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 Funding For Achievement

JANUARY 2004

A Report for the New York State Association of Small City School Districts Regarding State Aid Reform
Submitted by Charles A. Winters, School Finance Consultant

Table of Contents

Acknowledgement Page 

Executive Summary
Funding for Achievement Report
          Outcomes of the Formula
          Phased Implementation

Attachment A

Funding For Achievement:  A Formula to Target Public Resources on Educational Priorities

Attachment B

Calculating Cost per Level of Achievement

Attachment C

Regression Equation (selected aid ceiling and poverty weight)

Attachment D

The Problem of Very High Wealth Districts

Attachment E

Methods Used to Establish the Current Cost of Educational Achievement in New York State and Its Relationship to Student Poverty

Attachment F

Method Used to Calculate the Expenditure Level Needed in Each District from the Cost/Performance Formula

Attachment G

Draft Bill Language

PLEASE CALL (518) 475-9500 OR EMAIL OUR OFFICE FOR COPIES
OF THE FOLLOWING ATTACHMENTS:

Attachment H                                                                 

Policy Variables and Key Outcomes

Attachment I

Small City School Districts Simulated Aid Run Draft

Attachment J

Simulated Aid Run Draft for 680 Schools

ACKNOWLEDGEMENTS
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The Association wishes to thank Charles Winters, Association State Aid consultant and Chair of the Association’s State Aid committee. Members of this committee are also to be thanked for their dedication to the research and writing of this report. The committee consists of; Margaret Boice, Assistant Superintendent, Norwich CSD, James Chadwick, Business Manager, Ogdensburg CSD, Thomas Fitzgerald, Board Member, Newburgh CSD, Bob Gosden, Assistant Superintendent for Management Services, Elmira CSD, Lynn Hill, Assistant Superintendent. Canandaigua CSD, Judith Johnson, Superintendent, Peekskill CSD, Bob Libby, Business Official, Cohoes CSD, Daniel Lowengard, Superintendent, Utica CSD, Thomas McGowan, Superintendent, Glens Falls CSD, Marianne O'Connor, Business Executive, Auburn CSD, Mike Pacella, Business Official, Newburgh CSD, Joan Purtell, Board Member, Binghamton CSD, Michael SanAngelo, Superintendent of Business, Schenectady CSD, Sue Skidmore, Board Member, Elmira CSD, Mark Ward, Superintendent, Salamanca CSD, Fred Watchmeister, Board Member, Plattsburgh CSD, William Winans, Board Member, Norwich CSD, John Zappia, Assistant Superintendent, Canandaigua CSD, and Robert Biggerstaff, NYSASCSD Counsel.

Special thanks are also to be given to Professor William Duncombe, Syracuse University for his role as valued advisor to the Association.

EXECUTIVE SUMMARY
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WHAT IS FUNDING FOR ACHIEVEMENT?

Following the Court of Appeals’ final decision in the Campaign for Fiscal Equity’s (CFE) case, which found that funding for education failed to meet the State constitutional mandate to provide for a sound basic education for all, the Association of Small City School Districts realized that the CFE court order is likely to be only the beginning of an arduous process to determine the financial meaning of an “adequate education” through the political arena.  Many now speculate that, rather than comprehensive reform, we may see only incomplete solutions and temporary band-aids.  While the small city schools hoped it might not be so, they felt that they must be prepared for that eventuality. 

Therefore, the small city school districts of the state undertook a study to create a concrete model of comprehensive reform.  They determined to base this reform, not on wishful thinking, but on the actual test results of students and on the actual standards by which they are now judged.  While many very specific decisions need to be made in order to calculate results for individual districts, the Association endorses this as a broad conceptual proposal.

THE FFA FORMULA AND METHODOLOGY - SIX STEPS

1.      DETERMINE THE COST OF ACHIEVEMENT

2.      DETERMINE PER PUPIL SPENDING TARGET

3.      USE REGIONAL COST FACTOR TO ACCOUNT FOR DIFFERING “COSTS OF DOING BUSINESS”

 

4.      PHASE IN REFORM OVER 6 YEARS

 

5.      FOR THOSE NOT UP TO STANDARDS, AMEND AUSTERITY BUDGET PROVISIONS

 

6.      CONTINUE TO MONITOR FUNDING REFORM PROGRESS ANNUALLY

FINDINGS OF STUDY

·        Relationship between local wealth and test-based success in schools was pervasive and overwhelming

·        Community wealth and student poverty alone predicted over 70% of the variation in the average test scores among school districts

·        Vast majority of schools listed as being “in need of improvement” served a high percentage of children from poverty.

·        The cost of achievement in the highest poverty districts was more than twice that of the lowest poverty districts

• There was a strong and directly proportional relationship between the cost of achievement and the level of poverty in districts.

These findings are not isolated to New York City, nor only to city schools, but included many rural and suburban schools as well

THE RESULTS ARE CONSISTENT AND CLEAR:Many urban and rural schools did not have the funds necessary to reach the average level of achievement.

CURRENT FUNDING

·        Three-quarters of the state’s urban and rural schools are inadequately funded

·        A substantial number of school districts are funded over what is necessary to achieve to Regents standards.

• •Some districts currently taxed themselves much harder than should be necessary to raise the desired funding
• Other districts do not devote enough local revenue to their schools
• •A considerable number of districts encompassed so much taxable property that they raised an excessive amount from very small tax effort
• •Some of the wealthiest citizens of the state pay a minimal school tax while others bear a heavy tax burden, yet derived a spending level that is visibly inadequate

ACCOUNTABILITY AND FUNDING TARGET

The amount of change needed is so large that it would be inconceivable for it to take place in one year or even a couple of years We believe that this long-term transition to a fairer and more efficient distribution of school aid will take place only if there is clear, timely and public measurement of the efficiency of each year’s legislative session.  Each legislature must be held firmly to making “Adequate Yearly Progress” toward fairer and more effective funding.  Thus, we plan to create and maintain a funding target for each school district and measure the state’s progress toward that target.  Just as the schools need to be accountable for their results, the state must also be held accountable for the resources necessary to achieve those results.

These shifts are too dramatic to be accomplished rapidly.  Yet within this framework, it is possible to determine whether adequate progress is being made in the proper direction every year.  If a six-year transition timetable were adopted, for example, it is reasonable to expect that both the efficiency and adequacy of state aid would rise by 1/6th each year.  Under-funded districts receive increases equal to 1/6th of the difference between the target aid and the base aid.  As long as the base cost were updated for general school costs, these increases would be substantially above the rate of inflation, up to some absolute percentage cap.  Even with a full save-harmless for existing aid, funding gaps would decrease and efficiency and adequacy would improve over time.

STATE EXPECTATIONS REQUIRE FINANCIAL SUPPORT

Under the FFA formula, 61.6% of all districts, representing over 74.9% of students, would see aid increases. 

All of the largest five cities would see aid increases. Yet all of the Big-5 except Rochester would also need to raise their local taxes substantially.

Over 80% of small city schools and upstate rural schools would see aid increases, and many of them would see lower taxes.

FUNDING FOR ACHIEVEMENT
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(A comprehensive proposal for education funding reform)

Approved Jan. 11, 2004 NYSASCSD board of directors

The Court of Appeals’ decision in the CFE case established a new footing for children from poverty in New York.  Until now, many have held that the education clause in the state constitution guaranteed children little more than a free seat in some public school, no matter how shabby or inadequate.  Finally, after years of litigation and hundreds of hours of testimony, the state’s highest court found that the word “educated” in this clause had a much broader meaning than that of merely being “schooled”.  It has further determined this meaning evolves with the growing expectations of society and must result in imparting the skills necessary to participate meaningfully in society.  It has held that “local control” does not excuse inadequacy, nor does poverty justify ignorance.  This is in itself a monumental victory on behalf of all children who, every year, grow up poor in New York. 

The Board of Directors of the New York State Association of Small City School Districts had supported the litigation with friend of the court briefs at every level.  The Association recognized that many small city schools dealt with challenges very similar to those in New York City.  The state’s inability to deal with these challenges had short-changed the education of children in many small city schools in the same way, if not to the same extent, as those of New York City.

Following the court’s final decision, the Association realized that the court order is likely to be only the beginning of an arduous process to determine the financial meaning of an “adequate education” through the political arena.  Many now speculate that, rather than step up to its duty, the state may test the brink of inadequacy year after year and deadlocked session after deadlocked session.  Rather than a comprehensive reform, we may see temporary band-aids.  While the small city schools hoped it might not be so, they felt that they must be prepared for that eventuality. 

Therefore the small city school districts of the state undertook a study to create a concrete model of comprehensive reform.  They determined to base this reform, not on wishful thinking, but on the actual test results of students and on the actual standards by which they are now judged.  This report is the result of that effort.  While many very specific decisions needed to be made in order to calculate results for individual districts, the Association endorses this as a broad conceptual proposal rather than a finished product in all of its details.

As a threshold matter, the committee first needed to determine whether the inadequacy found in the New York City schools was an isolated occurrence or whether it was symptomatic of a pervasive problem.  What we found was that the relationship between local wealth and test-based success in schools was pervasive and overwhelming.  Community wealth and student poverty alone predicted over 70% of the variation in the average test scores among school districts.  The vast majority of schools listed as being “in need of improvement” served a high percentage of children from poverty. 

Next, we looked at the actual cost of attaining a given level of school achievement, after eliminating regional cost differences and diseconomies of small and sparse districts.  What we found here was that the cost of achievement in the highest poverty districts was more than twice that of the lowest poverty districts.  This relationship was strong and directly proportional to the level of poverty in districts.  It was not isolated in New York City, nor only in city schools, but included many rural and suburban schools as well. 

Next, we used this data to determine the level of funding that would be necessary for all schools to achieve the performance level that is now being achieved by the average school district in New York.  We used the observed relationship between cost and poverty, between cost and sparsity, and between cost and location around the state to determine the desired level of spending in each school district within the state to enable each district to reach the same achievement level as the average district.  Again, the results were consistent and clear.  Many urban and rural schools did not have the funds necessary to reach the average level of achievement. 

Finally, we used this data, along with local income and property wealth, to determine how much state and federal funding each district would need to supplement its local tax effort.  What we found was that a large number of districts were currently funded at a level much higher than is necessary to achieve at the average while a large number of districts were substantially under-funded.  We found that some districts currently taxed themselves much harder than should be necessary to raise the desired funding, but that others did not devote enough local revenue to their schools.  We also found a considerable number of districts that encompassed so much taxable property that they raised an excessive amount from very small tax effort.  This situation resulted in some of the wealthiest citizens of the state paying a minimal school tax while others bore a heavy tax burden, yet derived a spending level that is visibly inadequate. 

In an era that insists on accountability in education, that same accountability system is just as appropriately applied to the state’s finance system as it is to the state’s schools.  If a testing system is accurate and robust enough to withhold graduation from a student, is it not also accurate enough to drive state funding?  We proceeded on that belief.  We have used the current cost of producing current achievement to calculate the necessary cost to derive desired achievement.  From this it can be shown that over three-quarters of the state’s urban and rural schools are inadequately funded, and that a substantial number of school districts are funded over what is necessary to achieve to Regents standards.

Many groups have already issued statements flatly rejecting a “Robin Hood” approach to state aid reform, yet none of them has even hinted at the current cost to the state of preserving the current state aid level in all districts.  We have calculated that cost.  If the state feels it cannot afford to pay extra to raise the level of achievement where it is now lacking, can it also assert that schools that are funded in excess of what is needed to achieve the Regents standards have a more fundamental right to existing funds than the children in districts that are clearly under-funded?  We believe it cannot.  The reality is that a Robin Hood approach cannot be taken off the table unless a very substantial amount of additional money is put on the table.  

The amount of change needed is so large that it would be inconceivable for it to take place in one year or even a couple of years.  However, politics in New York has a notoriously short attention span.  We believe that this long-term transition to a fairer and more efficient distribution of school aid will take place only if there is clear, timely and public measurement of the efficiency of each year’s legislative session.  Each legislature must be held firmly to making “Adequate Yearly Progress” toward fairer and more effective funding.  Thus, we plan to create and maintain a funding target for each school district and measure the state’s progress toward that target.  Just as the schools need to be accountable for their results, the state must also be held accountable for the resources necessary to achieve those results.

Outcomes of the Formula
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                The formula (detailed in Attachment A) was applied to the 2001-2002 data for each of 680 schools receiving formula aid.  For each district, the formula calculated the target total operating resources, the local share and tax rate needed to fund the local share, and the amount of state and federal support needed to reach the target after the local share has been raised.  These results are compared with current spending, current tax rates and current aid.  Gains and losses in spending, taxing and state aid are calculated for each district.  Summary totals were calculated for the entire state and for separate sub-groups within the state. 

                These results are then used to calculate by how much the current state system falls short of funding each district at reasonable level to reach the achievement target with a reasonable tax rate, as follows:

Thus, by comparing the current distribution of funding to this achievement-based distribution, it can be said that current spending is higher than necessary in some districts, thus it is not perfectly efficient, and lower than necessary in others, thus not fully adequate.  Similarly, some districts are taxing harder than they should need to, while others are not taxing enough.  Since the model was calibrated on leaving the average tax effort alone, these amounts roughly balance.  Finally, some districts are receiving more state and federal funding than they would need to accomplish the desired achievement with a fair tax rate, thus aid is inefficiently allocated, while other districts do not receive enough aid, thus aid is not fully adequate. 

Phased Implementation
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These shifts are too dramatic to be accomplished rapidly.  Yet within this framework, it is possible to determine whether adequate progress is being made in the proper direction every year.  If a five-year transition timetable were adopted, for example, it is reasonable to expect that both the efficiency and adequacy of state aid would rise by 1/5^th each year.  Under-funded districts receive increases equal to 1/5^th of the difference between the target aid and the base aid.  As long as the base cost were updated for general school costs, these increases would be substantially above the rate of inflation, up to some absolute percentage cap.  Even with a full save-harmless for existing aid, funding gaps would decrease and efficiency and adequacy would improve over time. Currently, when aid increases in the needy districts are frozen or held below the rate of inflation, efficiency and adequacy drop.  Similarly, when aid increases go to over-funded districts, efficiency drops and, over time, the continued ability of these districts to out-bid needy districts for teachers only raises the cost of adequacy for all.  The court could well employ a standard such as this one in holding the state accountable for complying with its order. 

Both the State government, under its System to Account for Student Success (SASS), and the Federal government under No Child Left Behind (NCLB) attempt to hold all districts to achieving high standards of performance without ensuring that all districts have the means to succeed.  Neither system even attempts to assess whether schools may be inadequately funded or over-funded. There are negative consequences for students who fail and for the schools that allow them to fail, but as yet no consequences for communities that fail to make a reasonable tax effort, or for states that fail to allocate funding efficiently so as to deny students a reasonable opportunity to learn, and schools a reasonable opportunity to succeed.  This formula is an attempt to close some of these glaring gaps in the overall accountability framework.  However, it is also be necessary to reform contingency budget laws for school districts that are not meeting state standards.  Under the current system, funds intended to improve student achievement can be diverted to local tax relief.  We believe that the CFE ruling makes it clear that a student’s constitutional right to an adequate education must prevail over a tradition of local control.  Thus, state aid and local effort that is targeted to assist schools that are both under-funded and under-performing must be used improve the school system, not diverted to other purposes.

                Under this formula, 61.6% of all districts, representing over 74.9% of students, would see aid increases.  All of the largest five cities would see aid increases, ranging from $57.6 million in Syracuse to over $5 billion in New York City.  Yet all of the Big-5 except Rochester would also need to raise their local taxes substantially.  Over 80% of small city schools and upstate rural schools would also see aid increases, and many of them would see lower taxes.  Even though the formula contains a substantial regional cost weighting, fewer than 25% of the downstate suburbs would see aid increases.  However, some of the most disadvantaged districts fall in this region, and these districts would see very substantial increases.  This overall disparity in results between upstate and downstate is the primary reason why maintaining “regional balance” may be incompatible with school finance reform (unless New York City is included in the downstate share, in which case the downstate share actually increases). 

Due to difficulties in accounting for tuition students and in accurately deducting state and federal aid that would fall outside of this formula (true grants, building aid, and pre-kindergarten aid, for example) individual district results may well be inaccurate, but it is our belief that the overall result correctly approximates the impact of aid reform. 

After decades of substandard funding and frustration, it is unrealistic to expect that sudden and dramatic increases in achievement will occur immediately as soon as resource levels begin to improve.  Yet if the state commits itself to funding adequate resource levels over a multi-year time frame, it is reasonable to expect that local districts will plan to expand and intensify their services to needy students and begin a visible and steady reduction in their current rates of failure. 

I would like to acknowledge the valuable insights and assistance of Professor William Duncombe of Syracuse University, Mr. Robert Biggerstaff and the members of the Association’s State Aid Committee.   The Association welcomes further suggestions and feedback on its state aid reform position. 

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