So the Court of Appeals has ruled that in 2004 New York City schools should have spent, at a minimum, an additional $1.93 billion. Is that a lot, or a little? Would the total be an excessive waste of money, or nowhere close to the need? If the state paid for it all, would those elsewhere in the state have been cheated out of their rightful share of aid, or have continued to shortchange the city’s children? And would city residents have reason to be on-their-knees grateful, or outraged? To me, the way whatever settlement is described is as important as what that settlement is, because it will set the stage for what is demanded, and what is rationalized, for years to come. New York State’s winners expect a high level of service; they not only expect to win, but also expect to be told they have been generous, or cheated, so they can continue to sneer at and resent the losers. You’d think the truth would be the easiest thing to provide, since giving one person the truth doesn’t’ take money from someone else. It actually appears to be the most difficult. As it happens, while the Zarb Commission appears to have had Fiscal 2004 data years ago, that happens to be the latest available to me, both from the New York State Department of Education Fiscal Policy Unit and the U.S. Census Bureau. And below, using that information, is the meaning of the CFE $1.93 billion.

First, let’s examine equity in state aid.

In 2003-2004, according to NYSED, New York City had 36.4% of the state’s public school children, and a much larger share of its disadvantaged children. The city’s share of public school students would have been greater, given its much higher share of the state’s overall population (about 42%), if the quality of the city’s schools did not drive so many parents out of the public schools or out of the city entirely. The city’s combined wealth ratio, NYSED’s measure of ability to pay taxes, was right on the statewide average. Given the wealth of Manhattan balancing the poverty elsewhere, it generally is, although this measure gives no credit to the city for the excess burden imposed by the local share of Medicaid and other social services. Despite this, the city’s share of state school aid was just 34.5%, lower than its share of public schoolchildren – as it has been forever. Including STAR, its state aid per child was $5,719, not only well below the $6,970 average for low cost of living Upstate New York, but also barely above the $5,264 average for the affluent Downstate Suburbs.

In virtually any other state, a place with above average needs and just average resources would receive above average state education aid. Red state, blue state, liberal, conservative, it doesn’t matter. But let’s leave that aside, because the Court of Appeals has found that it is legal for New York State to do nothing in its state aid formula to offset differences in local wealth. Indeed, in its final ruling it once again claimed that the higher level of spending in the rest of the state is a choice based on higher local resources, not money taken from New York City.

Not so. As said here often and seemingly nowhere else ever, New York City residents (only slightly poorer than average overall remember) paid 40.2% for state income taxes in FY 2004 – city residents’ share of state income taxes is likely significantly higher today. That means that $542 million in taxes paid by city residents and used for education was spent elsewhere, a “Reverse Robin Hood” policy of transferring resources from the poor (or those who live near the poor) to the better off that goes back decades. The cumulative total from FY 1995 to FY 2004 was $5.3 billion transferred out of the city, in $2004 inflation-adjusted dollars, and there are at least three “Reverse Robin Hood” budgets after that. New York City’s children would have been better off if total state education funding was zero, and every part of the state were left to fend for itself.

How would an additional $1.93 billion in state aid have changed this? Well, it couldn’t change the money lost in the past, and would not reverse its consequences. Might the state’s share of payments on the city’s education capital bonds help to reverse the damage? Only in the unlikely event that all that promised state money to pay the bonds arrives over 30 years (the annual state contribution is small), and the city isn’t forced to sacrifice something else to get it. If there were any justice, the rest of the state would have been forced to return the educational resources redistributed out of the city up front in cash over the next few years, rather than have the city borrow billions no more to make the investments it could not afford then. The odds of the state making good its promise to pay half the interest on those bonds are very low, particularly given that the Court of Appeals has in effect blessed the state’s right to cut off the funds at any time by failing to mandate that the agreement be followed.

Looking forward, if state had increased its aid to the city by $1.93 billion in FY 2004 and not increased aid to any other part of the state, the city’s share of total state education funding would have been 41% -- in the vicinity of what city residents’ share of state income taxes paid by state residents is probably like today. In other words, the rest of the state would have been doing absolutely NOTHING for New York City’s children. Other than to stop hurting them financially. All the money spent in the city’s schools, whether from city of state sources, would have been paid by city residents in city and state taxes. Every dime. Would such a situation next year be described that truthful way? Would those in the rest of the state be forced to admit this was the situation? Or would they be allowed to resent every cent, or demand more for themselves as well?

More to the point, will the city’s residents and taxpayers do even that well? After all, while promising the city’s children $4.7 billion, now revised down, to increase school spending, incoming Governor Spitzer has all but guaranteed $6 billion in property tax relief to offset the much higher level of spending the rest of the state already has. (I wonder what the reaction would have been elsewhere in the state if the city had increased school spending and then said it needed more state funds because it was going broke and its taxes were too high?)

What if that additional $6 billion had also been provided in FY 2004, with New York City getting 25% of that amount, the same as its share of STAR? Then the city’s share of total state education funding would have been 37.2%, still higher than it actually was in FY 2004, but still lower than its share of state income tax payments by state residents that year. The Reverse Robin Hood amount would have been a higher $611 million, because the city’s children would have been ripped off to a lesser extent but on a greater amount.

Go to this post to get the attached data and play with it yourself

--

http://www.r8ny.com/blog/larry_littlefield/what_i_would_do_about_state_education_funding.html.

The data is before any possible CFE-related changes.

So much for fiscal equity. Now lets examine the Census Bureau data attached to this post to find out how that additional $1.93 billion would have affected NYC’s total spending in FY 2004.

That year the city’s per capita spending on elementary and secondary education was somewhat higher than the national average, though 29% lower than in the rest of New York State. But this measure does not adjust for the higher cost of living here, and thus the need to pay higher salaries to attract education workers of comparable quality by offering them a comparable quality of life. The measure that accounts for this is spending as a share of personal income, and here New York City was, at $43.25 per $1,000 of its residents’ personal income, well lower than the $46. 58 national average, though to a lesser extent than in much of the 1990s (the era that affected my children’s generation personally). The city would have ranked 36th if it were a separate state (better than 49th back then).

The Rest of New York State? School districts there spent a stupendous $65.49 per $1,000 of local residents’ income, which would have ranked first if Wyoming’s oil industry had a better year and raised the income of that state’s residents higher (and usually would have in fact ranked first). No wonder the “value free” people in the rest of the state want New York City to pay for that high level of spending in “tax relief aid,” rather than paying it themselves. The statewide average was fifth in the nation – it had been first in FY 2002. Hence outgoing Governor Pataki’s contention that NYC’s public school spending has to be kept low because the statewide average is high. The Campaign for Fiscal Equity, meanwhile, continues to insist the city should be “leveled up” to the average for the rest of New York State.

Now, what if the city’s spending had been $1.93 billion higher and the rest of the state had remained unchanged? The city’s elementary and secondary education spending would have risen to $49.11 per $1,000 of its residents’ personal income, above the national average (now at $46.78) and high enough to have ranked 15th if the city had been a separate state. It wouldn’t have been higher than average by a large amount given its needier that average students, but the city also frees up money for education by spending a much lower share of its money on non-instructional staff than average (yes, that’s right). So, perfectly well spent (ie. not on richer pensions) it might have been enough.

Except that the rest of the state still would have been spending so much more, leaving the city unable to compete for the most qualified and motivated teachers. And the less qualified and motivated hired in the past, and other lingering damage, would still have been there. Perhaps if the city had always spent slightly more than then national average as a share of income, and used it well, its schools would be good today. Perhaps that would be the case if the rest of the state was not provided with a school funding system that promised them more state aid the more they spent. As it is, it will take a decade or more to undo the damage. Will this be said when the budget passes, even if NYC gets the $1.93 billion in $2004? Even if it gets $4.7 billion? Will New York City parents be told that no child alive today can reasonably expect to get an adequate education in the New York City schools, unless they attend one of the special deal schools filled with easy to educate children that have been shielded from the decline? And that even there, they would be better off virtually everywhere else in the Metropolitan Area?

There is the truth. And given the truth, I’m not upset by the $1.93 billion, which I agree with the Court of Appeals is a tolerable (though not optimal) amount. I’m a value shopper, and don’t feel the need to gold-plate my purchases, let alone waste my money, even in education. I would have been content, in fact, if the City and State of New York had been prepared to offer my children the kind of elementary school education on offer in Levittown and Yonkers, two far from rich places, in the 1960s, when my wife and I attended there. What has been on offer for most children in New York City 30 to 40 years later, in a far richer country, is much worse. Can you think of any good or service, other than New York City’s schools, parks, and libraries, that is actually worse than 40 years ago? And that’s with higher tax rates, and now with fewer welfare recipients.

And now, I’m very upset that the rest of the state seems to think it also deserves more money, and that New York City residents disadvantaged by the past state school finance practices should have to pay for it in state taxes. I’m upset the rest of the state isn’t being told to cut wasteful spending, like NYC’s Medicaid providers. Wasn’t’ that the deal up there – their patronage vs. our patronage? It sure seemed to be. I’m upset that the leaked finding by S&P, that NYC should get 80% of any increase in funding (there are a few other low spending districts in the state) was deleted from the Zarb Commission report. I’m upset that the slip by an S&P researcher (they have to worry about their next commission and cannot say what their paymasters do not want to hear) that the state’s school aid formula was “certainly not like any other state” in its injustice was not more widely reported.

If state aid to New York City were increased by $1.93 billion, it would mean that after hurting the city’s children for decades, the rest of the state was doing absolutely nothing for the city and its children. Nothing. What should be done to in exchange to “take care of the rest of the state,” in Joe Bruno’s words, in a “statewide solution”? Nothing at the very most. Rather, in exchange for a demand for better efficiency from the Medicaid program, much of which is in the city, representatives from the city should demand reductions in public school spending in the rest of the state. Which schools? The ones that spend the most, by taking away a dollar of state aid for every dollar of spending above a given (cost of living adjusted) amount, and limiting referendum approvals for school district budgets to those spending more. That’s where the rest of the state should look for property tax relief. Personally, I’d rather have my income redistributed to those worse off than we are, not those better off.