Blog Education

Governor’s Education Proposal Pierces Cap And Lacks Needed Reforms

February 20, 2018

The New York State Fiscal Year 2018-2019 Executive Budget increases school aid by $769 million, or 3 percent, to $26.4 billion, twice the increase allowed by the school aid cap adopted in fiscal year 2012. Even though the cap has been overridden by the Legislature every year since it was adopted, this is the first time Governor Andrew Cuomo has proposed a budget that exceeds the school aid cap. In addition, the Governor proposes two changes to how increases in school aid are distributed. First, Foundation Aid, which is intended to be directed to high-needs districts, would be distributed through new formulas.  Second, the growth of certain expense-based aids will be limited beginning in school year 2019-2020. While some of these changes have merit, the Governor should limit school aid growth and make reforms to the distribution of aid to better direct it to the neediest districts.

Overview of School Aid Proposal

The Governor’s proposed budget increases formula-based school aid by $651 million, or 2.6 percent, to $25.8 billion. Slightly more than half of this increase is dedicated to Foundation Aid, which increases by $338 million, or 2.0 percent, to $17.5 billion. Expense-based aids increase by $302 million, or 4.1 percent, to $7.6 billion. The remaining aid categories increase by a total of $12 million. In addition to formula-based aid, the Governor proposes $50 million in new competitive grants for prekindergarten, after school programs, and other programs. The Executive Budget also includes a $64 million Fiscal Stabilization Fund, which will be distributed subject to legislative negotiations. 

Table 1: Formula-Based Aid Increase by Major Aid Category

 The Governor proposed two notable changes to how formula-based education aids are calculated:

  • The amount distributed through the Foundation Aid formula is frozen at fiscal year 2018 levels outside of New York City, with additional amounts added to existing distributions based on new formulas; and
  • Growth in certain expense-based aids is capped at 2 percent beginning in school year 2019-2020.

Foundation Aid

The Governor’s proposed budget freezes the amount of aid provided through the Foundation Aid formula, and provides increases to all districts based on new formulas. Districts outside of New York City receive an increase based on the larger amount as calculated by two new formulas.1 Both formulas account for wealth; however, neither accounts for changes in enrollment. Of the state’s 674 districts, 484 would receive increases pursuant to these two formulas.2 Since districts are also guaranteed an increase of at least 0.25 percent, the remaining 190 districts would receive this minimum increase. Almost all of these districts (182) are in high-wealth areas; the districts are grouped in deciles according to wealth below. (See Table 2.)

Table 2: 2018-2019 Foundation Aid by Wealth Decile

New York City is treated differently than the other districts. Foundation Aid to New York City will be determined under the existing formula, but the City will only receive 9.9 percent of the calculated increase. In recent years, this is how allocations for most districts have been determined. In addition to increases provided by these formulas, certain districts receive a share of $50 million in community schools funding added to their Foundation Aid allocation.3

Based on the new formulas, district increases range from 0.25 percent to 7.6 percent and the average district receives an increase of 1.4 percent. The larger increases are appropriately distributed to the highest-need deciles, and most districts in the low-need deciles receive the minimum increase of 0.25 percent.4 However, because enrollment changes are not reflected in the distribution, increases in funding are not as progressive when examined on a per-pupil basis.

While average district enrollment is flat from year-to-year, there is a meaningful difference between enrollment trends in high-need and low-need districts. Enrollment in the highest-needs decile averaged 0.4 percent growth; in contrast, enrollment declined by 0.9 percent in the wealthiest decile. Since the formula guarantees a minimum increase, some wealthy districts receive more generous increases in aid on a per-pupil basis than higher-need districts. 

Foundation Aid for the average district increases by $114, or 1.5 percent, per pupil. Higher-needs districts receive larger increases than wealthier ones as measured by dollar change per pupil and percentage, but distributions are not as progressive as they would be if the formulas took account of enrollment changes. Aid in the higher-need half of districts increases on average by 1.8 percent, or $173 per pupil, while aid in the wealthier half of districts increases by 1.1 percent, or $53 per pupil. (See Table 2.) 

On a regional basis, the Capital Region and Southern Tier have the highest growth rate per pupil, 2.2 percent. The Southern Tier grows by $211 per pupil, nearly double the statewide average, while the Capital region grows by $142. The Lower Hudson Valley has the lowest growth, increasing $13, or 0.6 percent, per pupil. (See Table 3.)

Table 3: 2018-2019 Foundation Aid Per Pupil by Region

Capping Growth in Expense Based Aid

The Governor’s proposed budget caps growth in Building Aid, Board of Cooperative Educational Services (BOCES) Aid, and Transportation Aid beginning in school year 2019-2020 with savings repurposed to Foundation Aid.5 These three are the largest types of state education aid after Foundation Aid. Building aid grows by 6 percent, or $177 million, in school year 2018-2019 and will be limited to 2 percent growth in the following year, with districts receiving a proportional share of what they would receive if the cap were not imposed. Imposing the limit in school year 2018-2019 would save the State $119 million.  Building Aid is capped statewide since individual district allocations vary considerably from year to year depending on district capital expenditures.

The 2 percent growth limit on BOCES and Transportation Aids beginning in school year 2019-2020 is imposed at the district level since there is less annual variability in these costs for districts. Limiting BOCES and Transportation Aids’ growth would save $132 million in school year 2018-2019 if imposed this coming year.

Conclusion and Recommendations

While the Governor’s Foundation Aid proposal drives the majority of additional aid to low-wealth districts, it does not fully account for changes in enrollment and fails to address major shortcomings of the existing Foundation Aid formula, which include using a decade of inconsistent local share calculations, arbitrary floors and ceilings, and old demographic data.6 The proposal also perpetuates needless spending growth by including a minimum increase per district regardless of financial need or enrollment changes. Instead of layering $338 million in aid on top of the existing distribution, the State should reform the formula to address the flaws that distort the total distribution of $17.5 billion in Foundation Aid.7

While Building, BOCES, and Transportation Aids do incorporate measures of wealth and need, they still drive significant sums to wealthy districts.8 Instead of limiting growth in the largest components of expense-based aids, the State should distribute those funds through a revised Foundation Aid formula to encourage districts to allocate funds to the highest priority needs. 

The Governor prioritized education spending in his budget proposal, including growth that is twice what would be allowed under the cap.9 To truly prioritize education the State should reform the Foundation Aid formula to ensure the highest needs districts are properly funded without unnecessarily sending aid to the wealthiest districts. If the State addresses these shortcomings, education aid easily could abide by the growth cap while ensuring all districts have adequate resources.

By David Friedfel

Footnotes

  1. Formula A:  0.0356*(1.616 – ((1.050*Foundation Aid Combined Wealth Ratio [FACWR])2)*(Foundation Aid Amount remaining) or Formula B: Only applies to districts with a FACWR below 1 (i.e. have less wealth than the state average) = the product of: 2017-2018 enrollment, the sum of a district’s Sliding Scale Ratio multiplied by $69.00, Extraordinary Needs (EN) Percent Base Increase ($32.50*EN%/statewide average of EN), EN Percent Sparsity Increase (must have a Sparsity Factor more than 1, EN Index*$9.42), and EN Percent Growth Increase (if EN% increases 3.25 percentage points over 2 years, EN index*$30).  FACWR=0.5*property valuation per student divided by the statewide average + 0.5*income per student divided by the statewide average. See: New York State Division of the Budget, Education Unit, “Description of 2018-19 New York State Executive Budget Recommendations for Elementary and Secondary Education” (January 16, 2018), p. 47, https://www.budget.ny.gov/pubs/archive/fy19/exec/fy19local/school/1819schoolaid.pdf. 
  2. Since these increases are based off of school year 2017-2018 allocations, they include the increase from last year’s budget that went directly to the Brighton Central School District in Monroe County. See: David Friedfel, “State Budget Increases School Aid Without Needed Reforms” Citizens Budget Commission Blog (April 20, 2017), https://cbcny.org/research/state-budget-increases-school-aid-without-needed-reforms.
  3. Community schools funding is limited to districts with failing or persistently failing schools, districts with large numbers of English language learners, and districts with large numbers of homeless pupils. Community schools funding now encompasses $200 million of the $17.5 billion Foundation Aid appropriation.
  4. Excludes the Putnam School District in Washington County, which would receive a 35 percent increase in Foundation Aid due to a $75,000 allocation of community schools funds.
  5. Building Aid reimburses districts for their capital construction costs, also incorporating district wealth. BOCES are public organizations created by the State to provide shared educational programs and services to school districts, including vocational and other specialized training that would be too expensive for an individual district to provide on their own. BOCES aid also accounts for district wealth. Transportation aid reimburses districts for their costs of transporting public and nonpublic students, utilizing district wealth as one factor.
  6. David Friedfel, A Better Foundation Aid Formula; Funding Sound Basic Education with Only Modest Added Cost (Citizens Budget Commission, December 12, 2016), https://cbcny.org/research/better-foundation-aid-formula.
  7. The Governor’s proposal also fails to reform or repeal aid types that inappropriately benefit wealthy school districts, specifically High Tax Aid, and Library, Textbook, and Software Aid.  See: David Friedfel, “Ripe for Reform; $466 Million in Education Aid” Citizens Budget Commission Blog (January 2, 2018), https://cbcny.org/research/ripe-reform.
  8. David Friedfel, “Ripe for Reform; $466 Million in Education Aid” Citizens Budget Commission Blog (January 2, 2018), https://cbcny.org/research/ripe-reform.
  9. Robert Mujica, Director, New York State Division of the Budget, “New York State: Excelsior Ever Upward” (presentation to Citizens Budget Commission, New York City, February 15, 2018), https://cbcny.org/sites/default/files/media/files/PRESENTATION_02152018.pdf.