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Zack Hutchins
Director of Communications

November 30, 2004

Court panel picks high end of dollar proposals to address New York City school financing

A special panel has recommended that the courts mandate another $7.5 billion a year in spending on the New York City schools, to comply with last year’s ruling by the Court of Appeals in the Campaign for Fiscal Equity case.

The panel, whose recommendations now go before state Supreme Court Judge Leland Degrasse for further action, opted for the high end of various cost proposals before it.

Phased in over four years, its recommendations would increase per-pupil operating spending in the city by 45 percent, to $16,800 per pupil (in current-dollar terms) -- by far the highest of any urban school system in the country, and almost double the level of, say, the Chicago schools. If the average class size were 20 pupils, the recommendation would equate to $336,000 in spending per class.

In addition to $5.63 billion a year in new operating funds, the recommendations would require $1.84 billion more a year in capital spending, for at least the next five years. But the special panel said that it should be up to the Legislature to decide whether state taxpayers would foot the bill for all the new spending -- or whether the state would require the city itself to put up a part of the cost.

The panel also said the courts should reject recommendations for a new state oversight panel to make sure the new funds are spent effectively. But it said the city’s school system should be required to prepare a specific plan for using the extra money to improve pupil performance.

The current court case applies only to the New York City school system; school systems in other parts of the state, however, are organizing attempts to pursue their own lawsuits over funding.

The Court of Appeals ruled in June of 2003 that the New York City school system is failing in its constitutional obligation to educate the city’s children. It ordered the state to remedy the situation by ensuring that every school in the city had enough money to provide a “sound basic education,” and to develop “a system of accountability to measure whether the reforms actually provide the opportunity for a sound basic education.” The first steps, the high court said, were for the state to calculate the actual cost of providing a sound education in the city’s schools -- and then to decide how the burden of the additional dollars would be shared between the city and state. The Court of Appeals set a deadline of July 30, 2004 for action.

Governor Pataki and the Legislature deadlocked on the issue this year, however, and after the deadline passed Judge Degrasse began proceedings to enforce the court’s order by judicial means. He appointed a three-member panel -- former appellate judges E. Leo Milonas and William C. Thompson, and retired Fordham Law School Dean John D. Feerick -- to hold hearings, review the case and make recommendations.

The panel’s recommendations now go back to Judge Degrasse for review, and possible further proceedings. Any decision he would hand down could be subject to further appeal, as well as to further deadlock in the Legislature.

Working against their Nov. 30 deadline, the three-member panel reviewed recommendations for new funding from a number of parties -- including a recommendation by the Pataki administration for $1.93 billion more in annual operating spending; the state Board of Regents’ plan for $3.83 billion; a proposal for $5.6 million put together by the plaintiffs, the Campaign for Fiscal Equity; and the city government’s proposal for $5.4 billion.

The panel’s recommendation for $5.63 billion in additional operating spending came in higher than any of those (partly because its recommendation starts with the 2005-06 school year, whereas CFE and the state worked from the 2004-05 school year). It said the increased operating funds should be phased in over four years -- $1.41 billion for school year 2004-05, $2.82 billion in 2006-07, $4.22 billion the next year, and $5.63 billion in 2008-09 -- with additional adjustments for inflation and enrollment growth during those four years and thereafter. The city currently spends $12.62 billion in operating funds.

And the panel added that the city’s schools need at least another $9.2 billion in capital funds, to be spent in even amounts of $1.84 billion in each of the next five years.

As to how the cost will be split between the city and the state, the panel said that “at least in the first instance, the state Legislature should make that state/city allocation determination itself.”

“It should be clear, however, that the burden of compliance with the … order, as a constitutional matter, remains entirely with the [state],” the panel went on. “Additionally, it should be made clear that the state Legislature cannot thwart the implementation of this court order by being arbitrary or unreasonable in its allocation to the city of New York.”

The panel structured its operating funds recommendation around the approach used by the commission appointed by Governor Pataki and chaired by former NASDAQ chairman Frank Zarb -- which studied the amount currently being spent by successful school districts in the state, and then applied various cost adjustments to attemp to extrapolate a spending level that would produce success in the New York City schools. But the court’s panel rejected two of the specific adjustments recommended by the Zarb Commission -- one an “efficiency factor” that weighed the spending only of the lowest-spending half of the successful districts, the other a weighting for high-needs pupils that the panel concluded was not generous enough. With those two changes, inflation, and an updated measurement for regional cost differences, the panel said, the “successful schools” model used by the Governor’s commission yielded a need for $5.63 billion in additional operating funds, in current dollar terms.

The panel’s recommendation of $9 billion in new capital funding was based on a capital projects plan prepared by CFE -- rather than upon the city’s own capital plan for the schools.

In keeping with the Court of Appeals’ requirement that there be a “system of accountability” to ensure that the new funds produce results, the Zarb commission had recommended an extensive series of accountability measures -- including a requirement that the schools plan for how best to spend the new money before they received it, and new structures that would closely supervise, and ultimately close, schools that failed to meet the objectives of their plans.

But the three-member panel rejected virtually all of those recommendations, arguing that “New York already has one of the best educational accountability structures in the nation,” combining requirements from the Board of Regents with the federal No Child Left Behind program. It said the city’s Board of Education should simply be required to upgrade its reporting on school performance -- and to publish its plan for using the new funds, then show that the funds are being used in the manner spelled out in the plan.

The panel’s full report may be found at www.cfequity.org/compliance/RefereesFinalReport11.30.04.pdf.