EdVANTAGE Blog

In separate statements, Senator Chuck Schumer and U.S. Education Secretary Arne Duncan said federal stimulus funds to schools will start to flow soon.

According to the Associated Press, Senator Schumer said that schools will get half their share of stimulus funds by the end of this month.  Schumer said schools will need to obligate 85 percent of their stimulus funds by the end of 2010 and the remainder by the end of September 2011.

Secretary Duncan said that $4 billion in stimulus funds will be available to schools in the next 30 to 45 days.  This includes about half the Title I and IDEA (special education) increases included in the stimulus plan.  An additional $49 billion will be distributed within six months.

On Saturday, Secretary Duncan released funding guidelines that states and schools have been awaiting.

We will provide more information on the details of the guidelines as soon as we can.  A critical concern is what maintenance of effort requirements will schools need to observe in spending the Title 1 and IDEA funds.

The New York Times summed up the the Secretary’s message with an article titled, “U.S. to Nation’s Schools: Spend Fast, Keep Receipts”

By the end of March, governors will be able to apply for a total of $32.5 billion in stabilization funds — two-thirds of their share.  Those funds would then be released within weeks.

New York State is counting on stabilization funds to avert proposed cuts to School Aid in its 2009-10 state budget.  The federal timeline means that, in order to adopt a budget in time for the April 1 start of its fiscal year,  the state would have to allocate the stabilization funds prior to formal approval from the federal Education Department.

UPDATE — March 9, 1 pm:

The conclusion of Secretary Duncan’s news release sends some signals that will be challenging to reconcile — use the money to save jobs and raise student achievement, but try to avoid continuing spending commitments with this temporary aid:

“These investments will save and create jobs in the short term, while raising achievement in the long term,” Duncan said. “We will need a strong commitment on the front end and even stronger proof on the back end that states are making progress.”

Duncan also said that states should work hard to avoid “funding cliffs” by investing ARRA funds in ways that minimize “the tail”-i.e., ongoing costs after the funding expires.

“These are one-time funds, and state and school officials need to find the best way to stretch every dollar and spend the money in ways that protect and support children without carrying continuing costs,” Duncan said…

“Our goals are to save jobs and improve education. Today’s guidelines show exactly how we can do both-balancing the need for a speedy release of funds with the need for aggressive and thoughtful school improvements and reform to improve results for our children,” Duncan said.

Today Robert Bennett announced that he is stepping down as Chancellor of the State Board of Regents.  The Chancellor acts as the chair of the Board.  He will continue to serve as a member of the Regents.

The Council released this statement:

NYS SCHOOL SUPERINTENDENTS REACT TO RESIGNATION OF ROBERT BENNETT AS CHANCELLOR OF STATE BOARD OF REGENTS

ALBANY – The New York State Council of School Superintendents (The Council) congratulates Regent Robert Bennett on his successful tenure as Chancellor of the New York State Board of Regents, the body responsible for setting education policy for the state’s system of colleges, universities and school districts.

Chancellor Bennett presided over a period of unprecedented change and improvement in public education in New York. During his tenure, the state resolved its longstanding school finance lawsuit, enacted the “foundation formula”, and increased aid to schools by nearly 50 percent. The state has also embarked on efforts to update its learning standards which define expectations for schools and students, and to develop new school accountability measures.

In particular, Chancellor Bennett aggressively focused the efforts of the state’s Education Department on closing achievement gaps. In recent years, New York’s schools have achieved broad gains in raising the percentage of students meeting standards on state tests and begun to raise high school completion rates.

In addition to his Regents’ service, Chancellor Bennett has been a leader in improving opportunities and outcomes for children in his professional career, including leading the United Way of Buffalo and Erie County for 15 years as president.

In 2007, the superintendents of New York state recognized his accomplishments with their highest award – “Friend of The Council”.

Together, Chancellor Bennett and Vice Chancellor Merryl Tisch have made an impressive leadership team. We’re pleased to learn that Vice Chancellor Tisch will remain a central and perhaps even more prominent figure in the future leadership of the Board of Regents.

Thomas L. Rogers, Ed. D.
Executive Director

- 30 -

The New York State Council of School Superintendents is the professional association of more than 700 superintendents and other school district leaders.

Yesterday, the State Education Department announced a set of options to spare students from re-taking the entire Regents English Exam, if the January 28th snow storms forced their schools to close and cancel the second day of the two-part exam.

Previously, the Department had said it was not possible to combine results from two separately developed and administered exams.

Affected students will be permitted to combine their result from part one of the January exam and part two of the June exam.  If they take both parts of the June exam, they will receive two total exam scores, one reflecting the combined results of the January and June tests and another for the complete June test.

Some students will also have the option of using May “component re-tests” in English.

Students in schools which closed also lost the opportunity to take the written portion of the Regents Physical Setting/Earth Science Exam.  The Department also provides options for the use of January performance (i.e., lab) test scores in combination with the June written exam for this subject.

Today’s Newsday has a column by Eastern Suffolk BOCES Chief Operating Officer Gary Bixhorn writing on behalf of the Suffolk County School Superintendents Association (SCSSA).

The column summarizes a report developed by the SCSSA last summer.  It explains that the report:

“…includes 22 recommendations to reduce school property taxes, help school districts control expenses and enhance efficiency, overhaul state support, provide greater transparency of all local spending and preserve local control of school districts. The centerpiece of the proposal is a recommendation that the state assume 50 percent of the cost of special education services, employee health insurance and pension costs.” 

The report also calls for special education mandate relief and a statewide school employee health insurance plan.

The column recommends that the state use different formulas to allocate state aid within different regions of the state.

Public pension issues have been in the news this week.

Yesterday, Governor Paterson’s Budget Division issued a report concluding that his “Tier V” pension proposal would save taxpayers nearly $50 billion over the next 30 years.

Earlier in the week, State Comptroller Thomas DiNapoli warned school board members at NYSSBA’s State Issues Conference that, due to investment losses, the employer contribution rate for the State and Local Employees Retirement System (ERS) could be in for a “significant increase” in 2011.

The State Teachers Retirement System used the same phrase in a similar warning issued a few weeks back.

As part of the state budget he proposed back in December, the Governor recommended creating a new tier of benefits for most newly hired public employees. In general, the proposal removes enhancements enacted since the implementation of the last new pension tier – “Tier IV,” created in the early 1980s.

For example, the Governor’s proposal would:

• restore the minimum retirement age from 55 to 62;
• renew the requirement that employees continue contributing toward their retirement past their first 10 years of service and instead throughout their careers;
• restore the minimum number of years of service to qualify for a pension from five to 10 years; and
• exclude overtime compensation from final average salary calculations.

The state constitution forbids the reduction of pension benefits for current system participants.  Accordingly, absent a constitutional amendment – a multi-year process, reductions in benefits must be imposed prospectively, applied to only future public employees.

The Division of the Budget (DOB) estimates that the proposal would save school districts outside New York City over $16 billion over the next 30 years. The report says, “An analysis by the New York State Teachers’ Retirement System (TRS) actuary indicates this proposal will result in savings equal to 3.4 percent of a Tier V employee’s salary base.”

Because both ERS and TRS base their employer contribution rates upon multi-year averages of investment earnings, and because both systems had a series of successful years, the rates are due to decline for the fiscal year for which districts are now developing proposed budgets.

The TRS rate is due to decline from 7.63 percent of payroll, to 6.19 percent. ERS has multiple rates but all are due to decline.

Again, both major retirement systems covering school employees expect a “significant increase” in employer contribution rates in the next year. Neither system has publicly volunteered an actual figure.

But a rule of thumb for understanding the impact of pension contribution rate increases is that, since payroll is about 50 percent of total school spending on average, every 2 percentage point jump in the contribution rate by itself would equate to a 1 percent increase in total spending.

Employer contributions are calculated by multiplying the contribution rates against the applicable payroll for the year preceding when the contribution is collected.

Accordingly, contributions reflecting investment losses and resulting “significant increases” in employer contribution rates would be based on 2010-11 payrolls and collected during the 2011-12 school year.

But, the overwhelming majority of school districts now follow “Generally Accepted Accounting Principles” (GAAP), which requires accounting for costs when they incurred, which sometimes occurs well before when they are actually paid. Under GAAP, districts are expected to budget each year for pension contributions based on the rate applicable to that year’s payroll.

To be specific, the decline to a 6.19 percent TRS employer contribution rate should be reflected in the budgets that “GAAP” school districts are developing now to propose to the voters in May.

The “significant increase” in employer contribution rates will need to be reflected in the budgets that districts assemble a year from now, at least for the majority of districts employing GAAP accounting.

Schools are at a disadvantage compared to local governments in preparing for this foreseeable cost spike, because they are not permitted to set up pension reserve accounts for TRS costs.  Both school districts and municipalities can use this reserve to save for ERS costs, but not TRS.  Most school employees are covered by TRS.

One of the themes of the Council’s budget advocacy this year has been that even with optimistic assumptions concerning the continuation of new federal support and recovery in the state’s fiscal capacity, schools face accumulating cost pressures, starting with pension costs.

The Governor’s Tier V proposal may not be perfect. Cost cannot be the only consideration. The most important factors that schools control in influencing student achievement are the quality of teachers and school leaders they employ.

So compensation structures should be designed, in part, with the aim of helping schools to get and keep the best teachers and leaders. Extending the period for vesting from five to 10 years, for example, might worsen already high attrition among early career teachers.

But the Governor’s proposal should start a careful and forthright discussion on how to balance the compensation needed to attract and keep the best teachers and administrators for schoolchildren with ensuring costs that are sustainably affordable for taxpayers.

Speaking on Long Island on Friday, Governor David Paterson said that as a result of the federal stimulus plan, “Every cut we made to school districts in this budget, we will restore.”

The Governor’s comments were reported in Newsday.

The article explains that, “Paterson said $1.25 billion will be put in his executive budget for 2009-10 and again in 2010-11. The budget must be approved by state lawmakers.”

That figure — $1.25 billion – is roughly the amount of the state stabilization funds that New York is to receive from the federal stimulus fund for the purpose of reducing or averting cuts to education or higher education.

The sense in the State Capitol has been that over 90 percent of New York’s stabilization funds will be targeted to elementary/ secondary education.  Accordingly that sum should be sufficient to eliminate the School Aid Deficit Reduction Assessment, which totals roughly $1.1 billion.

My impression has been that we will not see an actual allocation of the stabilization funds except as part of the complete state budget due to be enacted for the April 1 start of the next state fiscal year.

But the Governor’s comments raise expectations that the Deficit Reduction Assessment might be eliminated.

The article goes on to cite specific sums of cuts that selected districts will be spared.  These figures are the year-to-year reductions in total aid, excluding building-related aids, that were reported on the School Aid runs released with the Governor’s budget back in December.

The impact of the proposed Preschool Special Education cost shift is not reflected in the cut totals and it cannot yet be assumed that the Governor expects that proposed cost shift will be eliminated.

Nor do I think it can be presumed that the Governor is saying that there will be relief from the proposed freeze on Foundation Aid, which imposes cuts of $1.3 billion from what current law formulas would provide.

The Council has advocated for both the elimination of the Deficit Reduction Assessment and for an increase in Foundation Aid, as well as for rejection of the proposed Preschool Special Education cost shift.

UPDATE — 3/3/2009
The Governor said “Every cut we made to school districts in this budget, we will restore.”  But that leaves a lot of room for interpretation.

For example, the year-to-year cut in School Aid totaled $698 million, reflecting the freeze on Foundation Aid, the Deficit Reduction Assessment, and partially offsetting increases in reimbursement and categorical aids.  Adding $698 million to give every district flat overall funding could be interpreted as “restoring every cut.”

As explained above, the New York will receive over $2.4 billion over two years as “stabilization funds” to avert cuts in state support for education and higher education.  Half that sum — one year’s share ($1.2 billion) — would be sufficient to eliminate the $1.1 billion Deficit Reduction Assessment.

Or the state could use $698 million of the stabilization funds to restore every district to flat overall funding and use the balance for other purposes within education.

Whatever is to happen, it seems most probable that it will be done as part of a complete state budget to be enacted for the fiscal year starting on April 1.

For those who might be interested, below is the language of the federal bill addressing the allocation of stabilization funds by states:

(2) Restoring state support for education.

(A) In general. The Governor shall first use the funds described in paragraph (1)-

(i) to provide the amount of funds, through the State’s primary elementary and secondary funding formulae, that is needed-

(I) to restore, in each of fiscal years 2009, 2010, and 2011, the level of State support provided through such formulae to the greater of the fiscal year 2008 or fiscal year 2009 level; and

(II) where applicable, to allow existing State formulae increases to support elementary and secondary education for fiscal years 2010 and 2011 to be implemented and allow funding for phasing in State equity and adequacy adjustments, if such increases were enacted pursuant to State law prior to October 1, 2008.

(ii) to provide, in each of fiscal years 2009, 2010, and 2011, the amount of funds to public institutions of higher education in the State that is needed to restore State support for such institutions (excluding tuition and fees paid by students) to the greater of the fiscal year 2008 or fiscal year 2009 level.

(B) Shortfall. If the Governor determines that the amount of funds available under paragraph (1) is insufficient to support, in each of fiscal years 2009, 2010, and 2011, public elementary, secondary, and higher education at the levels described in clauses (i) and (ii) of subparagraph (A), the Governor shall allocate those funds between those clauses in proportion to the relative shortfall in State support for the education sectors described in those clauses.