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TESTIMONY of The NYS Association of Small City School Districts

Joint Legislative Hearing on 2008-09 Executive Budget
(Elementary and Secondary Education)

February 4, 2008

Presented by: Norma Barton, President, NYSASCSD
and Member and former President, BOE, Canandaigua CSD

 

     On behalf of the New York State Association of Small City School Districts and the quarter of a million children and
1.5 million residents we serve, we welcome this opportunity to comment on the 2008-09 Executive Budget.  

TARGETING OF STATE AID   

    Last year, through enactment of historic education reforms, the Legislature began the work of addressing the many funding
 inadequacies plaguing small city school districts and the more than 200 similarly situated high poverty, low wealth districts. The 2007-08 State Budget enacted a remarkable set of school funding and accountability reforms that largely erased road blocksto adequate funding which had been imposed for decades by regional and class politics. These reforms have already begun eliminating some of the root causes for the chronic failures that many of our schools experience.

    For decades, political considerations, not educational needs, drove the distribution of education aid. For example, from 1996 to 2006, small city school districts, poorer than the state average by 20%, received lower than average increases in education aid (See Exhibit A). The shortfalls in aid wreaked havoc on small city district programming and tax rates. Cumulatively, this shortfall caused the loss of many hundreds of millions of dollars in State Aid and taxes in these districts soared in comparison to wealthier districts.

     The resulting disparity in school tax rates can be clearly demonstrated: in some wealthy districts tax rates are $5/$1000 of
assessed value while in many small city districts rates are as high as $26/$1000. This gross disparity is a direct result of the decades long failure of traditional school aid formulas. This disparity effectively crippled the capacity of the poorer communities to meet the needs of their school children.

    Like the Governor’s Budget in 2007-08, this year’s Executive Budget has been thoughtfully crafted to recognize the disparities between wealthy and poor districts, to target aid to those students and districts with the greatest need and to achieve educational excellence for all by beginning to correct those disparities.  

    However, we are deeply concerned that, through Budget negotiations, the targeting of State Aid to those neediest districts will be blunted, just as it was last year with the addition of High Tax Aid and other compromises such as the Adjusted State Sharing Ratio. Last year under the Executive Budget, small city school districts and similar districts were targeted to receive a State Aid increase 3% above the state average increase. When the State Budget was finally approved, the margin between these poorer and wealthier districts was reduced by 33%, from 3% to 2%. The enactment of High Tax Aid and Sharing Ratio options were largely responsible for this diminution in targeting.

   This year under the Executive Budget, due to the $4 billion State deficit, the margin between poorer and wealthier districts is less than was proposed in 2007-08. We are worried that the progress made in 2007-08 will largely evaporate once political pressure is applied and that poorer districts will once again fall behind their suburban neighbors. We urge the Legislature to insure that any amendments to the Executive Budget are scrutinized so that targeting of aid necessary to keep faith with the commitment to provide additional funding for those students who are not now adequately supported is not jeopardized. The Legislature must keep its eye on the task at hand; targeting State Aid to insure that a quality education for all students is provided, regardless of where they live or how well-off their families are.

FOUNDATION AID SAVE HARMLESS

The proposed 2% save harmless increase in Foundation Aid is far too low for most our districts. On the basis of a recent survey, our districts are experiencing between 5 and 8% increases in the basic cost of doing business, without making any staffing or programmatic improvements. A 2% base increase in State Aid would erode the extra funds intended for new programs or drive double digit tax rate increases, particularly in those districts most heavily dependent on State Aid, i.e. poor districts. The minimum increase in State Aid should be based upon graduated scale depending upon wealth up to a ceiling of 6%. (See Exhibit B for suggested bill language.) Several high need small city districts are in special need of relief from the save harmless, including Ogdensburg, Auburn, Mt. Vernon, Peekskill and Hudson. Several of these are hurt by the Foundation Aid formula where enrollments are declining. (See Exhibit C.)

CONTRACT FOR EXCELLENCE

    The Executive Budget has also continued to address the critical issue of accountability, i.e. how can we be assured that the State’s significant investment in children will be used most effectively and will result in meaningful progress toward explicit educational goals. The experience this past year of the 19 small city Contract for Excellence (C4E) districts was difficult but nonetheless instructive. Our C4E districts are committed to making the accountability system work but they discovered that greater flexibility than they currently have in the use of funding is necessary. They also discovered that they need help in planning and in setting realistic and achievable goals.  We have developed several recommendations which are necessary to insure that the C4E reforms do not gut existing effective programs. (These recommendations are contained in Exhibit D.)

CHARTER SCHOOLS

    We are also deeply concerned about the effect that Charter Schools have had on Albany CSD, and to a lesser extent, on Schenectady, Troy and Lackawanna CSDs. The Transition Aid enacted last year is woefully inadequate and makes an assumption which is not true, i.e. that the stranded costs of serving students attending Charters will phase out. We believe that districts losing students to charter schools will experience increases in costs equal to 2/3 of the AOE per child on an indefinite basis. These increases in costs are a direct tax on the local property taxpayer, who in small city districts is already overburdened. (See Exhibit E which contains suggested bill language.)

CONSTITUTIONAL DEBT CEILING:

    Non-city districts have debt ceilings which are 4 times as great as in small city school districts. We ask that debt ceiling reform for Small City School Districts be enacted by approving legislation authorizing a Referendum to repeal the ceiling, by excluding amounts received in Building Aid from computation under the debt ceiling as is currently applicable to non-city districts or by providing that debt incurred by small city districts through the New York State Dormitory Authority be excludable from debt ceiling computations.

CONCLUSION

    The Governor and Legislature are to be greatly commended for their staunch support of the students we serve. We also commend both Houses of the Legislature for their long standing commitment to improving our educational system. As we noted last year, we all have a once in a generation opportunity to move education in New York into a new era, where all children will have the support necessary to fulfill their potential. Our state has the unique chance of becoming a lighthouse for the nation, a lighthouse showing the way to provide excellence in education for all. We look forward to working with the Legislature in any way we can to make this remarkable opportunity a reality.

 

                                                            EXHIBIT A

 2006-07cumulative analysis of state aid

Small City School District Computerized Aid Analysis

 

 

Fiscal Year 1996-1997 Through Fiscal Year 2006-2007

 

 

 

 

 

 

 

10 Year Average Actual Total Aid Increases

 

 

 

 

 1996-1997

 2006-2007

% increase

10yr avg % increase

SCSD Total

 $                          982,654,238

 $    1,601,102,664

62.94%

6.29%

NYC total

 $                       3,383,492,023

 $    6,477,901,841

91.46%

9.15%

State total

 $                       9,692,966,884

 $ 16,890,735,224

74.26%

7.43%

State-(NYC+SCSD)

 $                       5,326,820,623

 $    8,811,730,719

65.42%

6.54%

State-NYC

 $                       6,309,474,861

 $ 10,412,833,383

65.03%

6.50%

State-SCSD

 $                       8,710,312,646

 $ 15,289,632,560

75.53%

7.55%

             

                                                    

  EXHIBIT B                                                                                       

 

1. Each district should receive an additional amount of save harmless foundation aid computed as follows: 
 
plus an additional  per cent calculated as the product of three percent multiplied by the positive remainder 
of one and 3 tenths minus the district’s combined wealth ratio.

2. Following are examples of city districts that are now on a 2% minimum compared to using an equalized 3% supplemental minimum (above).  This would also prevent large tax increases in many low wealth non-city districts that are now on a flat minimum.

 

 

2.00%

 

1.3

3.00%

 

 

City districts on minimum

Exec. Budget Minimum

New Basic Minimum

CWR for 07-08 Aid

Multiplier

Supplemental Minimum

Total Minimum

Change From Exec. Budget

Ogdensburg

2.0%

2.00%

     0.400

     0.900

2.7%

4.70%

2.70%

Plattsburgh

2.0%

2.00%

     0.665

     0.635

1.9%

3.91%

1.91%

Hudson

2.0%

2.00%

     0.672

     0.628

1.9%

3.88%

1.88%

Glen Cove

2.0%

2.00%

     2.082

          -  

0.0%

2.00%

0.00%

Long Beach

2.0%

2.00%

     2.057

          -  

0.0%

2.00%

0.00%

Saratoga Springs

2.0%

2.00%

     1.165

     0.135

0.4%

2.41%

0.41%

Mount Vernon

2.0%

2.00%

     0.909

     0.391

1.2%

3.17%

1.17%

New Rochelle

2.0%

2.00%

     1.600

          -  

0.0%

2.00%

0.00%

Peekskill

2.0%

2.00%

     0.871

     0.429

1.3%

3.29%

1.29%

Rye

2.0%

2.00%

     4.728

          -  

0.0%

2.00%

0.00%

White Plains

2.0%

2.00%

     1.952

          -  

0.0%

2.00%

0.00%

Yonkers

2.0%

2.00%

     1.052

     0.248

0.7%

2.74%

0.74%

 

EXHIBIT C 

Because the new Foundation Aid formula is based on equalizing principles, most property poor school districts are on the formula itself and are not affected by the minimum provision.  Most of the districts on the minimum provision are wealthy.  Because of their healthy tax bases and low percentage of state aid, it does not take a large tax increase to compensate for a low aid increase in a wealthy district.  However, there are some unusual situations in which very poor districts are not receiving a significant increase from the formula. 

One factor that can eliminate an aid increase is a declining enrollment due to a depressed economy.  Small districts can lose 20-30% of their enrollment over several years without being able to close an entire building.  Thus, a substantial layer of cost remains many years after the students have left.  Some costs, like retiree health coverage, will remain for decades.  The Foundation formula does not now recognize the cost of these long term losses. 

As a result, a community that has a weak tax base, a depressed economy and a declining enrollment may have 5% cost increases, but only a 2% increase in Foundation Aid under the formula minimum.  Because it is a poor district, Foundation Aid may represent as much as 75% of its instructional funding.  In a wealthy district, Foundation Aid represents only 20% of its instructional funding.  Following is one illustration from the North Country.  Data were taken from 2007-08 Aid Claims.

Ogdensburg needs to tax at $26.02 per $1,000 of taxable property value in order to raise $7,219,278 or $3,404 per pupil.  Colton-Pierrepont taxes at only $17.57 per $1,000 yet raises $12,608 per pupil without any state aid.  Ogdensburg’s base Foundation Aid is $16,917,538, representing 75% of its operating funding.  If the district’s costs rise at 5%, but its largest source of funding rises at only 2%, the balance falls on the tax levy, causing a tax increase of 11.0%.

By contrast, the lost purchasing power of the Foundation Aid in Colton-Pierrepont causes less than a 1% increase in the tax levy.  Even though it spends much more, its loss per pupil is less than half that of Ogdensburg.

The remedy for this is straightforward.  If the minimum percentage increase in Foundation Aid varies with the property wealth of the community, the impact of the minimum would be relatively equal.  A minimum increase of 5% times the local property wealth aid ratio would protect poor communities from the few conditions not yet handled by the formula itself.  This change should not be expensive to the state since most poor communities are not on the minimum and most wealthy communities would not benefit from the wealth equalization. 

Causing double-digit tax increases in visibly poor communities was never an intended outcome of school aid reform.  It can easily be avoided by equalizing the impact of the minimum aid increase.

 

 Ogdensburg

 Colton-Pierrepont

Tax Levy

               7,219,278

           5,320,600

Full Value

           277,441,190

        302,873,097

Tax Rate

                     26.02

                  17.57

 

 

 

Approved Operating Expense

             22,663,727

           5,832,707

Tax Levy/Operating Expense

31.9%

91.2%

TAFPU

                     2,121

                    422

AOE/TAFPU

                   10,685

                13,822

Tax Levy / TAFPU

                     3,404

                12,608

 

 

 

2007-08 Foundation Aid

             16,917,538

           1,615,792

Percent of Operating Cost

75%

28%

 

 

 

Percent increase in expenses

5.0%

5.0%

Total funds to be raised

               1,133,186

              291,635

 

15.7%

5.5%

Percent increase in Foundation Aid

2%

2%

Funds from Foundation Aid

                  338,351

                32,316

Tax saving from minimum

4.7%

0.6%

Balance to be raised from taxes

                  794,836

              259,320

Resulting tax increase

11.0%

4.9%

 

 

 

Sliding scale Minimum based on RWADA Aid Ratio

                     0.852

                  0.242

Equalized minimum

4.26%

1.21%

 

 

 

New minimum funds from Foundation Aid

                  720,687

                19,551

Balance from taxes

                  412,499

              272,084

Resulting tax increase

5.7%

5.1%

 

 

 

Tax Increases Resulting from Minimum Aid Increase

 Poor

 Wealthy

Proposed 2% Minimum

11.0%

4.9%

Equalized 5% Minimum

5.7%

5.1%

 

 

Ogdensburg

 Colton-Pierrepont

Foundation aid to equal 5% cost

                  845,877

                80,790

2% minimum increase

                  338,351

                32,316

Lost Purchasing Power

                  507,526

                48,474

Per Pupil

                       $239

                    $115

Added Percent on Tax Levy

7.0%

0.9%


Following is a list of city districts that ended up with a minimum 2% increase along with the change that would occur using a wealth-based minimum.  Two property-based aid ratios give slightly different results.
 

Basis is:

 

 

5%

Equalized

 

5%

 

City districts on minimum

Current Minimum

Trans Aid RWADA Entry18

New Minimum

Gain

BOCES RWADA, Entry 1

New Minimum

Gain

Ogdensburg

2.0%

     0.876

4.38%

2.38%

     0.852

4.26%

2.26%

Plattsburgh

2.0%

     0.724

3.62%

1.62%

     0.683

3.42%

1.42%

Hudson

2.0%

     0.690

3.45%

1.45%

     0.646

3.23%

1.23%

Glen Cove

2.0%

          -  

0.00%

 

          -  

0.00%

 

Long Beach

2.0%

     0.001

0.01%

 

          -  

0.00%

 

Saratoga Springs

2.0%

     0.498

2.49%

0.49%

     0.432

2.16%

0.16%

Mount Vernon

2.0%

     0.574

2.87%