This year’s New York State Executive Budget includes a $1.1 billion increase in school aid, but also makes radical changes in the way Foundation Aid, the largest category of aid, is calculated. The changes proposed by Governor Andrew Cuomo would make permanent features of the Foundation Aid formula that drive unnecessary resources to wealthy districts instead of fixing problematic features and ensuring scarce state dollars are directed to the districts that need them to provide a sound basic education.

The Governor’s proposed budget for fiscal year 2017-2018 includes a 3.9 percent increase in total school aid from $24.6 billion to $25.6 billion in school year (SY) 2017-2018. Formula-based aids, which exclude certain grants and district-specific aids, would increase 3.2 percent or $768 million.¹

Foundation Aid, which totals $16.5 billion and more than two-thirds of all school aid, would increase $428 million or 2.6 percent in SY 2017-2018 as shown in Table 1. This increase accounts for almost 56 percent of the total increase. Expense-based aids would increase 5 percent or $323 million, led by building aid which would increase $179 million or 6.2 percent.

Table 1: Formula-Based Aid Increase by Major Aid Category (dollars in millions)

Source: CBC staff analysis, New York State Education Department, Fiscal Analysis & Research Unit, “2017-2018 Executive Budget School Aid Files” (January 19, 2017).

The size of the proposed school aid increases are generally in line with those proposed in recent Executive Budgets, but the proposed changes to the Foundation Aid formula would significantly alter how Foundation Aid is calculated and disbursed. The distribution of Foundation Aid has been problematic since its inception in 2007. The original formula sought to utilize district wealth and student needs to set per pupil state aid amounts at levels that would ensure all students have access to a sound basic education. The basic formula used to determine Foundation Aid for each district is:

1. Establish an amount needed per pupil for a sound basic education, as determined by the New York State Education Department (NYSED);
2. Adjust for variation in regional costs;
3. Increase funding based on the prevalence of students with special needs, English language learners, and impoverished students;
4. Subtract the expected local contribution per pupil, based on a district’s wealth per student, measured by taxable property value and adjusted gross income; and
5. Multiply the adjusted per pupil Foundation Aid amount by the number of students in the district to determine total Foundation Aid funding for the district.

However, arbitrary floors, ceilings, and phase-ins, combined with flexible local share calculations and use of outdated poverty measures, warp the formula’s original intent.² And the distortions do not end there. The output of the above formula is compared to the prior year’s distribution, and growth is limited based on a variety of factors, with a guarantee that per-district Foundation Aid will not decrease from year-to-year.  This last adjustment drives revenues to wealthy districts at the expense of needier districts.

Comparing the output of the formula to the amounts actually distributed to districts is how certain advocates calculate their claim that local districts are owed $4.3 billion in Foundation Aid. But this overstates the needed increase in Foundation Aid. If the problematic features of the formula were changed, all districts could be fully funded under Foundation Aid for an additional $569 million.³

The Executive Budget proposes significant changes to Foundation Aid, largely eliminating the current formula. Instead of basing Foundation Aid on a calculation of how much is needed to provide students with a sound basic education, the Executive proposal assumes that current aid amounts are sufficient, and only makes small adjustments for SY 2017-2018. Foundation Aid for SY 2017-2018 would be equal to SY 2016-2017 Foundation Aid increased by the largest of:

1. Amount needed for a sound basic education less calculated local share, incorporating regional cost differences, student need and district wealth, multiplied by 1.227%;⁴
2. A calculation of relative district wealth as measured by income and property values; or
3. A minimum increase of 2.93 percent for New York City, 2.165 percent for Big Four Districts (Syracuse, Rochester, Yonkers, and Buffalo), and 1 percent for all other districts.

After SY 2017-2018, the Governor would freeze Foundation Aid to districts at the amounts received in SY 2017-2018. Due largely to the minimum increase included the Executive proposal for SY 2017-2018, wealthier districts enjoy a larger percentage increase in per-pupil Foundation Aid than less wealthy districts as shown in Table 2.  The average dollar change per pupil is essentially flat across the neediest 60 percent of districts.

Table 2: Foundation Aid Per Pupil, School Years 2016-2017 and 2017-2018
 

Source: CBC staff analysis, New York State Education Department, Fiscal Analysis & Research Unit, “2017-2018 Executive Budget School Aid Files” (January 19, 2017).

The proposed Foundation Aid formula would not adjust for year-to-year changes in district wealth, student need, or enrollment beyond SY 2017-2018. It would take the 2016-2017 distribution, flaws included, make minor adjustments, and then keep disbursements steady thereafter.

The Foundation Aid Formula is broken and requires substantial reforms to alleviate current inequities. Unfortunately, the Governor’s proposal would make these inequities permanent instead of remedying them.