Posted by Doug Turetsky, October 10, 2013

We rarely comment on publications by other organizations. But a report that includes IBO in its title that was just issued by the organization Save Our States demands a response on at least two counts.

The new report “revisits” our February 2010 fiscal brief and 2011 blog post, which compared the amount of public funding for general education at charter schools with that for the city’s traditional public schools. We found that charter schools co-located in public school buildings receive slightly more per student in public support than traditional public schools when the value of free space and other in-kind contributions are accounted for.

The authors of the SOS report, Harry J. Wilson and Jonathan Trichter, contend that our finding was flawed and that the amount of public support that charter schools receive is thousands less per general education student than the true cost of educating students at traditional district schools. What was the flaw? They say we failed to consider the underfunding of the city’s pension plans and commitments for retiree health care benefits for school staff and should have accounted for those future costs when totaling the amount of support for the traditional public schools.

The problem with their contention is that our focus is the current level of actual public spending in support of charters and traditional schools in a given school year, as presented in the Bloomberg Administration’s financial plan. (Moreover, estimates of future costs and when they will come due, particularly for retiree health care benefits, vary considerably.) We clearly state the basis of our comparison in the fiscal brief and blog.

But even if we did take unfunded pension and retiree health care liabilities into account, the SOS contention fails to hold water. Why? Because there are two sides to the ledger. The formula in state law that determines the allocation to charter schools for each student enrolled includes an amount based on the pension and fringe benefit costs of personnel at traditional schools. So, for example, if the city administration chose to increase the amount spent for pensions each year to more fully reflect future liabilities for staff at traditional public schools, that amount would also go into the formula for charters, thereby increasing the per student allocation for charters as well.

In short, the difference in public support between traditional and charter schools would remain unchanged. Of course, given that charters tend to rely on cheaper 401(k) plans for retirement benefits, taking unfunded pension costs into account would increase the public subsidy to charters even though their retirement costs have not increased.

The SOS report is framed as a critique of IBO’s analysis of comparative public support for the city’s charter and traditional public schools. While the report provides important insights into the critical municipal finance issue of unfunded pension and health care costs, it offers nothing to undermine our core findings on public support for charters and traditional public schools.

Posted by Ray Domanico and Yolanda Smith, February 15, 2011

Last February, IBO published estimates (Comparing the Level of Public Support: Charter Schools versus Traditional Public Schools) of the level of public financial support for the city’s traditional public schools and charter schools in school year 2008–2009. Our new review of public financial support for general education services during 2009–2010 finds that charter schools located in public school buildings received an average of $649 more per student than traditional public schools. We have also updated our estimate for 2008-2009 to reflect some revisions to our methodology.

We estimate that total public financial support in 2009–2010 for general education services averaged $16,011 per pupil in traditional public schools, $16,660 per pupil in charter schools housed in public school buildings, and $13,653 per pupil in charter schools housed in private space (see Comparison of Funding Traditional Schools Versus Charter Schools table) The reason we calculate a higher funding allocation for charters housed in public school buildings than charters in private space is the value of in-kind services they receive due to their location: charter schools co-located in public school buildings don’t have to budget for space costs and utilities, janitorial services, or school safety agents. As of 2009-2010, two-thirds of the city’s 98 charter schools were housed in public school buildings.

School year 2009-2010 was the last year of a funding freeze on the state-mandated charter school per pupil allocation. The freeze was lifted for the current 2010–2011 school year, increasing the per capita adjusted operating expense for charter schools in New York City by $1,084. The adjusted operating expense per capita is the largest public source of funding for charter schools. When complete data from 2010–2011 become available, they are almost certain to show an even greater advantage for those charters housed within public school buildings compared with traditional public schools.

Applying our revised methodology to the 2008–2009 data, we now estimate that average public funding for traditional public schools was $15,672 per pupil that year. IBO’s estimates of public support for charter schools housed in public school buildings and charter schools in private space for 2008–2009 were unchanged at $16,373 and $13,661 per pupil, respectively.

Based on our revised approach, we estimate that charters in public school buildings received public funding that exceeded the support for traditional public schools by an average of $701 per pupil in 2008–2009. We’d previously estimated that funding for charter schools housed in public school buildings averaged $305 less per pupil. Our conclusions for charters housed in private space have not changed dramatically; these schools still received significantly less per pupil than did traditional public schools. (For an explanation of our methodological changes and a crosswalk between the estimates we published last year and our revised estimates for 2008–2009 see “Changes in Methodology.”)

With an overall increase in the Department of Education’s budget from 2008–2009 to 2009–2010, the funding provided to traditional public schools increased by an average of $339 per pupil. Average funding of charter schools housed within public school buildings increased $287 per pupil, while funding for charter schools housed in private space inched down by $8 per pupil. Thus, the funding advantage for charter schools housed in public school buildings narrowed somewhat in 2010, while the funding disadvantage for charter schools housed in private space widened.

For background on how we did the comparisons and detailed tables of our calculations click here.

Posted by Sarita Subramanian, November 22, 2010

The city’s newly released proposal to increase the plan for building, expanding, and repairing schools by $4.5 billion, or 38 percent, has received scant attention as the media has been focused on the appointment of a new Chancellor at Tweed Courthouse. The increase included in this year’s proposed amendment to the Fiscal Year 2010-2014 Five-Year Capital Plan was surprising, not so much for its identification of the need for 20,000 additional seats, but for the reliance on substantial amounts of additional funding from the city and the state with no detail on how it could be provided.

The timing of the education department’s acknowledgement of the need for more seats is also interesting, given the budget strains faced by the city and especially the state. Like the previous five-year plan (2005-2009) the current plan assumes that the costs will be funded equally by the city and state governments.

The bulk of the newly proposed spending aims to increase the school system’s capacity. Advocates have been calling for additional seats since the plan was originally adopted in June 2009, and the Department of Education has had to scramble—not always successfully—to identify classroom space to meet growing demand in a number of communities in recent years. The amendment adds $3.4 billion to the five-year plan to fund almost 20,000 additional seats, bringing the total number of new seats in the plan to about 50,000. Most of these new seats in the amendment, 18,883, would be at the elementary and middle school levels.

This emphasis reflects what the education department has described as “the start of a new growth trend” in public schools in the city. Total enrollment increased in the 2009-2010 school year after seven years of decline. School Construction Authority projections indicate that this increase is not an anomaly, but the beginning of a persistent trend, fueled by two main factors. First, enrollment in public and charter schools is increasing as enrollment in nonpublic schools is declining. Second, there is evidence that more students are remaining in the public school system for longer spans.

The amendment also proposes an increase of $1 billion in technology improvements to expand the Department of Education’s Innovation Zone program to reach a total of 200 schools. The department is also focusing on enabling on-line assessments in English and math in the 2014-2015 school year, on-line advance placement courses, and on-line credit recovery courses. All of the additional funding for technology is expected to be allocated in 2011-2013. The total for technology in the plan is $1.8 billion.

The great unknown surrounding the plans laid out in this amendment is the source of funding. The five-year plan counted on the state-funded borrowing of $1.071 billion for fiscal year 2010. Under the amendment, the state’s annual contribution would range from $1.326 billion in fiscal year 2011 to $2.135 billion in fiscal year 2014. Focusing on the November 2010 amendment alone, the increases in borrowing would require additional support from the state totaling an increase of 39 percent over the five years. The biggest year-over-year jump in state funding would occur in fiscal year 2013, when the plan anticipates a 43 percent increase. While the state’s fiscal condition three years from now remains an unknown, we do know it’s currently looking at steep budget gaps: $9 billion in the fiscal year starting April 1, 2011 and more than $17 billion in the following year, according to the latest estimates by the state’s Division of the Budget.

If the increases in state and city funding anticipated in the amendment occur as planned, the city will make progress toward alleviating current and projected school overcrowding. If the money does not materialize, families in some neighborhoods—particularly in Brooklyn and Queens, where 67 percent of the new seats are planned—will be left scrambling for scarce seats, little comforted by the knowledge that the capital plan included the best of intentions.

Posted by Yolanda Smith, September 21, 2010

As students and teachers headed back to school this month it was widely reported that given lower state aid, growing enrollment, and rising costs, school budgets had been cut. But the effect differed from school to school, with some schools even seeing their allocation per student rise. To provide parents, teachers, policymakers, and other interested New Yorkers with a clearer view of the funding available for schools across the city, IBO compared the initial allocation each school received to fund its basic operations this September with the allocation last September. Click here to look up the figures for particular schools.

Much of the year-to-year change was due to annual adjustments that take into account changes in the make-up of a school’s student body (how many students need special ed, are performing below standards, etc), plus changes in a school’s enrollment. But some of the change this year arose from funding shortfalls that threatened to leave some schools with budgets too small to cover basic operations, which led the education department to shift some of the basic allocation funding.

More schools than not will begin this year with less money per pupil for their basic operations than they had at the beginning of last school year. According to IBO’s calculations, 864 out of 1,464 schools have received an initial operating allocation per pupil that is less than last year’s. In contrast, 585 schools have received a greater per pupil allocation than last year, and 15 received exactly what they had a year ago, on a per-pupil basis. (Schools which have either been closed by the Department of Education or newly opened this year are not included in these counts.) These changes have real consequences—among schools with lower per capita allocations this year, the median decline was $151. In a school of 500 students such a change is roughly equivalent to the cost of one teacher. (Click here for table showing how changes in percentage terms were distributed.)

Each year the education department creates school allocation memoranda, often referred to as SAMs. These SAMs detail for principals the various sums of money available for each school’s budget. The most important of these, SAM #1, sets up the opening basic operating condition and the allocation of dollars largely through the fair student funding (FSF) formula, although some non-FSF funds are included in this allocation. In this post, we are comparing the initial SAM#1 FSF allocations made to schools this year and last year.

Fair student funding—the largest part of the SAM#1 allocation—is the method used since school year 2007-2008 to distribute most of the city and unrestricted state funds needed to run the schools. The FSF formula takes into account the student demographics at each school, with more money allocated for higher needs students. The FSF allocation is the core of a school’s budget, covering instructional staff and school operating overhead. The total amount of FSF allocated through SAM #1 this year is $4.4 billion, $91 million more than last year (including hold harmless and incremental funding, which are explained below).

The fair student funding methodology was originally going to be implemented gradually. In order to preserve stability and protect core programs in the first two years of implementation, the FSF allocations included hold-harmless money to avoid funding reductions for schools deemed “overfunded” under the formula. Schools deemed “underfunded” under the formula were only allocated enough to eliminate 55 percent of their shortfall with the expectation that their allocations would increase over time. The goal was to have all underfunded schools receive their full FSF funding level by 2009-2010. Yet as early as school year 2008-2009, the education department indicated that full implementation was likely to be slowed without adequate state and city funding. (See IBO’s report on FSF “New Funding Formula Seeks to Alter School Budget Disparities” for more details.)

Changes in the characteristics of a school’s student body generate changes in per pupil funding because FSF takes into account individual student needs. The formula, in other words, is weighted based on needs. Each student starts with a weight based on grade level, which can grow depending on the student’s characteristics. For example, a high school student performing below standards has 0.25 added on to her weight and high school students in English learner classes receive an extra 0.50 weight. All students’ weights are translated into dollars which determine the FSF formula allocation for the school.

The effect of changes in individual school demographics on each school’s SAM #1 allocation can be observed by looking at the percentage change in dollar allocations per needs-weighted student. We found that these changes in school demographics explain much, but not all, of the changes in per pupil funding for individual schools

Using the weighted student enrollment, the year to year per capita changes tended to be smaller compared to the simple per capita change, with most schools clustered between -2.9 percent and plus 2.9 percent, but there were still a significant number of schools that saw larger changes. One hundred and two schools saw their allocation per weighted student decrease by 3 percent or more and 151 schools increased by 3 percent or more. In total, 68 percent of all schools experienced a decrease in funding in weighted per pupil terms.

The combined effect of rising costs and reduced state aid also played a role in this year’s funding changes for schools. The Department of Education initially attempted to deal with these pressures, along with rising enrollment, by imposing a 4 percent cut on school budgets for the 2010-2011 school year; the second consecutive year with such a cut. After calculation of the baseline formula incorporating the 4 percent cut, the education department determined it had a problem: 400 schools would fall below the minimum funding level needed to maintain basic operations.

The education department then decided it needed to adjust its allocation methodology. In order to insure that all schools received at least a base allocation amount (actually 86 percent of the amount the department labeled “operating threshold”), other unrestricted funding was added to the pool to be allocated and the amount of funds that could be reallocated from any school was capped at 3 percent. This cap allows overfunded schools (in fair student funding terms) to remain overfunded. With the additional funding and the cap on reallocation in place, this year’s opening allocations were set by reducing the result under the FSF formula by 4 percent across the board and then using federal stimulus funds as needed to reach a final cut of not more than 4.2 percent in the total SAM#1 allocation—including dollars in addition to the FSF funds—for every school.

Posted by George Sweeting, May 26, 2010

Buried amidst the bleak news for city schools in the Mayor’s Executive Budget there is one spending category that is growing at a rapid clip: funding for charter schools. And because of the way charter school funding is mandated, it grows proportionately with enrollment even while the budget for traditional public schools, which also have growing enrollment, is shrinking.

The Department of Education (DOE) projects charter school enrollment to grow by 9,400 students next year, up from 30,500 this year—an increase of 30.8 percent. This enrollment growth reflects the planned opening of 29 new charter schools for September 2010, plus the addition of new grades to existing charters as they gradually expand towards their planned grade span. Enrollment in traditional public schools is also forecast to increase next year by 11,600, although in percentage terms the growth is much less (1.2 percent). In the case of charters, enrollment growth results in additional spending by the education department to maintain per capita support. For traditional public schools, other than a broad maintenance of effort requirement for total expenditures and mandates to provide some specific services, there are no explicit requirements to increase spending in line with enrollment and thus per capita spending will fall.

Under the state’s charter law, New York City, as the local school district, must provide charter operators with a flat per student amount for each student at a charter school. The budget assumes that amount is unchanged from its 2010 level of $12,443. (See “Comparing the Level of Public Support: Charter Schools versus Traditional Public Schools” for a discussion of additional resources that the city provides to charter schools beyond the mandated per student payment.) Thus, the enrollment growth increases the identified cost of charter schools in the education department budget by $117 million. The cost of providing mandated special education services to charter school students is also expected to increase by about $10 million this year, which brings the required charter school expenditure for the DOE to $545 million, an increase of 30.4 percent over the amount for 2010.

That $127 million in increased charter school expenses has to be absorbed in a proposed overall Department of Education budget that is virtually unchanged from this year. The budget for school year 2010-2011 shows year-over-year reductions in state and federal aid, and an increase in city support for the DOE that is just enough to offset the loss in state and federal funding, despite growing enrollment and mandated costs, including charter payments. As a result, the portion of the DOE budget used for traditional public schools (i.e. subtracting spending for charters and nonpublic schools from the total DOE budget) will fall next year from 90.2 percent to 88.7 percent.

Looking just at the traditional public school part of the DOE budget, spending will decline by $285 million (1.7 percent). The combination of a smaller budget and higher enrollment results in a $475 (2.8 percent) reduction in per student spending for traditional DOE public schools.

So it is clear that charter schools’ guaranteed adjustment for enrollment growth means that the cutbacks in the education budget has a smaller effect on charters than on traditional public schools. But does that mean that the budget cuts for traditional public schools are greater because of the shift of more money to charters? That depends on how much it costs to educate each additional student in the regular DOE schools—the marginal cost of a student—which is different from the average or per capita cost.

Suppose the increased charter school enrollment (9,400) for next year were instead educated in DOE traditional schools. More students would add to the cost pressure on the DOE budget for traditional schools, but there would also be potentially up to $127 million in additional resources available.

Assuming the additional money was allocated to the traditional public schools, this would likely have a somewhat smaller effect on classroom instruction spending—even with the higher enrollment—than will result from shifting those students and their funding to the charter schools. This is because the marginal cost of adding one student to the system is almost certainly lower than the average cost of educating a student or even the per capita charter school payment ($13,654, counting the required special education services), although how much lower is uncertain.

Operating cost adjustments in response to lower enrollment can take time. The loss even of thousands of students in a single year will not immediately lower the cost of running centralized departments such as human resources, information technology, food and supply warehousing, building maintenance, and the chancellor’s office. Even at individual schools, shifts of a handful of students may not significantly alter a school’s budget until the difference is large enough to trigger the loss or addition of a class section. While these adjustments can be expected to eventually occur, they almost certainly could not occur fast enough to offset the effect of next year’s shrinking DOE budget for traditional public schools.