and the Public Schools Robert Lowry Gregory S. Berck, Esq. March - - PowerPoint PPT Presentation

2018-19 Executive Budget and the Public Schools

Robert Lowry Gregory S. Berck, Esq. March 5,2018

www.nyscoss.org

THE COUNCIL’S 2018 WINTER INSTITUTE & LOBBY DAY

A $769 milli illion (3.0%) In Increase in in School Aid id

Aid Category Increase in Millions Foundation Aid New $50 million Community Schools set-side $338 Expense-Based and Other Aids 317 Fiscal Stabilization Fund (to be allocated in final budget) 64 Expanded Prekindergarten for 3 & 4 year-Olds 15 Empire State After-School Program 10 Early College High Schools 9 Smart Start Computer Science Initiatives 6 Breakfast After the Bell 5 Expanded AP/IB Access 2.5 Other Initiatives 2.5 $769 $719 million in traditional “School Aid”

• Includes $50 million

for Community Schools

• Offset by $70

million cost shift (explained below)

• $599 million

remaining increase (2.3%) to support

• ngoing costs

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Comparing th the Executive Budget t and th the Educational Conference Board’s “Current Services” Estimate*

* ECB also recommends $500 million for targeted priorities. SOURCE: Compiled from ECB and Division of the Budget publications.

$1,500 $605 $64 $100 ($100) $100 $300 $500 $700 $900 $1,100 $1,300 $1,500

Educational Conference Board $1.5 billion (Current Services Estimate) Executive Budget $769 million**

Dollars in Millions

Categorical Initiatives (Including new $50m Community Schools Set-Aside) Fiscal Stabilization Fund Regular School Aid

Assumptions:

• Salaries: +2.5%
• Health Insurance: 5.9%

(Projected increase for state workforce)

• Pensions: +9.7% (State

rate increase)

• Other: +2.1% (State CPI

projection)

• Offset by 2% local tax

increase **$669 million increase in aid to support current services – offset by $70 million cost shift explained below -- $599 million available.

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Expla laining th the Aid id Run

Total l In Increase: $6 $651 mill illion, 2.6 2.6% in incr crease

• Foundation Aid: $338 million, 2.0 increase
• Districts allowed increase under greatest of three tiers, plus a Community Schools increase (if

eligible). Minimum increase is 0.25% (179 Districts).

• Additional Community Schools Funding & Set-Aside -- $50 million, 133 districts
• 84% of districts would receive total Foundation Aid increases of 2% or less.
• State would be $3.9 billion below full phase-in amount.
• Expense-Based & Other Aids: $314 million, 3.9% increase
• Additional Building Aid for safety improvements extended 1 more year.
• Other 2018-19 aids calculated according to current law formulas (i.e., increases/decreases not due to

executive proposals).

• Districts launching Full Day Kindergarten in 2018-19 allowed an additional year of aid in 2019-20

equal to 50% of their 2018-19 aid.

• Starting in 2019-20, some expense-based aids would be capped:

₋ BOCES and Transportation Aids – increases capped at 2% for each district ₋ Building Aid – capped at 2% statewide increase, district aid pro-rated down to achieve 2% statewide increase. Estimated impact if in place for 2018-19: $200 million cut

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0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% Combined Wealth Ratio (Local Ability to Pay) % Eligible for Free & Reduced Price Lunches (Student Need)

Dis istrib ibutio ion of f th the Proposed $338 Mil illi lion, 2.0 .0% Foundatio ion Aid id In Increase

6 $50 million of proposed increase must be used for Community Schools – drops increase available to support current services to 1.7%

SOURCE: Council analysis of NYSED School Aid data

Capping Expense-Based Aid ids — start rting wit ith 20 2019-20 Aid id

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• Increases in Transportation and BOCES Aid would be

capped at 2% for each district – districts would lose any increase over 2 percent. – In effect, districts would receive the lesser of calculated aid or 2017-18 aid plus 2%.

• Increases in Building Aid would be capped at 2% statewide,

excluding New York City (initially).

• If the statewide total increase in Building Aid exceeds

2%, each district would have its Building Aid pro-rated down.

• New York City would be exempt from this adjustment

for projects approved prior to 7/1/2018.

1.9% 0.0% 6.7% 5.4% 1.3% 0.2%

• 0.3%

3.1% 0.1% 0.8%

• 2.7%
• 3.9%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% Total State New York City (8th) 1 (0.177 to 0.438) 2 (0.439 to 0.510) 3 (0.511 to 0.574) 4 (0.577 to 0.649) 5 (0.654 to 0.745) 6 (0.746 to 0.866) 7 (0.867 to 1.021) 8 (1.027 to 1.334) 9 (1.335 to 2.211) 10 (2.213 to 73.320)

Impact of Proposed Cap on BOCES Aid, if in Place for 2018-19 Aid ($51 million loss)

% Change in BOCES Aid, Current Law

Poorest districts stand to lose the most KEY POINT Districts with aid changes below +2% would not be affected by the cap

SOURCE: Council analysis of NYSED School Aid data.

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5.4% 0.2% 6.3% 8.5% 11.4% 5.9% 9.2% 7.5% 8.1% 6.5% 6.0% 11.7% 0% 2% 4% 6% 8% 10% 12% 14% Total State New York City (8th) 1 (0.177 to 0.438) 2 (0.439 to 0.510) 3 (0.511 to 0.574) 4 (0.577 to 0.649) 5 (0.654 to 0.745) 6 (0.746 to 0.866) 7 (0.867 to 1.021) 8 (1.027 to 1.334) 9 (1.335 to 2.211) 10 (2.213 to 73.320)

Impact of Proposed Cap on Transportation Aid, if in Place for 2018-19 Aid ($80 million loss)

% Change in Transportation Aid, Current Law

KEY POINT Districts with aid changes below +2% would not be affected by the cap

SOURCE: Council analysis of NYSED School Aid data.

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6.1% 6.5% 7.4% 1.6% 3.6% 3.1% 2.8% 8.1% 3.0% 11.7% 10.5% 10.4% 3.7% 6.5% 3.3%

• 2.3%
• 0.4%
• 0.8%
• 1.1%

3.9%

• 0.9%

7.5% 6.3% 6.2%

• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% Total State New York City (8th) 1 (0.177 to 0.438) 2 (0.439 to 0.510) 3 (0.511 to 0.574) 4 (0.577 to 0.649) 5 (0.654 to 0.745) 6 (0.746 to 0.866) 7 (0.867 to 1.021) 8 (1.027 to 1.334) 9 (1.335 to 2.211) 10 (2.213 to 73.320)

Impact of Proposed Cap on Building Aid, if in Place for 2018-19 Aid ($70 million loss)

% Change in Building Aid, Current Law % Change in Building Aid, after Cap

KEY POINT All districts (except NYC) would have aid reduced 3.821%

SOURCE: Council analysis of NYSED School Aid data.

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Su Summer Sp Specia ial l Educatio ion Co Cost Sh Shift ift

Estimated im impact of

• f $7

$70 0 mill illion for sch schools ls in in 20 2018 18-19 19

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0.177 0.395 0.615 0.835 1.055 1.275 1.495 1.715 1.935 2.155 2.375 2.595 2.815 3.035 3.255 3.475 3.695 3.915 4.135 4.355 4.575 4.795 State Reimbursement % Combined Wealth Ratio

Proposed Change in State Reimbursement Rate for School-Age Summer Special Education

Current Law (80%) Proposed (Wealth Adjusted) 36 districts gain 638 districts lose SOURCE: Compiled by the Council

• Over one-fifth of

districts would have their share of cost rise from 20% to 75%

• An average wealth

district would have its share rise from 20% to about 50%

State Control l of Local l Budgets

• Proposal would require certain districts to gain approval for

methodology for allocating funds among schools from SED and DOB

• No increase in school aid if plan not approved
• ESSA Reporting Requirement
• SED Capacity
• Local Control

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Beginning with the 2018-19 school year: school districts located in a city with a population of more than 125,000 people: Beginning with the 2019-20 school year: school districts containing at least nine schools and which receive at least 50 percent of their total revenue from State Aid:

State Control l of Local l Budgets

• Buffalo
• Syracuse
• New York City
• Yonkers
• Rochester
• Binghamton
• Newburgh
• Brentwood
• Niagara Falls
• Elmira
• Rome
• Hempstead
• Schenectady
• Jamestown
• Utica

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“Lunch Shaming”

• Prohibits differential treatment of students regarding school

meals

• Staff training and new notification protocols
• Including direct outreach to parents when insufficient funds to

purchase school meals.

• Greater school role in enrolling students as Free/Reduced-

Price Lunch

• Mandatory policies regarding handling of student with meal

debt

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Breakfast After the Bell ll

• Mandate for all school buildings with at least 70% FRPL to offer

breakfast after the instructional day has begun

• $5 million to support the schools in implementing and $7

million in capital funding for coolers and vending machines

• Mandate and unclear if state and federal funding will cover the

mandate

• Lunch reimbursement will grow to 25 cents/meal in 19-20

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Charter Schools ls

• Basic tuition will increase. Tuition has been frozen but new

formula last year unfroze it and increases are linked to district spending

• $140 million for supplemental tuition (eliminates NYC

reimbursement)

• $6 million for facilities reimbursement to NYC
• $22.6 million for NYC charters

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Lobby Day y and Process

• Explanation of handouts
• Assembly and Senate plan to release and pass

“one-house” budgets next week

• Religious holidays are sometimes thought of as

creating deadlines for budget passage. Passover begins the evening of Friday, March 30.

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The bigger picture The longer-term

The Total St State Budget

Proposed Di Disbursements, 20 2018 18-19 Executive Budget

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Measures of State Spending

Amount (Billions) General Fund $75.25 State Operating Funds (Includes General Fund above) $99.98 Capital Projects (State and Federal) $14.49 Federal Operating Funds $53.72 All Funds $168.18

Medicaid ($40.32) 75% Other Health and Human Services ($6.55) 12% Education (All levels) ($3.54) 7% State Agency Operations ($2.40) 4% Other Local Assistance ($0.91) 2%

Distribution of Federal Operating Funds (Amounts in billions)

SOURCE: Compiled by the Council from NYS Division of the Budget, FY 2019 Executive Budget Financial Plan -- Updated, Feb. 2018

St State Operating Funds Budget (2 (2018-19 Proposed)

Governor’s Executive Budget

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Where it comes from…

Receipts Amount (billions) Share of Total Personal Income Tax $49.24 49% Sales Tax, Other Consumption and Use Taxes $17.03 17% Business Taxes $7.55 8% Other Taxes $2.14 2% Miscellaneous Receipts $20.13 20% Other Financing Sources $3.88 4% Total $99.98 100%

Where it goes…

Disbursements Amount (billions) Share of Total School Aid* $26.36 26% Medicaid $20.34 20% Other Local Assistance $19.72 20% State Agency Operations

(including employee fringe benefits)

$27.93 28% Deb Service/Capital Projects $5.64 6% Total $99.98 100%

*Total disbursements for all P-12 education totals 32% of all proposed State Operating Funds spending.

SOURCE: Compiled by the Council from NYS Division of the Budget, FY 2019 Executive Budget Financial Plan -- Updated, Feb. 2018

State Budget Proje jections, 2018-19 to 2021-22 22

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Division of the Budget State Financial Plan (dollars in millions)

State Operating Funds Budget 2018-19 2019-20 2020-21 2021-22 Projected Structural Deficit

• (3,471)

(5,189) (5,112) Structural Deficit as % of Projected Expenditures 0.0%

• 3.3%
• 4.8%
• 4.6%

Cuts to Achieve 2% Spending Growth NA 2,659 4,760 5,640 Surplus/(Deficit) After Cuts to Achieve 2% Growth NA (812) (429) 528 School Aid and Total Disbursements* 2018-19 2019-20 2020-21 2021-22 Projected Change in School Aid ($) 769 949 1,174 1,282 Projected Change in School Aid (%) 3.0% 3.6% 4.3% 4.5% Projected Change, All Disbursements (%) 1.9% 4.8% 4.0% 2.7%

*All projected before application of cuts to achieve 2% growth SOURCE: Compiled by the Council from NYS Division of the Budget, FY 2019 Executive Budget Financial Plan -- Updated, Feb. 2018

School Aid id and Personal In Income

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• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10%

Personal Income Growth Index (projected after 2018-19) % Change in School Aid (proposed for 2018-19)

SOURCE: Compiled by the Council from U.S. Bureau of Economic Analysis data and N.Y.S. Division of the Budget Description of New York State School Aid Programs (annual). Certain federal aids excluded from School Aid figures. *Personal Income Growth Index calculated by the Council using data posted as of November 2017. Results may differ from Index values calculated using data posted earlier.

What’s been happening with Personal Income Tax Proje jections?

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Executive, January 2017 $50.683 Executive, January 2017 $53.089 Executive, April 2017 $49.382 Executive, April 2017, $51.873 Executive, Nov. 2017 $48.632 Executive, Nov. 2017 $51.123 Executive, January 2018 $50.935 Executive, January 2018 $49.244 Assembly, February 2018 $51.747 Assembly, February 2018 $50.014 Senate February 2018 $51.751 Senate February 2018 $49.991 $40 $42 $44 $46 $48 $50 $52 $54 2017-18 2018-19 Dollars in billions

“All Funds” Personal Income Tax Projections

SOURCE: Compiled by the Council from Executive and Legislative budget documents.

Revenue Forecasts (“All Funds” Receipts)

Prim rimary ry fund funding sou source for

• r leg

egis islativ ive budg budget t add addit itio ions

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Assembly Amount 2017-18 $0. 904 2018-19 $1.252 2-Year Total $2.156 Senate Amount 2017-18 $0.656 2018-19 $0.817 2-Year Total $1.473 CONSENSUS Amount 2-Year Total $0.675 to $0.750

Amounts above Governor’s Executive Budget Estimates

(in billions)

Ris isks

Revenues th that may not t be approved or r reali lized

• Executive Budget proposes revenue actions that would generate $586

million in SFY ‘18-19, $981 million in SFY ‘19-20

• Examples (SFY ‘18-19 Impact):

– Health Insurance Windfall Profits Tax ($140 million) – Opioid Epidemic Surcharge on Pharmaceutical Companies ($127 million) – Discontinue Energy Services Sales Tax Exemption ($96 million) – Impose an Internet Sales Fairness Tax ($80 million)

• Senate wants to cut taxes, not raise them
• Governor has said revenues are needed to avoid cuts to education and

health care

• Bottom line: Some additional revenue identified in consensus forecast

will go to tax relief (avoiding increases or cutting taxes)

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Other Ris isks

• The Executive Budget relies on $5.1 billion in temporary or one-

time resources to avoid a 2018-19 deficit. Examples (SFY 2018-19 Impact): – Use of reserves, settlements and pre-payments ($998 million) – Health Insurance Conversion Fee: ($750 million) – Higher Personal Income Tax rate on higher earners ($2.3 billion; due to expire 12/31/2019) – Some may not be adopted or may not generate full benefit

• Impact of federal tax legislation and budget actions
• Changes in the economy

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Ris isks – The Economy

Excerpts fr from th the Con

• nsensus Economic an

and Revenue Forecast

“The economic forecasts contained in the Executive Budget and Legislative reports portray

accelerating economic growth for 2018. All parties agree that the national economy will be buoyed by synchronous global growth, higher energy prices, and the injection of fiscal stimulus stemming from federal tax changes and increased federal spending…” “The parties agree that the New York State labor market will continue to exhibit historically robust growth going forward…” “All parties agree that there are multiple risks to the economic outlook for the national and State economies, and thus revenues. Slower growth in global trade would have an adverse impact on the U.S. economy, with the rise of protectionism representing a particular source

• f uncertainty... Energy price volatility also remains both a positive and negative risk. The

potential impact of federal tax law changes represents a source of both upside and downside risk…” “Risks to both the national and the New York forecasts also stem from monetary policy

• actions. Higher interest rates than reflected in the consensus forecast could hamper the

housing recovery and reduce business investment and hiring….” 27

Federal Tax x Law Im Impact

• Capping of SALT Deduction may cause political upheaval in

May 2019

• First year voters will have filed taxes and seen impact under new law
• 529 Plan and K-12 Tuition
• State Tax Department has ruled no impact
• Senate and Executive likely to seek changes
• EITC Redux?

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Federal Tax La Law Im Impact – Future federal sp spending in in je jeopardy

• Federal deficit and debt increase
• Tax bill increased federal deficits over 10 year by approximately $1.4

trillion

• IDEA, Title I, Title II etc. may be impacted because of escalating

deficits

• Congressional Budget Office has not established new official

10-year projections as the impacts of tax bill still being analyzed

• Shouldn’t shock anyone if cost is much higher

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St State deri rives  42%

• f

f its its Perso sonal l In Income Tax revenue fr from 1%

• f its

its taxpayers.  250 taxpayers le leavin ing could ld cost th the state $500 mil illi lion.

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Federal Tax x Law Im Impact-State Actio ions

• New York and other high tax states will sue to overturn SALT

Cap.

• Option payroll tax increase for businesses
• Local and State Charitable Donation
• Hypothetical for taxpayer with $20K property tax bill.
• Donate $20K to charity.
• Charity remits payment to school district and taxpayer gets credit of

95% and is left with a bill of $1K.

• Taxpayer makes final payment, but is made hold via federal deduction.

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Federal Funding of Education

• Has been decreasing
• IDEA 2010 to 2017=$1 billion decrease from $14.1 to $13.1
• First year voters will have filed taxes and seen impact under new law
• 529 Plan and K-12 Tuition
• Federal Tax Department has rules no impact
• Senate and Executive likely to seek changes
• EITC Redux?

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Federal tax x changes and School Aid id

“By capping the state and local tax deduction at $10,000, President Donald Trump’s new tax law sets up a looming battle over funding for New York State’s public schools, which have long relied on a delicate balance of redistribution between upstate and downstate districts. As suburban taxpayers become less able to deduct taxes that subsidize schools in lower-wealth districts, public support for the subsidy balance is likely to erode.” ~ Richard Brodsky, former Assemblymember

http://www.rockinst.org/observations/brodsky/2018-01-09_brodsky.aspx 33

Illustration…

34 SOURCE: Council Analysis of NYSED School Aid data NYS Tax Department Personal Income Tax data (Figures may not total 100% due to rounding)

REGION 2014 Adjusted Gross Income per Pupil Share of 2014 Statewide Personal Income Tax Liability Long Island $304,977 19% New York City $305,598 50% Lower Hudson Valley $412,802 13% Upstate $166,480 18% Share of 2016-17 School Aid + STAR Revenue per Pupil from a 2% Property Tax Increase 14% $409 38% $273 6% $415 43% $186

Another compli licatio ion for r su sustainable Sc School Aid id form rmulas – “shares”

35 $751.8 $936.6 $1,120.1 $1,299.9 $1,350.1 $995.4 38.86% 38.86% 38.86% 38.86% 38.86% 38.86% 12.96% 12.96% 12.96% 12.96% 12.96% 12.96% 0% 5% 10% 15% 20% 25% 30% 35% 40% $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 2012-13 2013-14 2014-15 2015-16 2016-17 (on the aid run) 2017-18

% share of statewide increase Statewide in School Aid ($ in millions)

Statewide Increase (in millions) NYC Share Long Island Share

SOURCE: Compiled by the Council from NYSED School Aid data.

“Shares” – Why is is it it a problem?

• With the focus on hitting share targets, development of School

Aid formulas proceeds backward.

• A simple test of fairness: Are similar districts treated similarly

in aid distribution? With shares, similar districts in different regions can experience greatly different aid results.

• Working backward from numerical targets also makes it hard
• r impossible to have an operating aid formula that districts

can plan on from year to year.

• It is also harder to fit aid for programmatic purposes (e.g., CTE,

ELL services) into the annual budget.

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A key theme: Doing less on any of the 4 items would require doing more

• n others:

“Change the rules or fund the rules.” 37

www.nyscoss.org Follow us on Twitter: @NYSchoolSupts @robertnlowry @Greg_Berck Questions: Write to advocacy@nyscoss.org

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