• Our testimony at last week’s Assembly-Senate budget hearing.
• An excel spreadsheet that produces easy to read printouts of the Governor’s School Aid proposal for any district.
• A power point presentation I did for superintendents in Western New York last Friday.

Part of my presentation attempted to convey how different and better the state budget outlook is for schools compared to a year ago.  Obviously, however, the tax cap is a huge dark cloud on the horizon.

Battle lines are forming over one aspect of the Governor’s education budget – his proposal to devote nearly a third of his overall proposed increase — $250 million – to incentive grants intended to encourage and reward gains in student achievement and management efficiency.

State Education Commissioner John King led off the witnesses at the legislature’s budget hearing and supported holding funding for the incentive grants at $50 million and providing an additional $200 million in general aid to districts.  This was the recommendation in the School Aid proposal adopted by the Board of Regents.

All the traditional education groups called for shifting funds out of the incentive grants and into general aid.  A collection of seven other groups emerged to back the Governor’s plan.  Newsday jumped into the debate with a short editorial siding with the Governor.

In our testimony, I acknowledged that promoting student achievement and management efficiency are desirable goals, but said “more than new incentives, we think changes in old rules are necessary – changes in state mandates which will allow schools to get more impact for students from the resources taxpayers can provide.”

Another concern expressed by some school officials is that their districts simply lack the administrative capacity to devote to assembling a grant application.

A fundamental problem is that, whatever the merits, the timelines for awarding grants do not “sync” with school budget decision-making.  Very little of the funding will be awarded in time for districts to factor into the budgets they will ask voters to consider in May.

Here is an article on the difficulties with the grant programs which ran in several papers in the Gannett chain over the weekend.

In the area of education, the Governor that in his first year he learned the lesson that superintendents, teachers, school boards, maintenance personnel, and bus drivers all have lobbyists, but students do not have a lobbyist.  So he declared he would be taking on a second job in the coming year – students’ lobbyist.

He announced he would appoint a commission on education to recommend reforms in key areas, including teacher accountability and student achievement and management efficiency.

The Governor said, “we need a meaningful teacher evaluation system. The legislation enacted in 2010 to qualify for Race to the Top didn’t work.”

He added, “We must make our schools accountable for the results they achieve and the dollars they spend.”

No details have been provided yet on who will sit on the commission or when it will report.

I was quoted in a New York Times article on the commission and appeared on Time Warner’s statewide Capitol Tonight television show, along with Tim Kremer from the School Boards Association and Nikki Jones from the Alliance for Quality Education.

In the Times article, I said

“There are a lot of people who would disagree with the governor’s rhetoric and parts of his analysis, but would agree with the big picture.  How do we produce more learning for students with the resources our taxpayers can provide?”

On the rhetoric…

There is some grumbling across the education community about the Governor’s assertion that no one advocates for students.  Certainly superintendents see that as central to their work.

Capitol Tonight’s Liz Benjamin asked her guests for their reactions to the Governor’s announcement that he would be the students’ lobbyist.

I gave a two part response.

First, I said “We welcome him,” and added that that is a good perspective for a state leader to take – to be asking how the actions of state government affect student learning.

But I added that everyone working in the schools – teachers, principals, superintendents – got into the business because they wanted to have a positive impact of the lives of children, and that in our surveys superintendents tell us they sought their jobs to be able to affect more children.

On the analysis…

The Governor repeated claims that New York is first in per pupil spending but 38^th in graduation rates.

The numbers are what they are.  But using single broad measures overlooks simple facts and over simplifies complex situations.

As I explained on Capitol Tonight, New York is a high cost state across the board.  We have the highest weekly wages for all workers of any state.  Schools are labor intensive.  It should not be a surprise that we would have high per pupil spending.

I also said that we are a hugely diverse state, in ways good and bad.  Our graduation rate problem is concentrated, rather than universal, mostly focused in typically urban districts.

On the bigger picture…

With all the foregoing in mind, it remains that many in education would agree with the Governor on the bigger picture thrust.  I do.  We need to be asking how can our schools produce the learning our students need now with the resources our taxpayers can provide.

A commission can provide the focus for an extended statewide conversation aimed at answering that question.  So pending further details, we can welcome the idea of a commission.

Capitol Tonight’s Liz Benjamin said she had the sense the Governor would look to fill the commission with people from outside the state’s education system.

I said I hoped it would include insiders as well, because they could speak to what is working well now, and what isn’t.

I also said that it would be a mistake to assume that everyone working in schools now is wedded to the status quo.  Again, they entered education to positively affect the lives of young people.

I went on to add that even if some are wedded to the status quo, the status quo is changing – we have had there years of state aid cuts or freezes, now the tax cap, and continuing cost pressures from pensions and health insurance.  Schools have to change.

A commission can’t just point to what schools are doing wrong, however.  A corollary question for it must be what does the state need to change, in order to help schools produce more learning for students with the resources the taxpayers can provide.

A complication for the commission will be how to work with the $700 million worth of promises the state has made to Washington under Race to the Top, which has already defined a significant and demanding reform agenda for the State Education Department and the schools to execute.

Here is the complete prepared text of the Governor’s address (the education section begins on p. 19 and is preceded by a discussion of mandate relief).

Here is the video of the speech.  He discusses education beginning about 38 minutes in.

Here is the passage on education:

Education Commission to Promote Performance and Accountability

As we reimagine government, we must focus on our core values.

The future of our state depends on our public schools. A strong, effective school system is the hallmark of a healthy democracy.

We must make our schools accountable for the results they achieve and the dollars they spend.

I learned my most important lesson in my first year as Governor in the area of public education.  I learned that everyone in public education has his or her own lobbyist.

Superintendents have lobbyists.  Principals have lobbyists.  Teachers have lobbyists.

School boards have lobbyists.  Maintenance personnel have lobbyists.  Bus drivers have lobbyists.

The only group without a lobbyist?

The students.

Well, I learned my lesson. This year, I will take a second job — consider me the lobbyist for the students. I will wage a campaign to put students first, and to remind us that the purpose of public education is to help children grow, not to grow the public education bureaucracy.

Today, we are driven by the business of public education more than the achievement in public education. Maybe that’s why we spend more money than any other state but are 38th in graduation rates.

We have to change the paradigm. We need major reform in two areas:

· Teacher accountability and student achievement. We need a meaningful teacher evaluation system. The legislation enacted in 2010 to qualify for Race to the Top didn’t work.

· Management efficiency. We must make our schools accountable for the results they achieve and the dollars they spend.

We cannot fail in our mission to reform public education, because we simply cannot fail our children.

I will appoint a bipartisan education commission to work with the Legislature to recommend reforms in these key areas.

1. Governor to appoint education commission
2. Teacher evaluation conflicts
3. School finance news

1.       Governor to appoint education commission

The 2012 session of the State Legislature begins on Wednesday when Governor Andrew Cuomo delivers his second, “State of the State” address.

Monday’s New York Daily News reported that the Governor will announce a commission to recommend reforms to the state’s education system.

The Daily News explains,

 Cuomo’s announcement will come just days after he was critical of the city and other districts that failed to reach agreement with their unions on a new teacher evaluation system by an end-of-year deadline.

“The failure to pass the teacher evaluation system is an example that not only is the system broken, but the ability to monitor the system and come up with a method to ensure kids are educated properly is broken,” said a source close to Cuomo.

The education commission he will announce will be designed to look at education from a “student perspective,” the source said.

“What are the performance indicators? How do you judge performance in the education system? How are the services being provided?” the source said. “No one has really looked at it without a particular perspective on what’s going on in education.”

Last Friday, Newsday reported that Governor Andrew Cuomo “wants to take a hard look at school governance.”

Asked in a year-end interview, what surprises he encountered upon taking office, the paper reported,

Cuomo didn’t hesitate before saying, “The need for reform in education is much more striking to me,” adding that he’s troubled by “the lack of performance evaluation-management strategies on the school system.

“The greatest challenge is going to be reforming the education system in this state,” Cuomo said. “It’s probably the most complicated, intractable issue I’ve come across.”

The Governor did not disclose any specific proposals during the interview.

2.       Teacher evaluation conflicts

In the preceding item, the New York Daily News cited the failure of New York City, some other districts, and their teacher unions to reach agreement on new evaluation procedures as an instigation for the Governor’s decision to appoint a commission on education.

Here’s more on that aspect of the story…

At the beginning of last week, State Education Commissioner John King announced that he would suspend federal School Improvement Grants to New York City and nine other districts if they and their local unions were unable to come to agreement on procedures for evaluating teachers and principals consistent with new state requirements.

At that time, Commissioner King said that only Syracuse and Rochester had submitted materials for review of their evaluation procedures.

Subsequently, Buffalo, Albany, and Schenectady submitted materials, although a State Education Department spokesman cast doubt on Schenectady’s chances for approval.

New York State United Teachers issued a statement accusing the Commissioner of “an arbitrary exercise of brinksmanship.”  The union noted that 14 states had received waivers from the U.S. Education Department allowing more time to work out evaluation procedures.

Last Friday, New York City Schools Chancellor Dennis Walcott announced he was breaking off negotiations on new evaluation procedures with the City’s teacher union, the United Federation of Teachers.

The Wall Street Journal reported,

The sticking point for a deal was whether teachers should be able to appeal a low rating to an outside arbitrator. Union officials said an appeal process would prevent principals from abusing their authority, but the city dismissed it as an unnecessary layer of bureaucracy.

Commissioner King issued a statement calling the breakdown in talks, “beyond disappointing,” adding

Sadly, the adults in charge of the City’s schools have let the students down.  SIG schools need to be fixed, and the best way to make that happen is to make sure there’s a quality teacher in front of every classroom and a quality principal at the head of every school.

On New Year’s Eve, Governor Cuomo issued this statement,

Teacher evaluations are critical to ensure our kids have high quality teachers in the classroom because performance counts.

I am disappointed that agreements could not be reached to impose teacher performance evaluations at some of our troubled school districts across the state.

Students lose twice because of this failure. First, the failure to reach agreements on teacher evaluations forces these schools to continue to operate without true accountability, which would ensure students receive a high quality education from high quality teachers. Second, these schools will also lose out on millions of dollars in much needed federal aid.

I urge all involved to get back to the table immediately, put their differences aside and put the kids first. They should agree on an evaluation system that improves performance and prevents the loss of more than one hundred million dollars this year for these schools across the state.

City Schools Chancellor Walcott elaborated his perspective in a Daily News columnon Monday, calling the UFT’s insistence on outside arbitrators to hear appeals “a radical departure” and a “a burdensome procedural layer designed to keep ineffective teachers in the classroom.”

UFT President Michael Mulgrew gave his side of the story on Time-Warner’s Capitol Night.

3.       School finance news

In blog posts last month I summed up the Regents State Aid proposal and offered reflections on the complexities of school district consolidation.

Here are some other items on school finance…

The attorney who led the Campaign for Fiscal Equity’s successful challenge to New York’s system of school finance is contemplating a new effort.

Speaking with the Wall Street Journal, Michael Rebell said he isn’t necessarily headed back to court, but he is leading a research project which will evaluate whether a sample of schools in New York City and around the state are able to provide a sound basic education, as promised under the state constitution.

Mr. Rebell told the Journal, “I don’t rule out litigation.  I’ve been there. I’m prepared to do it if necessary. But we’re in this for the long run, and we’re not looking to just score some quick points and free up a few bucks if we can get it.”

Mr. Rebell also appeared on Capitol Tonight last evening.

On December 15, Governor Cuomo appeared on the Capitol Pressroom radio program to discuss the Regents state aid proposal.

The Gannet News Service Politics on the Hudson Blog observed,

Cuomo, asked several times about the Regents’ proposal by WCNY’s Susan Arbetter, didn’t commit to a specific formula for distributing school aid—always one of Albany’s most scrutinized decisions during the budget process—but said he wants to make sure school performance is part of the conversation.

As the blog reported, the Governor added,

“We want to incentivize performance by the school districts. This system, in my opinion, is sorely lacking in terms of performance,” Cuomo said. “We just fund process. We give school districts a block grant … where they get the same amount whether they are doing great or doing poorly.”

…But Cuomo repeatedly said he wants to focus on performance, without committing to any specific aid-distribution system. Cuomo’s budget proposal will be revealed in January.

“I want to add another component to the conversation, which is let’s talk about the students and whether or not you are educating students,” Cuomo said. “This whole conversation has become about the school district and the teacher and the superintendent, and I want to talk about the student.”

Also in the middle of last month, the Rochester Democrat and Chronicle contrasted the learning opportunities available in poor rural districts and elsewhere.  Phelps-Clifton Springs superintendent Mike Ford warned that his district faces the prospect of eliminating kindergarten and all high school electives next year.

Another potential source of tension in school finance is the disparity between where state revenues come from versus where they go.

The State University’s Rockefeller Institute of Government reported that New York City residents and businesses paid about $4.1 billion more in taxes and fees than the City received in state funding and services in 2009-10.

The suburban counties (Nassau, Suffolk, Westchester and Rockland) paid $7.9 billion more into the state treasury than they received in state aid.

In contrast, upstate regions contributed 28 percent of the state’s revenues and received 42 percent of state outlays.

Writing in the New York Post, the Institute’s Deputy Director, Robert Ward, notes

Regional disputes, often bitter, have haunted New York since colonial days. City and suburban taxpayers might take some comfort simply in knowing that their basic sense of the state’s budgetary balance — we’re paying more than our share! — is, by the numbers, absolutely correct.

Upstaters also have a point when they say that Downstate political sensibilities drive up local taxpayer costs everywhere in New York. Thus, the state sets the rules for programs such as Medicaid and special education — helping to make them far more costly here than in most states — but requires localities to pick up much of the cost, which helps explain the Empire State’s extraordinarily high property taxes.

Nor does the apparent imbalance among regions necessarily mean the current division of dollars is unfair.

For a century or more — certainly since the days of Franklin Delano Roosevelt — Americans, and especially New Yorkers, have believed that redistribution of wealth is a central purpose of government. FDR defined the measure of progress itself as “whether we provide enough for those who have too little.”

Thus, Albany will distribute some $20 billion in education aid this year based partly on how many children in each school are poor enough to qualify for free lunch. Individuals’ age and need will help drive more than $50 billion in Medicaid and welfare spending.

On the other side of the ledger, the state’s major source of revenue, the personal-income tax, is designed to take more from individuals who have more….

Finally, in the past I have noted the powerful impact of two costs — pensions and health insurance — on school spending and taxes.

For four successive years in the last decade, increased costs for those two items roughly matched or exceeded increases in state funding, contributing to a run of higher than historically typical local tax increases.  More recently, districts have cut other spending on balance to absorb pension and health costs while holding down overall spending and taxes.

Monday’s New York Daily News carried a column by the Speaker of the Massachusetts State House of Representatives on that state’s successes in managing pension and health care costs of its workforce.

Here is a piece from the Boston Globe providing more details on the health insurance initiative.

The Regents proposal would attempt to re-start the Foundation Aid formula which was first enacted in 2007 as a resolution of the Campaign for Fiscal Equity’s challenge to the constitutionality of the state’s system of funding public schools.

Big increases in Foundation Aid were approved in 2007-08 and 2008-09, but the formula has been frozen for the past three years.

Meanwhile total aid from all formulas (excluding Building Aid and Universal Prekindergarten) has been reduced through large “Gap Elimination Adjustments” in each of the last two years.

The Regents propose an overall increase in aid of $805 million or 4.1 percent, consistent with the unique two-year appropriation for School Aid in the current state budget.

In effect, the Regents chose through their proposal to take the role of advising elected state officials how to best allocate the scheduled increase.

It was disappointing to us and other groups that the Regents accepted the $805 million figure as a given, without first making some effort to determine a level of need, particularly since the $805 million increase is partly diluted by the loss of federal Education Jobs money.

“High need” districts, as defined by the State Education Department, would receive 73 percent of the overall increase proposed by the Regents, slightly more than their 68 percent share of current overall aid.

The Regents new approach to Foundation Aid
The centerpiece of the Regents proposal is a recommendation to re-start the Foundation Aid formula.

The Regents have not published a complete explanation of their new Foundation Aid formula, but a few key points are known.

First, the Regents would create a new “Foundation Aid base” by combining the old Foundation Aid and four other formulas – Academic Enhancement Aid, High Tax Aid, Supplemental Public Excess Cost Aid, and the Gap Elimination Adjustment.

Due to limits on the state’s fiscal capacity, the Regents would not revive the promise of the 2007 formula of 3 percent annual aid increases for all districts.

But they would provide a “save-harmless,” so that no district would receive less in Foundation Aid in 2012-13 than it received in 2011-12 from the combination of formulas consolidated to form the Foundation Aid base.

The original formula allowed districts two methods for calculating how much they are expected to contribute from local revenues.  The Regents would drop the “aid ratio” option for calculating the local share and require all districts to use an “expected local tax rate” approach.

The Regents would also eliminate a cap on the income wealth index (IWI) which limited its benefit to low income districts.  The IWI adjusts how much districts are expected to raise locally based on how the adjusted gross income of their residents compares with the statewide average per pupil.

A brief explanation of the original Foundation Aid formula is provided at the end of this post.

In total, the Regents propose a $376 million increase in Foundation Aid, equivalent to a 3 percent increase over the 2011-12 base.

Commentary on the Foundation Aid proposal
― The Foundation Aid freezes and Gap Elimination Adjustments of the past three years essentially wiped out the state’s efforts at implementing school finance reform in 2007-08 and 2008-09.  The Regents Foundation Aid base for 2012-13 is only $20 million greater than the 2006-07 starting point base, or 0.2 percent.

― Paraphrasing Regents State Aid Subcommittee Chair Jim Tallon, having a formula that giveth (Foundation Aid) and a formula that “taketh away” (the GEA) is confounding.  Whatever its other effects, folding the GEA into the new Foundation formula improves the understandability of aid calculations, making the state more accountable for its funding choices.

― It is an arcane point, but the Council, New York State United Teachers and others vigorously opposed the use of the expected tax rate approach to calculating the local share when it was first proposed by the Regents and then Governor Spitzer five years ago.

Our concern over the expected tax rate approach arose from historical volatility in property values.

Briefly, the method multiplies a standard “expected” tax rate (originally $16 per $1,000 of full value property wealth) by the district’s property wealth.  So, if a district’s property value increases and nothing else changes, its expected local contribution will rise and its Foundation Aid will decrease, or with save-harmless, be frozen.

While for the most recent pair of years statewide property wealth is down nearly 2 percent, double digit percentage increases have not been unusual in past years.

In contrast, the impacts of changes in wealth are moderated under the aid ratio approach because wealth is always measured in comparison to state averages.  Only if a district’s increase in wealth exceeds the state average will its local share rise.

Reservations over the expected tax rate approach rise with the advent of the tax cap, which will limit the ability of districts to increase taxes by an “expected” amount.

Expense-based aids
As I wrote in a recent blog post, projected 2012-13 increases in expense-based aids (Building, Transportation, BOCES, and special education) under current law formulas came in well below what would have been expected based on historical patterns — $253 million instead of something in the vicinity of $400 million.

This appears to be one more example of districts scaling back spending to hold down taxes while absorbing the impacts of state aid cuts and surging pension and health care costs.

The Regents propose no changes in the expense-based aids for the coming year, “because districts have already incurred expenses” those formulas reimburse.

But the Regents do recommend changes in reimbursement for expenses districts will incur after July 1, 2012.

The proposal explains,

By supporting more aggressive cost-containment measures in the expense-based aids, the Regents propose to shift a greater percentage of State resources allotted for the General Support for Public Schools toward instructional educational costs.

In Building Aid, the Regents propose to eliminate a 10 percentage point bonus to the state reimbursement share, to discontinue the ability of districts to use the most favorable aid ratio of any year going back to 1981-82, and to discontinue state support for “excessive amounts” of incidental costs.

The Regents would also require projects to have a minimum use life of at least 15 years to qualify for Building Aid, and would require that school buildings comply with high performance design standards, such as the best value based on life cycle cost.

The Department estimates that eliminating the 10 percentage point incentive would save the sate $296 million annually, and elimination the choice of aid ratios would save $198 million.

The Regents would also eliminate a choice of reimbursement ratios under Transportation Aid and that “…aid be made more progressive and responsive to school districts’ current fiscal capacity, i.e., more strategically target aid to the highest need districts and support greater flexibility for shared pupil transportation services.”

The Regents recommend some expansion in the role of BOCES, but also ask that BOCES Aid be made “…more progressive by eliminating the multiple aid ratio choices and refining the computation of the State share to better reflect districts’ fiscal capacity.”

All these changes would require approval by the Assembly, Senate and Governor and would be made prospectively, to aid calculations starting in 2012-13, not next year.  Also,the Building Aid proposal would not retrocatively reduce state reimbursement shares for projects already approved.

There are parallels between debates over the role of mandates and growth in expense-based aids.

In an atmosphere of constrained resources, if mandates are maintained, then schools will be forced to find savings from areas not dictated by mandates.  If expense-based aids continue to grow and state resources are limited, then general purpose aids will bear the brunt of co0st containment.

So whatever the merits of the Regents’ specific proposed changes to the expense-based aids, they have started a discussion worth pursuing.

Again, one new fact for that discussion is the surprising slowing of expense-based aids that has already occurred, as districts have apparently scaled back on the expenses these formulas reimburse.  The slowing appears generally greater in poorer districts.

In explaining recommended Building Aid changes, the Regents proposal claims, “”The goal of encouraging school districts to invest State and local funds in their facilities has been accomplished…”  Leaders of some poorer districts, especially from urban areas dispute that conclusion.

Other Elements
While folding old High Tax Aid allocations into the new base for Foundation Aid, the Regents also propose a new, more targeted High Tax Aid formula which would distribute $58 million.  The proposal would also increase UPK funding.

The proposal recounts past efforts by the Legislature, Governor, and the Regents themselves at mandate relief and outlines some new ideas.

The Regents also call for exploring different approaches to school district organization to promote high performance, but offer only limited clues as to what might be done:

• Explore reorganization options for school districts on a broader level, including consideration of multi-district reorganizations; and
• Expand legislation to allow regional high school districts permitted by law only in Suffolk County to occur in the rest of the State.

Finally, the Regents also acknowledge the prominence of health insurance costs in driving overall school spending, but only point to existing cost savings models, such as consortia, and do not recommend new steps to help better manage health care costs.

Explaining the old Foundation Aid formula

A streamlined explanation of the 2007 Foundation Aid formula is that aid was calculated using “four moving pieces”  — multiplying a (1) standard per pupil amount by factors to adjust for differences in (2) pupil needs and (3) regional variations in the cost of providing education, then deducting an (4) expected contribution from local resources.

The standard per pupil amount was calculated based on an estimate of what it would cost a successful and efficient district to provide a sound basic education to a student without special needs.

Multiplying that figure times the regional cost and pupil needs factors and by the district’s total enrollment represented the estimated total cost of providing a sound basic education to its mix of students.

That sum was then reduced by an expected local contribution.  Districts were allowed the more favorable of two methods for calculating their local share.

One calculated the local share based on what the district would raise from an “expected local tax rate.”  The original expected rate was $16 per $1,000 of property value.

The other used New York’s traditional “aid ratio” approach, which calculates a percentage of cost to be paid by a district out of local resources.  The percentage share rises as district wealth increases.

The standard expected tax rate was adjusted by an “income wealth index” which compared the district’s adjusted gross income (of residents) per pupil to the state average.

Applying the IWI raised or lowered the expected tax rate, within limits, based on whether the district’s income per pupil was above or below the state average – a below average income district had its expected local contribution lowered, wealthier districts were expected to contribute more.

In contrast, the aid ratio method calculated a percentage share of cost for each district based on the ratio of its property wealth and income per pupil compared to state averages, each weighted at 50 percent.

Districts with below average wealth were expected to pay a lower percentage of costs from local resources, while wealthier districts were expected to pay more.

Finally, during the initial four-year phase-in period, all districts were promised annual 3 percent increases in Foundation Aid over the prior year, with the first year based on what districts received in total from the 30 previously separate aid categories consolidated into Foundation Aid.

Large increases in Foundation Aid were enacted for two years — $1.1 billion in 2007-08 and $1.2 billion in 2008-09.  But the formula has been frozen for the past three years.

]]> http://blog.nyscoss.org/2011/12/15/hitting-the-reset-button-on-school-aid/feed/ 4 http://blog.nyscoss.org/2011/12/09/debating-school-district-consolidation/ http://blog.nyscoss.org/2011/12/09/debating-school-district-consolidation/#comments Fri, 09 Dec 2011 17:31:45 +0000 Robert Lowry http://blog.nyscoss.org/?p=3062 State Education Commissioner John King has sparked a debate over school district consolidation…

First some humor, at least an attempt:

The CEO of a failing baby food company calls a meeting of senior corporate executives and leads off, “I don’t understand why we are losing money.  We use the best ingredients.  We spend the most on advertising.  We have a great marketing strategy.  We have a great delivery system.  We even have the most attractive packaging.  Why aren’t we selling more dog food?”

Silence.

Finally, the most junior executive speaks up from a distant corner of the room, “Babies don’t like it.”

The point?

Voters also often don’t like something it is presumed they should like – school district consolidation.

Over the past few weeks, Education Commissioner John King has spoken of the potential benefits of school district consolidation in stops around the state, and in a televised interview (the school discussion begins 10 minutes in).

Here are reports on the Commissioner’s observations from the Mid-Hudson Valley, Long Island, and Westchester County.

The Commissioner has stressed that broader consolidations, more than just a pair of districts, but perhaps countywide school systems, could better support comprehensive learning opportunities for all students, enhance administrative efficiency, and improve funding equity.

He has stressed that the greatest opportunities for savings would probably come from school district mergers downstate.

But current law generally gives the final say to local voters, with a requirement that voters in each separate district give their approval.  Over the past decade or so, fewer than a quarter of studied mergers have come to pass.

This past week, voters in Oppenheim-Ephratah rejected a proposed merger with Saint Johnsville, whose voters gave the proposition overwhelming support.

Superintendents of both districts expressed discouragement with the outcome.

Here are some observations about school district consolidations:

♦ There are some places upstate where superintendents are strong supporters of consolidation – because they see districts are running out of kids and they cannot offer comprehensive high school programs and consolidation is geographically feasible.

♦ Generally, consolidations have not produced upfront savings, because reductions in administrative costs are more than offset by the practice of leveling up compensation of the merged workforce.

♦ Savings in upstate rural districts are likely to be especially limited because they already often very lean administratively.

♦ Merging combinations of small, poor school districts would result one larger poor district, providing only a temporary break from deeper structural challenges in school finance.

♦ Everyone wants to “marry-up,” but no more than half the districts can.  All districts would prefer to merge with a more affluent neighbor, to share the neighbor’s wealth and lower tax rates for their residents.

♦ There are legitimate concerns about accelerating the decline of rural communities from closing schools.

♦ School district consolidations are also controversial because they can affect the most consequential financial decision most families make — where to buy a home.  Schools systems often are a critical consideration affecting home values.

♦ In some places regional high schools should be authorized while allowing districts to maintain their elementary schools, this would preserve at least some community schools as well as shorter bus rides for younger children.

♦ There is already a lot of activity aimed at sharing and consolidating administrative and other overhead functions.  These don’t raise concerns about direct impacts on children or losses of community identity.

♦ In downstate regions, typically there have not been the steep enrollment declines found upstate.  But these are areas where districts tend to be more geographically compact and they may realize more administrative savings from consolidation.

♦ Consolidation among smaller downstate districts could also improve funding equity in these areas.  There are also nasty demographic issues in some cases, however.

♦ There are other states with comparable numbers of districts which don’t spend what we do, so the number of districts we have does not fully explain our high overall per pupil spending.

♦ As a cost saving strategy, “the juice may not be worth the squeeze” with consolidation.  If we merge a bunch of small districts, the aggregate savings, by definition, will be small.

♦ Focusing primarily on school district consolidation diverts attention from other actions which may yield more immediate benefits for sustaining student opportunities or managing taxpayer costs.

The bottom-line on the debate, however, is that voters generally have the final say under existing law and they have opposed consolidations, more often than not.

So if one believes that voters are too often making the wrong decision on whether or not to consolidate their local school systems, then that begs the question, what should be done?:

♦ Nothing — New York’s strong tradition of local voter control is justified;

♦ Make the choice clearer, by somehow providing better information to voters;

♦ Make the choice more compelling, for example, by strengthening incentives or by threatening reduction in state aid if a state-endorsed merger is not locally approved; or

♦ Take the final decision away from the voters in some cases.

If one favors more aggressive state authority, then what criteria should be applied and what procedures should be followed?

As criteria, simple enrollment cut-offs don’t work. Some of the smallest districts measured by enrollment are among the largest measured in square miles.

For process, the Education Department could be authorized to order consolidations, or to recommend them with either a streamlined process for approval, or consequences if not locally approved.

Or the state could follow the the military base-closing model, empowering a special commission to develop a plan for school district consolidation which the Legislature would vote up or down, without change.

The Council has not adopted  positions on what, if anything, should or should not be done to support actual school district consolidation.

This past August, the Onondaga-Cortland-Madison BOCES held a one-day conference on consolidation.  OCM BOCES has a website with many good pieces of background information on the process now, and research on the effects of consolidation.

The agreement improves the outlook for School Ai in next year’s state budget.

The centerpiece is a proposal to lower personal income tax rates for 4.4 million New Yorkers with incomes up to $300,000, raise rates on those with incomes greater than $2 million, and generate an estimated $1.9 billion in revenue for the state.

Under the agreement, for couples making more than $2 million annually, the new rate would be 8.82 percent, lower than the 8.97 percent due under a continuation of higher rates enacted in 2009, but more than the 6.85 percent they would pay upon the scheduled expiration of those rates after December 31.

The Governor had steadfastly opposed a so-called “millionaire’s tax” which was estimated to promise roughly $5 billion in revenue for the state.

But in video remarks the Governor said,

…we need revenue. As a matter of simple math, there is not an intelligent or productive way to close the current gap without generating revenue. The gap is just too large and it goes on for too long.

While I am against higher taxes and I believe our long-term economic future for this state is enhanced by in fact lowering taxes to make us more competitive, the deal with this emergency, short-term we do need additional revenue.

If I were to close the entire gap by budget cuts it would decimate essential services doing real harm to the State’s economy and strangling local governments all across this state.

The Governor has responded thoughtfully and resourcefully to changing circumstances.  The fiscal conservatism he has exhibited to this point unquestionably strengthened his standing to lead this change now.

The package says nothing about School Aid funding for next year.  But it would absolutely improve the state’s capacity to pay for School Aid.

In his video remarks, the Governor said that the state’s projected deficit for next year is $3.5 billion, equivalent to roughly 5.8 percent of projected spending.

That deficit figure assumes an $805 million (4.1 percent) increase in School Aid, the balance of the unique two-year appropriation for School Aid included in this year’s state budget.

But under the state constitution, governors are required to recommend a balanced state budget to the Legislature each year.

If the Governor sought to close the gap entirely through cuts, and the cuts were allocated in proportion to each area’s share of total spending, then School Aid would need to be cut by more than $500 million.

The extension of the millionaire’s tax, as tenaciously advocated by Speaker Silver over the past year, would generate an additional $5 billion in revenue.

A $5 billion revenue boost would obviously do more for the state’s capacity to fund School Aid than the agreed upon $1.9 billion, but $1.9 billion more revenue is better than zero.

The scheduled $805 million School Aid increase would be partly diluted by the loss of federal Education Jobs Fund.

But it would still be a better starting point than any of past three Governor’s budgets, all of which proposed reductions.

It would even be a better end point than the last three enacted budgets.  The last two imposed year-to-year cuts, and the 2009-10 budget increased total aid by 1.9 percent while freezing Foundation Aid and other categories.

Prior to recent deterioration in the state’s financial outlook, both Senate Leader Skelos and Assembly Speaker Silver had said they looked at an $805 million increase as a base they anticipated would be improved upon.

Yesterday’s agreement does not address how School Aid will be distributed in 2012-13.  That will be resolved through the regular state budget process, commencing on January 17, the deadline for the Governor to submit his budget proposal.

In a post last week, I explained some of the considerations for School Aid next year arising from projected growth under current law formulas totaling $316 million.

Assuming no change in current law formulas and $805 million overall School Aid growth, the state would then have $489 million to allocate as increases, through a reduction in the Gap Elimination Adjustment, an increase in Foundation Aid, some combination of those two actions, or other means, for example.

The package also includes $50 million for flood relief grants and a reduction in the Metropolitan Transportation Authority payroll tax.  The pieces are described at the end of the leader’s news release.

A bit more detail on the MTA payroll tax reduction is available here.

It is now being reported that Governor Cuomo is contemplating changes to the state’s tax code to increase rates for higher earning New Yorkers, reduce them for lower income taxpayers, and generate more revenues for the state.

In two radio appearances yesterday, the Governor acknowledged considering the idea, but refused to be pinned down on whether his state budget for 2012-13 would include such a proposal.

The New York Times summed up the Governor’s comments, “On Wednesday, Mr. Cuomo affirmed his opposition to a state millionaires’ tax, but declined to say that he would not seek any tax increases in the legislative session that begins in January.”

Governor Cuomo has stressed that he sees budget deficits as a “symptom,” explaining “The illness is the economy going south.”  He added, “I have not decided on the economic program for the state, part of which will be how do you use the tax code to create jobs.”

The deadline for submission of the Governor’s budget proposal is January 17.

Budget Forecasts
Before the Thanksgiving holiday, the Governor’s Budget Division released its Mid-Year Update on the state’s financial plan, followed by revenue and partial expenditure forecasts issued by the Assembly and Senate fiscal committees.

The Budget Division report concludes that a $350 million gap in the current year state budget has opened-up since its first quarter update.  That report also now estimates that the structural deficit for the next fiscal year to be between $3 billion and $3.5 billion.

To give some sense of perspective, the current year $350 million deficit is equivalent to 0.6 percent of expenditures, while a $3.25 billion deficit would equal 5.4 percent of projected expenditures for 2012-13.

Both the Assembly Democrats and Senate Republicans were a bit more positive than the Governor in their revenue projections for the current year, with the Assembly coming in $48 million higher and the Senate $286 million higher.

At this time, it is not expected that the Legislature will return to Albany for a December special session for deficit reduction exercise.  The Governor said he would not summon the legislature without an agreement, just for “theater.”

For now, the relatively small size of the current year deficit and the fact that both legislative majorities were more positive in their near-term revenue forecasts suggest a December special session is unlikely.

UPDATE(12/2/2011):  The New York Times reports

Facing an increasingly worrisome budget outlook, Gov. Andrew M. Cuomo and legislative leaders are in negotiations to return to Albany for a special session later this month, an official briefed on the negotiations said on Thursday.

Lawmakers would return to vote on ways to offset a shortfall caused by lower-than-expected tax collections, according to the official, who spoke on the condition of anonymity because the negotiations were still in the early stages.

…

The official said that the negotiations were being conducted by aides, and have not yet directly involved Governor Cuomo; Dean G. Skelos, the Senate majority leader; and Sheldon Silver, the Assembly speaker.

“These are preliminary discussions in advance of additional revenue numbers coming in next week,” the official said.

Looking at the next fiscal year, however, the Assembly is more pessimistic, estimating all funds revenues will be $235 million lower than the Governor, while the Senate essentially agrees with the executive forecast, expecting revenues to be $17 million than the Governor’s Budget Division.

My biggest fear would be a repeat of the revenue “free-falls” the state experienced in 1990-91 and 2008-10, where each updated forecast lowered the state’s revenue estimates.  For example, over the span of one year, the projected structural deficit for the 2009-10state fiscal year more than tripled, from $5 billion to $17.3 billion.

School Aid and the Deficits
To compile its comprehensive surplus/deficit projections, the Governor’s Budget Division must make assumptions about changes in every state revenue source and expenditure item, including School Aid.

For 2012-13 School Aid, the executive assumes an increase of $805 million, or 4.1 percent.  This is the balance of the unique two-year appropriation for School Aid enacted in this year’s budget.

A key point is that the Governor is required to propose a balanced budget.  So while state law calls for an $805 million School Aid increase, the state constitution requires the Governor to close a projected deficit of $3.25 billion.

If the gap were closed entirely by spending reductions, and each expenditure took a cut proportionate to its share of total general fund spending, School Aid would decrease by over $500 million, instead of increasing by $805 million.

The current year budget also includes a two-year appropriation with a funding increase for Medicaid.  In addition, collective bargaining agreements with the two largest state employee unions include qualified “no layoff” pledges.

It’s hard to see how all these spending expectations could be met without action to generate more revenue for the state.

Current Law Estimates of School Aid for Next Year
By law, the State Education Department is required to compile, update and release a database of School Aid estimates at specified intervals throughout the year.  The first estimates of aid for 2012-13 under formulas now in law (“current law”) were due in mid-November.

One factor helping the near-term state budget picture is that estimates for total formula School Aid for 2011-12 are $143 million below what was assumed when the state budget was passed last March.

I don’t recall such a large shortfall in my 23 years of involvement with School Aid.  Over-runs have that magnitude have been common.

The steepest decline (9.2 percent) in 2011-12 aid estimates is in Private Excess Cost Aid, which reimburses districts for the cost of student placements in private special education programs.

The initial current law aid estimates for 2012-13 show School Aid rising by a statewide total of $268 million.  This total includes only the aid categories presented on School Aid “runs.”

These estimates assume no change in Foundation, Universal Prekindergarten, and High Tax Aids, or in the Gap Elimination Adjustment.

The growth in expense-based aids is well below historical patterns — $253 million, instead of the expected $350 to $400 million, suggesting that districts have scaled back in these areas.

The expense-based aids include Building Aid, Transportation Aid, Excess Cost Aid (for special education), and BOCES Aid and its analogs for districts not part of a BOCES.

Factoring out big jumps in Building Aid for Buffalo and Syracuse, changes in expense-based aids tend to reflect variations in district wealth, with more affluent districts anticipating larger percentage increases in these aids.

Total School Aid is expected to increase by $316 million under formulas in law now, after adding $50 million for the Governor’s new performance incentive and management efficiency grant programs plus changes in other programs funded through School Aid.

Assuming the $805 million increase and no structural changes to the expense-based aids or other categories, the state would then have $489 million to allocate as additional aid.

Options could include increasing Foundation Aid, reducing the Gap Elimination Adjustment, some combination of those two, changes in other categories, or creating new formulas.

Here are a few charts on state budget deficits and School Aid projections from a presentation I did for school business officials earlier this week.

Here is an excel spreadsheet which will calculate 2012-13 “current law” School Aid for each individual district.

Below is the text of the news release announcing the agenda.  At the end of the release is a link to a more detailed explanation of the agenda.

Update:  Here is a 12-minute video clip video of Bob Reidy discussing the agenda with Gannett News Service reporter Jon Campbell.

For Immediate Release: November 1, 2011

Contact: Andrew Gregory

518-689-7208 (Office)

518-424-3245 (Cell)

agregory@corningplace.com

New Statewide Coalition Unveils Let New York Work: A Common Agenda for the Common Good

Business, local government and education leaders introduce six-point plan to achieve mandate relief.

ALBANY, NY – An historic coalition of eleven prominent business, local government and educational organizations launched a new, comprehensive initiative to advance significant mandate relief. The effort, Let New York Work: A Common Agenda for the Common Good, consists of six key measures that will provide relief from mandates faced by all New Yorkers.

The agenda’s main points include:

• Make the pension system predictable and affordable – The state should offer two retirement options to new employees – a reduced defined benefit plan or a new defined contribution plan that is controlled by the employees and does not weigh down taxpayers.

• Redefine compulsory arbitration – A number of amendments are needed to the state’s compulsory arbitration statute that will benefit local municipalities and taxpayers such as: defining the ability to pay; prohibiting consideration of non-compensation issues; limiting access to binding arbitration; and, adding transparency to the arbitration process.

• Reduce the costs of construction on public/private projects – The state should enact a number of measures that will spur building and development such as: supporting alternative project delivery methods like design build; increasing the Wicks Law threshold across the state; enacting the Public Construction Savings Act (S.4121/A.7855); and making common sense changes to the antiquated Scaffold Law.

• Freeze step increases when contracts expire – Due to the state’s Triborough Amendment, all public employees’ pay continue to increase under an expired contract, placing additional burdens on school districts and municipalities.

• Establish minimum health insurance contribution level for employees and retirees – Employers should cover no more than 85 percent of a single healthcare premium or 75 percent of a healthcare premium for families or retirees.

• Prohibit new mandates – The state should not impose any future mandates on municipalities, school districts and taxpayers.  Enacting the Unfunded Mandate Reform Act (S.5379/A.8150) and requiring a super-majority to add new unfunded mandates would be beneficial.

Following the passage of the 2-percent property tax cap earlier this year, members of the newly-formed coalition recognized the need for a unified pro-mandate relief voice leading up to the 2012 legislative session.

“Just as we faced the property tax cap head on, we must focus on enacting meaningful mandate relief,” said Brian Sampson, executive director of Unshackle Upstate.  “Making our communities more affordable and preventing the insolvency of local governments and school districts needs to be our top priority.  Doing so will help to stabilize the state’s economy and provide a sense of security for taxpayers.”

Representing prominent business, local government and education organizations across the state, the coalition’s leaders strongly believe that mandate relief is essential to the future of New York’s economy.

“In order to rebuild our economy and our state, we must reduce costs on job creators, taxpayers, local governments and school districts alike. The comprehensive reform agenda that a historic and unprecedented coalition of organizations representing all of these entities is advancing today is a critical and common sense step in that direction,” said Mike Elmendorf, President and CEO of the Associated General Contractors of New York State.

“Real mandate relief is part of a broader goal of controlling total state and local spending, and lowering the combined tax burden on individuals and businesses,” said Heather Briccetti, acting-president and CEO of The Business Council of New York State, Inc. “A more competitive cost climate is essential for promoting new investment and new job growth in New York. The enactment of a 2 percent cap on the growth of property taxes was the first step. By working together, members of this newly-formed coalition hope to rein in the high cost of state mandates and provide much-needed fiscal relief to municipalities.”

“Outdated, only-in-New-York laws, like labor law 240/241, are actually unfunded mandates on our municipalities,” said Tom Stebbins, executive director, Lawsuit Reform Alliance of New York. “Our local communities pay for these unnecessary laws in the form of inflated legal settlements, skyrocketing insurance rates and prohibitively high construction costs. We need to free our municipalities from these antiquated laws in order to make New York a better place to live and do business.”

“This is not the first tough year for schools.  We have had three years of state aid cuts and freezes,” said Robert Reidy, executive director, New York State Council of School Superintendents. “With the prospect of operating under a tax cap it is imperative schools get help to preserve services for children. Immediate and significant mandate relief is necessary to maintain quality services for all children.”

“New York is at a crossroads and action is needed now to stem the high costs of mandates on local governments and school districts. These mandates translate into ever increasing costs for agricultural businesses and create a very unfavorable environment for farm retention and growth. While the enactment of the property tax cap helped solve the first half of the problem, New York must address the cost drivers for local governments and school districts to truly let New York work,” said Jeff Williams, Manager of Governmental Relations for New York Farm Bureau.

“Enacting the property tax cap was the first step in drastically changing the future for New York’s small business owners and taxpayers. This coalition of business, school and municipal leaders stands here today advancing the critical second step of mandate relief. This agenda will drastically reform our business climate, by addressing many of the key cost drivers that have driven businesses and people from New York’s borders, and provide significant relief to communities and school districts across the state from public pension and health benefit costs that are rising at an unsustainable rate. We urge the Governor and legislative leaders to heed this call of business owners and taxpayers, setting New York on a course for a new dawn of prosperity,” said Mike Durant, New York State Director of the National Federation of Independent Business

“New York’s local government cost structure, in its current mandate-driven form, cannot support real and sustainable property tax relief. A property tax cap, alone, will not change this fact,” said Peter A. Baynes, executive director of the New York Conference of Mayors. “Yet, with the significant mandate relief our broadly-based coalition is advancing today, there is an opportunity to finally change this destructive equation and provide the property tax relief New Yorkers desperately need.”

“Now is the time to finish the job of building meaningful and lasting property tax relief,” said Duncan MacKenzie, CEO of the New York State Association of REALTORS.  “The cap approved earlier this year provided the framework for ending the cycle of property taxpayer abuse. To fulfill the promise of sustainable tax relief, this diverse coalition calls on state lawmakers to rethink every existing mandate and refrain from any further unfunded requirements on our schools and local governments. While the tax cap issue created divides between business and local taxing entities, mandate relief does not.”

“As school districts continue to grapple with the worst fiscal crisis in a generation, they need a new set of rules. The Let New York Work proposals, if enacted, would result in dramatic improvements to the fiscal health of our schools,” said Timothy Kremer, executive director, New York State School Boards Association. “They would also result in a more viable system of operating in this heightened era of fiscal responsibility and taxpayer fatigue. If we are to simultaneously address the fiscal crisis and advance academic achievement we must focus resources on those things that improve results for kids.”

“The Westchester County Association is very pleased to be a part of the Let New York Work coalition. We have long believed that once the tax cap was passed, there would be a collective outcry for mandate reform,” said Bill Mooney, president of the Westchester County Association. “Having the business community joined by local government and school groups with one common agenda, sends a powerful message to our elected officials in Albany that meaningful and significant mandate relief must be achieved in 2012.”

Following today’s release of the Let New York Work agenda, the group will continue to advocate for the passage of the agenda during the 2012 legislative session.

To view the complete version of the Let New York Work agenda, click here.

It has generated a lot of attention.

I was invited to discuss the report with Liz Benjamin on Time Warner cable’s Capital Tonight statewide television show.

Superintendent Neil O’Brien of Port Byron (Cayuga County, west of Syracuse) and I discussed it with Susan Arbetter on the statewide Capitol Pressroom radio show.

It received a good amount of print coverage.  I think Gannett News Service did the best piece, running in many of their papers.  See this version from yesterday’s Rochester Democrat and Chronicle as an example.

A Sunday editorial in the Albany Times Union said, “The superintendents’ report should be required reading.”

UPDATE:  And on Wednesday (October 19), as reported in the New York Daily News, U.S. Senator Chuck Schumer cited our report in advocating for part of the President’s jobs plan.

The editorial concluded by recommending a dialogue between the Cuomo administration and school officials over what a “new era” of tax cuts and lower school costs should be like.

A point I stressed early in every media conversation is that while Governor Cuomo has been in office for less than 12 months,schools have been dealing with tough budgets for three years.

With some reporters, I said that if this had been the first difficult year, there would be a valid point – draw down reserves, make cuts away from the classroom, do what you have to do get through the year, and hope things will get better.

But many districts already had already taken those steps – in 2009-10 and 2010-11, as well as in 2011-12.

The report tries to describe the budgeting choices schools have been making over the past three years, some of the consequences of those choices, and concerns about future financial prospects.

It also describes some of the hard limits on school budgeting options, including, for example, how spending is distributed now, the pressures of caused by benefit costs, and limits on the ability of districts to cut some areas any further.

The report does not try to define possible solutions.  That has to come next.

Our silence on solutions led some reporters and others to fill the vacuum and interpret our report as a call for additional state aid.

But the report also stresses a second set of financial pressures besides state aid cuts and freezes which also began before Governor Cuomo took office – surging pension and health insurance costs.

Additional state aid has to be part of the solution – especially for poor districts.

During my television interview, host Liz Benjamin told me that during a news conference that day, Governor Cuomo said that he expected to follow through on the two-year School Aid funding plan in this year’s state budget with a 4 percent increase next year, despite recent bad economic news.

For now, that would not tell any one district how much to expect, but it would certainly be a much better starting point than what schools have been through in any of the last three years.

Whatever might happen on state aid, our sense is that our members see the need to be more aggressive in seeking help in managing the cost side of their districts.

We have regularly asked our members, “What actions could the state take to help your district reduce or control costs?”

But now we should focus on a second set of questions as well, not just how to cut costs, but how to achieve better outcomes for the cost:

“How can our schools produce the learning our students need with the resources our taxpayers can provide?” and “What does the state need to change to help advance that goal.”

The report, titled At the Edge, is available here.

A presentation summarizing the survey is here.

A key theme of the report is that although schools absorbed one of the biggest cuts in state aid ever in 2011, and now face operating under a property tax cap, this was not the first tough year.

State aid was also cut in 2010-11 and most aid was frozen in 2009-10.  At the same time, schools have had to absorb steep increases in pension and health insurance costs.

As a result, going forward, schools find it harder and harder to make cuts that don’t cut jobs or hurt student services.

A spokesman for Governor Cuomo responded to the report by saying, “The schools and school districts chose to make these reductions in the classroom rather than dip into their reserves, cut back on the bureaucracy or reduce the growing number of administrators.”

But the report plainly contradicts these claims.

Nearly 90 percent of superintendents are concerned by the extent to which their districts are already relying upon reserves to fund operating costs.  Without the reserves used this year, their districts would have had to cut spending by over 4 percent, raise taxes by an additional 7 percent, or adopt some combination of the two.

The report also shows that districts cut administrative positions more steeply than teaching jobs.  Superintendents reported eliminating an average of 7.5 percent of administrator positions in 2011-12, compared to 4.3 percent of their teaching staff.