Financing a Sound Basic Education in New York

1
Financing a Sound Basic Education in New York

• William Duncombe
• Center for Policy Research
• Syracuse University
• Education Finance and Accountability Program
• http//cpr.maxwell.syr.edu/efap/

2
Impetus for Change the CFE Decision

• Judge Degrasse ruled
• The court holds that the education provided New
  York City students is so deficient that it falls
  below the constitutional floor set by the
  Education Article of the New York Constitution.
  (p. 4)
• The court also finds that the States actions
  are a substantial cause of this constitutional
  violation. (p. 4)
• With respect to plaintiffs claims under Title
  VIs implementing regulations, the court finds
  that the State school funding system has an
  adverse and disparate impact on minority public
  school children.. (p. 4)

3
Reforming the Finance System Will Require State
Action

• the State is ultimately responsible for the
  provision of a sound basic education (p. 114)
• In the course of reforming the school finance
  system, a threshold task that must be performed
  by defendants is ascertaining, to the extent
  possible, the actual costs of providing a sound
  basic education in districts around the State.
  (p. 115)
• Once this is done, reforms to the current system
  of financing school funding should address the
  shortcomings of the current system. (p. 115)

4
Organization of Presentation

• Estimating Costs of Adequacy
• Cost of Adequacy Results
• Effective Operating Aid Formulas

5
Method for Estimating Cost of Adequacy

• Select student performance measures.
• Estimate required spending to reach adequacy in a
  benchmark district.
• Estimate required spending in all districts
  typically by adjusting benchmark spending for
  cost differences across districts.
• This is the most crucial step in the process,
  because it will be most important determinant of
  school aid distribution.

6
Defining a Sound Basic Education (CFE decision)

• Productive citizenship connotes civic
  engagementcapable voter needs the intellectual
  tools to evaluate complex issues. (p. 14)
• a capable and productive citizen is capable of
  serving impartially on trials that may require
  learning unfamiliar facts and concepts and
  decide complex matters that require the verbal,
  reasoning, math, science, and socialization
  skills that should be imparted in public
  schools. (p. 14)
• Beyond voting and jury service, productive
  citizenship implies engagement and contribution
  in the economy as well as public life. This is
  defined as foundational skills to obtain
  productive employment. (pp.14-15)

7
Translating CFE Decision into Possible Standards

• Determine what subjects, and what levels of
  student performance are required to produce
  productive citizens
• School accountability system developed by SED
  provides a framework for considering alternative
  standards.
• SED developed four levels of performance for 4th,
  8th and Regents Examinations.
• Level 1 serious academic deficiencies
• Level 2 require extra help to meet standards
• Level 3 meet standards, and should with growth
  pass Regents
• Level 4 exceed standards and moving to high
  performance
• SED developed a weighted average of percent of
  students in Level 2, 3, and 4. Level 1 students
  were weighted at zero.

8
Select Student Performance Measures
Performance measures for each exam
x 1
x 2
x 2
Measure
Aggregate performance measure
Avg. 4th Math Eng.
Avg. 8th Math Eng.
Avg. Regents Math Eng.
x .25
x .25
x .50
Measure
9
Comparison of Student Performance Index (2000) by
District Type
200
180
160
140
120
Performance Index
100
80
60
40
20
0
New York City
The Big Four
High-Need
High-Need Rural
Average Need
Low Need
Urban/Suburban
Need/Resource Capacity Categories
10
Three Approaches to Estimating Cost of Adequacy

• Empirical identification approach Find districts
  meeting the standard and determine how much they
  spend.
• Pros Simple to explain, and inexpensive.
• Cons By itself it does not estimate cost of
  adequacy in high need school districts.
• Resource cost model approach Ask professional
  educators what resources they think are required
  to achieve adequacy. These are adjusted for
  geographic cost of doing business differences.
• Pros Provides very detailed profiles of
  benchmark schools and districts, and costs out
  best practices.
• Cons Expensive and time consuming to do well,
  and relies on educators knowing what it takes to
  raise high need students to standard. Most
  adjustments appear to be ad hoc.

11
Cost Function Approach

• Collect data on performance measures, teacher
  salaries, student and district characteristics.
• Estimate cost function using statistical methods.
• Pros Based on actual historical relationship
  between performance and spending. Leads to clear
  predictions about what it costs to achieve
  adequacy in high need districts.
• Cons Difficult to explain method to public,
  statistics may be sensitive to outliers, and it
  is a black boxdoesnt tell you what to do,
  just how much to spend.

12
CFE Decision Implies Adjustment for Cost and
Need Differences

• Reforms of current system should Take into
  account variations in local costs. (p. 115)
• Defendants also argue that the State is required
  only to provide the opportunity for a sound basic
  education that students failure to seize this
  opportunity is a product of various
  socio-economic deficitsThe court rejects the
  argument that the State is excused from its
  constitutional obligations when public school
  students present with socio-economic deficits.
  (p. 63)

13
Estimate Local Cost Variation Using a Teacher
Wage ModelEstimate Salaries to Required to
Recruit Equal Quality Teachers
Poverty, LEP, enrollment, Pupil density,
14
Table B-2. Results of the Teacher Wage Models
1
Model A
Model B
Model C
Model D
-45.71180
-3.72
-40.31091
-7.66
-40.34876
-7.71
Share of counties teachers
-0.16193
-2.93
-0.16798
-3.00
-0.17790
-4.49
-0.17663
-4.44
2
R
0.71420
0.71400
0.74210
0.74210
15
Comparison of Competitive Teacher Salary Index by
District Type (state average100)
16
Developing Education Cost Index (controls for
both local cost and student need)
Predicted Spending Per Pupil
a b1 Average b2 Average Performance
Efficiency
Same for All Districts
b3 Salaries b4 Enrollment b5 Student needs
Allowed to Vary Across Districts
Cost Index
(Predicted spending / Average spending) x 100
17
Determinants of Education Spending
18
Variables Used in Cost Model
Student
Teacher
Free Lunch
Child Poverty
LEP
Average
Performance
Salaries
Percent
Rate (1997)
Percent
Enrollment
Index
Descriptive Statistics
Minimum
24,484
0.00
0.90
0.00
34
83
25th Percentile
32,459
9.51
7.40
0.00
987
149
Median
35,413
21.81
14.67
0.00
1,657
161
75th Percentile
41,701
32.42
22.14
1.10
3,217
172
Maximum
57,196
87.35
50.71
22.70
1,069,141
196
Need/Resource Capacity
New York City
39,561
74.86
34.90
12.32
1,069,141
103
The Big Four
36,644
70.83
42.67
9.18
32,893
99
High-Need Urban/Suburban
37,709
52.29
28.57
5.02
5,139
131
High-Need Rural
32,680
34.60
25.92
0.32
1,146
151
Average Need
36,341
19.65
13.03
0.94
2,625
160
Low Need
45,269
5.01
6.22
1.98
2,789
178
19
Table B-5. Results of the Education Cost Models
1
Model 1
Model 2
Standardized Coeffcients
Variables
Coefficient
t-statistics
Coefficient
t-statistics
Model 1
Model 2
Constant
-2.58360
-2.29
-1.50718
-0.45
Performance index
0.00752
3.57
0.00946
2.40
0.573
0.721
2
Efficiency variables
Full value
0.00000
10.55
0.00000
11.60
0.341
0.358
Aid
1.12073
3.83
0.51555
1.83
0.132
0.061
Income
0.00000
0.61
0.00000
-0.18
0.021
-0.006
3
Average teacher salary
0.99296
7.65
0.87231
3.07
0.577
0.507
4
Adjusted 2-year avg. free lunch
1.04423
2.83
0.690
5
Percent child poverty (1997)
0.97819
5.46
0.414
5
2-year avg. LEP
1.07514
2.30
1.15393
2.17
0.143
0.153
6
Enrollment classes
1,000-2,000 students
-0.09342
-4.20
-0.07613
-3.22
-0.189
-0.154
2,000-3,000 students
-0.07956
-2.72
-0.07678
-2.76
-0.127
-0.122
3,000-5,000 students
-0.09500
-2.68
-0.09678
-2.94
-0.144
-0.147
5,000-7,000 students
-0.07944
-2.01
-0.08547
-2.32
-0.082
-0.088
7,000-15,000 students
-0.09579
-2.08
-0.10451
-2.47
-0.092
-0.100
Over 15,000 students
0.05404
0.51
0.00247
0.03
0.024
0.001
Downstate small city or suburb
0.12282
1.70
0.233
Adjusted R-square
0.493
0.551
20
Comparison of Cost Indices by Type of District
200
180
160
Full cost index
Student needs only
140
Teacher salaries only
120
Index (state average100)
100
80
60
40
20
0
New York City
The Big Four
High-Need
High-Need Rural
Average Need
Low Need
Urban/Suburban
Need/Resource Capacity Category
21
Cost Impact of Student Needs
Extra Cost Per
Child Poverty
Extra Cost Per
LEP Student
Classification
Child in Poverty
Weight
LEP Student
Weight
Descriptive Statistics
Minimum
2,425
0.30
10,067
1.08
25th Percentile
7,350
0.90
10,115
1.08
Median
7,927
0.97
10,172
1.09
75th Percentile
8,570
1.05
10,339
1.10
Maximum
23,780
2.92
11,399
1.22
Need/Resource Capacity
New York City
7,945
0.98
10,762
1.15
The Big Four
8,640
1.06
10,582
1.13
High-Need Urban/Suburban
7,943
0.98
10,392
1.11
High-Need Rural
8,082
0.99
10,221
1.09
Average Need
7,920
0.97
10,225
1.09
Low Need
7,993
0.98
10,269
1.10
22
Organization of Presentation

• Cost of Adequacy Method
• Cost of Adequacy Results
• Effective Operating Aid Formulas

23
Developing Estimates of Required Spending for
Adequacy
Required Spending Per Pupil
a b1 Adequacy b2 Average Standard
Efficiency
Same for All Districts
b3 Salaries b4 Enrollment b5 Student needs
Allowed to Vary Across Districts
24
Required Spending to Reach Adequacy Standards
(1999-2000)(for districts below standard)
25
Required Per Pupil Spending to Achieve Adequacy
(1999-2000) (for districts with performance below
the standard)
20,000
2000 Spending
18,000
Standard of 140
Standard of 150
16,000
Standard of 160
14,000
12,000
Per Pupil Spending
10,000
8,000
6,000
4,000
2,000
0
New York City
The Big Four
High-Need
High-Need Rural
Average Need
Low Need
Urban/Suburban
Need/Resource Capacity Categories
26
Required Additional Per Pupil Spending to Achieve
Adequacy, 1999-2000 (for Districts with
Performance Below the Standards)
10,000
9,000
Standard of140
Standard of 150
8,000
Standard of 160
7,000
6,000
Per Pupil Spending
5,000
4,000
3,000
2,000
1,000
0
New York City
The Big Four
High-Need
High-Need Rural
Average Need
Low Need
Urban/Suburban
Need/Resource
Capacity Categories
27
Share of Additional Spending to Achieve Adequacy
Standard of 140 (7.2 Billion)
2
5
New York City
The Big Four
High-Need Urban/Suburban
High-Need Rural
Average Need
92
Low Need
Standard of 160 (10.7 Billion)
1
3
4
6
New York City
The Big Four
High-Need Urban/Suburban
High-Need Rural
Average Need
86
Low Need
28
Organization of Presentation

• Cost of Adequacy Method
• Cost of Adequacy Results
• Effective Operating Aid Formulas

29
Key Advantages of Performance Foundation

• Formula is built to achieve performance adequacy
  standard.
• It is driven directly by the estimated cost of
  adequacy.
• Targets money to districts most in need. Can be
  designed not to reward inefficiency.
• Simple designfocuses debate on what factors
  affect costs and their weights.

30
Performance Foundation Formula
Required spending to meet adequacy standard
Minimum local tax effort
Federal Aid
Aid per pupil
-
-

Minimum local tax effort
Property values per pupil
Minimum tax rate

x
Set by State
31
Total Aid by Need CategoryPerformance Foundation
Aid
NOTE Based on a local tax effort of 20 per
1,000 of actual property values. 2000-01 aid
includes all formula aid except Building Aid,
Transportation Aid, and Reorganization Building
Aid. Federal aid is also included as a source of
funding.
32
Comparison of Present Aid with Performance
Foundation Aid Per Pupil for Different Adequacy
Standards (20 per 1,000 minimum local effort)
1
12,000
2000-01 Aid
10,000
Proposed Aid-Standard of 140
Proposed Aid-Standard of 150
Proposed Aid-Standard of 160
8,000
Per pupil aid
6,000
4,000
2,000
0
New York City
The Big Four
High-Need
High-Need Rural
Average Need
Low Need
Urban/Suburban
Need-capacity categories
33
Share of Total State Aid to Achieve Adequacy
Standard
Standard of 140 (14.6 Billion)
1
14
5
New York City
The Big Four
8
High-Need Urban/Suburban
High-Need Rural
64
Average Need
8
Low Need
Standard of 160 (19.3 Billion)
1
16
New York City
5
The Big Four
High-Need Urban/Suburban
7
High-Need Rural
Average Need
64
Low Need
7
34
State-Local Share of Financing Education
35
Policy Choices in Financing an Adequate Education

• State Aid
• How high performance standard?
• Type of aid formula
• Hold harmless/min. aid provisions
• Local Contribution
• How high local contribution?
• Require minimum local tax effort
• How to distribute the aid without significantly
  increasing inefficiency?

36
Impacts of Increased Aid on School District
Efficiency

• Rapid expansion of aid in large cities may
  increase inefficiency by
• Putting pressure on already strained teacher
  labor markets.
• Encouraging rapid expansion of teacher salaries
  without accountability.
• Putting pressure on local construction costs
  through large building program.
• Straining district capability to monitor
  contracts and manage finances.

37
SED Can Play a Crucial Role in Improving District
Efficiency

• By providing technical assistance on
• Personnel policies and practices
• Program evaluation and use of performance
  measures
• Financial management.
• Through development of effective accountability
  systems.