Archive for February, 2009

New York Times reports on Comptroller audits of school districts

February 27th, 2009 by Robert Lowry

Today’s New York Times reports on the State Comptroller’s audits of school districts.  The article quotes several superintendents and me.

I assisted the reporter in identifying superintendents to speak with, although she independently contacted all those cited in the article.

I also noted to her that, my sense has been that, more often than not, the district audits have been well-received by school officials.  I added that they have had a positive effect in that school leaders have reviewed the audits of other districts and revised their practices even before their turn to be audited came up.

Here’s the passage quoting me:

Robert N. Lowry Jr., deputy director of the New York State Council of School Superintendents, said the audits have too narrow a focus because they look only at compliance rather than larger fiscal issues. For instance, he said, state law prohibits districts from putting more than 4 percent of their budget into a general reserve fund — a cap that school officials have said could hamper their ability to avert budget problems in the future.

“It would be helpful if state leaders like the comptroller would question some of these mandates and restrictions,” Mr. Lowry said. “If you do these audits and criticize districts for failing to comply with all these detailed requirements, it reinforces the presumption that they all make sense. In some cases, it would be missing the forest for the trees in terms of what would be most helpful to taxpayers.”

With the reporter, I did note that the district audits, by their nature, have a narrow focus and that the Comptroller’s Office must audit against what is the law, rather than what we might deem sensible.

My criticism is most pertinent to the programmatic audits, where the Comptroller exercises discretion in picking which programs or functions to examine and what benchmarks to apply.

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“Other” State Budget News

February 26th, 2009 by Robert Lowry

A lot of the New York State budget news this year starts in Washington — with the federal stimulus package.  We have a separate post today updating the stimulus news.  This post covers the rest of the story.

Consensus Revenue Forecast
As required by state law, on Monday representatives of the Governor, Assembly, and Senate met with prominent regional economists to discuss their economic forecasts and attempt to reach a consensus forecast of state budget revenues.  On Tuesday, they announced agreement.

Reflecting the continuing deterioration in the economy since Governor Paterson released his budget in December, the consensus is that the state will take in $1 billion less than estimated in the Governor’s budget.

In years past, the houses have been able to pay for some of their changes to governors’ proposed budget by predicting the state would take in more revenue.

This year, in contrast, legislative budget negotiations must start with finding over a billion in additional revenue or spending cuts, before Legislators can start adding to the Governor’s budget.

“Millionaire’s Tax”
Voter support for a tax increase on higher income New Yorkers seems to be growing, although Governor Paterson expresses reservations.  One variation is estimated to generate $6 billion by raising personal income tax rates for households with incomes in excess of $250,000 per year.

It can be expected that part of an income tax increase — if approved — would be used to avoid implementing some of the over $3 billion in tax and fee increases proposed by the Governor.

Next Steps
The injection of federal stimulus funds into the state budget process presents a unique complication, and one which is not fully shared by most other states.  Most states have more time to make decisions, with fiscal years that start three months after ours (July 1, not April 1).  As a result, New York’s planned distribution of federal stabilization funds may be incorporated into the state budget and School Aid without having been formally approved by U.S. Education Secretary Arne Duncan.

Uncertainty over how the federal funds might be used and how much might be coming has left rank-and-file legislators more uncertain than usual over how the state budget might be resolved.

This week’s consensus revenue forecasting exercise is one step in the state’s formal process of reaching an enacted budget.

The next step should be introduction and passage of separate “one-house” budget plans by the Assembly and Senate.  This is expected to happen the week after next – the week of March 9.  It’s not an absolute certainty that the houses will repeat this step, however.

The amount of detail presented in the one-house plans varies, from year-to-year, and between the houses.  In years past, the Assembly Democrats released at least district total School Aid allocations, while Senate Republicans did not.  This year we have a new Democratic majority in charge in the Senate and its leaders may take a different approach.

Whatever is included in the one-house budgets — if they are made public — will not be precise or dependable enough for districts to make firm budgeting directions, but it should give an indication of what restorations are likely to be made and what cuts may remain in a final state budget.

Prospects for an On-Time Budget
With the complication of the federal stimulus funding and the “newness” of Senate Democrats to majority status one might presume there are good reasons why the state could again miss adopting a budget before the April 1 start of its fiscal year.

But there are contrary considerations that might induce timely action.

First, for the first time in 35 years one party controls all three chambers – Governor, Assembly, and Senate.  Democrats will want to demonstrate their capacity to make state government work.

Second, there is a payoff for the state to enact a budget earlier rather than later — budget cuts and revenue increases go into effect sooner, enabling the state to realize the impact of its actions earlier and over more of its fiscal year.

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Stimulus Plan — still seeking answers; updated Title I allocations

February 26th, 2009 by Robert Lowry

School and state officials share many of the same questions about federal stimulus plan funding, generally boiling down to “how much, when, and what are the strings?”

State Stabilization Funds
For education, the single most clearly helpful element of the plan is the state stabilization fund, which will provide New York almost $2.5 billion in federal aid over two years expressly to avert cuts to education and higher education over the next two years.

The federal law authorizes governors to allocate their state’s shares of stabilization funds, but it seems likely that dividing up New York’s share will be done as part of the overall state budget due to be enacted by April 1, and not before.

Elementary/secondary education is expected to receive over well over 90 percent of New York’s education stabilization funds.

Updated District-by-district allocations
The U.S. Education Department has now posted district-by-district estimates of the increases in Title I funds to be provided by the federal stimulus plan.  These are two-year totals.

There has been conflicting information however, how much of the money will not be available until the second year, but it seems likely that at least one-half will be available in the first year.

The USDE estimates differ some from figures previously released by the U.S. House of Representatives Education and Labor Committee.  The Department numbers are still labeled “preliminary,” but coming from the administering agency, I would regard them as more on target.

The U.S. Department has not yet issued district-by-district IDEA estimates.

Title I, IDEA (special education), and some other education funding increases will be allocated directly by federal formula, leaving states no discretion.  This should result in sooner notification of district-by-district allocations but it is not clear when we might receive final, official estimates of all those allocations.

1st payments — 30 to 45 days
State officials are awaiting official guidance from the U.S. Education Department.  Education Week reports that U.S. Education Secretary Arne Duncan held a conference call with state education chiefs yesterday and advises that the first stimulus payments should actually be available within 30 to 45 days.

The paper also speculates that the first payments are likely to be “formula dollars” such as from the Title I increase, since the allocation formula is already in place.

Federal guidance — next week
Secretary Duncan also advised the state chiefs that written guidance will be issued next week.  It may not directly answer “how much” questions for school districts but should help both state and school officials understand limitations on how funds might be used and what will be required of successful applications.

There are conflicting interpretations of the extent of “supplement, not supplant” restrictions on the use of Title I and IDEA funds, for example.

Accountability demands
We have been hearing a lot about the volume of information that states and schools will be required to compile and report on their uses of stimulus funds.  For example, we can anticipate some requirement to identify the number of jobs created or saved.  Consistent with the President’s emphasis on “transparency,” much of the information may wind up on the website.

Vice President Biden joined the end of Secretary Duncan’s conference call with state education chiefs.  Both stressed that a lot will be expected from education.  The Secretary said, “We’re going to have a much higher bar than other folks [receiving stimulus money].  We need to create jobs, and we need to get dramatically better.”

Obviously there is some tension between, on one hand, providing increased federal support to offset state cuts and preserve jobs, and, on the other, expecting it to leverage dramatically better outcomes.

As we have explained previously, the state is to receive other significant general budget assistance from the stimulus plan.

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Some district-by-district estimates of stimulus $$$ now available

February 16th, 2009 by Robert Lowry

The U.S. House of Representatives Education and Labor Committee has made available district-by-district estimates of some of the funds in the federal stimulus bill passed by Congresss on Friday.

Estimates are available for Title I and IDEA (Individuals with Disabilities Education Act).  The sums are two year totals.  Bill language provides that half the funds will not be available until July 1, 2010.

These are preliminary estimates, not official allocations.

We will be seeking clarifications of maintenance of effort requirements and other restrictions on how the money may be used.

The stimulus bill will provide other funds to New York schools.  Potentially the most helpful will be the “state stabilization fund.”  Its purpose is to enable states to avoid or minimize cuts to education, higher education and other services.

On Saturday, Governor David Paterson issued a news release outlining New York’s shares of stimulus funds.  His office estimates that the state will receive $2.5 billion from the stabilization fund over the next two years for education and higher education.  Again, half the funds will not be available until July 2010.

District alllocations of stabilization funds will not be available for awhile.  The federal law will authorize and direct state governors to allocate funds between education and higher education, with first priority given to averting cuts and funding previously enacted formula increases.

To give a sense of magnitude, the stabilization fund will apparently give New York State roughly $1.25 billion for education and higher education to be used over the next year.  The statewide cut imposed by the proposed School Aid Deficit Reduction Assessment would be $1.1 billion and districts lose would $1.3 billion from the proposed freeze on Foundation Aid.

The stimulus bill provides additional funds for education and for general state budget relief.  These are described in the Governor’s news release.

President Obama plans to sign the bill on Tuesday.

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U.S. Education Secretary Arne Duncan praises AASA work on stimulus

February 13th, 2009 by Robert Lowry

Education Week reports that in a conference call with 500 school organization leaders yesterday, U.S. Education Secretary Arne Duncan singled out five individuals to thank them for their hard work on the stimulus package.  One of them was Mary Kusler – the Assistant Director for Advocacy and Policy of our national affiliate, the American Association of School Administrators.

Congratulations – and thank you – to Mary.

AASA has a concise chart summarizing the nationwide funding levels for education programs in the stimulus bill.

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Stimulus update

February 13th, 2009 by Robert Lowry

We cannot yet add much to what we have already reported on how the federal stimulus package expected to pass Congress today may benefit individual New York school districts.

The House has already passed the bill.

The State Education Department will work hard to get information out as promptly as possible — as will we.

As we have explained, the state stabilization fund is intended expressly to help states avert reductions in aid to schools and colleges– first, cuts from either 2008 or 2009 levels (whichever is greater) and then from levels promised under state aid formulas enacted by state law prior to October 1, 2008 (for example, new York’s Foundation formula).  Subject to this direction in the federal law, these funds are to be allocated by each state’s governor.  This will require some time to sort out.

Most other new aid — for Title I and IDEA (special education) will be allocated by existing federal formulas.

The federal stimulus legislation gives the State Legislature little or no role in directing where new education funds should go.  But a State Court of Appeals decision requires that federal grants to New York State be appropriated by the State Legislature.

In other words, the Legislature may not have authority to direct the funds, but must take the step of appropriating them before they can be legally spent.

Most probably, appropriations of federal stimulus funds would be made as part of the state budget due for the fiscal year starting April 1.

We would expect that allocations of the the Title I and IDEA funds to be available to districts soon — no state government action is needed to determine the allocations, only to appropriate the funds.

Again, allocation of the stabilization funds does require state action and presumably some approval by federal authority, so that will take longer.

It can be expected that the Legislature would want to factor the allocation of federal support — including stabilization funds — into its decisions on any further restorations of state education funding.

Governor Paterson has sent conflicting signals in his reactions to the stimulus plan.

The New York Daily News reported, “Gov. Paterson said the stimulus bill all but required him to restore a proposed $700 million cut in state aid to [New York] City schools – a whack that Schools Chancellor Joel Klein had warned could cost thousands of teachers their jobs. “We have no choice [but to restore the funds], and we are glad we have no choice,’ Paterson told reporters during a late-day conference call with [U.S. Senator Chuck] Schumer.”

As reported by the Buffalo News, Senator Schumer said that “This [the stimulus funds] should cover most, if not all, of the state funding gap this year.”

On the other hand,the Governor has said that the state needs to follow through with some budget cuts:  “We’re not going to reduce our requests for [spending] reductions. To just start opening up the door for us to go back to our addictive conduct, I’m not going to let that happen.”

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Preliminary details on the stimulus plan agreement in Washington

February 12th, 2009 by Robert Lowry

Yesterday, U.S. Senate and House leaders announced agreement on the outlines of a final federal stimulus package.  The agreement came quickly, just one day after the Senate had passed its version of the legislation.  The House expects to pass the bill tomorrow (Friday).

Details have been slow to emerge.  So far, however, the reported funding levels for education programs appear encouraging, even though the overall price tag for the plan is lower than for either of the plans passed by the houses.

The state stabilization fund would be funded at $53.6 billion over two years, part-way between the House ($79 billion) and Senate proposals ($39 billion).  Specific funding for school construction is omitted from the final package, but the agreement reportedly would allow states to use some of the stabilization funds for construction.

A fact sheet from House Speaker Nancy Pelosi explains that the stabilization fund would include $40.6 billion to be allocated by states to local school districts using existing state funding formulas.  Another $5 billion would be provided to states as incentive grants for meeting key performance measures, and $8 billion would be available to states to for other high priority needs, which may include education.

Although the stabilization fund would get less than in the original House plan, and would be expected to cover some school construction projects, the amount directed to schools could be comparable, depending on bill language – which is not yet available.  Bills passed by each house would have allowed states to use more of the stabilization funds for non-education priorities.

Preliminary estimates suggest that New York State could receive $2.5 billion over two years from the stabilization fund.  From the preliminary summaries it is not clear whether some of this funding would used to maintain higher education support, as well as school funding.  Prior bills did so.

Without bill language, we cannot advise how the stabilization funds might be allocated within New York State.  The bills which previously passed the houses would have provided that the funds are to be allocated by the governor of each state, first to provide the amount of funds through the state’s principal school aid formula needed to maintain state support at 2008 levels.  The Senate bill went on to add a provision to use funds to support previously enacted state formula increases – such as New York’s Foundation formula.

Increases for Title I and IDEA (special education) are modestly reduced from the levels in the previously passed bills – basic IDEA grants would be $11.7 billion (nationwide), down from $13 billion; and Title I grants would be $10 billion, down from $11 billion.  Previously released district-by-district estimates would presumably be proportionately higher than what would be forthcoming from the enacted plan.

The agreement also preserves an $87 billion increase in the federal share of Medicaid costs.  States may use this funding as general budget relief.  Senator Chuck Schumer estimates that this will provide $8.4 billion over two years for new York State, plus $3.6 billion to counties and New York City.

Category: National Policy | 1 Comment »

Assembly more pessimistic on revenues than Governor; “millionaire’s tax” getting consideration

February 12th, 2009 by Robert Lowry

Yesterday, Assembly Democrats released their economic and revenue forecasts.  They believe the Governor is too optimistic in his predictions.

The Assembly forecasts that state revenues for 2009-10 will be $1 billion less than in the Governor’s forecast, making the projected deficit for next year correspondingly greater – $14 billion, not $13 billion.

The Assembly forecast presents a collection of gloom-inducing facts and predictions about the severity of the national recession:

  • The January unemployment rate of 7.6 percent is the highest in 15 years.
  • 1.8 million jobs have been lost in the last three months alone.
  • The predicted 1.9 percent decline in Gross Domestic Product would be the first overall decline in economic growth since 1990-91 and would tie 1982 for the steepest since World War II.
  • Personal consumption spending is expected to decline by 1.6 percent for 2009, the first yearly decline since 1980.
  • Before the recession ends, employment is projected to decline by 3.8 percent, or 5.3 million jobs and consumer spending is expected to drop by 2l.7 percent. Both would be the worst declines of any recession since World War II.
  • New York State is expected to lose 268,000 jobs – the double the decline of the 2002 recession.
  • Wall Street’s share of total wages paid in the state is projected to decline from 24.4 percent in 2007, to 19.2 percent by 2010.

The Assembly’s forecast is significant, not just because it is lower than the Governor’s, but also because one of the ways that the Legislature has almost always paid for the items it adds the governors’ proposed budget is to predict the state would take in more money than the executive budget assumed.

The Legislature has the advantage of making its forecast a month or two after the Governor.  In years past, its optimism has almost always been more than borne out.  In 10 of the 12 years between 1996 and 2007, the state took in even more revenue than projected at the time the Legislature passed its budget.

With revenues now headed in the opposite direction, the Legislature needs to find new sources of revenue to pay for additions to School Aid and other items.  The two most often cited targets are the federal stimulus package and an increase in the state personal income tax on higher income New Yorkers.

Look for a future posting on latest developments in Washington.

Assembly Speaker Sheldon Silver has expressed support for such a tax increase and support seems to be widespread among his Democratic colleagues in the Assembly.   Earlier in the week,  collection of Democratic State Senators introduced a proposal estimated to raise $6.2 billion by raising the maximum state rate from 6.85 percent to 8.25 percent for households with annual incomes above $250,000, to 8.97 percent for households above $500,000 income, and to 10.3 percent on those with incomes above $1 million.

The leader of the Senate Democrats, Malcolm Smith, indicated he was not convinced that a tax increase is the right course.

Governor Paterson has left the door open to an income tax increase, but indicated he would want to see substantial cuts in spending first.

If an income tax increase is enacted, it  needs to be recognized that there would many claims on the revenue — not just School Aid.  Some of the revenue would go to avoid doing some of the regressive tax and fee increases in the Governor’s proposed budget.

So the income tax increase could be helpful, but it would close only a small share of the state’s huge projected deficit.

In 2003, the Legislature approved increases in state income and sales taxes over the vetoes of Governor Pataki.  If Governor Paterson were to veto an income tax increase, the prospects for an over-ride appear slim.

In 2003, the then Republican majority in the State Senate had the cooperation of Democratic Senators willing to over-ride vetoes by a Republican Governor.  Now in the minority, the Senate republicans have expressed opposition to a state income tax increase.

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Senate advances stimulus plan

February 10th, 2009 by Robert Lowry

On Tuesday, the U.S. Senate passed its version of a federal stimulus bill. Senate leaders had struggled to gain the 60 votes needed to close debate and secure passage.

The bill passed with 61 votes – 56 Democrats, three Republicans, and two independents.

To gain the votes, Senate Democrats were forced to cut several education initiatives from their original proposal, which closely resembled the version previously passed by the House of Representatives.

Now that both houses have passed bills, a conference committee will be convened to resolve differences. Leaders are aiming to have a bill pass both houses and on President Obama’s desk by Monday – Presidents’ Day.

The cuts in the Senate bill eliminated all funding for school construction and cut the state “stabilization fund” from $79 billion to $39 billion. The purpose of the stabilization fund is to enable states to reduce or avoid budget cuts, with priority given to education and higher education.

The Senate bill preserved nearly all the planned increases in federal aid for Title I services to disadvantaged students and special education pursuant to the Individuals with Disabilities Education Act. The Senate bill would increase IDEA funding by $13.5 billion nationwide, as would the House, and increased Title I aid by $12.4 billion, $600 million less than the House.

Our national affiliate, the American Association of School Administrators, has a good side-by-side comparison of the spending levels for education programs in the two houses’ bills.

The decision to cut the stabilization fund while essentially preserving the Title I funding is puzzling, on at least two fronts.

First, the stabilization fund would be more useful in preserving jobs in schools. Maintenance of effort requirements for the Title I increase would largely preclude its use for that purpose.

It’s also puzzling that the compromise resulting in this funding arrangement was brokered by a Democratic Senator from Nebraska and a Republican from Maine – two states that are not major beneficiaries of Title I funding.

Both houses do propose increases in the federal match for Medicaid. This increase is envisioned as providing general fiscal relief to states, enabling them to avert either tax increases or spending cuts – in health care and in other areas.

The Buffalo News summed up the impact of the Senate bill with an article titled, “New York loses millions, in Senate stimulus bill.” But the National Education Association estimates that New York would lose over $3 billion compared to the House plan due to the Senate’s cut to the stabilization fund and its elimination of school construction funding.

Congressional Republicans have been critical of the spending components of the stimulus bill, favoring tax cuts instead.  But there are valid arguments for public spending.  Consumers are saving, not spending right now — taking money out of the economy.  So tax cuts may get saved as well.

We’ve calculated that there could be 18,000 or more school positions eliminated if the Governor’s budget is adopted, many through layoffs.  Keeping those people in the workforce, spending money could have a bigger economic benefit than some tax cuts, in addition to the benefits for schooling.

A generally conservative commentator warns that mass layoffs could harm teaching quality — because of the seniority rules in collective bargaining agreements often force districts to eliminate the jobs of recently hired teachers who may be more effective than veteran colleagues.

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Education and Unemployment

February 10th, 2009 by Robert Lowry

Last Friday, it was reported that the nationwide unemployment rate jumped from 7.2 percent in December to 7.6 percent in January. For the third month in a row, the nation lost over 500,000 jobs.

One striking note buried in the report concerns the connection between education and unemployment.  Here are the nationwide unemployment rates for from January for individuals with varying levels of education:

High school dropout:  12%

High school graduate, some college:  8%

Some college or associate degree:  6.2%

Bachelor’s degree and higher:  3.8%

The disparity is longstanding and did not emerge during this recession.

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