Education Finance Before the Campaign for Fiscal Equity Lawsuit

If you read my last post and downloaded the data, you might be wondering why the Campaign for Fiscal Equity sued New York State on school spending, and why the courts ever ruled in its favor. To find the answer one cannot look at New York’s school spending in FY 2005-2006. One has to look back a decade earlier to the FY 1995 to FY 1996 school year. In June 2005, the New York State Court of Appeals ruled that the Campaign for Fiscal Equity lawsuit was legitimate, and could go forward. The context was a state and city budget crisis that came to a head several years after a recession had begun, when costs could no longer be deferred to the future and revenues no longer stolen from it, at least to the same extent. The resulting sacrifice would be targeted at those who mattered least. The following post will show what the city’s school finance situation was that year, the year the Campaign for Fiscal Equity lawsuit was launched; the next will review what the CFE got for its effort, and how much it cost.

In Jun 2005, the State of New York had just passed a budget that increased state education assistance for the portion the state outside New York City by $604 million dollars, or about $850 million in today’s money. State education funding for New York City, in contrast, was cut by about $250 million, or $350 million in today’s dollars. With 37.2% of the state’s public school students, New York City received only 29.6% of state education funding, despite a far needier-than-average student population. But New York City did not require a handout. Its residents paid 37.4% of state income taxes that year, despite a deep recession that saw 1 million people on welfare, 10% of the city’s private sector jobs lost, and hundreds of people lining up to seek employment when a McDonalds opened in Harlem. The amount of education resources redistributed out of New York City to the rest of the state that year, the amount the city’s children could have had if state school aid did not exist, was over $790 million or over $1.1 billion in today’s money.

With its own fiscal crisis, and burdened by a state policy of shifting much of the cost of welfare and Medicaid to local governments, a policy virtually unique to New York State and intended to shift the cost of the needy to New York City where they were concentrated, the city was in no position to make up the difference. The City of New York ended up spending the equivalent of 3.7% all the personal income earned by New York City residents on public education that year. The national average was 4.2%. The average for the rest of New York State was 5.9%, according to the U.S. Census Bureau. New York City’s elementary and secondary spending as a share of its residents’ personal income has been below the average for the United States, often far below, and the rest of the state above the national average, often far above, every year going back to FY1972, the first year such data is readily available.

In June 1995, to save money, the City of New York had just reached an agreement with the unions, including the United Federation of Teachers, to allow existing employees to retire early, to be replaced by younger and lower paid workers. Of the 65,000 teachers in the system 5,000 left, according to a July 20, 1995 article in the New York Times. The timing was inopportune. As the children of the baby boomers flooded the schools, joined by the children of immigrants, the 1990s were a time of soaring school enrollment. Even in New York City, where low educational quality was driving a disproportionately large share of middle-class parents to the suburbs or into private schools, enrollment rose from 918,000 in fall 1989 to 1,058,000 in fall 1998. At the same time the much smaller baby bust generation was exiting college, leading to a nationwide teacher shortage.

According to the Times, the New York City Board of Education was laying people off in spite of the early retirement plan because it was probably not going to yield the savings needed to close the budget shortfall — because “many who are applying for early retirement are math and science teachers who have been in the system for a long time. They would have to be replaced…but not by teachers in the system who may be licensed to teach only physical education or English, so the system may not save any money.” In reality the school system did save money, because higher spending school districts elsewhere in the metropolitan area hired the motivated, qualified teachers not only in math and science but also in physical education and English. New York City ended up with uncertified instructors who just needed a job, often several in succession, teaching its neediest students in its worst schools.

The financial strain would have been worse had not those parents who could left the city’s schools, keeping enrollment down and per-student spending from falling further. Per student revenues and expenditures by category in FY 1996 for New York City, other parts of New York State, New Jersey and the Untied States, adjusted into 2006 dollars for inflation and the cost of living downstate, is displayed in the attachment. (Which prints on two-pages, and is identical to the FY 2006 data attached to the prior post).

The data show that in the school year after the CFE lawsuit commenced, New York City spent $11,493 per child, or $8,575 adjusted for the cost of living (see my prior post), about the same as the national average of $8,455 but with a far needier student body. This compared with vastly higher per-student expenditures of $11,389 in Upstate New York, $11,524 after a cost of living adjustment in the Downstate Suburbs and $10,038, also adjusted, in New Jersey. (All figures cited here for NYC, the Downstate Suburbs and New Jersey are adjusted for the higher cost of living – see prior post for method). New Jersey’s per-student expenditures would have been about the same as Upstate and the Downstate suburbs, except that NJ had ramped up the predicted investment returns for its public employee pension funds and stopped contributing to them, “saving” money in the short run (but leading to a possible bankruptcy in the next few years. New York would repeat the trick in 2000).

New York City’s per-child spending would have been much lower if it hadn’t been going deep into debt. The city’s total revenues per child adjusted for the cost of living was $7,702, well below the national average of $8,446, the (adjusted) $11,769 in the Downstate Suburbs, the $11,576 in Upstate New York, and the (adjusted) $10,120 in New Jersey. The city’s schools were falling apart, and its capital expenditures per child were below the national average, so that’s not what the borrowing was for. The State of New York, in both that recession and in the 2001-03 recession, simply offset some of the lost funds due to discriminatory treatment of the city’s schools in state aid by looking the other way while the city went deeper into debt. Over and over again, the rest of the state has received tax dollars collected in New York City as a part of deals to allow New York City to go deeper into debt. That is one reason why despite inadequate school seat capacity, the city has above average education debt, and a greater than average amount of money going to interest rather than education. In the most critical case, the city only received the promise of more debt in exchange for cash elsewhere. Governor Pataki had promised the city a state education bond issue to remedy the city’s facilities deficiency in exchange for the STAR program, which provides little to the city’s schools. He then failed to support the bond issue referendum, which did not pass.

One might remember the assertion back in the day that the city’s schools didn’t need more money, and could get by with less, because all the money was going to administrative waste. There was plenty of waste in the city’s schools, but the data shows the consequence was even less money available for education, not higher spending. Overall, the city’s non-instructional expenditures totaled $2,005 per student, well below the national average of $2,789, and vastly below the $$3,725 in the Downstate Suburbs, $3,463 in Upstate New York or $3,585 in New Jersey. In the general administration category, which includes the boards of education and other district-level staff, the city averaged $136 per student compared with $162 for the nation, $210 in the Downstate Suburbs, $188 in Upstate New York and $284 in New Jersey.

The only non-instructional category in which the city was higher than the U.S. average was student transportation at $406 per student compared with a national average of $303, a stunning fact given how high a share of the city’s children live within walking distance of a school compared with other places. Both former Mayor Giuliani and Mayor Bloomberg tried to take on the politically powerful school bus company/union nexus, with their automatically renewed non-bid contracts. You might remember the bus company/union stalling Bloomberg to the middle of the school year and then screwing up and giving him a black eye. No wonder the state legislature is sympathetic to this private interest, however, over and above its extensive campaign contributions – per-student transportation expenditures are even higher elsewhere in New York State.

Thanks to low non-instructional spending, New York City’s total instructional spending per child at $5,116 was actually higher than the U.S. average of $4,524, primarily because of higher benefits – such as pensions and health care for the retired. But such spending was no match for the $7,035 in the Downstate Suburbs, $6,759 in Upstate New York, or $5,421 in New Jersey – which would have been higher had not that state spent half as much per student on instructional employee benefits despite pension and health care promises that were about as generous. Other than wages and benefits, New York Cit spent $285 on instruction compared with a national average of $463. The public school down the street received virtually no teaching supplies in fiscal 2006.

How about instructional wages per student? The city’s spending per child, at $3,664, was actually slightly higher than the U.S. average of $3,294 even after adjustment of the cost of living, but was far lower than the $5,290 for the Downstate Suburbs, $5,057 for Upstate New York, and even the $3,964 for New Jersey. Indeed, low cost Upstate New York outspent New York City on instructional wages per student even without a cost of living adjustment for the latter, and almost did so on overall spending as well. In addition, New York City’s spending on special education students was higher, relative to other places, leaving the amount of money available for general education diminished further. It is likely that if general education were tabulated separately, instructional wages per student were lower in New York City than the national average – again despite a more challenging teaching environment than average even in general education.

The anecdotal evidence from press reports and word of mouth at the time, moreover, suggests that New York City got poor value for its teacher pay back then, over and above the problem of being outbid by just about every other school district in the metropolitan area. Press reports indicate that under “you will pretend to work and we will pretend to pay you” contract provisions dating back to the 1970s fiscal crisis, New York City teachers spent far fewer hours in the classroom than teachers elsewhere – meaning more bodies had to be hired for the same dollars per child, instead of the money being used for better salaries or smaller classes. In the early 1990s fiscal crisis, the Dinkins Administration agreed to cut the time worked further by releasing teachers from lunchroom duty, and showed “respect” by adding a provision to forbid principals from examining teach work papers, shifting it from impossible to very impossible to make those who didn’t want to teach. At the local elementary school, the teacher who didn’t work was made a “special subject” teacher – presumably in poorer neighborhoods they were just stuck in a class.

While some of these contract provisions may have been repealed over the years, they presumably still influence the expectation of many who are still on the job. And teaching isn’t a field where it is easy to measure the work effort of employees quantitatively, and that makes it hard to push them to do better or replace them. It particularly isn’t easy given a new state law that makes it illegal to measure the effort of teachers quantitatively. Of course most teachers did their best for the kids regardless, but it isn’t surprising that many became demoralized given the lack of support from families and the school system (and lack of reward) for doing their job and the extensive support received from the UFT contracts for not doing it. Public employment is no picnic if you care. Remember, I’m an ex.

As we move on to the discussion of how things have changed over a decade, two things need to be kept in mind.

First, for literally millions of people in New York City, it really doesn’t matter how much money is spent on education today and how much is received in exchange for it. All that matters is what was done to them a decade ago, when they or their children were school-aged, and when they were either pushed out of the city, forced to pay for school out of their own pocket while paying sky-high taxes for others, or denied an education altogether. For such people education finance in FY 1996 isn’t the past, it is the present, a present that no one has been willing to acknowledge, and education finance in 2006 or 2008 is irrelevant. If state taxes are to be raised to pay for the sky-high level of spending elsewhere in the state – high then, higher now – those so abused would be forced to pay again.

Second, however, things have changed as will be discussed in the next post (or you can see for yourself by looking at the spreadsheet attached to this one). New York City’s public schools are no longer under-financed by any measure. So let’s see what the Campaign for Fiscal Equity got, and what it cost.