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The
Foundation Aid implementation is the most progressive and welcoming
change that has come into NYS education financing in years. The basic
tenants of a fair formula have started to re-adjust state support so
that the distribution is more equitable. We will take a closer look at
some of the adjustment factors interplay with the flow of funds and how
they affect the equitable distribution of this funding in New York.
What does it cost to adequately fund an
education?
According to the
Regents, the resources necessary to attain Regents Standards has been
determined to be a base of $5,662 per student, per year. The base
foundation aid is adjusted for the regional cost factors and pupil
needs. By applying additional weightings for poverty and English
language burdens, the cost to adequately fund an education ranges from
$5,662 to $16,137 per weighted pupil. These factors are outlined in more
detail in the “Foundation Aid Primer” on the ASBO website and are
available at the NYS Education website inn conjunction with the
district-specific calculations.
The Regents
recommendation for our current discussion as it is based on the
Successful Schools Model and accounts for the basic elements of poverty
and Language English Proficiency (LEP) populations. There are credible
arguments from Statewide and Campaign for Fiscal Equity that this level
of funding is still inadequate funding for our neediest students, but
the analysis of the adequate cost of education is not included as part
of this analysis.
What is the
Community’s ability to pay?
The calculation of
ability to pay is based on the tax base and the Income Wealth Index (IWI)
of the district. It is the fraction of the Adjusted Gross Income (AGI)
per Total Weighted Foundation Pupil Unit (TWFPU) over the state average
of the same.
IWI = District AGI per TWFPU/State
Average AGI per TWFPU
The IWI is an indicator of the ability of the
taxpayers in a district to support the schools as compared to the
average of the state. By combining the IWI, the assessed full values,
and an average tax rate, it appears that we have been able to generate
an equitable expectation of local contribution.
The chart indicates
that the poorest districts to the left have a lower ability to raise
taxes than the wealthier districts to the right. The chart below is
topped out at $1M property value per TWFPU in an effort to aid the
readability of the chart.
The calculation of the
IWI is limited on the lower end of the scale. Any district that is more
than 35% less wealthy than the average, or has an AGI per TWFPU of less
than $109,850 is determined to have an IWI of .65. By applying a
minimum IWI, the calculated expected share is higher and the state’s
share of the funding is lower. It artificially inflates the ability to
pay for over 300 districts at the poorest end of the scale.
- State average
is $169,000 Full Assessed Value per student
- 197 districts
have the potential to support 100% of their Adjusted Foundation Aid
and still receive Foundation Aid as a result of state sharing ratios
and save-harmless provisions.
- 21 Districts
need more than 90% State Aid to sustain adequate funding due to the
lack of a taxable base needed to support the cost of education their
students.
- 94 districts
have Full Assessed Values of $1M or more per Total Weighted
Foundation Pupil Unit to support local effort and still receive
Foundation Aid. This chart has limited the full assessed value (FAV)
per student to $1M for presentation, as the 94 remaining districts
have the ability to raise over $100,000 per student at a rate of $10
per thousand.
The income wealth index
times the expected local contribution of 1.6% is the calculated tax rate
that is determined to be the expected local contribution to be raised by
the district. By using a minimum floor of .65 for the IWI, the minimum
tax rate applied to all districts is $10.40.
The wealthier
districts have the local contribution calculation capped at a maximum
tax rate equal to their IWI times 3.2%.
Despite the floor on
the IWI of .65, there are districts whose expected local contribution
still falls less than 10% of the amount required to provide an adequate
education for their students. Due to the lack of tax base and very high
needs, the unrestricted expected local contributions of the poorest
districts in the state is only 2-3%. The foundation formula requires a
minimum of 10% local contribution regardless of the extreme poverty
conditions.
What happens when we place a floor of .65 on the Income Wealth Indicator
and a Maximum of .032 on the tax rate and a minimum of 10% local
contribution%?
- The Minimum
IWI factor of .65 forces a higher contribution rate for the poorest
districts. Some of this is subsequently counteracted by the State
Sharing Ratio #1 as discussed in the next section.
- Any benefit
derived from State Sharing Ratio #1 is eliminated by the 10% minimum
local contribution (alternate limit on state sharing of .9) ,
thereby denying the poorest of district from receiving their
calculated aid.
- The alternate
limit on State Sharing to 90% forced higher burdens on the lower
wealth districts
- The maximum
tax rate of .032 caps the expected local contribution of the
wealthier districts.
- $329M is
withdrawn from the Adjusted Foundation Aid of the poorest districts
by applying the .65 wealth factor or limiting local contributions to
90% of the Adjusted Foundation Aid
What are the State Sharing Ratios?
The State Sharing
Ratios are percentages of the state’s share of every district’s
calculated Foundation Amount per Pupil.
The unadulterated formula is fairly simple:
Cost to
educate based on need – Expected Local Contribution = Unadjusted State
Share
There are five
alternate calculations, however. Each of the alternate calculations
benefits a different group of districts. Alternate State Sharing Ratio#1
benefits the poorest districts. It raises the State’s share of their
funding by applying a weighting to the Combined Wealth Ratio. This
appears to re-align the state share to close to where it would be if
there were no previous limitations in the formula (.65 IWI or .9
Adjusted State Sharing Ratio). The second and third ratios benefit
progressively wealthier districts. The fourth Alternate State Sharing
Ratio benefits the wealthiest of districts by increasing their state
share %. Even then, there are 36 districts that would not qualify for
any Foundation Aid. In order to satisfy the political players, a floor
of $500 per student becomes the fifth alternate calculation. Every
district in the state receives foundation aid, regardless of the
financial resources of the district.
What is the effect of the State Sharing Ratios?
- State Sharing
Ratio #1 increases aid to poorer districts but the .9 limitation
takes the benefit of State Share #1 calculation from the poorest of
all of the districts.
- Without the
application of these ratios, 197 Districts would not qualify for
Foundation Aid because they were determined to have sufficient
resources to provide for their base aid, adjusted for cost indexes
and for student need.
- State Sharing
ratios progressively increase the state share of funding so that
only 37 districts are excluded from some state aid after the state
sharing ratio is applied.
- The minimum
funding of $500 per TAFPU gives funding to the wealthiest districts
in the state.
- $1.97 Billion
is guided into the districts with lower needs by applying State
Sharing Ratios #2, 3 and 4.
- $49M is guided
into districts under the minimum $500 per TWFPU Calculation
Is the Foundation Aid driving enough money into
the neediest districts?
If we compare the basic foundation formula
(Cost –ELC = State Share) with the final cost allocations under the
formula, the poorest districts are losing the most and the vast majority
of the remaining districts are slotted to receive more than their
unadjusted share of state funding. How can we continue along this path
with the impending threat of budget deficits? Our largest urban centers,
with seemingly insurmountable problems, are not receiving adequate or
equitable funding while we maintain and even increase, funding to
districts under save-harmless provisions and inflated ratios. If the
State is sincere about adequacy, it needs to eliminate the manipulations
in the formula that deprive the poorest districts of adequate funding.
Four Years of Implementation
The Foundation Aid formula addresses many
inequities in the funding of education, but it is planned for
implementation over four years. Should the funding cease, the
disparities between districts revert to the dysfunctional and grossly
inequitable situation of the previous decade.
We should not expect
true equity in funding, as communities will continue to spend available
resources and they should not be restricted from using them. The State’s
responsibility, however, should end at adequate funding for these
districts.
By funding tax
limitation aid on the basis of tax levy, the State is, in effect,
subsidizing high resource districts that spend out of desire to provide
better program. The high tax aid, if based on expected local
contribution, would still allow state aid to flow to the high needs
districts in high tax sections of the state. More than $20M is allocated
to districts that raise more than $16,000 per student through local tax
effort and $10M of that aid is allocated to very wealthy districts that
raise more than $20,000 per student. In the calculation of High Tax Aid,
expected local contribution should replace the tax levy, eliminating the
allocation of funds to high spending, not high needs districts. It would
also eliminate high tax aid in resort areas where the ratio of taxes to
the income wealth of the community is high, but the taxpayers are not
residents of the area.
It is also important
to keep the tax levy itself in relative terms. A $20,000 bill on a $1M
property is the same tax on true than a $2,000 bill on a $100,000
property. If we use income equal to half of the house value, the $20,000
bill on a $500,000 income is less stressing to a family than a $2,000
bill on a $50,000 income. Hence real estate taxes are regressive taxes
and this is exaggerated when state sharing ratios provide additional
relief to the higher income taxpayers.
Maintenance of effort
is a key element of a community’s responsibility to support its’
schools. By maintaining and increasing the save harmless provisions, the
state underwrites the local share of these districts. Contract for
Excellence districts receive 45% to 80% of adequate funding in 2007/08
while $221,734,468 is added to the save harmless districts who have
already attained their 2010/11 state funding levels.
As we move closer to
adequacy in education, we encourage Foundation Aid that is sustainable
in the long-term and will provide adequate funding for the neediest of
our children. If we can sustain the implementation of funding without
the removal of save-harmless floors and minimum funding streams, then
the current course is inequitable but feasible. If, however, our
legislators choose to cut off funding of Foundation Aid in the midst of
implementation, then the continuation of funding to low needs districts
through the use of state sharing ratios and minimum floors would be
inexcusable and contradictory to adequate funding.
What changes could make a more equitable
distribution?
- Eliminate the .65 floor for high needs
districts
- Eliminate the 90% Maximum on the state share
for high needs districts
- Eliminate the $500 minimum funding for low
need districts
- Eliminate minimum increases in funding until
all districts are at 2010/11 funding levels.
- Eliminate minimum increases on all districts
receiving Foundation Aid under save harmless provisions
- Base High Tax Aid on expected local
contribution, not tax levy
- High Tax Aid should consider the income of the
non-resident owners
- Eliminate High Tax Aid and use the wealth
factors in the formula to determine the required tax effort.
Where to, from here?
It is imperative to the
economic health of the State that the funding of Foundation Aid continue
its course and that the adequacy in education funding be achieved. Our
individual responsibility lies in the effective communication of our
support for a sustainable, equitable and transparent formula for
success. |
