What the Campaign for Fiscal Equity Accomplished

If you read my prior post you know that the school finance situation was grossly inequitable in FY 1996, as the Campaign for Fiscal Equity lawsuit got underway. The personal background of many of New York City’s children would have made education challenging enough, but the under-funding was at least a major contributing cause to the city’s unconstitutionally bad schools. So were the contract provisions the teachers’ union had obtained, allowing a lower level of effort by the teachers in exchange for lower pay (which obviously did nothing for teachers who made a real effort despite that pay). If you look at the change from FY 1996 to FY 2006, however, one thing the CFE lawsuit achieved was an increase in education spending. The New York City schools already had enough money three years ago as a result, it seems to me, and have since received more.

But education spending increased in places where it was already high, not just in places where it was low. New York City residents, which had been cheated out of a fair share of school aid for decades, ended up paying local taxes for much of the increase in spending inside the city and state taxes for much of the increase outside the city. And while the gap between the city’s education resources and that of other parts of the state did decline, it remained large. The Campaign for Fiscal Equity achieved higher spending but not fiscal equity, so it is not unreasonable to expect that now that its lawsuit is over New York City’s schools will fare even worse in the next fiscal crisis, and some of the gains will be lost.

The spreadsheet that is the basis of this post was attached to the prior post. Adjusted for inflation, state revenues for the New York City public schools rose by 73% from FY 1996 to FY 2006. But state revenues for the Downstate Suburbs, which were already over-funded in FY 1996 rose 61.7%, or nearly as much, mostly due to the STAR program. And this was before the special “high tax aid” that was used to cut the city’s share of state education assistance in the past two years. Even the Upstate districts, which receive so much state aid that it is nearly enough to cover the entire cost of education at the national average, got an increase of 41.6% more than inflation over a decade. This is under the political principle in the New York State legislature that in good years everybody gains equally, including those who were advantaged in the past.

But in bad years everybody doesn’t lose equally. Repeating the trick of the mid-1990s, after 9/11 (after 9/11!) New York City’s state education assistance was cut by $249 million (or nearly $300 million in today’s dollars) even as state education assistance for the rest of the state was increased by $335 million (or nearly $400 million in today’s dollars), and city residents were hit with massive state tax increases. Had those increases not been imposed, presumably state education aid to the city would have been cut even more. You may have heard about a “hold harmless” provision in state education funding, with school districts around the state getting more as much or more state funding each year no matter what — even if enrollment is going down. The CFE lawsuit apparently did not get rid of the hold harmless policy outside New York City. It also did not change the fact that hold harmless does not apply to New York City’s schools and children.

How about the local tax contribution to the schools? For the City of New York it increased 67.2% more than inflation over a decade. The state contribution to New York City’s public schools rose by $2,367 per student during that time, the city’s contribution rose by $2,427. And the rest of the state? The local tax contribution per child to elementary and secondary schools rose 12.0% more than inflation in the Downstate Suburbs even as expenditures rose by 26.5% more than inflation. And the local tax contribution rose by 11.9% per child more than inflation Upstate even as expenditures per child rose by 30.4%. These are the areas complaining about their soaring taxes.

Now in the Downstate Suburbs total expenditures increased faster than per student expenditures, because in the face of demographic trends that would have otherwise pushed enrollment down, the flight of middle class parents from New York City and the advent of universal pre-kindergarten pushed enrollment up from 590,200 in fall 1995 to 680,442 in fall 2005. A similar pattern can be found in New Jersey, where enrollment rose from 1,193,928 to 1,371,115. In New York City, on the other hand, despite the ongoing shrinkage of the Catholic School system and universal pre-kindergarten, enrollment fell from 1,149,101 to 1,092,886 during those years, a decline that in itself helped to push per-student spending higher. It is worth mentioning that when New York City’s enrollment was rising faster than the rest of the state, its state education funds were not. If the Downstate Suburbs didn’t want to pay taxes to educate New York City children in their own schools, they shouldn’t have had state legislators working to prevent those children from getting an education in New York City schools.

Given where things started, the revenue side certainly doesn’t seem equitable. And it doesn’t matter how one defines equity. Based on need, and given the characteristics of its student population, New York City’s share of state education aid should be higher. And based on its residents’ share of state tax revenues, it would be higher still. That hasn’t changed. But the measure of equity in Albany is that those who have had more should continue to get more in good years, while those who have had less should be sacrificed in bad years.

How about expenditures?

Due in large part to an increase in its own local taxes, and due in large part to the benefit of falling enrollment, New York City’s expenditures per pupil did increase by 56% more than inflation from FY 1996 to FY 2006. Instructional spending rose by nearly 70%, and non-instructional spending — low to start with — rose by 35.1%. The cost of general administration in the city’s schools fell by nearly two-thirds from an already low level adjusted for inflation, while instructional staff support spending rose five-fold from a very low level of one-tenth the national average. While spending in this category per child is still below the national average, it is here that the United Federation of Teachers (UFT) would like to see the budget cut, since much of the increase in instructional staff support spending under the Bloomberg administration has been for contracts with outside providers. The non-instructional category with the second greatest percentage increase in spending per child over a decade in NYC is student transportation, which was already high in FY 1996 as discussed last post.

In the instructional category, New York City’s per student spending increased by 56% more than inflation over a decade, substantially more than the national average increase of 29% more than inflation. The increase in the Downstate Suburbs and Upstate New York was about as great as the U.S. average — even though spending in these areas was high to start with.

In New York City, moreover, per-child spending on instructional wages and salaries — which determines how much teachers are paid to work and how small class sizes could be — rose by just 46% more than inflation from FY 1996 to FY 2006 — but just 9.6% more than inflation after FY 2002. The U.S. average was increase was 16% more than inflation over a decade, none after FY 2002, with the Downstate Suburbs and Upstate New York increasing at about the national rate — despite being high to start with.

New York City per student spending on instructional employee benefits, the bulk of which go to the retired, rose far faster than per student spending in wages. Spending in the non-wage benefit category — including pension contributions and health care– rose by 100% — doubled — over a decade after adjustment for inflation, including a 50% increase just since 2002.

And that was before Mayor Bloomberg and the UFT agreed, the state legislature passed, and ex-Governor Spitzer signed a law allowing current teachers to retire at age 55 rather than 62, in many cases after not contributing an extra dime. That deal earlier this year had a radically negative effect on my view of all concerned, save the legislature which I couldn’t think any less of. The result will be vastly more money diverted to pension contributions and retiree health care — and away from those teaching in the classroom — in the future. According to the Census Bureau, there were 60 retired teachers receiving pensions for every 100 working before this change. Based on current average life expectancy, it is quite possible that there will be one retiree for each teacher in the future. And the active teachers include those on sabbatical, those out sick and, based on today’s newspaper article, a rising number (now at 600) paid to do nothing because their school closed and not one of the principals of the more than 1,000 other schools wants to hire them (they’d rather than a completely green teacher instead).

But that is their choice. And not our problem, because we have given them all the money they need, and paid for waste in the rest of the state for the privilege of doing so, after in many cases being robbed of educational services in the past.

Not our problem because the New York City public schools had all the instructional spending per child they needed in FY 2006 to provide quality teachers with good salaries and small class sizes, relative to the rest of the country. If school spending rose between then and now, adjusted for inflation, then it could be cut relative to inflation in the next few years, and the city’s taxpayers and children would still have the right to demand no loss in services, smaller classes, and better teachers.

One can see this by comparing the city’s FY 2006 spending per child with the national average, after adjustment for the cost of living. It was 56% higher in FY 2006, including instructional wages per student that were 40% higher, even after than adjustment. The unadjusted figures show NYC instructional wags per student were 84% higher than the national average that year. Nearly double. New York City’s teachers are not underpaid anymore compared with the rest of the country. Those elsewhere in New York State are overpaid.

One can also see this by comparing New York City’s elementary and secondary school spending as a share of its residents’ personal income with the national average. I won’t pronounce this officially until the dataset I have used in the past for this purpose is available later in May, but based on this data it appears the city’s spending by that measure nearly equaled the national average in FY 2006 after decades of being lower — often far lower. Total spending from the Census Bureau as a percent of personal income from the Bureau of Economic Analysis was 4.85% for New York City, 4.89%, for the United States, and — 6.4% for the rest of NY State in FY 1996.

(The added cost of public schools in the rest of the state equals 1.5% of the income of the people who live there; the national average tax burden for state and local taxes combined is typically around 10% of income. How can residents of the rest of the state afford this? By shifting the burden to New York City.)

One can see that New York City’s instructional spending per child is sufficient just by looking at the numbers themselves, and imagining what could be done with that amount of money.

Instructional spending per child, unadjusted, was $11,400 in FY 2006. Now imagine that instead of putting that money in the public school system, parents could use it to hire teachers who lived in their neighborhood and taught children in their homes, the way they hire music teachers and tutors. Those teachers could be given $136,800 to teach 12 children — for their wages, health insurance, IRA contribution, and teaching materials. If the parents were willing to pay for after-school and summer care, and the teachers were willing to provide it, they could earn additional money over and above the $136,800 just to sit in the park while the kids played or be around as the did their homework or played games. And they would have a class size of 12. Twelve!

The $608 per child NYC now spends on instructional staff support and school administration could be used to pay a “principal” to go around to 20 such at-home teachers, coordinate things they do together (like swapping students for their specialty), and check up on them. The “principal” would receive $150,000. And the cost of the school buildings would be saved — an important saving in a space-short city. In fact, add in the other spending in NYC, not just instructional spending, and the local in-home teacher freed from overhead and those not working could have received $203,844 for a class of 12. That’s how much money is available. That is how much we are paying.

What if the money must be spent in school buildings? Well, just the “instructional” money going into the New York City public schools was enough for $228,060 for a class of 20. How many classes of 20 are they in the New York City public schools, and why is more money then needed for smaller classes? According to press reports, a New York City charter school scheduled to open in 2009 is planning to pay teachers vastly more than New York City public schools do — $125,000 plus bonus. How is that possible? Did the school get extra money? No, it got less money per child as all charter schools do, to offset the vastly greater share of money the regular public schools must shift to unfunded pension and retiree health care benefits.

According to a March 7, 2008 article in the New York Times the future principal was quoted as saying “I would much rather put a phenomenal, great teacher in a field with 30 kids and nothing else than take the mediocre teacher and give them half the number of students and give them all the technology in the world.” But as noted above, the total instructional spending per class in the NYC public schools could have been nearly twice that $125,000 salary with a class of just 20 — three years earlier than the school is scheduled to open. As it is, according to the article, “it has generated so much buzz with its e-mail blasts and postings on education and employment Web sites that its voicemail message now implores prospective hires to please, make inquiries by e-mail.”

So, teachers, how about $228,060 for you, minus your own health insurance cost, plus you contribute to your own 401K for retirement, buy your own teaching materials (in the past NYC teachers were stuck doing that anyway at far lower salaries), and hire your own sub when you are out sick? OK it wouldn’t be $228,000 for general education, because of the higher cost of special education. How about $200,000? Yes, $200,000. That’s what we are paying. Is that what you are getting?

Where is the money going? It isn’t going to administration — that is tabulated separately from institutional expenditures. It isn’t going to custodians — that is tabulated separately as well. It is going to those represented by the United Federation of Teachers, structured in the way that organization chooses due to its political power and priorities.

The Campaign for Fiscal Equity lawsuit may be the reason New York City’s schools now have enough money. That is its achievement. But the cost was high. The lawsuit did not achieve fiscal equity. New York City has enough money, but the rest of the state, which already had more than enough, got even more, and city residents are being forced to pay for it. A large and rising share of the additional money the city did receive is going to those retired, not those providing an education for the city’s children. And given that spending in the rest of the state, pensions, and retiree health care are never reduced, even the gains the city’s children have received are tenuous. It is those gains that are likely to be cut in a fiscal downturn.

It’s enough to make me wonder what happened, particularly given that early in the lawsuit, after being put in touch with CFE staff by a friend who is a lawyer, I provided the organization with all the data I had at the time. But look at who is behind it. The plaintiffs in the lawsuit include the United Federation of Teachers, the very group responsible for shifting as much money as possible away from teachers doing their best in the classroom, and the New York State Association of School Boards, the very group that has benefited disproportionately from the STAR program and from having New York City’s schools cut and their own schools spared every time the economy turns down. The City of New York was thrown off the case by the Court of Appeals, and the beneficiaries of the injustices of 1996 were among the plaintiffs! Why did the CFE stun me by objecting when the Bloomberg Administration proposed changing the school funding formula that directed greater resources away from poorer children within the city? Perhaps because given the expected lawsuit endgame, the yuppies had to be bought off and kept quiet.

It wouldn’t surprise me at all if when this recession really starts to hit the city and state budgets, all the gains in the classroom will be taken away, and all that will remain after the decade-long CFE lawsuit is a richer pension after fewer years working for the UFT, even higher spending for schools in the rest of the state, and even higher state and local taxes in New York City. But at this point I will accept no excuse. If the schools are not as good as anyone could hope for at current funding, if any services are lost for any reason, and if anyone dares to say even more money is required, that just proves that we were had, we never had a chance, and its hopeless. The UFT should be very careful about saying either that the schools have not improved despite additional resources, or that even more resources are required. They have the money. They and the state legislature decided what to do with it. The people of New York City no longer have obligations, only demands. Meet those demands or acknowledge that you are the enemy.