Lecture 3: New Yorks School Aid System

1
Lecture 3New Yorks School Aid System

• EDA 757/PPA 730
• Fall 2002

2
Lecture 3 Outline

• Overview of NYs school aid system
• An alternative design of NY school aid to fund a
  sound basic education.
• NY school aid simulation (computer simulation
  done in class)

3
Importance of School Finance Systems

• 30 billion in total spending in NY, and 14
  billion in state aid. Largest spending category
  in most states.
• Complex intergovernmental fiscal system that
  affects fiscal health and behavior of local
  school districts.
• Politically controversial
• Tension between state standards and financing,
  and local control.
• Achieving equity goals will involve
  redistribution.

4
Overview of NYs School Aid System

• Politics of school aid formula design.
• Problems with NYs school aid system.
• Aid shares and trends by types of aid.
• Key measures used in aid formulas.
• Overview of specific formulas.
• Categorizing NYs school aid programs.

5
Politics of School Aid Formula Design

• State-level politics dominate decisions over the
  size and distribution of aid budget.
• In NY, political negotiation over how much
  upstate, NYC, and downstate suburbs get.
• All districts get something. Many states have
  minimum aid per pupil.
• Minimum aid in NY is 400 per pupil for operating
  aid.
• No district is significantly worse off this year
  than last year, commonly called hold harmless
  provision.
• In NY, there has been a transition adjustment
  aid.

6
Problems with NYs School Aid System

• There a many aid programs averaged between 25 to
  50 aid programs in 1990s.
• Have been several proposals to reduce the number
  of aid programs by creating block grants.
• Needlessly complex aid formulas. Difficult to
  understand and predict future aid levels.
• Transition adjustment effectively removed 93
  of districts from operating aid formula in
  2000-01.
• Most aid in 2001-02, and operating aid in 2002-03
  are not distributed by formula.
• No required local tax effort- some large cities
  have substituted school aid for local revenue.

7
Aid Shares and Trends by Program

• Operating aid has declined to 50 of formula aid
  (compared to 58 in 1994)grown at 60 of overall
  rate.
• Student need related aid has grown to over 25 of
  aid budgetfastest growth in ERRSA, ENA, and
  Excess Cost aids.
• Capital grants for building have grown rapidly.
• Categorical grants for other school resources
  represent very small levels of aidlarge
  differences in growth rates by type of aid.

8
(No Transcript)
9
2002-03 Enacted School Aid Distribution within
New York

• In general, aid goes up as need goes up (Figure
  3-1). Exception is NYC with below average aid.
• Rural districts have highest aid, due in part to
  high building aid and operating aid.
• Operating aid, ENA, excess cost aid are
  redistributive, building aid is not.
• ENA, which is targeted to high needs students,
  represents less than 5 of total formula aid.

10
(No Transcript)
11
School Aid Trends Since 1994

• Total aid Upstate districts and large cities
  (high need districts and rural districts)
  generally above average growth, and downstate
  districts are below average.
• Operating aid Matters a lot whether trans.
  adjustment is included in 1994 aid. With it,
  fastest growth in high need districts (downstate
  small cities, and Yonkers) except NYC and rural
  districts. Trans. Adj. primarily benefiting
  downstate suburbs.
• Building aid is fastest growing aid program,
  especially in rural districts (over 40 per
  year). Also faster growth in average and low
  need districts.
• Extra. Needs Aid fastest growth in lower need
  and rural districts.
• Aid for special needs students has generally
  grown fastest in large cities and upstate
  districts.

12
(No Transcript)
13
Key Measures Used In Aid Formulas

• Fiscal capacity
• Property value index (pupil wealth ratio)
  property value by pupil in district divided by
  state average.
• Income index (alternative pupil wealth ratio or
  income wealth ratio) adjusted gross income (from
  NY income tax forms) per pupil in district
  divided by state average.
• Combined wealth ratio (CWR)
• CWR 50 x pupil wealth ratio 50 x income
  wealth ratio
• Different pupil measures used to construct
  ratios.

14
Key Measures Used In Aid Formulas

• Pupil measures in general
• Average daily attendance (ADA) average students
  present on each regular school day.
• Enrollment Pupils registered to attend public
  schools at a certain time (usually in fall).
• Average daily membership (ADM) average
  enrollment over the course of the year.
• ADA and enrollment diverge the most in large
  cities, where attendance rates are relatively low.

15
Key Measures Used In Aid Formulas

• Pupil measures used in NY aid formulas
• Adjusted ADA ADA with half day kindergarten
  weighted at 50.
• Weighted ADA (WADA) 25 extra weight for
  secondary students.
• Resident WADA (RWADA) WADA for residents.
• Total wealth pupil units (TWPU) WADA for
  residents of districts with extra weighting for
  special needs, and at-risk students (special
  educational needs).
• Total aidable pupil units (TAPU) Same as TWPU
  except for all students attending district
  schools, with extra weight for summer school, but
  not at-risk pupils.

16
Key Measures Used In Aid Formulas

• Student need measures
• Poverty measure percent of students receiving
  free and reduced price lunch (federal school
  lunch program).
• Limited English proficiency (LEP) students
  percent of students in approved ESL (or similar)
  programs.
• Special needs student categories
• High cost students disabled students with
  special education needs costing in excess of
  10,000.
• Students requiring placement in resource room 60
  of time.
• Students requiring placement in resource between
  20 and 60 of time.

17
2000-01 Operating Aid Formula

• Aid (3,900 ceiling adjustment) x state
  sharing ratio
• per
• pupil Foundation level
  Fiscal capacity
• Ceiling adjustment1 (AOE/TAPU - 3,900) x
  (.075/CWR)
• AOE approved operating expenditure (previous
  year)
• State sharing ratio Use the highest among the
  following
• 1.37 (1.23 CWR) poor district
• 1.00 (0.64 CWR) low average wealth district
• 0.80 (0.39 CWR) high average wealth
  district
• 0.51 (0.22 CWR) rich district
• Rewritten like traditional foundation (low
  average wealth)
• E (3,900 ceiling adjustment)
• tV (3,900 ceiling adjustment) x 0.64 x
  CWR
• 1AOE/TAPU cannot exceed 8,000, CWR cannot exceed
  1.

18
Operating Aid Example for Syracuse (2000-01)

• Aidable expense per pupil (foundation level)
• 1998-99 AOE/TAPU 5,317
• CWR.5.498 (wealth).5.469 (income) .483
• Ceiling adj (5,317 - 3,900) X (.075/.483)
  219.91
• Aidable exp. per pupil 3,900 219.91
  4,119.9
• State sharing ratio (fiscal cap.) Use highest
  of--
• 1.37 (1.23 CWR) .776
• 1.00 (0.64 CWR) .691 Use .776
• 0.80 (0.39 CWR) .612
• 0.51 (0.22 CWR) .404
• Aid per pupil 4,119.91 x .776 3,197.05
• Total aid 4,119.91 x 24,394 (TAPU)
  77,988,838
• Aid actually received 72,632,021 (transition
  adj.)

19
2002-03 Extraordinary Needs Aid (to assist with
at-risk students)

• Aid (3,900 ceiling adjustment)
• x (1 (.4 x Income wealth ratio)
• x ENA pupil count
• x Concentration factor
• ENA pupil count LEP students (enrollment x
  of K6 students receiving subsidized
  lunch)sparsity count
• Sparsity count (enrollment x (25 pupil
  density)/58) (for districts with pupil density
  below 25)
• Concentration factor 1 (concentration -
  74.5)/38.7
• Concentration equals ENA count divided by
  enrollment.
• If 2000-01 is higher than calculated aid, use
  2000-01 aid.

20
Extraordinary Needs Aid Example for Syracuse
(2002-03)

• Aid (3,900 233.29) x 11
• x (1 (.4 x .82)
• x 18,150
• x 1.12764 7,814,914 (estimated
  formula aid)
• 2000-01 aid 8,142,382 Since this is higher,
  use this.
• ENA pupil count 1,275 (LEP) 16,874 (lunch) 0
  (sparsity) 18,150
• Sparsity count 0 since pupil density is above
  25.
• Concentration factor 1 (79.44 - 74.5)/38.7
  1.12764
• Concentration (18150 / 22846) x 100 79.44

21
Building Aid (Example of open-ended matching
project grant)

• Aid per pupil Approved Building Expense x Aid
  Ratio
• Approved Building Expense To limit state cost,
  use minimum of
• Construction, lease or purchase of school
  buildings, including incidental expenses approved
  by Facilities Planning Unit of SED.
• Pupil construction cost allowance multiplied by
  pupil capacity of building. This is adjusted for
  regional cost of living differences.
• Aid ratio1 1 - ((1999 AV/2001 RWADA)/state avg.
  x 51)
• For average wealth district, state pays 49 of
  costs.
• 1Aid for a project approved after 7/2000.
  District could choose instead 1999-00 aid ratio
  minus 10. If district has high property wealth
  but low income wealth, then it can use an
  alternative calculation.

22
(No Transcript)
23
Designing an Aid Formula to Finance a Sound
Basic Education

• New York has chosen a performance adequacy
  standard
• Regents have required passage of 5 exams for
  graduation.
• NY Constitution interpreted as requiring sound
  basic education.
• Key issue How high should the standard be, and
  how should aid be distributed to help districts
  reach this standard?

24
Impetus for Change the CFE Decision (January
2001)

• Justice Degrasse ruled
• The court holds that the education provided New
  York City students is so deficient that it falls
  below the constitutional floor set by the
  Education Article of the New York Constitution.
  (p. 4)
• The court also finds that the States actions
  are a substantial cause of this constitutional
  violation. (p. 4)

25
Reforming the Finance System Will Require State
Action

• the State is ultimately responsible for the
  provision of a sound basic education (p. 114)
• In the course of reforming the school finance
  system, a threshold task that must be performed
  by defendants is ascertaining, to the extent
  possible, the actual costs of providing a sound
  basic education in districts around the State.
  (p. 115)
• Once this is done, reforms to the current system
  of financing school funding should address the
  shortcomings of the current system. (p. 115)

26
Key Steps in Designing Aid System To Achieve
Adequacy

• Select adequacy standard.
• Estimate required spending to have the
  opportunity to reach adequacy in each district.
• Develop aid formula to target aid effectively to
  reach adequacy standard.
• Develop local effort provisions.

27
Step 1 Defining an Adequate Education CFE
Decision (1/31/01)

• Performance standard Productive citizenship
  connotes civic engagementcapable voter needs the
  intellectual tools to evaluate complex
  issuesthat may require learning unfamiliar facts
  and concepts Beyond voting and jury
  service, productive citizenship implies
  engagement and contribution in the economy as
  well as public life. This is defined as
  foundational skills to obtain productive
  employment. (CFE decision, pp.14-15)
• Resource standard Children are entitled to
  minimally adequate physical facilities and
  classroomsminimally adequate instrumentalities
  of learning minimally adequate teaching of
  up-to-date basic curricula by sufficient
  personnel adequately trained (Court of Appeals,
  1995, p. 317)

28
Alternative Standard (Recent Appellate Court
Decision 6/25/02)

• The State submitted evidence that jury charges
  are generally at a grade level of 8.3, and
  newspaper articles on campaign and ballot issues
  range from grade level 6.5 to 11.7Thus, the
  evidence at trial established that the skills
  required to enable a person to obtain employment,
  vote, and serve on a jury, are imparted between
  grades 8 and 9, a level of skills which the
  plaintiffs do not dispute is being provided. (p.
  14)
• The term function productively does imply
  employment. It cannot be said, however, that a
  person who is engaged in a low-level service
  job is not a valuable, productive member of
  society. (pp. 12-13)

29
Translating CFE Decision in NY (01/31/01) into
Possible Standards

• Determine what subjects, and what levels of
  student performance are required to produce
  productive citizens
• School accountability system developed by SED
  provides a framework for considering alternative
  standards.
• SED developed four levels of performance for 4th,
  8th and Regents Examinations.
• Level 1 serious academic deficiencies
• Level 2 require extra help to meet standards
• Level 3 meet standards, and should with growth
  pass Regents
• Level 4 exceed standards and moving to high
  performance
• SED developed a weighted average of percent of
  students in Level 2, 3, and 4. Level 1 students
  were weighted at zero.

30
Select Student Performance Measures
Performance measures for each exam
x 1
x 2
x 2
Measure
Aggregate performance measure
Avg. 4th Math Eng.
Avg. 8th Math Eng.
Avg. Regents Math Eng.
x .25
x .25
x .50
Measure
31
Figure 3-5 Comparison of Student Performance
Index (2000) by Region
180
169
160
156
160
148
145
140
120
107
103
96
100
Performance Index (state average159.5)
80
60
40
20
0
Downstate
Downstate
New York City
Yonkers
The Big Three
Upstate Rural
Upstate Small
Upstate
Small Cities
Suburbs
(upstate)
Cities
Suburbs
32
Method for Estimating Cost of Adequacy

• Factors affecting costs
• Cost of doing business (teacher salaries)
• Sparsity (higher costs in smaller districts)
• Pupil needs (poverty, LEP, special needs)
• Estimate cost function
• Use coefficients to develop cost index and cost
  of adequacy estimates.

33
Determinants of Education Spending

Factors District Can Influence

Factors Outside District Control

Competitive
Salaries

Student



Performance




Poverty



Rate


Spending


Inefficiency

Factors

Per Pupil




Limited English


Proficiency


Severe
NoteRegression results reported in
Handicaps
Yinger (2001).
District

Enrollment

34
Developing Comprehensive
Education Cost Index
a b
Average b
Average
Predicted
1
2
Spending
Performance
Efficiency
Per Pupil
Same for All Districts
b
Salaries b
Enrollment b
Student needs
3
4
5
Allowed to Vary Across Districts
Cost
(Predicted spending / Average spending) x 100
Index
35
Figure 3-6 Comparison of Cost Indexes by Region
in New York
200
180
Cost of education index
160
Teacher cost index
140
120
Cost index (average 100)
100
80
60
40
20
0
Downstate
Downstate
New York City
Yonkers
The Big Three
Upstate Rural
Upstate Small
Upstate
Small Cities
Suburbs
(upstate)
Cities
Suburbs
36
Developing Estimates of
Required Spending for Adequacy
Required
Spending required in district with average costs
to achieve adequacy

Spending
Per Pupil
X
Full cost index/100
Total
Required
Total
Required
Required
Spending
Required
Spending

x

x
Enrollment
Spending
Per Pupil
Spending
Per Pupil
37
Figure 3-7 Required Per Pupil Spending to
Achieve Adequacy (1999-2000) (for districts with
performance below the standard)
38
Advantages of a Performance Foundation Aid System

• Formula is built to achieve performance adequacy
  standard
• It is driven directly by the estimated cost of
  adequacy.
• Targets money to districts most in need. Can be
  designed not to reward inefficiency.
• Simple designfocuses debate on what factors
  affect costs and their weights.

39
Performance Foundation Formula
Required spending
Minimum local
Aid per
-

to meet adequacy
pupil
tax effort
standard
Minimum
Property
Minimum
local tax

x
values per
tax rate
effort
pupil
Set by State
40
Figure 3-8 Comparison of Present Aid with
Performance Foundation Aid Per Pupil for
Different Adequacy Standards (15 per 1,000
minimum local effort)
1
41
Impacts of Increased Aid on School District
Efficiency

• Rapid expansion of aid in large cities may
  increase inefficiency by
• Putting pressure on already strained teacher
  labor markets.
• Encouraging rapid expansion of teacher salaries
  without accountability.
• Putting pressure on local construction costs
  through large building program.
• Straining district capability to monitor
  contracts and manage finances.

42
NYS Comptroller and SED Can Play Crucial Role in
Efficiency Improvement

• By providing technical assistance on
• Personnel policies and practices
• Program evaluation and use of performance
  measures
• Financial management.
• By providing financial accountability systems.
• By helping to establish with NY School Business
  Officers Association a clearinghouse for
  strong business practices.
• By sponsoring conferences and training courses
  for new school business officers.