricted Fund Balance to Replenish Moreover,539(80.3%)ofallschooldistrictshave Assigned (Appropriated) Fund Balance simplyenoughAdjustedUnrestrictedFundBalanceto # Under 2 Years 539 replenishthe201213AssignedAppropriatedFund % Under 2 Years 80.3% Balanceforlessthantwofullyears.Schooldistrictsin CWR Average 1.20 thisgrouphaveanaverageCWRof1.2andaFRPLof FRPL Average 0.34 .34(enoughtoputastrainonbelowaverageand CWR Median 0.74 averagewealthschooldistricts).Thesedataareabout FRPL Median 0.36 atthestateaverages. CWR <.5 101 CWR <.6 192 AdditionalanalysisrevealsthatthemedianCWRfor FRPL >.5 121 these539schooldistrictsiswellbelowaverageat.735. FRPL >.6 46 ThemedianFRPLisaboveaverageat.357.Fromthis dataset,101schooldistricts(15%ofallreported)haveCWRslessthan.5(lessthanhalfthestate averagewealth)and192(28.6%)haveCWRslessthan.60.Furthermore,121schooldistrictsinthisdata setonlyhaveaFRPLpercenthigherthan.5andanother46arehigherthan.6thesearehighpoverty schooldistricts.Again,byandlarge,theseschooldistricts,aretheleastlikelytohavethecapacityto replenishfundbalancesunderanycurrentfiscalarrangement. Finally,598(89.1%)ofallschooldistrictshavejustenoughAdjustedUnrestrictedFundBalanceto replenishthe201213AssignedAppropriatedFundBalanceforlessthanthreefullyears.Schooldistricts inthisgrouphaveanaverageCWRof1.18andaFRPL Adjusted Unrestricted Fund Balance to Replenish of.34.Thesedataareclosetothestateaverages. Assigned (Appropriated) Fund Balance # Under 3 Years 598 However,themedianCWRforthese598school % Under 3 Years 89.1% districtsiswellbelowaverageat.73.Themedian CWR Average 1.18 FRPLiswellaboveaverageat.36.Fromthisdataset, FRPL Average 0.34 119schooldistricts(17.7%ofallschooldistrictswhere CWR Median 0.73 dataappearinthePropertyTaxReportCard),have FRPL Median 0.36 CWRslessthan.5(lessthanhalfthestateaverage CWR <.5 119 wealth)and215(32%ofthosereported)haveCWRs CWR <.6 215 lessthan.60.Further,134schooldistrictshaveaFRPL FRPL >.5 134 percenthigherthan.5and48higherthan.6(these FRPL >.6 48 arehighpovertyschooldistricts).Andtheseschool districtsaretheleastlikelytohavethecapacitytoreplenishfundbalancesunderanycurrentfiscal structure. Bycomparison,schooldistrictswiththeleastwealthandsignificantpoverty,onaverage,havetheleast capacitytousetheirAdjustedUnrestrictedFundBalancetoreplenishtheAssignedAppropriatedFund Balance.Thefirstdatasetalsopointsoutthatalmosthalfoftheschooldistrictsdonthaveenough AdjustedUnrestrictedFundBalancetoreplenishtheAssignedAppropriatedFundBalanceforasingle year.Over80%ofschooldistrictsareinthesamedilemmacoveringaspanoflessthan2yearsinthis scenario.ThecaveatintheuseoftheAdjustedUnrestrictedFundBalanceforthispurposeisthatitwill virtuallyruinaschooldistrictscashflowunlessthelevelofthesefundsaresignificantlyhigherthan allowedbylaw.Absentsignificantdecreasesinexpensesandincreasesinrevenuessuchasstateaid,

72 fundbalances,ingeneral,willcontinuetodissolveandfiscalinsolvencyappearsmorelikeformany soonerratherthanlater. TheseconddatasetscenariousestheAdjustedRestrictedFundBalancetoreplenishtheAssigned AppropriatedFundBalancefor201213.Rememberthatthiscanmostprobablyoccuronlyonpaper andwouldbeextremelydifficulttoactuallycarryoutformostschooldistricts,andduetoEBALR reservesinparticularwouldbelegallyquestionableatbest.Thatsaid,forpurposesofthisexercise, thesedatatooaredisaggregatedsoastodeterminehowmanyyearstheAdjustedRestrictedFund BalancecouldreplenishtheAssignedAppropriatedFundBalanceasbotharecurrentlyfunded.Itshould benotedthatstatewide,thetotalamountofAdjustedRestrictedFundBalanceis2.75timeslargerthan thetotaloftheAdjustedUnrestrictedFundBalance;thatis,theAdjustedRestrictedFundBalancetotals over$3.33billionandtheAdjustedUnrestrictedFundBalancetotalsmorethan$1.21billion PropertyTaxReportCarddataanalysisrevealsthat Adjusted Restricted Fund Balance to Replenish 130(19.4%)ofallschooldistrictshavemerelyenough Assigned ( Appropriated FB) AdjustedRestrictedFundBalancetoreplenishthe Disaggregated Data 201213AssignedAppropriatedFundBalanceforless # Under 1 Year 130 thanonemoreyear.Schooldistrictsinthisgroup % Under 1 Year 19.4% haveanaverageCWRof.90(belowthestateaverage) CWR Average 0.90 andaFRPLof.39(morethanenoughtoputastrainon FRPL Average 0.39 belowaverageandaveragewealthschooldistricts). CWR Median 0.67 FRPL Median 0.40 CWR <.5 34 ThemedianCWRforthese130schooldistrictsiswell CWR <.6 57 belowaverageat.67(onlytwothirdsofthestate FRPL >.5 40 averagewealth).ThemedianFRPLiswellabove FRPL >.6 17 averageat.40.Fromthisdataset,34schooldistricts (5.1%oftheallschooldistrictswithdatainthePropertyTaxReportCard)haveCWRslessthan.5(less thanhalfthestateaveragewealth)and57(8.5%ofallreported)haveCWRslessthan.60.Furthermore, 40schooldistrictshaveaFRPLpercenthigherthan.5and17higherthan.6(thesearehighpoverty schooldistricts).Theseschooldistrictshaveseverelydiminishedcapacitytoreplenishfundbalances. Additionally,279(41.6%)ofallschooldistrictshave Adjusted Restricted Fund Balance to Replenish justenoughAdjustedRestrictedFundBalanceto Assigned ( Appropriated FB) replenishthe201213AssignedAppropriatedFund # Under 2 Years 279 Balanceforlessthantwofullyears.Schooldistrictsin % Under 2 Years 41.6% thisgrouphaveanaverageCWRof1.1(slightlyabove CWR Average 1.10 FRPL Average 0.36 thestateaveragewealth)andaFRPLof.36(enoughto CWR Median 0.75 putastrainonbelowaverageandaveragewealth FRPL Median 0.36 schooldistricts). CWR <.5 52 CWR <.6 96 ThemedianCWRforthese279schooldistrictsiswell FRPL >.5 70 belowaverageat.75(onlythreequartersofthestate FRPL >.6 31 average).ThemedianFRPLisaboutaverageat.36. Fromthisdataset,52schooldistricts(7.7%ofallschooldistrictswithdatainthePropertyTaxReport Card)haveCWRslessthan.5(lessthanhalfstateaveragewealth)and96(14.3%ofthosereported) haveCWRslessthan.60.Furthermore,70schooldistrictshaveaFRPLpercenthigherthan.5and31 higherthan.6(thesearehighpovertyschooldistricts).Theseschooldistrictsalsohaveseverely diminishedcapacitytoreplenishfundbalances.

73 Finally,390(58.1%)ofallschooldistrictshaveonly enoughAdjustedRestrictedFundBalancetoreplenish the201213AssignedAppropriatedFundBalancefor lessthanthreefullyears.Schooldistrictsinthis grouphaveanaverageCWRof1.14(slightlyabove thestateaverage)andaFRPLof.35. ThemedianCWRforthese390schooldistrictsiswell belowaverageat.75(onlythreequartersofthestate averagewealth).ThemedianFRPLisaboutaverage at.36.Fromthisdataset,76schooldistricts(11.3% oftheentireschooldistrictdatasetintheProperty TaxReportCard)haveCWRslessthan.5(lessthanhalfthestateaveragewealth)and131(19.5%of thosereported)haveCWRslessthan.60.Furthermore,91schooldistrictshaveaFRPLpercenthigher than.5and39higherthan.6(thesearehighpovertyschooldistricts). Bycomparison,again,schooldistrictswiththeleastwealthandsignificantamountofpovertyon averagehavetheleastcapacitytousetheirAdjustedRestrictedFundBalancetoreplenishtheAssigned AppropriatedFund LiquidateUnrestrictedFundBalance201213Estimated(PTRC) Balance.Thefirstdataset toReplenishAppropriatedFundBalance NumberofYears Years alsopointsoutthatalmost 10.0 20%oftheschooldistricts 9.0 donthaveenough AdjustedRestrictedFund 8.0 Balancetoreplenishthe 7.0 AssignedAppropriated 6.0 FundBalanceforasingle year;almost42%ofschool 5.0 districtsareinthesame 4.0 predicamentinlessthan2 yearsinthisscenario.The 3.0 caveatintheuseofthe 2.0 AdjustedRestrictedFund 1.0 Balanceforthispurposeis thatthesefundsalmost 0.0 0 0.5 1 1.5 2 2.5 3 3.5 4 alwaysrepresentknown andcalculatedschooldistrictliabilitiesorotherspecificpurposes.Thoseliabilitiesandpurposeswill remainevenifthesefundsareremoved. ThethirddatasetscenariousesboththeAdjustedRestrictedFundBalanceandAdjustedUnrestricted FundBalancetoreplenishthe201213AssignedAppropriatedFundBalancefor201314andbeyond. Congruentdatasetsareusedforcomparisonpurposes.Thesamecaveatsareinplacefortheuseofany orallofthesefunds.Thetotalamountoffundsavailableforthisexerciseis$4.54billion. PropertyTaxReportCarddataanalysissuggeststhat37(5%)ofallschooldistrictshavemerelyenough AdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalancetoreplenishthe201213 AssignedAppropriatedFundBalanceforlessthanonemoreyear.Schooldistrictsinthisgrouphavean
Adjusted Restricted Fund Balance to Replenish Assigned ( Appropriated FB) # Under 3 Years 390 % Under 3 Years 58.1% CWR Average 1.14 FRPL Average 0.35 CWR Median 0.75 FRPL Median 0.36 CWR <.5 76 CWR <.6 131 FRPL >.5 91 FRPL >.6 39
CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth)

74 averageCWRof.80(belowthestateaverage)anda FRPLof.40(easilymorethanenoughtoputastrain onbelowaverageandaveragewealthschool districts). ThemedianCWRforthese37schooldistrictsiswell belowaverageat.61(lessthantwothirdsofthestate averagewealth).ThemedianFRPLiswellabove averageat.44.Fromthisdataset,11schooldistricts (1.6%oftheentireschooldistrictdatasetinthe PropertyTaxReportCard)haveCWRslessthan.5 (lessthanhalfthestateaveragewealth)and19(2.8% ofthosereported)haveCWRslessthan.60.Furthermore,13schooldistrictshaveaFRPLpercenthigher than.5andfivearehigherthan.6(thesearehighpovertyschooldistricts).Pleasenoteagainthatthis exerciseuseseverypennyofcashtheseschooldistrictshave.Theyhavereachedafundingcliff.They arebelowaveragewealth,havesignificantpovertyandthereislittlereliefinsighttoregaintheirfiscal foundation. Inaddition,148(22.1%)ofallschooldistrictshaveonlyenoughAdjustedRestrictedFundBalanceand AdjustedUnrestrictedFundBalancetoreplenishthe201213AssignedAppropriatedFundBalancefor lessthantwofullyears.SchooldistrictsinthisgrouphaveanaverageCWRof.97(belowthestate averagewealth)andaFRPLof.39(enoughtoputastrainonbelowaverageandaveragewealth districts). ThemedianCWRforthese148schooldistrictsiswell All Fund Balances to Replenish Assigned belowaverageat.69(abouttwothirdsofthestate ( Appropriated FB) average).ThemedianFRPLisaboutaverageat.39. # Under 2 Years 148 Fromthisdataset,32schooldistricts(4.8%ofthe % Under 2 Years 22.1% CWR Average 0.97 entiredistrictdatasetinthePropertyTaxReport FRPL Average 0.39 Card)haveCWRslessthan.5(lessthanhalfthestate CWR Median 0.69 averagewealth)and58(8.6%ofthosereported)have FRPL Median 0.39 CWRslessthan.60.Furthermore,44schooldistricts CWR <.5 32 haveaFRPLpercenthigherthan.5and18higher CWR <.6 58 than.6thesearehighpovertyschooldistricts. FRPL >.5 44 Again,thethemerepeatsitself.Clearlyasignificant FRPL >.6 18 numberofschooldistrictsfacefiscalstructuralissues withfewprospectsforimprovementoftheircurrent All Fund Balances to Replenish Assigned trajectory. ( Appropriated FB) # Under 3 Years 261 Finally,261(38.9%)ofallschooldistrictshave % Under 3 Years 38.9% basicallyenoughAdjustedRestrictedFundBalance CWR Average 1.11 andAdjustedUnrestrictedFundBalancetoreplenish FRPL Average 0.35 the201213AssignedAppropriatedFundBalancefor CWR Median 0.75 lessthanthreefullyears.Schooldistrictsinthis FRPL Median 0.36 grouphaveanaverageCWRof1.11(abovethestate CWR <.5 46 average)andaFRPLof.35. CWR <.6 85 FRPL >.5 60 FRPL >.6 26 ThemedianCWRforthese261schooldistrictsiswell
All Fund Balances to Replenish Assigned ( Appropriated FB) Disaggregated Data # Under 1 Year 37 % Under 1 Year 5.5% CWR Average 0.80 FRPL Average 0.40 CWR Median 0.61 FRPL Median 0.44 CWR <.5 11 CWR <.6 19 FRPL >.5 13 FRPL >.6 5

75 belowaverageat.75(onlythreequartersofthestateaveragewealth).ThemedianFRPLisabout averageat.36.Fromthisdataset,46schooldistricts(6.9%oftheentireschooldistrictdatasetinthe PropertyTaxReportCard)haveCWRslessthan.5(lessthanhalfthestateaveragewealth)and85 (12.7%ofthosereported)haveCWRslessthan.60.Furthermore,60schooldistrictshaveaFRPL percenthigherthan.5and26higherthan.6(denotingthatthesearehighpovertyschooldistricts). Thesedataarealarminginlightofthisexercisethatsimplyeliminateseverypennyofcashadistrict possesses.Noplancoverthenextthreeyearshasseriouslydiscussedorevenmentionedpublicallyby anystatelegislatororthegovernorthatcouldremedythisintensifiedfiscal,educationalandoperational conundrum. LiquidateAllFundBalances201213Estimated(PTRC) Bycomparison,even toReplenishAppropriatedFundBalance NumberofYears Years throughtheuseofall 24 23 availablefundbalances, 22 21 schooldistrictswiththeleast 20 wealthandanappreciable 19 18 amountofpovertyon 17 16 averagehavetheleast 15 14 capacitytousetheir 13 12 AdjustedRestrictedFund 11 BalanceandAdjusted 10 9 UnrestrictedFundBalanceto 8 7 replenishtheAssigned 6 5 AppropriatedFundBalance. 4 Thisthirddatasetscenario 3 2 alsopointsthat5%ofschool 1 0 districtsdonthaveenough 0 0.5 1 1.5 2 2.5 3 3.5 4 AdjustedRestrictedFund BalanceandAdjustedUnrestrictedFundBalancetoreplenishtheAssignedAppropriatedFundBalance forasingleyear;over22%ofschooldistrictsareinthesamequandaryinlessthan2yearsusingthis scenario;andalmost39%ofallschooldistrictsareinthesamepredicamentinlessthanthreeyears. Thesedatapointtoasignificantandshockingdangersignalthatwarnsoftherealpotentialforan educationalcatastropheinthenottoodistantfuture.Thesimultaneousandcompleteuseofthe AdjustedRestrictedFundBalanceandAdjustedUnrestrictedFundBalanceforthispurposewouldbean unmistakabledisasterbecauseabsentthesefundsadistrictcannotoperate.
CWR (Combined Wealth Ratio (.5 Property + .5 Income) 1.0 = Average Wealth)

ThePaceofFiscalChange
OurresearchbegsanotherdirectquestionWhatwillbethepaceoffiscalchange?Thisexpression representstherateatwhichschooldistrictsspendstateaidmoney,theirownreservesandstillattempt toraisetaxleviesoveragivenperiodoftimetosupporttheirprogramsandoperations.Toillustrate thepointexaminethechartbelow. ThesumofallAdjustedRestrictedFundBalancesandAdjustedUnrestrictedFundBalancesinNewYork Stateschooldistrictsfor201112wasjustover$5billion.By201213thatamounthaddiminishedto roughly$4.5billion;thatsadecreaseofalmosthalfabilliondollars($482million)inasinglefiscalyear. This9.6%decreaseinfundbalanceswasdue,tosomedegree,totheuseofaportionofthesemoniesto

76 createanAssignedAppropriatedFund Balance.Simultaneously,schooldistricts acquiredalmost$752millioninnewstate aidfor201213.Inthissameperiodthey alsocutstaff,operationsandprograms. Yettheytriedtoraisetheirlevies concurrently.Allthiswasdonetoensure thatschooldistrictscouldcontinueto financeprogramsandoperations. Withthelossofalmosthalfabillion dollarsofreservesandagainof$752millioninnewstateaiddirectlytoschooldistricts,itcan accuratelybeasserted,that(notcountingtheactualbudgets)accumulatedexpensesoranticipated expensesschooldistrictswillconsumeatleast$1.2billionevenaftertaxesareraisedfor201213. Thisisthepaceofchangeandabsenttheseconsumedfundbalancesschooldistrictswillnotbeableto keepupthispace.Thispaceofchangewillbeespeciallycomplicatedin201314asstateaidthatis directlysenttoschooldistrictsisexpectedtobereducedtoabout$712millionaccordingtorecent estimatesbytheOfficeoftheComptroller.Atthisrate,clearly,schooldistrictswillnotbeabletokeep upandwillcontinuedownaslipperyfiscalandeducationalslopetoinsolvency. AlsonotethepaceofchangetofullyfundFoundationAidstatewideanderadicatetheentireGEAcuts identified,calculatedandanalyzedearlierinthispaper.Whentherateofinfusionoffundsintothe schooldistrictrevenuestreamiscomparedtothecontinuousescalationofcostsandtheresultantloss ofstaff,programs,reservesandtheabilitytoaccomplishthemissionoftheschooldistrict,therecanbe littletonodoubtthatarealdisasterisonthehorizonformanycommunitiesandtheecoeducational foundationofthestatewillbeplacedintoseriousjeopardy. Withnosignificantmodificationsmadetotheeducationaidformula,asignificantnumberofschool districtswillnothavethecashreservestosustainthemselvesoverthenexttwoyearsastheyfacestate createdmandates,contractualobligations,andhealthinsuranceandpensioncosts.Simplyput,inmany localesresidentswillnotbeabletofundtheirschooldistrict.

Adjusted Unrestricted & Restricted Fund Balance Totals Compare 2011-12 to 2012-13 Aggregated Data Total Restricted and Unrestricted FB 2011-12 $5,025,371,325 Total Restricted and Unrestricted FB 2012-13 $4,543,659,440 $ Difference 2011-12 to 2012-13 ($481,711,885) % Difference 2011-12 to 2012-13 -9.6% Additional State Aid for 2012-13 (SA 121-3) $751,757,712 The Pace of Change* $1,233,469,597

OtherChallengesSchoolDistrictsFace
Whyisnextyearspossiblescenarioworsethanthecurrentcondition?Bylaw,stateaidtoschool districtswasallowedtoincreaseby4.1%roughly$805million.Asnotedearlierinthispaper,some fundsareskimmedoffforgrants,teachercentersandthelike.Bythetimedirectaidwasdistributed, $752million(just93.4%)ofthatmoneyfounditswaydirectlytoschooldistrictsacrossNewYorkState. Thewaythe$752millionisdoledoutisclever.Firstfromthe$752millioncomesexpensedrivenaids. TheremainderisleftforuseasaGEAcutreductionand/ortoincreaseFoundationAidastheGovernor andlegislatureseefit.Foundationaidmadeupandadditional$111.5millionofthestateaid;theGEA cutswerereducedby$400.2millionandexpensedrivenaidsmadeupthebalanceatabout$240.1 million. Nextyearonlya3.5%increaseintotalaidisintheoffing.Thatsonlyabout$712million.Thefollowing ispossibleextrapolationfromthe201213aiddistribution.Tostartforargumentssakeletusagain

77 leavelastyears93.4%payoutrateoftheoriginalamountaidincreasefordirectdistributiontoschool districtsaftergrants,teachercentersandthelikearesubtractedout.
Key Elements in School Aid Changes 2010-11, 2011-12 and 2012-13 ($ in Millions) Possible Extrapolation $ $ % $ % Program 2010-11 2011-12 Change 2012-13 Change Change 2012-13 Change Change Foundation Aid $14,894 $14,893.6 $0.0 $15,005.2 $111.5 0.7% $15,005.2 0.0% Building Aid $2,489 $2,633 $144 $2,721.0 $88.0 3.3% $2,811.0 $90.0 3.3% Other Aids $4,479 $4,288 -$191 $4,439.7 $152.0 3.5% $4,594.7 $155.0 3.5% Gap Elimination Adjustment -$2,138 -$2,556 -$418 -$2,266.7 $289.8 -11.3% -$1,846.7 $420.0 -19.5% Restoration of GEA $0 $0 $110.4 $110.4 Federal Offset to 2010-11 GEA $726 $0 -$726 $0 $0 $0 Federal Education Jobs Fund $608 $0 -$608 $0 $0 $0 FMAP Reduction (State Medicaid Shortfall) -$132 $0 $132 $0 $0 $0 Total Aids $20,925.1 $19,257.8 -$1,667.3 $20,009.6 $751.8 3.9% $20,564.2 $665.0 3.3% All 2012-13 Aid to Education was $20.34 billion; "Formula Driven Aids" are noted above (All aids for 2013-14 will increase $712 million (PIT=3.5%); Formula Aid averaged 93.4% of that or about $665 million.)

Thatleaves$655million.Subtract$245millioninexpensedrivenaidsfromthatandyouget$420 millionleftoverforGEAreductions(themostequitableplan)andpotentialincreasestotheinequitable FoundationAidamount.Thatsabout19.5%lessoperationalaidtodirectlytoschooldistricts. Anotherproblembyallaccountsisthattheexpenseincreasesforpensionsandmedicalinsurance,and insomeschooldistricts,laborcostscontinuetoescalateatafargreaterratethattherateofinflationor theabilityoftheTaxCaptoabsorb.Thesepensionsareextremelyproblematicinthattheyaretiedto salary,haveincreaseddramaticallyrecentlyandareanticipatedtocontinuetoincreaseconsiderably. WelookforwardtopensionupdatesfromtheTeachersRetirementSystem,theEmployeesRetirement System(whohavealreadynoteda2percentagepointincreasefornextyearthatsaboutan11% expenseincreaseonaverage),andanalysisandprojectionsfromtheOfficeoftheComptrollerandthe EmpireCenterforNewYorkStatePolicy.TaxCapexemptionscouldalsobeanissuehere. Medicalinsuranceisafactornotonlyforactiveemployeesbutlegacycostsforretirees.Someschool districtsofferlittlehealthcoverageafterretirement,butavastnumberdoandasignificantnumberof thosethatdorequirelittleornoretireecontribution.Schooldistrictshavemadeseriousattempts, somesuccessfulandsomenot,tocontrolthesecosts.Theyhavenegotiatedsettlementswithunions thatincreasedcopaysforhealthvisits,treatmentandprescriptions,changestoplandocumentsand coverage,selfinsuranceplansandinsurancecooperatives.Theseeffortsnotwithstanding,school districtsfindthesavingsareoftenmarginaland/orshortlived. Thiscreatesanexceptionallydifficultsituationforschooldistrictsastheytrytobalancetheirbudgets andsecurevoterapprovalfortheirannualfinancialplan.Voteranxietyoverschoolexpenses,collective bargainingagreementsandotherissueshavechangedthestrategiesofmanyschooldistrictsastheytry tostemvoterdissatisfactionbycuttingstaff,programsandusingmorefundbalanceifanystillexist. Aschooldistrictsfinancialplanistiedtoitseducationalprograms,studentdemographicand performanceissues,cocurricularandinterscholasticprograms,communityinitiatives,useofitsgrounds andbuildings,capitalimprovement,maintenanceandbuspurchaseplans.Andtheseinturnare inextricablylinkedtocommunitypoliticsandtheoftenoverlookeddesirabilityoftheschool district/communityasamagnetforincreasedeconomicdevelopment.Asqueriedearlierinthispaper,

78 whatbusinessorindustrywantstorelocateorcontinuebusinessinaschooldistrict/communitythatis indecay? CareshouldbetakentounderstandthatwhileNewYorkStatemaybeOpenforBusiness,many strugglingschooldistricts/communitiesarenotattractivebusinesslocationtargets.Annuallyless appearattractiveasbusinesslocationsafterreportsoffiscalandeducationalproblems,community discordandassociatedpoliticalstrifeandrecognitionbybusinessenterprisesovertheabsenceofa soundshortandlongtermplanforrapidanddecisiveremediestosuchconditions.Withoutadequate funds,theproperdistributionofthosefunds,andgreatercostefficiencies,performanceeffectiveness andeconomiesofscale,thistrendwillcontinue. Somepointtotheefficacyofregionalhighschoolsandschooldistrictmergers(alsocalled consolidationsandreorganizations)asawaytogetabetterbangforthebuck.Thereisnocredible evidencethatinNewYorkState,underthecurrentlawsandregulationsthatgoverntheactionsand obligationsofschooldistricts,thattherewillbeanyincreaseinefficiencies,effectivenessoreconomies ofscale.Perhapstherearerareexceptionsyettobestudiedofsomeofthesmallestschooldistricts, withsimilardemographicsandtaxbaseandtaxburdens,andamanageablegeographythathave producedtheeconomicgoalsproponentsseemtobelievewillexist.Therulesbywhichschooldistricts live,thepoliticalrealitiesthatexistwithemployeesandcommunityexpectations,infact,support increasedperstudentcosts,notless. Currentlawpermitstheunificationoftwoschooldistrictsintooneschooldistrict,notadissectionor divisionofaschooldistrictintotwoormoreneighborschooldistrictswiththeendproductthecreation oftwoschooldistrictsfromthree.Perhapsthestatewilldevelopothermodelsthatallow reorganizationwherebyschooldistrictscouldbedividedupintologicaldemographic,geographic, topographicandtaxbaseunitsthatwouldmakemoresensethantheonlylegalandcurrentmerge completeschooldistrictstogetherorforgetaboutitmethod. Schooldistrictsturntosuchmechanismsasameansoffiscalandeducationalsurvivalguaranteedfora timebyasignificantinfluxofstateReorganizationIncentiveAid(MergerAid).Forsomeschool districtsitwillbetheonlyplacetoturniftheycanfindawillingpartner.Aswithallsuchinitiatives, thereareadvantagesanddrawbacks.Theprocessiscumbersome,longandfilledwithpoliticaldiscord aswellashopeforabetterfutureforthechildrenoftheaffectedschooldistrictsasprosandconsof suchamoveareformallystudiedandthendiscussed,linesdrawnandmultiplevotestaken. Additionally,regardlessofthemeritsordrawbackstoamerger,thereisthequestionofthecosttothe stateofmergers,regionalhighschoolsandotherpotentialmonetaryincentivestogetschoolsto consolidateservices.ReorganizationIncentiveAid(MergerAid)comesintwoformsoperational (ReorganizationIncentiveAid)andbuildingaid(ReorganizationBuildingIncentiveAid).If56school districtsfromthesoutherntipoftheAdirondacks,throughtheMohawkValley,tothenorthernschool districtsaroundtheStateRoute88corridorweretomergeinto28consolidatedschooldistrictswhat wouldbethecostinjusttheReorganizationIncentiveAidstateaids?Clearlyitdependsonthesizesand characteristicsoftheschooldistrictsaffected.Inthiscaseitcouldbeabout$752millionintotalover14 years(ThesameamountofallthedirectformuladrivenstateaidtoschooldistrictsintheEducation Budgetfor201213.).Wherewouldthatmoneycomefrom?Itwouldrequirenewmoney.Otherwise woulditcomefromthesamefinitepoolofmoneythatallstateaidcomesfrom?Wouldthisadditional $752millioninjustregularReorganizationIncentiveAidbesubtractedfromthesamestateaidpiethat

79 expensedrivenaidsaresubtractedfromtogetthefinalyieldamountfordistributionasareductionto theGEAcutsorincreasedFoundationAid?Thatwillnotwork. Forinstance,toworkanonewmoneyscenario,usingtheenacted201213stateaiddata,wouldone wouldstartwiththeoriginal$752millionandsubtractthe$79million(thefirstyearsportionofatotal of$752milliontotalover14yearsofReorganizationIncentiveAid)fromtheremaining$512millionleft afterexpensedrivenaidsweretakenintoaccount.Thiswouldleaveonly$433millionfordistributionto allschooldistricts.Thatwouldbeanaveragereduction,whencomparedtothecurrentamountof increaseddirectaiddistributed,of15.4%.Thatis,thelossof$79millionfromthe$512millionpie wouldbealossof15.4%;thiswouldalsorepresent10.5%oftheentire$752millionincreaseinstate aid.Theonlyalternativetothisunwelcomelossofstateaidrevenuethatwouldnotdiminishthenon mergedschooldistrictswouldbenewmoney. (Thebestsourcetoobtainquick,helpfulandaccuratedataaboutReorganizationIncentiveAidamounts andactuallyartificiallymergedistrictsisfromDr.JohnSippleofCornellUniversity.Hismergeraid calculationsandmapsareavailableat:http://pad.human.cornell.edu/schools/reorg.cfm.Hedirectsthe CornellProgramonAppliedDemographicsincooperationwiththeNewYorkStateCenterforRural Schools.)

SummaryofImplicationsandChallenges
Thispaperhasrevealedthedeteriorationofthefiscalconditionofschooldistrictsofdifferentcapacity, butcommonmission.Ithasclearlypointedoutthattheeconomicallypoorestandmoderatewealth schooldistrictsinthestatefacefiscalandeducationalinsolvencyinthenearfuturebasedoncurrent trends.Andeveryoneshouldalreadyknowthatschooldistrictsareamajorfactorintheeconomic climateofeveryregionofthestate. Overthelastfouryearsthestateplanseemstohavebeentosolveitsownselfinflictedfiscalwoesby renegingonpromisedsupportforschooldistrictsandmunicipalities,distancingitselffromlegislatively enactedmissioncreep,increasedunfundedmandatesandageneraldisassociationwithwhatsactually goingonornotgoingononthegroundincommunitiesacrossthestate. Schooldistrictshaveenduredmuchpainoverthisperiod.Theyhavepaidthepriceforyearsofbenign neglectbystategovernment,characterizedtoooftenbycomplicitpoliticsthatresultedinlow productivity,efficiency,andstudentperformanceresults.Evennowelectedofficialsarecongratulating themselvesfortheirmostproductivetwoyearsinoffice.Whenitcomestotheeducationofour children,itisnotthenumberofbillsthatbecomelaw,ortheperceivedamountofcooperation, compromiseandpoliticalmaneuveringthatcounts. Whatcountsisthemeasureableimprovementofconditions,thelackoffurtherdamageandgettingthe mostimportantthingsdonewell.Fortheover400publicschooldistrictsthatcomprisetheStatewide SchoolFinanceConsortium,andmanyothereducationadvocacyorganizationswhoareourpartnersin thisstruggle,itisdifficulttosaythatthingsarelookingbetter.Somethingsareabitbetter,butmany otherthingsshownoimprovementandafewsignificantthingsareworse.Butschooldistrictsare nowherenearwheretheycouldhavebeen,shouldhavebeen,andmustbe.

80 Themostrecentdamageincludesthetransferofcosts,creationofadditionalcosts,expansionof mission,absenceofreformormandatereliefandthedenialofaiddrivenbylegislativealterations designedtoabrogateresponsibilitybytheuseofauthority.Allofit,sofast,sofurious,hasbrought schooldistricts,especiallythosewithmarginalcapacity,andthebiggestmissionlift,totheirknees. Thecurrentalgorithmsusedbystategovernmenthavefailedtomakeschooldistrictsmorefiscally effectiveorefficientthroughtheuseofstateaidincentives,disincentivesorlevelsoffunding.Strong dataovertheyearsandinthispapercontinuestosuggestthateventhe200708FoundationAid formulawasinequitable,unsustainableandmoreofapoliticalinitiativethanafiscaleducationalone. Ashasbeenarticulatedthroughoutthemediainnewsreportsandineditorials,aswellasbymany legislators,theirleadershipandtheGovernorthedistributionofstateaidispatentlyinequitable. Undeniably,absentsignificantchangestostateaidfundingvolume,sufficiencyanddistribution,the calculusofschooldistrictfinancewillforcemanyschooldistrictsintoorfurtherintoeducationaland fiscalinsolvencyinveryshorttime.Likeitornot,thissituationiscommonknowledgeinallcornersof NewYorkState. Worseyet,theFoundationAidalgorithmsremainflawedespeciallyfortheschooldistrictswiththeleast wealthandthemostpoverty.Thestatesfiscalwoesofrecentyearsnotwithstanding,inequitablestate aidfundingformulasareonlyexacerbatedbythemorevirulent,deceptiveandclevermetricscarved intotheartificiallyandpoliticallycontrivedstateaidcutsknownastheDeficitReductionAdjust(DRA), anditsmoredestructiveandharmfulsuccessor,theGapEliminationAdjustment(GEA).Again,themost seriouslydisadvantagedbythesecutsaretheschooldistrictswiththeleastcapacitytocopewith revenuelossandthosethatstrugglewiththeheavyeducationalliftaffordedthembylargeamountsof poverty. Nothingcreatedbystategovernmenthascurrentlyaffectedtheexpenseescalationsexperiencedby schooldistrictsineveryregionofthestate.Therehasbeennomeaningfulmandaterelief,nochangesin statute,nodiminishmentofrequirementsinrecentmemorytoreducethemonetaryburdenonschool districts.Infact,legislationpassedforschoolyear201213onlyheapedincreasedunfundedand expensivemandatesonthebacksofschooldistricts.Theyincludelegislationforteacherandprincipal evaluationprocesseswithproblematicimplicationsforstudents,parents,taxpayersandschooldistricts. Schooldistrictswanttoimprovestudentperformance.Withthisinmind,isthisthebeststatewideplan NewYorkcanoffer,oristhisthebestitispoliticallywillingtooffer?Mandatinglabornegotiations betweenalmost700schoolboardsandteacherunionsisthelatestnarrowminded,misguidedand costlyabrogationofstateresponsibility. Attemptsatstateaidreformandmandatereliefhavegonenowhereinrecentyears,eventhoughthere havebeencountlesssuggestionsbytheStatewideSchoolFinanceConsortium,NewYorkStateCouncilOf SchoolSuperintendents,RuralSchoolsAssociation,CitizensBudgetCommissionandothers.These suggestionsarecontinuouslyeitherkeptoffthetable,outofmind,cantbedone,lackpoliticalsupport orwill,arenotapriority,devoidofasponsororsimplydiscussed,mentionedinpassing,dismissed, introducedasabillwithnointentionofpromotiontowardpassageor,laughedat,malignedandeasily dismissedbecausethereisnothinginitforstatepolicymakersinthecostbenefitanalysisthatcontinues totakeprecedenceinAlbany. Therearetwotacticsinplay.First,thereisthedenialofmeaningfulandsignificantfiscalnourishment totheschooldistrictsthatneeditthemost.Asillustratedrepeatedlyinthisresearchpaper,slow starvationisunattractiveandidentifiable.Themostastutecommunitymustsurelyrecognizethattheir

81 abilitytocreate,maintainandpromotelocalprosperityisinlargeparthinderedbytheeconomicand educationalstarvationoftheschooldistrictsintheregion.Afterall,theyhaveexperiencedhighertaxes; diminishedcurrentandfutureopportunitiesforstudentstobepreparedforandliveinaposthigh schoolworld.Certainlyincreasedunemploymentoflocalprofessionals,aproducttosomedegreefrom thousandsofschooldistrictlayoffs,willhaveadeleteriouseffectonthelocaleconomyandits attractivenesstothemaintenanceofcurrentbusinessenterprisesand/ornewbusinessorindustrial development. Clearly,thefiscalconditionofschooldistrictsoverallcontinuestodeteriorateasthestateputsits financesinorder.Asthefiscalconditionofaschooldistrictweakens,sodoesitsoperationalprogram, thenitsorganizationalprogramandultimatelyitseducationalprogram.Theschooldistrictswiththe leastcapacity,thosewiththeleastwealthandgreatestpovertyallthewaytothoseofaveragemeans, findthemselveslosingagriponalloftheseprograms;theveryprogramsthatkepttheschooldistrict andthecommunityitservesvibrant.Atthispointeventhestudentsinsuchschooldistrictshave realizedwhatmanyadultshaveignoredorwithdrawnfrom;thefutureoftheirschooldistrictandits studentsgrowsmorebleakeachyearandthatleftuntreatedtheseschooldistrictsandtheir communitieswillbelessattractivetoresidentsandpotentialeconomicdevelopmentandthus,less sustainableuntiltheybothdisappear. Second,stategovernmentandotherswhodemandreformofthepublicschoolsystemofferfewifany consequentialormajorlongtermsolutions.Therapieshavebeenintroducedinvariouswaystoailing schooldistricts.Regionalhighschoolshavebeenarticulated,mergershavebeenmentioned,andthe consolidationofbackofficefunctionshasbeenstressed.Yettheincreasedfundingtoaccomplish thesetherapiesorsavingsthatcouldbegleanedfromthemremainselusiveandlargelyimaginary.As policymakersandpoliticiansdiscussorignoretheirownadvice,theinequitabledistributionofstateaid, continues.Additionally,inequitablyappliedstateaidcutsandescalationsofmandatedcostscontinue tobleedthepatient.Aseachtherapyfailstoattractthefundingorthelevelofanalysisitneedstobe evaluatedformeritand,unfortunatelyandmoreimportantly,forpoliticalsupport,theschooldistrict patientsgetweaker.Unlesssolutionsarefoundandinstitutedquicklythelowtoaveragewealthand higherpovertyburdenedschooldistrictpatientswillnotrecoverandtheStateEducationDepartment willbesaddledwiththeroleofreluctant,understaffedandemasculatedhospiceprovider. Soourorganizationandmanyothersaskwhatistheplanfromthispointon?Doesstategovernment haveaplan?Ifnot,whynot?Pleasedonttellusthereisntaplan.Regardlessofwhichpartyhashad themajorityinthelegislatureorintheexecutivemansion,allhavelargelyignorednumerous opportunitiestosolvetheequitablefundingissue.Theissuewillnolongerwait,becauseitcannotwait anylonger. Anecdotalinformationandnewreportspointtoanimproved,butmarginal,recognitionaboutthefiscal andeducationaloperations,problemsandchallengesofthemanagementofalmost700community schooldistricts.Manystakeholdergroupsandindividualswithpowertocontrol,guideandinfluence schooldistrictoperations,policiesandpracticesarenotcognizantoftheshortandlongtermdilemmas facedbytheirschooldistrictorasschooldistrictemployees.Thissituationmustberemedied immediatelybytheschooldistrictsleadershipteamofschoolboardmembers,superintendentand businessofficial.Thismustbecompletedasefficientlyandquicklyaspossible.Difficultdecisionsare aheadandtheeducationofstakeholdersmustbeginimmediately.

82 Thestatewillnotcontinuetosendmoneytoinefficient,ineffectiveornonperformingschooldistricts muchlonger. Schoolboards,superintendents,andbusinessofficialswillhavetotacklenewrolesasdefenderofthe rational,thoughtful,efficientandeffectiveschooldistrictoperations,practicesandpoliciesastheyface unprecedentedscrutiny.Costeffectiveness,efficienciesandeconomiesofscalewillbeparamountto publicandpoliticalsupport.Theimmediateselectiveabandonmentofineffectiveandinefficient operations,practicesandpolicieswillberequiredforsuchsupport. Inanypoliticalsense,thestateiscurrentlyincapableofsolvingtheproblemsofschoolfunding. Thereforeitisourbeliefandstrongrecommendationthataseparate,completelynonpolitical commission,madeupofthosewhostudyschoolfinanceandequityissues,beimmediatelyconvenedto createandforwardforlegislativeactionbyDecember1,2013anewstateaidformulabasedon: Fiscalcapacityandpovertylevelsofschooldistricts; Aminimumlocalshareofeducationalcoststobebornebyeveryschooldistrict; Acomprehensivestateaidformulathataccountfordemographic,geographicandregional factors,and; Appropriatemeasuresofcosteffectiveness,efficiency,andeconomyofscalerequiredto maintainnewstateaidlevels.

83

SummaryofConclusions
AswithalloftheresearchtheStatewideSchoolFinanceConsortiumhasconductedoverthepast21 years,ourobjectivesremainthesameUndertakeathoroughanalysisofNewYorkStatesowndatato developadeepunderstandingofthehistoricandcurrentprocesses,trendsandimpactsofhowpublic educationisfinancedinthestate.Thenutilizeourfindingstoprovokeconversationandadvocacythat willleadtochangeinwhathasstubbornlyremainedalargelyinsidious,unfairandpolitically manipulatedfunctionofstategovernmentformuchtoolong. If,astheadagegoes,thatnumbersdontliethedatapresentedandtheconclusionsraisedinthis studywillprovokesuchadebatebecause,intheclearestandmostdirectofterms,publiceducationin NewYorkisonthethresholdofnothingshortofadisaster. Atthepresenttimethereismuchdiscussionanduneaseaboutthequantifiabledevolutionintoa have/havenotpubliceducationsystemincapableofsuccessforallchildren.SSFCanditsmembershipof over400publicschooldistrictsbelievethatNewYorkisalreadywelldownthatroadandthatthekey conclusionsreachedbythisstudywillinspirethelegislatureandexecutivetosupportandleadthereal reformthatissodesperatelyneeded. KeyConclusionsofthisstudy: 1. Whilein200708FoundationAidformulawasacclaimedasthestatesanswertotheconstitutional responsibilitytoprovideameaningfulandsound,basiceducationforallstudents,ithasbeen incessantlyandundeniablyfoundtobeinequitable,unfair,unreliableandfiscallyunsustainable fromitsinception. 2. Unfairstateaiddistributionisnot,assomesay,ageographicissuethatpitsUpstatevs.Downstate. ThereareoverthreedozenDownstateschooldistrictsthatsharesimilarwealthandpovertyfactors asthoseUpstateandthesamebleakfutureasSSFCmemberschooldistricts.Theinequitiesinthe distributionoftheFoundationAidformulaandthemassivestateaidcutsoverthepastseveralyears wereanintentional,politicallymotivatedredirectionofmoneytowealthierschooldistrictsatthe expenseofthelesswealthy.Indeed,theneedsoftheseschooldistrictsareasunderrepresentedas SSFCschooldistricts. 3. Recenteffortstoprovidefiscalsupporttoschooldistrictsareartificiallymisguidedandlack direction.ThefailureofthestatetorethinktheFoundationAidformula,theimpactoftheGap EliminationAdjustment(GEA)cuts,theTaxCaplawandtheinequitiesinstilledintothefiscaland economicfabricofschooldistrictswillcontinuetodiminish,ifnotdoom,economicrecoveryina significantportionofthestate. 4. TheresolvetogarnerthefiscalresourcestokeepthepromiseofaFullyFundedFoundationAid formulaasarticulatedin200708aremoreremotethanever.Thestatewillinsistongreaterefforts byschooldistrictstocutexpenseswithincurrentlawandregulationwithoutregardtothe irrationalityandbarrierspresentedbyboth.Thus,thestatewillbegintohedgeonstateaid alteration,increasesanddistributionsratherthantosendmoneytoinefficient,ineffectiveornon performingschooldistrictswiththeoversimplifiedassumptionthatassuchaneffortis unsustainableandlacksmerit. 5. Precariousstateresourcesareanunacceptableexcuseforparalyticpolitics.Thestatesfiscal conditionisidentifiedbythenewestfiscaloutlookprovidedbythestateintoitsownlongtermfiscal condition.Thereport,FIRSTQUARTERLYUPDATETOTHEFINANCIALPLANFORFISCALYEAR2013 PROJECTIONSFORFY2013THROUGHFY2016,suggeststhatthestatefacesGeneralFunddeficitsof

84 $982millioninFY2014,3.59billioninFY2015and$4.37billioninFY2016.(See: http://publications.budget.ny.gov/budgetFP/FY2013JulyUpdate.pdf) BasedsolelyonthemostrecentandmostpropitiousincreasestoFoundationAidand diminishmentstotheGEAcuts: o Itwilltake50yearstofullyfundFoundationAidattherateofimprovement exercisedlastyear. o Itwilltake6yearstoeradicatetheGEAatcurrentlevelsofdecline. o Itwilltakeover$5.5billiontogettofullfundingintheFoundationaidformula. o Itwilltakeover$2.2billiontoeradicatetheGEAcuts o Itwilltakenearly$8billiontofullyfundFoundationAidanderadicatetheGEAcuts andaccountforexpensedrivenaids HalfofthedistributionofboththeGEAreductionandFoundationAidfor201213wasbasedon variouspovertymeasures,andtheotherhalfonaninequitableformula.Untilaidisdistributedona fiscalcapacityandpovertyformulaofsomereliabilityandbalance,theFoundationAidformulawill neverattaintrueequity. Withnochangesintheeducationaidformula,asignificantnumberofschooldistrictswillnothave thecashreservestosustainthemselvesoverthenexttwoyearsastheyfacestatecreated mandates,contractualobligations,andhealthinsuranceandpensioncosts.Simplyput,inmany localesresidentswillnotbeabletofundtheirschooldistrict. Bylaw,201213stateaidtodistrictswasallowedtoincreaseby4.1%roughly$805million.Bythe timetheaidwasdistributedonly$752million(just93.4%)ofthatmoneywastargeteddirectlyto schooldistricts.Afteraccountingforexpensedrivenaids(BOCES,Transportation,BuildingandAid forStudentswithDisabilities),justtheremaining$512millionfounditswaytoschooldistrictsas FoundationAidincreasesandreductionstotheGEAcuts. Inthe201314statebudget,onlya3.5%increaseabout$712millionoftotalaidhasbeen projectedbytheexecutive.Onepossibleextrapolationfromthe201213aiddistributionprocess appearsreasonablypredictive.Aftergrants,teachercentersandthelikearesubtracted(for argumentssake,againusingthe201213rateof93.4%oftheoriginallydesignatedamountfor distribution),only$655millionremains.Thensubtractafurther$245millioninexpensedrivenaids andallthatremainsis$420millionforGEAreductions(underthemostequitabledistributionplan) andpotentialincreasestotheinequitablydistributedFoundationAidamount.Thatrepresents about19.5%lessoperationalaidtobesentdirectlytoschooldistricts. Comparatively,evenbyusingallavailablefundbalances,schooldistrictswiththeleastwealthand anappreciableamountofpovertyonaveragehavetheleastcapacitytousetheirAdjusted RestrictedFundBalanceandAdjustedUnrestrictedFundBalancetoreplenishtheAssigned AppropriatedFundBalance.Additionally,5%ofallschooldistrictsdonthaveenoughAdjusted RestrictedFundBalanceandAdjustedUnrestrictedFundBalancetoreplenishtheAssigned AppropriatedFundBalanceforasingleyear;over22%ofschooldistrictsareinthesamequandary inlessthan2yearsinthisscenario;andalmost39%ofschooldistrictsinlessthanthreeyears.These dataraiseasignificantdangersignalthatwarnsabouttherealpotentialforaneducationalcalamity inthenottoodistantfuture.ThesimultaneousandcompleteuseoftheAdjustedRestrictedFund BalanceandAdjustedUnrestrictedFundBalanceforthispurposewouldbeanunmistakabledisaster becauseabsentthesefundsadistrictcannotoperate. Schooldistrictschosetoabsorbover$138millionworthofallowableexemptionstostaywithinthe psychologicalTaxCap.Thisisalsounsustainable.Unlesstaxleviesareraisedthatincludethese exemptions,schooldistrictswillbeforcedtocutotheritemsfromtheirbudgetsasawaytoabsorb theexemptionsforwhichtheyqualify,buthavechosennottoincludeintheirtaxlevy.

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85 13. ThepropertyTaxCaplawguaranteesthatthoseschooldistrictswithlesswealth,fiscalcapacityand thegreatestpovertywillnotprospereducationallyorfiscally.Whencoupledwithpaststateaid freezesandcuts,andtherecentinsufficientstateaidreductionofthosecuts,itisnearlyimpossible formanyschooldistrictstosurvivefiscallyoreducationallyoverthenextfewyears.Manyschool districtsareinfiscalandeducationaljeopardy.Thequalityoflifeinthesecommunitiesaswellas economicdevelopmentopportunitieswillseverelydiminishastheschooldistrictdiminishes.New residentsorbusinessesarenotattractedbyaschooldistrictthatisinfiscaloreducationaldecay. 14. UnderthenewTaxCaplawwealthierschooldistrictsthatarelessdependentonstateaidwillbe abletoraisemoremoneyperpercentoftaxlevythanaverageorbelowaveragewealthschool districts.Thus,theattainmentofthe60%supermajoritytogoabovethetaxlevylimitmandated inthenewlawwillbeanunrealisticoutcomeinmostcommunities;averageandbelowaverage wealthschooldistrictsthosethatrelymuchmoreheavilyonstateaidwillbeforcedtocontinue tocutstaffandprogramsandusereservestostayinoperation.Thisisanunsustainableprocess. 15. TheTaxCapfornextyearisproblematic.Inflationisrunningat2.93%.TheTaxCapinflationfactor calculationfor201314holdsat2%.Ifinflationactuallykeepsoutstrippingthetaxcapinflation factorasitdidthisyearandisexpectedtodoagainnextyear,schooldistrictswillactuallyfall furtherbehindinfiscalbalancerevenuestoexpenses.Additionally,theexemptionsbymany districtswillnotbereclaimed.Thetaxlevylimitwillnotbeenoughtooffsetcostescalationsby schooldistricts.Furthercutsinmanyschooldistrictswillinstillsomeleveloffiscaland/or educationaldysfunctionratherthanprohibitit.Suchastrategyisunsustainable. 16. TheuseofPILOTagreementsinaschooldistrictsTaxCapformulaisbadforeconomicdevelopment andbadforschooldistricts.Theabilityofaschooldistricttolevytaxesthatarenecessarytosustain itishamperedbythePILOTasthePILOTdoesnothingtoincreasethetaxbaseandtherebyprovide adequatesupportfortheschooldistrict.Itisunrealistictoassumethatanybusinesswillbeenticed tomovetoacommunitywhoseschooldistrictlacksfundamentalfiscalcapacity. 17. Absentsignificant,solidandexpansiverecommendationsforanewFoundationAidformula,and accelerationoftheeradicationofGEAcutsthroughamoreequitabledistributionofthosefundsand viableinitiativestoadvancecostefficienciesandeffectivenessinschooldistrictsbythecurrentNew NYEducationReformCommissioninitspreliminaryreportforDecemberof2012,thecommission mustbeimmediatelydisbanded.Areconstitutedcommissionmustbesolelyformedofthose familiarwiththeworkings,successopportunities,andfailuresofschooldistrictsfiscallyand educationallyandhaveafirmgraspoftheconceptofequity.Thereconstitutedcommissionmust thenimmediatelyexaminestateaidtoschoolsandschooldistrictmandatesandmake recommendationsforlegislativeactionontheircontinuance,modificationorabandonment.New recommendationsmustbedevelopedandthenpassedandsignedintolawbyApril1,2013sothat theywilltakeeffectinthe201415schoolyearandeveryschooldistrictcanincludethemintheir planningforthe201415schooldistrictbudget. 18. Giventhepoliticalmachinationsthathavepervadedpublicschoolfinancesforsomanyyears,the stateiscurrentlyincapableofsolvingtheproblemsofschoolfunding.Aseparatecompletelynon politicalcommission,madeupofthosewhostudyschoolfinanceandequityissuesshouldbe immediatelyconvenedtocreateandforwardforlegislativeactionbyDecember1,2013anewstate aidformulabasedon: o Fiscalcapacityandpovertylevelsofschooldistricts: o Aminimumlocalshareofeducationalcoststobebornebyeveryschooldistrict; o Acomprehensivestateaidformulathataccountsfordemographic,geographicandregional factors,and; o Appropriatemeasuresofcosteffectiveness,efficiency,andeconomyofscalerequiredto maintainnewstateaidlevels.

86 19. Allofthedatapresentedinthispaper,aswellasotherresearchundertakenbyRutgersUniversity, CornellUniversity,SyracuseUniversity,theRuralSchoolsAssociation,theCitizensBudget Commission,theAllianceforQualityEducationandothers,pointtothesameconclusionsabout NewYorkStategovernment:Itisnotpayingseriousenoughattentiontothisissueandwhileitis empoweredtoactonfundingequityithaschosennottodoso.Why? 20. Manystakeholdergroupsandindividualswiththepowertocontrol,guideandinfluenceschool districtoperations,policiesandpracticesareonlyminimallyawareoftheshortandlongterm problemsthatconfronttheirschooldistrict.Thissituationmustbecorrectedimmediatelybythe schooldistrictsleadershipteamofschoolboardmembers,superintendentandbusinessofficial. Difficultdecisionslieaheadandtheeducationandenlistmentofschooldistrictstakeholdersmust beginimmediately. 21. SchoolBoards,superintendents,andbusinessofficialswillhavetotacklenewrolesasdefendersof rational,thoughtful,efficientandeffectiveschooldistrictoperations,practicesandpoliciesasthey faceunprecedentedscrutiny.Costeffectiveness,efficienciesandeconomiesofscalewillbe paramounttopublicandpoliticalsupport.Theimmediateselectiveabandonmentofineffectiveand inefficientoperations,practicesandpolicieswillberequiredforsuchsupport. 22. BulletAidisawrongmindedprocessthatisanextensionofpoliticalauthorityatitsmostcynical. SchooldistrictsthatreceiveBulletAidarealwaysgratefulforanynewfunding.However,someare needyandsomearenot.Ourdatasuggestthatthedistributionofthesefundsismixedatbest.Itis distributedtothewealthiestandthepoorestschooldistrictsor,asweseeit,tothehighneed schooldistrictsandtothe"noneedschooldistricts."Wecanidentifynostatisticalcorrelation betweenindicatorsofneed,suchaspovertyorwealthfiscalconditions,oranythingelseinthe amountoffundsgiventoschooldistrictsingeneral.Thedetailsofthedistributionofthesefunds runthegamutfrompoliticallycalculatedtohaphazardbyanymeasure.BulletAidisbeyonda flawedsystem;itiswrongandshouldberedirectedtoprovideanequitabledistributionofsuch funds. 23. Stategovernmenthasofferednoformal,recognizableorconstitutionallysuitableplanmoving forwardthataddressestheshortandlongtermreformandfiscalsustenanceofthestatesnearly 700schooldistricts.Rather,thereisajumbleofvagueandimprovisationalstrategiesaimedatthe survivalofhundredsofbatteredandbruisedfiscalandeducationalentitieshavinglowfiscalcapacity andhigherlevelsofpoverty.Theissuewillnotwait.

87 AboutTheStatewideSchoolFinanceConsortium TheStatewideSchoolFinanceConsortium(SSFC)isanorganizationofover400NewYorkpublicschool districtswhosemissionistobringequitytothedistributionofNewYorkStateeducationalaid.SSFC membershipislargelycomprisedofschooldistrictsfromaverageandlowwealthcommunitiesthat receiveaninsufficientanddisproportionateallocationofstatefundingincomparisontohighwealth regionsofNewYork.ThereformofthestateaidprocesswillhelpensurethatallofNewYorkschildren receivethesameeducationalopportunitiesregardlessofthewealthorlocationoftheircommunity. PleasevisitSSFCatwww.statewideonline.org