Gotham Gazette

The Place for New York Policy and politics


Funding The Schools

As soon as they enter kindergarten, New York City schoolchildren get a crash course in tight budgets. They carry home notes asking their parents to chip in to buy tissues and paper towels for classrooms and hear teachers say, "Be careful with that. I paid for it myself." In some schools, children remain inside at recess because the school cannot pay lunchtime aides to supervise their play.

By the time they are in high school, many youngsters attend classes at odd hours to enable school buildings to handle hundreds of extra students. They will share some classrooms with 40 other students, with textbooks, computers and lab equipment in short supply.

"As we traveled across the city," a team from Inside Schools reported earlier this year, "we were struck by the long-standing shortages of money and staff that schools face. Clerical help is in short supply. . . .Basics that suburban schools take for granted - like a functioning photocopy machine -- are often missing....Class size is typically far too large for teachers to give kids the attention they need."

Last week, a court-appointed panel took a step that supporters say could change all that. Three distinguished lawyers found that city schools require $5.6 billion a year more than the $12.6 billion they now receive annually for operating expenses. That is what is needed, the "special masters" said, to enable the city to provide its 1.1 million students with the "sound basic education" they are guaranteed in the state constitution.

"I'm ecstatic," said City Councilmember Robert Jackson, who launched the lawsuit that led to the decision.

But Jackson's jubilation may prove premature. The judge still has to review the report and issue his order. Governor George Pataki can make further legal appeals. The state and the city must hash out how the cost will be divided between then - and how to raise the money to cover it. The school system will have to decide how to spend the money. Only then will students, parents, and teachers reap the benefits of more than a decade of legal wrangling and find out whether money can solve the problems facing the nation's largest school system.


The New York case had its origins in the early 1990s when Jackson, then president of a community school board in Washington Heights and the father of three girls in public schools, became angry about the poor quality of city schools. He and the community school board's lawyer, Michael Rebell, then formed the Campaign for Fiscal Equity and launched the lawsuit challenging the state's funding of education in the city. Rebell has worked on the case ever since. Jackson went on to win election to the City Council in 2001.

In January 2001, State Supreme Court Judge Leland DeGrasse found that the state's method of funding education illegally deprived New York City students of their right to a "sound basic education." The state appealed the ruling, but the state's highest court upheld the decision in June 2003.

The court gave the state government about a year to determine how much money the city schools would need and how to ensure the city got those resources. But the deadline came and went with no resolution as Governor George Pataki, Senate Majority Leader Joe Bruno, and Assembly Speaker Sheldon Silver failed to reach agreement.

Faced with apparent gridlock, DeGrasse in August appointed the three legal experts -- former Judges E. Leo Milones and William C. Thompson (father of City Comptroller William Thompson) and John D. Feerick, onetime dean of Fordham law school - to help him determine how the state could comply with the court ruling.


In their report issued November 30, the panel came down squarely on the side of those who believe city schools need a lot more money. "While money is surely not all that matters," the judges wrote, "there is a direct, and strong, correlation between adequate funding and the ability of a local school district to fulfill its educational mandate. Nowhere is that truer than in New York City."

"It's a wonderful decision," said Rebell. "It confirms the extent of resources the children of New York City have been deprived of….The needs are astronomical."

But E.J. McMahon of the Manhattan Institute told reporters the decision is based on "a myth. The myth is you dump more money on the schools, make no change in . . .the teachers' contract, and it's going to produce great results. That has never worked anywhere at any time."

More Money

The special masters called for city schools to receive an additional $5.6 billion a year in operating expenses - the exact figure that the Campaign for Fiscal Equity had calculated would be needed, a figure greater than either the city or the state government had calculated. The increase would be phased in over the next four years.

New York State already spends more per student than almost any other state in the nation (some calculations rank it number one). But school funding per student in New York City, with its high percentage of students from low-income families, has lagged behind other state districts, particularly wealthy suburban ones. In the 1999-2000 school year, for instance, New York City spent an average of $10,469 per student, compared with the $13,760 in the richer suburbs.

The panel also called for a five-year $9.2 billion capital funding plan for the schools. This money would go toward building schools to eliminate overcrowding and reduce class size, as well as maintaining existing schools and buying computers and other technology.

Earlier this year, the city had proposed a five-year, $13.1 billion program to improve schools facilities, with half of the money coming from the state. Albany never acted on that proposal.


The panel suggested that the state conduct studies every four years to determine the cost of a sound basic education. This would ensure that funding keeps up with inflation, changes in student population and other shifts.

Pataki had sought to keep an eye on the city by creating a new state office that would determine how the money is spent. Mayor Michael Bloomberg opposed this, saying any new layer of bureaucracy would threaten mayoral control of the schools. The panel sided with the city. New York State, the lawyers said, already "has one of the best education accountability structures in the nation."

An aide to Pataki said this decision disappointed the governor. "We are particularly concerned that the recommendations appear to reject any type of real reform and fail to overhaul the current accountability system," Kevin Quinn told reporters.


The panel left the thorniest issue unresolved. It did not say how much of the additional cost should be borne by Albany and how much by the city. The panel apparently saw this as a way of not overstepping its bounds. "The State Legislature has the constitutional authority to make that state/city allocation," they said.

Joe Wayland, a lawyer with Simpson, Bartlett and Thatcher who served as lead counsel for the Campaign for Fiscal Equity, said the three lawyers' refusal to rule on the matter showed "how deferential" they were "to the political process."

But the state has some obligations. For one, the state -- not the city --- is the defendant in the lawsuit, so the state can be brought back into court if it violates any court ruling in the case.

The panel cautioned the legislature not to try to wriggle out of its obligations by "being arbitrary or unreasonable." If it is, the court could levy fines against the state. The report notes that, when the city of Yonkers flaunted a court order, the court fined it $1 million a day.

Some observers say the panel did not go far enough. "My fear is it's going to take increasingly stronger orders from the courts" for the state to meet the requirement of school funding, said Robert Berne, a senior vice president at New York University speaking at a conference on school finance last week.


Last month, as the Campaign for Fiscal Equity, the city and the state struggled to reach an out-of-court settlement, the city's share of funding presented the major sticking point. Leaving aside the small percentage of education expenses paid by the federal government, the state covered 55 percent of the city school's budget in 2001.

Pataki reportedly wants the city to assume 40 percent of any additional costs. "We have to turn to the city and say, 'pony up,'" State Senator Dean Skelos told the New York Times after the 2001 ruling. "The city has not maintained its responsibility to the schools."

But, the city says it should not pay more than it already does. In a written statement praising the report, Bloomberg noted that the city faces a $3 billion budget deficit next year. Any increase in education spending, he said, would require cuts in other areas that "would harm the very children this lawsuit is designed to help."

But budgets are tight in Albany, too. The Pataki administration estimates the state faces a deficit of $6 billion in its $103 billion budget for next year. "The city is in dramatically better shape than the state is," said State Comptroller Alan Hevesi, who said he supports the court decision.

Hevesi predicted the city would have to bear about 30 percent of the cost -- then cautioned against taking that prediction too seriously.

"The state can't do it alone. A zero number for the city is not going to be the end point," said Berne of NYU, before calculating a reasonable split would be 80-20.

Complicating the issue is the way education is funded in New York City. Most school districts get their funding from a property tax that goes to the school system, and citizens vote on how much they want to spend. But city residents cannot do that. The mayor and City Council determine how much the Department of Education gets and must weigh spending for schools against spending for other city services.


As soon as the report was made public, critics began cautioning that the proposed settlement would mean higher taxes. "The predominant message is $5.6 billion is going to bankrupt the state. How are we ever going to pay for this?" Rebell said. Once the state decided to set uniform requirements -- such as the passing of Regent exams by all high school students -- it had no choice but to ensure that students get the tools to enable them to meet those requirements.

"This is an obligation just like every other obligation the state has," Eileen Larrabe, from the office of Assembly Speaker Silver, told the Sun. "We have to find a way to pay for it."

But others say the money simply does not exist. "There is no $14 billion there to spend," former Parks Commissioner Henry Stern wrote in his blog (citing a figure that represents the the total additional money for the first four years). "You cannot spend money you do not have, nor have any reasonable prospect of getting."

"The question is: Will the governor appeal or surrender?" E.J. McMahon of the Manhattan Institute has said. "Surrender will demand an immediate, significant tax increase. There is simply no two ways about it."

Most would agree. Earlier this year, Pataki sought to bring in extra money for education through video gambling terminals. The courts and the legislature have been skeptical, however, and no one foresees electronic gambling bringing in $5.6 billion a year

In a recent report (in pdf format), the Citizens Budget Commission, a group that usually opposes tax hikes, called for a combination of measures to finance the increase in school funding. These include making schools more efficient by operating year round and freeing teachers of some administrative tasks. The group also recommends expanding gambling. Together, those two suggestions could bring in about $3.2 billion a year, it says.

But the rest would have to come from expanded and higher taxes. The commission recommends trying to collect sales taxes on Internet purchases, broadening the sales tax to includes some purchases, such as home improvements, that are now exempt. The commission also said that the state should raise the income tax.


The court panel did not attempt to revise the state funding formula for education -- a series of calculations so complicated and arcane that even Pataki once denounced it as a dinosaur.

Many experts believe that only redoing the way Albany figures how much money each district gets can solve the school funding problems across the state. The panel wrote that it supported "formula reform" but did not address it because its job was limited to the funding of New York City schools.

But some observers disagree. "The referees blew it by not agreeing to a formula that could be used in the absence of one by the legislature," said Berne.

By their reluctance, the referees virtually guaranteed that, unless the state government acts, lawsuits from other cities and poor rural districts will further challenge education funding in the state.


In the coming weeks, Judge DeGrasse will review the report and then issue a court order that most observers expect will adhere pretty closely to the panel's recommendations. The state will then have 90 days to figure out how to comply with that order. Meanwhile, participants in the case continue to negotiate.

Pataki could appeal the judge's ruling, further delaying any resolution of the case.


If and when all this is settled, where will the money go? In its presentation to the panel, the city set out four "major initiatives":

  • recruitment, retention, training and development of teachers and other staff
  • focus on early childhood education, including universal pre-kindergarten
  • overhauling middle schools and high school by breaking them into smaller schools
  • support for special education students and English language learners.


All are vague enough to spur conflicting proposals. Already, Bloomberg has cautioned the schools not to rush "willy nilly" with ideas for this program or that. The teachers union has made clear that it expects a piece of the new pie, and the City Council is drawing up its own plan on how to spend the money.


Over the last few years, some education advocates have seen billions from the lawsuit as a kind of holy grail that would bring smaller classes, clean, well-maintained buildings, well-equipped labs, and happier teachers to New York City.

Money matters, the lawsuit's proponents say. If not, why do people spend $20,000 a year to send their kids to private school?

Nationally, activists seeking more fairness in schools have moved from seeking to end racial segregation to challenging the funding of education, particularly in poor and minority districts.

The lawsuits spring partly from the writings of Jonathan Kozol. In his 1992 book "Savage Inequalities," Kozol found huge disparities between funding for schools in poor cities and those in wealthier areas. Such differences arose, he said, because school districts relied increasingly on property tax revenues to fund education. As a result, Kozol concluded, America's schools had become more separate and unequal than they were during the days of segregation.

"There's something fundamentally wrong with providing education to a child based on the town the child happened to come from," said former New Jersey Governor James Florio, who lost his re-election campaign after seeking to change education funding in his state.

Advocates of increased spending found their argument strengthened when various states instituted uniform requirements for students. How could students packed into large classes and working with outmoded textbooks and equipment stand the same chance of meeting those standards as their counterparts blessed with small classrooms, state of the art science labs, and lavish libraries?

About 25 states have faced lawsuits over how they fund education, according to a report by the National Council of State Legislatures. In most cases the courts ruled again the states.

But a large gap persists between spending in America's poor and affluent school districts. The Education Trust, a group that works to promote academic achievement, determined (in pdf format) that nationally, high poverty districts had $868 less per pupil to spend in 2001 than more affluent districts in the same state. Even though the gap in New York State has declined in recent years, it, along with Illinois, still had the highest differentials.

But critics argue that a shortage of money is not the main problem. "The real problems with Gotham's schools is the city's dysfunctional and unaccountable school system," Sol Stern wrote in an article about the court decision in City Journal last spring. "Simply providing that system with more money . . . won't improve things but will only entrench the problems more deeply."

Nationally, since 1960, school funding in the United States has tripled, but "student performance has hardly budged," said Martin West, an education researcher at Harvard University.

In some states, though, money apparently has helped. Because of a lawsuit, "Kentucky's education system had to be brought into the 20th century as most of the rest of the country was leaving it," said Norman Fruchter executive director of the Institute for Education and Social Policy at NYU. And, he said, it worked: "In every education indicator you can look at, Kentucky has made enormous progress."

Florio was more cautious about the results in New Jersey. "We've had some good experiences," he said. But, he added, "Not all the problems are in the schools. We should not be oblivious to the fact that the school setting also is important. . . .If we're trying to teach middle-class values, you have to be sure you have a middle class."

Clearly, even when the long-running legal battle over school funding ends, there is no guarantee that the problems of educating New York public school students will be solved.

Related Links

Education Groups

Alliance for Quality Education
A statewide coalition working to improve education

Campaign for Fiscal Equity
The group that filed the suit

Class Size Matters
Provides information on class size and advocates smaller classes

Reports and Articles on New York

The full report of the court-appointed panel (in pdf format)

Can New York Get an A School Finance Reform (report, in pdf format, by the Citizens Budget Commission)

Ensuring Children an Opportunity for a Sound Basic Education
The report of a state commission appointed by Governor George Pataki to issue recommendations on education reform, including finance

Go Figure: How a Bigger Education Budget Became Less Money for Schools
Independent Budget Office

New York’s Fiscal Equity Follies City Journal
A critical look at the school funding lawsuit

"The New York Adequacy Study: Determining the Cost of Providing All Children in New York an Adequate Education (in pdf format)

Articles and Reports on School Funding Nationally

Poor Schools Sue for Funding: Higher Standards Are Basis for Seeking 'Educational Adequacy'
Washington Post

Standards Push Helps Lawsuits
Catalyst Chicago

Why Adequacy Lawsuits Matter
Education Week

Adequacy Lawsuits: The Wrong Answer for Our Kids
Education Week

The Funding Gap 2004: Many States Still Short Changes Low-Income and Minority Students
The Education Trust (in pdf format)




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