Something Has to Give - New York State Council of School ...

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SOMETHING HAS TO GIVE | October 2016

Something Has to Give Despite recent state aid increases, financial worries persist for New York’s public schools

Sixth Annual Survey of New York State School Superintendents on Financial Matters October 2016

NEW YORK STATE COUNCIL OF SCHOOL SUPERINTENDENTS 7 Elk Street Albany, NY 12054 518-449-1063 www.nyscoss.org TABLE OF CONTENTS

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SOMETHING HAS TO GIVE | October 2016

TABLE OF CONTENTS Introduction and Overview

2

Highlights

7

Overall Fiscal Condition

8

Programmatic Impact

12

Reserves and Multi-Year Planning

15

Costs and Mandates

18

Methodology THE COUNCIL conducted its sixth annual survey of New York State school district superintendents on financial matters between August 16th and 31st. The survey was conducted online through K12 Insight, a corporate partner of THE COUNCIL. A total of 361 superintendents submitted complete responses, a response rate of 54 percent. Long Island: Nassau, Suffolk Counties Lower Hudson Valley: Putnam, Rockland, Westchester Counties Mid-Hudson Valley: Dutchess, Orange, Sullivan, Ulster Counties Capital Region: Albany, Columbia, Greene, Rensselaer, Saratoga, Schenectady, Warren, Washington Counties Mohawk Valley: Fulton, Herkimer, Montgomery, Oneida, Schoharie Counties Central New York: Cayuga, Cortland, Madison, Onondaga, Oswego, Tompkins Counties North Country: Clinton, Essex, Franklin, Hamilton, Jefferson, Lewis, St. Lawrence Counties Southern Tier: Broome, Chemung, Chenango, Delaware, Otsego, Schuyler, Steuben, Tioga Counties Finger Lakes: Genesee, Livingston, Monroe, Ontario, Orleans, Seneca, Wayne, Wyoming, Yates Counties Western New York: Allegany, Cattaraugus, Chautauqua, Erie, Niagara Counties

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SOMETHING HAS TO GIVE | October 2016

INTRODUCTION AND OVERVIEW First, the good news: three years of state aid increases averaging more than 6 percent per year have helped many school districts in New York State turn a corner in their financial operations, despite the near zero percent property tax cap applied to school budgets this year. Now the bad news: Looking ahead, worry is widespread among New York superintendents about financial prospects for the schools they lead. Those are the central themes that emerge from the New York State Council of School Superintendents’ sixth annual survey on school finance matters. A driving force behind the concern expressed by so many superintendents is that most of the major factors affecting school finances are now beyond the control of district leaders and their voters. As one Long Island superintendent observed, There are two major revenue sources – local taxes, state aid. With the advent of the tax cap, both are now controlled by Albany. There are essentially two drivers of new costs – mandates and benefits/pensions, again both controlled by Albany. The only tool districts have to absorb Albany-controlled fluctuations in these four areas is to cut core program. Regular education is the shock-absorber for all of Albany's financial decisions. In recent years, pension costs have been declining but they will rise again someday, and another uncontrollable cost has arisen for many schools: growing student needs. Key Points from the Surveys In summer 2011, THE COUNCIL conducted its first comprehensive survey. Coming a few months after the enactment of a state budget imposing a $2.5 billion Gap Elimination Adjustment (GEA) reduction upon School Aid, the results were predictably grim. For example:  75 percent of superintendents said the financial condition of their district had worsened over the preceding year.  89 percent said they were concerned by their district’s reliance on reserves to pay for recurring costs, with 66 percent reporting they were “very concerned.”  56 percent of superintendents said their district budget for that year would have a negative impact on instruction in core subjects of English, mathematics, science and social studies. One factor contributing to the dismal outlook that summer was that it was not the first year of hard budgeting choices, but the third. Most state aid was frozen in 2009-10, with cuts avoided only through an infusion of stimulus funding from Washington. School Aid then was reduced in 2010-11 and again in 2011-12. Our survey showed that 80 percent of districts eliminated teaching positions and 63 percent reported increasing class sizes in 2011-12, while 66 percent of superintendents said they had accepted a freeze in salary or some other action to reduce costs for their school district. Subsequent surveys showed modest improvements in financial condition. But gains remained fragile, because the damage brought on by cuts during the depths of the Great Recession was so deep. By 2014-15, school districts outside New York City were still employing 8.3 percent fewer teachers than in 2008-09, the last budget adopted before the onset of economic trauma. Superintendents leading high

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SOMETHING HAS TO GIVE | October 2016 student poverty districts were most likely to report problems with general funding adequacy, capacity to provide extra help to students who needed it, and capacity to offer classes beyond state minimum requirements. Change in professional personnel, 2008-09 to 2014-15 School districts outside New York City -10%

-8%

Classroom Teachers

Central & Building Administrators

-6%

-4%

-2%

0%

-8.3%

-9.9%

Other Professional Personnel (e.g., Guidance Counselors, Social Workers, School Nurses)

-1.7%

SOURCE: Council analysis of NYS Education Department Personnel Master File data.

This summer, THE COUNCIL surveyed superintendents on finance matters for the sixth time. Statewide, the results continue trends which began to emerge a year ago: More superintendents again report their district’s financial condition has improved rather than worsened (by 31 to 16 percent). More report positive rather than negative impacts on specific program areas from the budgets their districts adopted this year. Compared to one year ago, how has the financial condition of your district changed, in terms of its ability to fund services meeting expectations of parents in the community? 100% 2% 80%

1% 6%

23%

17%

51%

56%

3%

4%

28%

27%

51%

53%

15%

41%

60% 40%

1%

1% 15%

53% 42%

20% 0% 22% 2011

10%

2012

28%

23%

14%

4%

3%

4%

2013

2014

Significantly worse

Somewhat worse

Somewhat better

Significantly better

2015

1%

2016

About the same

But those hopeful trends are not the entire story. THE COUNCIL also asked superintendents for perspective on their schools’ finances looking forward. Specifically, we asked, Thinking ahead three years or so, which statement below best expresses how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students?” Only 19 percent of superintendents declared themselves optimistic about their schools’ financial prospects. Seventy-nine percent professed some degree of pessimism, including 20 percent declaring themselves to be very pessimistic and 6 percent who said that their districts are already unable to fund adequate programs and services – the equivalent of roughly 40 districts already in educational insolvency. Superintendents leading higher poverty school districts were again most likely to express pessimism regarding the financial outlook for their schools. 3

SOMETHING HAS TO GIVE | October 2016 Thinking ahead 3 years or so, how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students? Not able now, 6% Other, 1%

Very pessimistic, 19%

Very optimistic, 1%

Somewhat optimistic, 19%

Somewhat pessimistic, 53%

Something has to give. As elaborated below, New York’s basic structure of education finance puts schools in a potentially unsustainable position, required to accommodate costs they cannot control with revenues they can no longer presume will materialize. Why the worry? First, the impact of a uniquely restrictive school property tax cap has been mitigated in recent years by large increases in state aid, but state government revenues are highly sensitive to changing economic conditions. A downturn would impair the state’s ability to maintain its recent level of support. In a recent report, the Citizen’s Budget Commission projected that a recession matching in magnitude the average of the last three would create a state budget deficit equal to 20 percent of state revenues.i Accounting for nearly 30 percent of state General Fund expenditures, School Aid would almost certainly be required to share in the cuts to close a deficit of such magnitude. Volatility in state funding is one reason why schools must maintain reserves and is cited by superintendents as the leading obstacle to credible multi-year financial planning. Second, recent experience with the tax cap has brought a clearer recognition of its implications.

A 2% Tax Cap? Allowable Levy Growth Factor for School District Property Tax Cap 2.5%

2.00% Commonly advertised as a “2 percent tax 2.00% 2.0% cap,” the cap in fact varies from district to 1.46% district and from year to year. The basic cap 1.5% for 2016-17 is 0.12 percent. With a tax 1.0% increase of that level, most districts could 0.5% raise less than $50,000 and fewer than 20 percent would generate enough to preserve 0.0% 2012-13 2013-14 2014-15 the job of a single early career teacher SOURCE: Office of the State Comptroller earning typical compensation. If voter approval cannot be obtained, no increase in tax levy is allowed – a zero percent tax cap.

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1.62%

0.12% 2015-16

2016-17

SOMETHING HAS TO GIVE | October 2016 A very tight tax cap raises the stakes over School Aid allocations, making state aid the only possible source for adequate new revenue for nearly all school districts, rich, poor, and in-between. Third, while our surveys offer some encouraging findings, in each of our six annual surveys, at least two-thirds of superintendents indicated their districts had experienced either no change or a worsening in financial condition. So it is probable that many schools hurt by cuts during the Great Recession have seen little or no improvement in the years since. A commonly expressed fear among superintendents has been that students in the future may never again have opportunities matching those of students in the past. Fourth, direct financial pressures upon schools have been compounded by growing needs of students coming into schools. Enrollment has been declining in most school districts, precipitously so in some. But in most districts we have also seen rising numbers of students with special needs. Since 2007, the number of children in poverty has risen by 11 percent, including by more than 50 percent in Long Island and the Lower Hudson Valley. The number of children who are English Language Learners – children for whom English is not their first language – has risen by 20 percent, more than doubling in the Capital Region and Western New York. Fifth, uncertainty arising from the total level of state funding is compounded by uncertainty over how any future funding increases might be allocated. The 2016-17 state budget finally ended the GEA. Attention must now turn to Foundation Aid, comprising two-thirds of total School Aid. When first enacted in 2007 as part of the resolution of the Campaign for Fiscal Equity litigation, it was an under-appreciated achievement in public policy: It generally provided the greatest aid per pupil to the neediest districts. It promised all districts greater predictability in aid going forward. It used factors which could be understood and debated, making state funding decisions more transparent and state decision makers more accountable. But after credible strides toward implementation in the two years first following enactment, the Foundation formula was frozen for three years, then minimally increased several years thereafter. In its tenth anniversary year, the formula will need to be updated to better recognize the demographic changes described above which have emerged during the years of freezes and wrangling over the GEA. Also, now 37 percent of districts are on save-harmless (receiving more Foundation Aid than the pure formula would deliver) including 30 percent of high need districts. Some action must be taken to assure additional revenue for those schools, particularly given the restrictive tax cap. Last, there have 5

SOMETHING HAS TO GIVE | October 2016 also been policy changes bearing upon school budgets in the years since the inception of the formula: standards have been raised, new requirements have been mandated, and the tax cap has been imposed. Sixth, public education costs in New York State are high, as is widely noted. But a neglected question is why? There are multiple reasons; one is that New York schools operate under mandates not found in other states, including extensive special education requirements and the “Triborough Law” mandating that all provisions of an expired collective bargaining agreement remain in force until a successor agreement is ratified, including annual salary increments paid for additional years of service. Given recent history, there is little reason to expect action on consequential mandate relief. The simple arithmetic reality is that it is impossible to save money for taxpayers without keeping that money out of someone else’s pockets – school employees or suppliers. Benefits for individual taxpayers are diffused and indiscernible, while the impact for individual parties adversely affected is concentrated and perceptible. So any consequential mandate relief initiative is likely to have more vigorous opponents than supporters. Nearly all mandates have some merit, but all create costs, in money, time or both. To complain about school costs while keeping all mandates in place resembles tying a runner’s shoes together, then complaining he or she doesn’t run fast enough. Conclusion The financial rules under which New York’s public schools operate drive costs while constraining the ability of districts to raise local revenues to match those costs. These rules increase the urgency for adequate state aid increases for every district, every year, notwithstanding faltering state tax revenues, both to maintain current services and to improve opportunities for children who need the most from their schools if they are to succeed in life beyond school. If New York wishes to keep these rules, it must fund them.

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IN THEIR OWN WORDS Just because we make it work each year in a manner that appears students are finding success doesn't mean that we're crying wolf about our financial distress and that the state aid system is equitable. We are very much like the families in our community that, despite having financial challenges, protect and shelter their kids from those realities and make sure they provide everything possible for their kids. Making the money work doesn't mean the funding system is working. – Finger Lakes Rural Although enrollment may be declining, the demographics of our community require support services to provide ALL students with the opportunity to be successful. Our free-reduced lunch districtwide is up to 30% with one building at 35%. Our special education population is rising which increased our budget this year by $900,000. Providing our English as a new language students with optimum services has also increased our budget significantly. – Long Island Suburb Even under the best of circumstances, and my district is well-funded and considered one of the best managed in the state, the current tax cap levy formula is unsustainable. It threatens public education, but especially districts in poverty. – Lower Hudson Valley Suburb We are no longer in control of our financial future...with the heavy dependence on State aid due to the implementation of the tax cap we are limited on our resources short of going after the supermajority. There has been NO break on mandates and in fact we just seem to get more of them placed on us...Quite frankly between the myriad of laws, regulations, mandates the operation of schools and education in general is over regulated. We have hoops to jump through that no other level of government faces and yet we face a public vote each year. – Western New York Rural The vast majority of the budget is mandated by Law and until the Legislature is willing to restructure the mandates including collective bargaining nothing will really change. Southern Tier Rural Schools need a fair, reliable, and stable funding formula from NYS. The tax cap makes every district more dependent on state aid. School districts will be hard pressed to survive a recession or economic downturn without stability in state aid. - Western New York Suburb

SOMETHING HAS TO GIVE | October 2016

HIGHLIGHTS 

Overall fiscal condition and outlook: THE COUNCIL’S sixth annual survey of superintendents on financial matters finds a divergence between current and longer-term outlook: –

Continuing a pattern first found in the 2015 survey, more superintendents reported their school districts’ overall financial condition improved (31%) rather than worsened (16 percent) over the prior year.



But asked to look ahead three years or so and say how optimistic or pessimistic they are about whether their districts will be able to fund programs and services adequate to the needs of their students, only 20% professed optimism. 53% responded that they were somewhat pessimistic, 19% answered very pessimistic, and 6% said their districts are not able to provide adequate programs and services now.



A sense of diminished control over finances: Anecdotally, superintendents report a sense of diminished ability to control district finances to explain the longer-term pessimism. With the advent of the tax cap, the two major school revenue sources – state aid and property taxes, are both essentially controlled by Albany. Major cost drivers such as pension and health care costs are also largely beyond the control of school districts, and new mandates have been thrust upon schools. Finally, most districts have experienced an increase in students with special needs.



No improvement for many districts: Even with recent improvements in financial condition, it is important to recognize that in each of THE COUNCIL’S six annual surveys, at least two-thirds of superintendents reported either no change or a worsening in district financial condition. So it is probable that many districts endured damaging budget cuts in 2011 and 2012 and have experienced no improvement in the years since.



Causes for concern: We also asked what factors cause superintendents concern in thinking about the financial outlook for their districts. Inadequate state aid and the tax cap stood out as the greatest concerns: Inadequate state aid The tax cap Increasing student needs Increases in fixed or hard to control costs Declining enrollment Poor or uncertain community support Increasing enrollment Other

A concern 91% 89% 78% 76%

The greatest concern 44% 28% 10% 9%

47% 10% 5% 10%

5% 0% 0% 2%



2016-17 programmatic impact: The survey also inquired about how district budgets this affected specific student services. Similar to findings on overall condition, improvements which began in 2015 continue in 2016. For example, by 47% to 8% more superintendents anticipate a positive than negative impact on core instruction in elementary grades. Again, however, over the last four years, large numbers of superintendents have reported no change in how annual budgets affected specific student services.



Reliance on reserves: Since 2011, the share of superintendents saying they are very concerned about their districts’ reliance on reserves to fund ongoing costs declined from 66% to 18%. But 64% of superintendents still say they are at least somewhat concerned by reliance on reserves.



Multi-year planning, local efforts to protect student opportunities, how the state can help: The survey also inquired about multi-year financial planning practices and invited superintendents to share examples of creative or difficult actions their districts had taken to preserve or improve opportunities and to recommend actions the state could take to help.



Results below the state level: Some results are reported by student poverty level, community (city, suburb or rural), and region.

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SOMETHING HAS TO GIVE | October 2016

OVERALL FISCAL CONDITION

IN THEIR OWN WORDS

There is dissonance between how superintendents assess their districts’ current financial condition and their outlook for the future. It arises because of the uncertainty over major cost and revenue items cited above. Current Condition Again, THE COUNCIL’s 2015 survey marked the first year in which more superintendents responded that their school district’s financial condition had improved rather than worsened over the preceding year. That pattern held in the 2016 survey: 31 percent of superintendents said their district’s financial condition has improved, 16 percent said it has worsened, and 53 percent said it has remained the same. Compared to one year ago, how has the financial condition of your district changed, in terms of its ability to fund services meeting expectations of parents in the community? 100% 2% 80%

1% 6%

23%

17%

51%

56%

3%

4%

28%

27%

41%

60% 40%

1%

1% 15%

53%

20% 0% 22% 2011

51%

53%

15%

42%

10%

2012

28%

23%

14%

4%

3%

4%

2013

2014

Significantly worse

Somewhat worse

Somewhat better

Significantly better

2015

1%

2016

About the same

This trend is encouraging, but a caution is in order. In each of our six four annual surveys, from 2013 to now, at least twothirds of superintendents responded that their school district’s financial condition has not changed or had worsened. So it is probable that the condition of many districts worsened in the first year or two of our surveys and has not improved much since. It is also likely that some districts experienced multiple years of financial deterioration. Outlook for the Future A grimmer picture emerges when superintendents are asked to contemplate the future. We asked, “Thinking ahead three years or so, how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students?” Here are the results: 8

We have a great school district with community and board support, yet we control our spending and keep taxes within the tax cap and still we cannot position ourselves any better for the future. We live year to year with the hopes the state will come through with funding to continue to support what we have. The reality is that our programs and staffing levels are threatened every year. Sustainability is a real concern for us. – Mohawk Valley Rural We need more help. We have done everything asked of us. We have very little left in reserves, we stay at or under the cap (many times less than 1.5%), we share everything we possibly can, and we have cut to the bare minimum. We need help from the state because very soon, we may not be able to achieve a balanced budget without a huge tax burden on our community! – Central New York Rural The control for funding public schools is now much more a function of the state than of the local taxpayer. Local control is severely diminished. - Capital Region Suburb There are very few options the local board has in its control to balance a budget in a poor rural district that don't involve cutting staff. It is imperative that residents communicate with legislators about mandate relief and adequate funding through state aid. - Finger Lakes Rural We overrode the tax cap but how many times can you do that? ...if something doesn't change we will no longer have the funding needed to ensure the same quality education. - Lower Hudson Valley Suburb With the inability to raise local revenue, and the uncertainty of state aid, we will be forced to cut programs (and pretty deep) as we spend down reserves. - Southern Tier Suburb We rely on State Aid for 2/3 of our revenue. When the overall economy is good, we are in good fiscal shape. We have very little property wealth to tax, so the tax cap affects us to a lesser extent. We offer the best programming we can to our students. - Finger Lakes Rural A district has very little control of some the increases. Many are not a direct result of decisions made by the district but part of the system we find ourselves attached to at this point in time. I like for people to see those increases before even getting to adjustments or adaptations the district has made for the upcoming year. Additionally, our ability to raise money is limited. - Southern Tier Rural

SOMETHING HAS TO GIVE | October 2016  6 percent said their schools are not able to provide adequate programs and services now; this translates into approximately 40 districts across the state;  19 percent answered very pessimistic;  53 percent responded somewhat pessimistic; and

Thinking ahead 3 years or so, how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students? Not able now, 6% Other, 1%

Very pessimistic, 19%

Very optimistic, 1% Somewhat optimistic, 19%

 Only 20 percent answered that they were somewhat (19 percent) or very optimistic (1 percent).

Somewhat pessimistic, 53%

Not surprisingly, superintendents who report that their school districts’ financial condition has worsened over the past year are far more likely than their colleagues to say they are very pessimistic about their district’s ability to offer adequate services looking ahead three years, or to report that their district is already unable to do so – 54 percent versus 10 percent. We also asked what factors cause superintendents concern when thinking about their districts’ financial future, and then what factor causes them the greatest concern.

Which issues cause concern in thinking about the financial outlook for your district?

Potentially inadequate state aid topped both the list of most widely shared concerns (91 percent) and greatest concern (44 percent). Second on both lists is the tax cap, cited by 89 percent of superintendents as a concern and named by 28 percent as the greatest concern. There is a drop-off in the percentages of superintendents naming any of the remaining issues as the greatest concern, but two other factors are very widely cited as a concern – increasing student needs, such as rising student poverty and increasing numbers of English Language Learners or recently arrived immigrant children (78 percent) and impossible or hard to control costs such as pensions or health insurance (76 percent).

A concern 91%

Greatest concern 44%

The tax cap

89%

28%

Increasing needs of students (e.g., increasing student poverty or increasing numbers of English Language Learners, recently arrived immigrant children, or students with disabilities) Expected increases in fixed or hard to control costs (e.g., pensions, health insurance) Declining student enrollment

78%

10%

76%

9%

47%

5%

Other (Please specify)

10%

2%

Increasing student enrollment

5%

0%

Poor or uncertain community support for the schools

10%

0%

Inadequate state aid

The possibility of inadequate state aid dominates as the leading concern for superintendents reporting that their districts are already unable to offer adequate services: 71 percent of those leaders picked that factor as their greatest concern, followed by 16 percent choosing the tax cap.

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SOMETHING HAS TO GIVE | October 2016

Below the State Level Dissonance also emerges when we explore results below the state level. For example, superintendents leading high poverty districts tend to be somewhat more positive than colleagues in assessing this year’s change in their districts’ fiscal condition, but more pessimistic in appraising future prospects. Superintendents serving high student poverty districtsii were 6 percentage points less likely than their peers to report their district’s financial condition has worsened over the past year (10 percent versus 16 percent). But high poverty school district superintendents were more than twice as likely to say their districts are currently unable to provide services adequate to the needs of their students (12 percent versus 5 percent).

How has the financial condition of your school district changed over the past year? 0%

20%

High poverty districts 5%

40%

60%

29%

All other districts 4%

80%

100%

56%

27%

10%

53%

Significantly better About the same Significantly worse

16% 1%

Somewhat better Somewhat worse

Thinking ahead 3 years or so, how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students? 0%

20%

High poverty districts 2% 15% All other districts 1%

20%

Very optimistic Somewhat pessimistic Not able now

40%

60%

49%

80%

22%

54%

100%

12% 19%

5%

Somewhat optimistic Very pessimistic

Differences in revenue sources School revenue sources and changes in spending probably explain the divergence in Share of Share of % change spending current and longer-term outlook. 2015-16 in State increase This year, high poverty districts spending Proposed % Proposed Aid (excl. supported by % of K-6 Students benefitted from increases in their Building tax levy eligible for free/reduced supported change in % change by tax levy spending in tax levy Aids) increase primary revenue source – state aid price lunch program 0-10% ("Low 80.2% 1.7% 0.7% 10.7% 30.7% – and were less affected by the 11-20% Poverty") 72.2% 1.6% 0.7% 8.6% 29.2% very tight tax cap. The opposite 21-40% 60.8% 2.3% 0.7% 7.3% 19.9% was true for low poverty districts: 41-60% 47.8% 2.2% 0.6% 6.0% 14.0% even large percentage increases in Over 60% ("High Poverty") 40.8% 3.1% 0.6% 6.0% 7.3% state aid could not offset the Total State 59.2% 2.2% 0.7% 6.9% 18.0% impact of the low tax cap. But due SOURCE: Council analysis of NYSED School Aid and Property Tax Report Card data; Big 5 City districts not included to their deeper reliance on state aid, poorer districts have tended to be more deeply hurt when austerity in state aid becomes necessary. Results for city schools resemble those for high poverty districts. Forty-two percent of city superintendents reported their district’s financial condition has improved over the last year, compared

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SOMETHING HAS TO GIVE | October 2016 to 30 percent in total for rural and suburban district leaders. Notably, however, 8 percent of city superintendents reported that their schools’ financial condition has grown significantly worse over the past year; only one rural superintendent and no suburban superintendents did so. Compared to one year ago, how has the financial condition of your district changed, in terms of its ability to fund services meeting expectations of parents in the community? Significantly better

Somewhat better

0%

About the same

20%

Somewhat worse

40%

60%

Significantly worse

80%

100%

Statewide Community City Suburb Rural Student Poverty Percent 0 to 10% 11 to 20% 21 to 40% 41 to 60% Over 60% Region Long Island Lower Hudson Valley Mid-Hudson Valley Capital Region Mohawk Valley Central New York North Country Southern Tier Finger Lakes Western New York

Thinking ahead 3 years or so, how optimistic or pessimistic are you about whether your district will be able to fund programs and services adequate to the needs of your students? Very optimistic

Somewhat optimistic

Very pessimistic

Not able now

0% Statewide Community City Suburb Rural Student Poverty Percent 0 to 10% 11 to 20% 21 to 40% 41 to 60% Over 60% Region Long Island Lower Hudson Valley Mid-Hudson Valley Capital Region Mohawk Valley Central New York North Country Southern Tier Finger Lakes Western New York

20%

40%

11

Somewhat pessimistic 60%

80%

100%

SOMETHING HAS TO GIVE | October 2016

2016-17 PROGRAM IMPACT

IN THEIR OWN WORDS

Each year, THE COUNCIL’s surveys have asked superintendents how they perceive their district budgets affecting specific operations and services. In recent years, we have limited the survey to inquiring about direct student services. As with our findings regarding overall financial condition, 2015 seems to have marked a turning point for some districts.

As a district with a significant rate of poverty, the needs of our students are great. We are finding an ever growing need to provide social emotional support, etc. in order for our students to learn and succeed. We have developed a rich community schools approach to support these needs but financial support is needed to meet the needs of our students and families. – Southern Tier City

In our first survey, following the $675 million School Aid cut in the 2011-12 state budget, majorities of superintendents reported their district budget would have a negative impact on nearly all operations, including 56 percent foreseeing damage to core instruction at all grade levels, for example. In last year’s survey, we found a shift; it was the first year more superintendents anticipated positive rather than negative budget impacts rather on specific services. There were notable increases in anticipated positive impacts and decreases in negative impacts. Those trends have strengthened in the current year. For example, 47 percent of superintendents say they anticipate a positive impact from their district budgets on core instruction in elementary grades; only 8 percent foresee a negative impact. Particularly encouraging are the results for “extra academic help for students who need it.” In earlier surveys, that area was more widely cited as suffering a negative budget impact than almost any other, even though it was also most widely cited as a priority for new funding. This year, 40 percent of superintendents expect those services will improve as a result of their school budgets; 15 percent still expect a negative impact. But the same cautions stressed regarding overall financial condition apply here to specific programs. In recent surveys, majorities or near majorities of superintendents anticipated that their district budget that year would result in no change for most services. So it is again probable that in many districts, programs were damaged in 2011-12 and have not improved much since. Also, no doubt, services in some districts experienced multiple years of negative budget impact.

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Between the GEA, tax cap, tax freeze and state aid cuts compounded by new unfunded mandates my district has lost upwards of $5 million dollars over the past 7 years. We have reduced student programs, eliminated staff and put off necessary facility repairs. If things continue at this rate my district will be educationally insolvent in less than 5 years. We can make cuts to make the financial side work, but at a tragic cost to the quality of education we can provide? ~ Mid-Hudson Valley Rural As a district with a significant rate of poverty, the needs of our students are great. We are finding an ever growing need to provide social emotional support, etc. in order for our students to learn and succeed. We have developed a rich community schools approach to support these needs but financial support is needed to meet the needs of our students and families. Southern Tier City Due to our district's size, at some point …we will not be able to meet the fixed financial cost requirements and maintain quality programs for students if we have to continue to rely on the taxes of our mostly impoverished community …Last year, when lawmakers touted large increases in aid (a shell game) we received $30K more! This is not equivalent to the starting salary of one teacher. …we had to cut close to 900K from our budget. Next year I am anticipating that we will be cutting two foreign languages and offering fewer AP classes. ~ Finger Lakes Suburb We are compared to other areas of the state but we don't have the resources to allow our students to compete with other students from around the state. It's a great dis-service when our kids are penalized in college admissions because we can't offer them the required challenging classes. - North Country Rural We are drying up slowly. As people leave, I don't replace them. We are just maintaining but it is getting harder and harder for our students to compete. Our building is old, the original portion is from 1929. Only 30% of my student population has internet. - Mohawk Valley Rural

SOMETHING HAS TO GIVE | October 2016 What was the impact of this year's district budget decisions on each of the following areas of student services? Program Area

Impact

Positive Instruction in English, Math, Science and Social Studies -No Change All Grades Negative Positive Core instruction in elementary grades No Change Negative Positive Instruction in English, math, science, and social studies in No Change the middle level grades Negative Positive Instruction in English, math, science, and social studies in No Change high school Negative Positive Extra academic help for students who need it -- any level No Change Negative Positive Advanced or enrichment classes No Change Negative Positive Career and technical education No Change Negative Positive Second language instruction at the middle or high school No Change levels Negative Positive Student counseling, social work, mental health or similar No Change support services Negative

2011

2012

2013

2014

2015

2016

3% 41% 56% NA NA NA NA NA NA NA NA NA 2% 39% 59% 3% 56% 41% NA NA NA NA NA NA NA NA NA

NA NA NA 13% 46% 41% 11% 56% 33% 10% 53% 37% 9% 42% 48% 8% 57% 35% NA NA NA NA NA NA NA NA NA

NA NA NA 19% 50% 31% 16% 56% 29% 13% 60% 27% 16% 40% 45% 9% 56% 35% 5% 67% 28% 8% 69% 25% 6% 65% 30%

NA NA NA 27% 47% 26% 21% 55% 24% 18% 56% 26% 21% 38% 42% 14% 56% 31% 9% 70% 21% 7% 72% 21% 11% 61% 28%

NA NA NA 36% 52% 13% 29% 60% 11% 31% 57% 12% 34% 40% 26% 21% 58% 21% 21% 68% 10% 11% 74% 15% 23% 58% 18%

NA NA NA 47% 46% 8% 34% 62% 4% 36% 58% 6% 40% 44% 15% 28% 62% 11% 26% 67% 6% 12% 80% 8% 29% 60% 11%

Below the state level Looking at district groupings below the state level, superintendent appraisals of how their district budgets affected specific student services resemble their assessments of change in overall fiscal condition. Superintendents of city districts were most likely to report positive impacts and suburban superintendents were least likely to report negative impacts this year. Superintendents serving rural communities were least likely to report positive impacts on student services from their district budgets and most likely to anticipate negative consequences. Similarly, superintendents of high poverty districts are most likely to anticipate positive impacts on student services and, following the lowest poverty districts, are second least likely to foresee negative effects. Notably, superintendents leading districts serving the second highest percentages of low income students (those with between 41 and 60 percent eligible for free and reduced price lunches) were most pessimistic in assessing their district budgets’ impact on student services. This group comprises the largest share of superintendents, with 42 percent of our survey respondents reporting that level of student poverty.

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SOMETHING HAS TO GIVE | October 2016 What was the impact of 2016-17 budget decisions on each of the following areas of student services? (Shading indicates the district group hadInstruction a higher percentage of positive or negative responses than the state average) in Instruction in

Statewide

Core instruction in elementary grades + 47% – 8%

English, English, Extra math, math, academic science, and science, and help for social studies social studies students who in the middle in high need it -- any level grades school level 34% 36% 40% 4% 6% 15%

Student counseling, social work, mental health School or similar Safety & supports Security 29% 28% 11% 6%

Advanced or enrichment classes 28% 11%

Career and technical education 26% 6%

35% 9% 34% 5% 23% 14%

44% 13% 29% 3% 22% 8%

35% 9% 30% 9% 28% 12%

39% 9% 35% 6% 23% 6%

43% 0% 32% 6% 27% 7% 22% 17% 31% 7%

24% 3% 29% 4% 31% 5% 22% 11% 29% 0%

22% 3% 34% 10% 35% 13% 24% 12% 34% 7%

38% 0% 36% 8% 24% 7% 23% 9% 39% 2%

32% 0% 30% 13% 39% 13% 35% 12% 34% 10% 23% 15% 18% 18% 24% 18% 35% 11% 15% 3%

27% 0% 21% 8% 31% 9% 37% 2% 23% 5% 26% 11% 31% 5% 16% 13% 25% 16% 28% 0%

25% 2% 21% 12% 35% 4% 41% 9% 32% 14% 26% 22% 20% 18% 29% 13% 30% 17% 33% 5%

28% 5% 25% 4% 39% 9% 28% 5% 29% 5% 29% 11% 23% 3% 24% 9% 41% 11% 23% 8%

Community + 56% 39% 44% 43% – 9% 4% 9% 9% + 56% 44% 44% 46% Suburb – 2% 2% 3% 10% + 40% 27% 30% 38% Rural – 11% 6% 8% 20% Student Poverty (% of K-6 Students Qualifying for Free/Reduced Price Lunch Program) + 60% 52% 48% 39% 0 to 10% – 0% 3% 3% 3% + 54% 40% 36% 42% 11 to 20% – 4% 2% 4% 10% + 44% 35% 35% 49% 21 to 40% – 8% 3% 6% 15% + 39% 26% 32% 32% 41 to 60% – 11% 6% 9% 23% + 59% 41% 46% 56% Over 60% – 5% 2% 5% 5% Region + 49% 36% 31% 37% Long Island – 2% 0% 0% 5% + 46% 50% 42% 38% Lower Hudson Valley – 4% 4% 4% 17% + 56% 35% 39% 47% Mid-Hudson Valley – 0% 4% 4% 30% + 52% 41% 43% 41% Capital Region – 7% 5% 5% 14% + 54% 32% 32% 32% Mohawk Valley – 9% 5% 5% 5% + 26% 23% 30% 37% Central New York – 15% 4% 15% 19% + 35% 25% 30% 31% North Country – 10% 0% 5% 23% + 40% 28% 37% 37% Southern Tier – 18% 9% 11% 24% + 57% 27% 35% 54% Finger Lakes – 3% 8% 11% 14% + 51% 44% 42% 54% Western New York – 7% 5% 7% 10% City

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SOMETHING HAS TO GIVE | October 2016

RESERVES AND MULTI-YEAR PLANNING In each annual survey, we have asked superintendents, “To what extent, if at all, are you concerned that your district is drawing upon reserves to pay for recurring operating costs?” This question provides additional insight into superintendent perceptions of their school districts’ overall financial strength. As with other questions, we find an improving outlook: in 2011, 66 percent of superintendents were “very concerned” by their districts reliance on reserves; this year, that figure is down to 18 percent. Still, 64 percent of superintendents continue to profess some degree of concern about use of reserves to pay recurring costs. Reviewing property tax report card data, if districts had had no fund balance to apply to their operating budgets this year, they would have needed to raise taxes by an average of 5.4 percent rather than the 0.7 percent they did request, or make cuts of corresponding magnitude. In the poorest districts, tax increases averaging more than 12 percent would have been needed to support budgets without the use of fund balance.

To what extent, if at all, are you concerned that your district is drawing upon reserves to pay for recurring operating costs? 2011 0% 5% 6% 20%23%

2012

2013

2014

2015

6%

5%

6%

10%

10%

22%

21%

26%

37%

37%

40%

11%

12%

34%

34%

60%

2016

46%

80% 100%

49%

66%

35%

49%

18%

32%

Very concerned Somewhat concerned Not concerned, our use of reserves is limited Our district is not drawing upon reserves to pay for recurring operating expenses

Additional 2016-17 tax levy increases needed if districts had no fund balance to apply toward budgets 0% Total State

0.7%

1 - Poorest 20%

0.6%

2

0.7%

3- Middle 20%

0.6%

4

0.7%

5 - Wealthiest 20%

0.7%

Districts grouped by property wealth per pupil

5%

10%

15%

4.7% 11.9% 7.5% 4.6% 3.6%

2.8%

Actual proposed 2016-17 tax levy increase Additional tax increase needed if fund balance not available

SOURCE: Council analysis of NYS Education Department Property Tax Report Card data

Limitations on reserves Nearly every week, the Office of the State Comptroller issues reports of audits of state agencies, public authorities, local governments, and school districts that it has completed. Some criticize school districts for over-estimating expenses and under-estimating revenues, leading to reserves deemed excessive. The Comptroller’s audits apply standards prescribed by law and accounting principles. State law limits school districts to an unrestricted fund balance equal to no more than 4 percent of their budgets and school district leaders have an obligation to adhere to the law.

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SOMETHING HAS TO GIVE | October 2016 But is 4 percent a reasonable limit on unrestricted fund balance? The limit for Pennsylvania school districts is 8 percent. Local governments in New York have no percentage limit and unrestricted fund balances in double-digit percentages are not uncommon – nor should they be. The Government Finance Officers Association recommends an unrestricted fund balance of no less than two months’ regular general fund operating expenditures or revenues – about 15 percent – for general purpose governments and 10 percent for school districts.iii In short, what is prescribed as a maximum for “rainy day funds” for New York State school districts is less than half the level that experts recommend as a minimum. Going further, school districts, like municipalities, may use a retirement contribution reserve account to set aside funds in anticipation of future pension costs for workers in the Employees Retirement System (ERS). But only about 20 percent of school employees are covered by ERS – chiefly bus drivers, custodians, food service workers, and so on. Teachers and most administrators are covered by the Teachers Retirement System and districts may not set aside funds for those obligations. New York school districts operate with tighter restrictions on reserves than local governments, despite being subject to greater financial reporting requirements and, outside the five largest cities, to annual public votes to approve their requested local tax levy.

Extreme variability year to year in state aid, pension costs have a huge impact to districts. Stability in revenue and expenses allow for a better outcome for schools and the community Capital Region Suburb While we are very careful financial planners/budget developers, we are often challenged with mandates (English as a New Language, most recently) that are staff or resource expensive. - Long Island Suburb We are extremely state aid dependent. Not having a guarantee of state aid every year, causes fluctuations in programs and staffing, impedes long term planning, costs us many hours in labor time advocating for state aid, and decreases the effectiveness of how we purchase items, or hire people. - Mohawk Valley Rural It is becoming increasingly difficult to budget for special education needs/services for students. With incoming students throughout the year and increasing mental health issues, costs are rising and are very unpredictable. - Southern Tier Rural The dependency on state aid and tax cap prevent us from providing innovative solutions for our students. We are always uncertain about funding from year to year. - Southern Tier Rural Until NYS provides fair and reliable school aid the 4% limit for reserves is irresponsible... Western New York Rural

Changes in state aid tend to track changes in personal income of NYS taxpayers % change in state aid

% change in NYS personal income

12%

9% 6% 3%

0% -3%

1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

All the extra reserve restrictions may have made sense in earlier years, before state revenues and therefore state education aid became so sensitive to gyrations on Wall Street. Local revenues have become more volatile too, with the floating tax cap and with large tax certioraris challenging local assessments of property value.

IN THEIR OWN WORDS

Over time, how district leaders view -9% reserves has changed. The particular SOURCES: NYS Education Department, Analysis of School Finances in New York State construction of New York’s tax cap School Districts, 2013-14. Change in state aid does not include federal stimulus aid received in 2009-10 through 2011-12 or STAR payments. makes it both harder and riskier for a U.S. Bureau of Economic Analysis, SQ1 Personal Income Summary. Figures compare district to seek a large tax increase to personal income as of the first quarter of each calendar year. accommodate an unforeseen event: 60 percent voter approval is required to over-ride the cap and rejection denies a district any increase in local revenue. Reserves are one tool left to districts to exert some control over their financial futures. -6%

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SOMETHING HAS TO GIVE | October 2016 The Comptroller’s 2010 report on five years of school district audits found some districts had more money in reserve than the law allowed. But it also recommended laws be amended to give school districts more ways to place money in reserve, specifically calling for authorization of a tax stabilization reserve fund, a teacher pension contribution reserve, and a trust fund for other postemployment benefits (chiefly retiree health insurance costs).iv Multi-year financial plans School districts are encouraged to develop multiyear financial plans. Our survey asked superintenddents whether their districts develop such plans, whether they make their plans public in some fashion, and what obstacles they see in attempting to assemble credible plans.

In assembling its annual operating budget, does your district attempt to develop a multi-year financial plan projecting either expenses or both expenses and revenues for succeeding years? Yes, for two years beyond the budget to be adopted, 16% Yes, for three or more years beyond the budget to be adopted, 49%

We found that the vast majority of superintendents – over 80 percent – report that their districts do assemble multi-year financial plans which attempt to project either expenses or both expenses and revenues for at least one year beyond the budget under development. Nearly half attempt to project at least three years out. Superintendents whose districts do assemble multiyear plans are equally divided in whether or not they make those plans public in some fashion – half do, half do not. Some superintendents explain that their districts do not release projections because they are unavoidably speculative, with major factors beyond the district’s control – state aid, the tax cap, pension and health care costs, and new state and federal mandates.

Yes, for the one year following the budget to be adopted, 16%

No, 16%

Other (Please specify), 4%

To what extent do you see each of the following factors as complications in developing a credible multi-year financial plan? Please answer whether or not your district does develop a multi-year financial plan. A significant complication

Somewhat of a complication 0%

20%

40%

Uncertainty over possible future state aid

60%

80%

77%

Uncertainty over what the tax cap will be in future years Uncertainty over fixed or hard to control costs (e.g., pensions and health insurance) Additional costs arising from state or federal mandates

31%

44%

3%

51%

44%

4%

55%

19%

12%

Complications in working with our board of education

5% 15%

Uncertainty over voter support for district finances 3%

5%

53%

34%

Uncertainty over future student enrollment

100%

22% 1%

64%

Changing student needs Uncertainty over the outcome of collective bargaining

Not a complication

11%

60%

21%

52%

35% 80%

39%

58%

Those four factors were near universally cited as complications in financial planning, led by uncertainty over future state aid, seen as a complication by 99 percent of superintendents, including 77 percent who characterized it as a significant complication.

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SOMETHING HAS TO GIVE | October 2016

COSTS AND MANDATES New York’s public schools lead the nation in per pupil spending. This fact is sometimes cited to suggest that the state’s public schools may not need more funding. But why do New York’s public schools spend as they do? There are many factors at work: New York is part of a high cost region. New York is high cost in many things, not just education. New Yorkers value public services. New York is home to some of the nation’s absolute best public schools and the opportunities they provide their students are expensive. New York makes a more honest effort to fund its pension obligations than most states. But New York schools also operate with rules and mandates not found in other states and those requirements drive up costs. In this survey, we invited superintendents to share openended comments describing actions their districts have taken to reduce or control costs or produce more impact for students within existing resources. We then asked for specific steps the state could to take to help schools to achieve those goals. Local efforts to protect and improve student opportunities We asked superintendents, Please share with us any examples of actions by your district in recent budgets [to protect or improve opportunities for students] that you feel were especially creative or especially difficult to implement. In reviewing the responses, it is important to bear in mind the phrasing of the question. In this survey, we did not ask superintendents to recount all the actions their districts have taken to balance needs against resources in annual budgets. From past surveys, we know that districts made extensive efforts to restrain costs in employment agreements and to align staffing with changing enrollment. In this survey, we focused on obtaining examples of actions aimed at preserving or improving opportunities for students that superintendents felt were especially creative or difficult to implement. One-hundred twenty-six superintendents offered responses. Some superintendents described multiple initiatives falling into multiple categories. For example, one Central New York superintendent wrote,

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We’re Number One? Why? New York is part of a high cost region – All but two of the 10 highest per pupil spending states are located in the northeast. New York is high cost in many things, not only education – New York routinely ranks in the top four states in average weekly wages for all workers, for example. Unions are especially strong in New York State – A 2012 study by the Fordham Foundation ranked New York in the top tier of states in teacher union strength and first in membership and resources. New Yorkers value public services – New York has more state park acreage than all but two states and maintains two of the largest public university systems in the nation, for example. New York is home to some exceptional public schools – New York perennially dominates the Intel Science Talent Search competition, for example, producing roughly 30 percent of the nationwide semifinalists year after year. At the same time, some studies rate new York poorly on equity in school funding. New York makes a more honest effort to fund its pension obligations than most other states – In 2014, Pensions and Investments ranked the New York State Teachers Retirement System as one of the nation’s top 10 pension funds, public or private. In contrast, New Jersey and Illinois have been charged with fraud for mis-stating their pension obligations. New York’s public schools operate with mandates not found in other states – For example, no other state we have found has a Triborough Law, for example, mandating that salary “step” increases continue even under an expired contract. New York also has extensive special education mandates.

For more details on these observations, including citations, see New York State Council of School Superintendents. We’re Number One. Why?, December 2015.

SOMETHING HAS TO GIVE | October 2016 IN THEIR OWN WORDS Declining enrollment allowed us to consider "packing in" students and staff into existing buildings to reconfigure from a 4 building structure to 3 building structure. This was painful for our staff and community. We proceeded before it really made sense with enrollment but it was necessary to reduce annual operating expenses. In addition, we've been operating with NO School Business Official, NO Transportation Director, and NO Superintendent of Buildings & Grounds… This is NOT a sustainable model but we continue to manage with minimal capacity, oversight, and leadership in these areas. Being forced to cut in these areas to preserve instructional capacity AND meet required staff hires (for example, to meet the new, expanded ELL requirements). There just isn't enough room in the budget with underfunded State Aid and limited tax levy increases to restore all that was lost in the past years. We're making it work because we have to NOT because it's working for long-term viability. - Finger Lakes Rural We have taken advantage of solar panels to decrease our electric bills. We have purchased propane buses that save on operational costs in a geographically large district. We share many services with BOCES taking advantage of various cooperative service agreements. We seek private grants, although opportunities are decreasing. We share services with the town. We use volunteers in many areas. - Mohawk Valley Rural

We have changed core operations of the district to improve services and reduce costs: changes in collective bargaining agreements to reduce long-term costs, changes in work rules to help reduce current costs, increased use of BOCES for services, and structural changes have all produced significant savings. Please share with us any examples of actions by your district in recent budgets to protect or improve opportunities for students that you feel were especially creative or especially difficult to implement.

Budget actions Shared services (including transportation, academic programs, administration and athletics) Realigned staffing with enrollment, including closing schools Reduced energy costs

% of SuperinNumber tendents 38 30%

15

12%

12

10%

Changes to collective bargaining agreements

11

9%

Careful management of reserves

9

7%

Changes to pupil transportation

7

6%

Expanded dual enrollment with higher education/early college high school Other

6

5%

68

---

Most widely cited by a wide margin were shared service initiatives. Superintendents described 38 examples of efforts to provide services through sharing with other districts or with municipalities. These included collaborating in pupil The following actions have permitted the district transportation, expanding use of Board of Cooperative Educational Services programs, sharing administrative to address funding short comes: (1) closing of one of three elementary schools, (2) addition of positions (including superintendents), merging sports teams new health benefit program and deletion of a with neighboring districts, and sharing academic programs more costly program, and (3) continued (including greater use of online or distance learning). As an monitoring of class size at all levels to look for saving opportunities. - Mid-Hudson Valley Rural example, one superintendent serving a rural upstate community wrote, Our school district continues to increase the sharing of services with a neighboring school …I have served as a shared superintendent with a district. We are currently sharing in the areas of neighboring district. Additionally, we are in our second athletics, transportation, academic programs and professional development. We are also year of sharing a school business administrator from moving in the direction of an art academy and a another district. We are also currently exploring sharing science academy learning environment however a facility director and possibly a cafeteria manager the reduction in State aid over the years and the tax cap have made it very difficult to implement within the next year. All athletic programs modified, JV these strategies. - Western New York Suburb and varsity are currently shared with neighboring Inter-municipal collaborations in purchasing, districts as well. busing, buildings & grounds to reduce overall costs... - Finger Lakes Suburb

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SOMETHING HAS TO GIVE | October 2016 Next most cited were efforts to more carefully align staffing with needs, sometimes in response to enrollment declines, in some cases through closing schools. Superintendents gave examples of how their districts have adopted policies to assure more careful analysis of student needs before filling or creating positions and allocating other resources. For example, a Capital Region superintendent wrote, We became much better at defining student specific needs prior to allocating resources to fund personnel, materials, supplies, programs… This has been somewhat of a challenge to implement. During the budget process, principals need to do a much more fine-tuned analysis of their buildings and it means that some buildings might get more support; others less. But when times were tough, we have been able to make some reductions, or conversely make sure all students received what they needed. Another 10 percent of superintendents responding to this question cited energy savings initiatives and 9 percent gave examples of changes in collective bargaining agreements. We know from prior surveys and other sources that revenue constraints have had a wider impact on collective bargaining than this survey’s request for creative budgeting actions reveals. For example, in our 2012 survey, 59 percent of superintendents said that the tax cap made it more likely that their districts would be able to negotiate cost savings in bargaining with their teachers, including 15 percent who said the cap had already had that impact in just its first months of application. Consistent with findings on reserves and multi-year planning covered in the last section, 7 percent of responding superintendents described efforts to manage reserves to meet future needs. A Long Island superintendent wrote, Despite very healthy reserves and a recently published audit by the State Comptroller's Office, we were able to avoid criticism by demonstrating that our reserve plan is publicly vetted and that our plan for the use of capital and repair reserves is shared with the community, supported by them in annual budget propositions, and implemented as planned. These funds have allowed us to direct state aid and annual property tax revenues to the instructional program.

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IN THEIR OWN WORDS In the last four years we have positioned several HUGE dominoes: 1. Closed an elementary building in a rural portion of the community. 2.) Revised the district transportation contracts to bus these children to the main campus 3.) Passed a project to renovate remaining occupied buildings. 4.) Reconfigured the remaining 2 elementary buildings temporary measure through the renovation and 4.) At the completion of the project we will tear down the 1916 middle school and have 3 separate buildings, all newly renovated… This was difficult because it closed a building, shuffled all staff and students, will result in the demolition of a "loved" but structurally end-of life building. It allowed us to consolidate resources and have an economy of scale with instructional staff, resources, administration, support staff and programs… ALL job restructuring was accomplished as a result of retirements - no one was left unemployed. It was a rough four years but enabled us to weather fiscally difficult times and has reduced costs through economy of scale. North Country Rural We have slowly changed our bus fleet from diesel to propane. This change has allowed us to save money and foster an Eco-friendly image with our community. - Long Island Suburb We collectively purchase fuel with our village and fire departments to help in bulk purchases. This arrangement led to us now servicing ambulances and vehicles similar to busses in our garage, helping to reduce local taxes. Finger Lakes Suburb The teachers union has taken wage freezes and change their salary schedule resulting in longterm financial benefit. - Lower Hudson Valley Suburb I worked very hard to eliminate our deficit while minimally impacting our programs... I had a $2.4 million dollar deficit 3 years ago. I also carefully researched lower cost health insurance options and negotiated with our bargaining units to change health insurance which saved and added programs. - Southern Tier Rural We have closed a building (Middle School) and created a single campus, All of our school buses are Wi-Fi equipped and provide access to our students, We have entered in to shared service agreements with … to manage their transportation as well as combine various athletic programs. - Southern Tier Rural Careful management of our fund balance so that there will be future adequate resources for our instructional program. - Mid-Hudson Valley Rural

SOMETHING HAS TO GIVE | October 2016 IN THEIR OWN WORDS We have pursued some online high school courses through our local BOCES. These have provided opportunities for students to study engineering and other STEM courses not available in large numbers to our students. Lower Hudson Valley Suburb Implemented School Based Mental Health Clinics licensed and operated by a mental health agency; started a regional early college high school; expanded dual enrollment opportunities with higher education - Capital Region Suburb …We recently worked with our teachers' union to allow for more distance learning opportunities for our students. They needed to see that our teaching staff was not being decreased. We have purchased the service through BOCES, making these options affordable and accessible in our district… I also took advantage of an opening in our business office and purchased centralized business office service from BOCES. This savings has helped us increase in other budget areas. - Western New York Rural

What is the one change in law or regulation the state could make that would produce the greatest benefit in enabling your district to reduce or control costs, or to use existing resources to produce the greater benefit for students?

Recommendations Amend Triborough

% of SuperinNumber tendents 33 15%

Flexibility in academic mandates

25

12%

New or increased reserves

22

10%

APPR

16

7%

Health insurance

16

7%

Special education

14

7%

No unfunded mandates

10

5%

8

4%

Amend Part 154 (English Language Learner) requirements Predictable state aid

7

3%

Other

33

12%

Changes to tax cap

54

25%

Finally, many superintendents described initiatives to preserve and improve opportunities for students, including launching classes in coding or computer science, sharing instructional programs with neighboring districts, expanding use of distance learning, and forming partnerships with higher education institutions. A rural Mohawk Valley superintendent explained, College Now (dual enrollment with [a local community college] and P-Tech are two excellent programs that provide opportunities for our students. For the last two years, a grant from [our county] has allowed high school students to complete college level coursework at no cost! In the past and next year, the cost will be one-third of the regular course tuition (still a great deal!) Our students have earned 30 to 40 college credits prior to high school graduation. Similarly, the Pathway to Technology program through our BOCES has created an opportunity for students to earn a college degree along with a high school diploma in five years. How the state could help We are regularly asked for our “list of unfunded mandates.” We have not compiled such a list. Doing so would require agreement both on what is a mandate and what constitutes “funded.” Both exercises at definition invite interminable debates. A better question is the one we posed to superintendents: What is the one change in law or regulation the state could make that would produce the greatest benefit in enabling your district to reduce or control costs, or to use existing resources to produce the greater benefit for students? Two hundred fifteen superintendents made recommendations, some more than one. Most frequently recommended were changes to the Triborough Law which guarantees continuation of all provisions of a collective bargaining agreement after expiration until a successor agreement is approved. In the past, THE COUNCIL has recommended amending Triborough so that, as in other states, benefits such as health insurance would remain in place but annual salary increments for additional years of service (“steps”) would cease.

21

SOMETHING HAS TO GIVE | October 2016 The guarantee of step increases even after an agreement expires means that most union members will continue to receive some increase in pay each year even after a contract expires. Superintendents thus argue that Triborough diminishes the leverage of school districts to negotiate any cost savings through collective bargaining. We have found no other state which guarantees continuation of steps. Thirtythree superintendents recommended Triborough reform as a priority. Twenty-five superintendents recommended an assortment of changes in academic mandates, with the greatest number calling for reduced reliance on seat time requirements, especially in the middle school grades. Unsurprisingly, given the discussion in the preceding section, 22 superintendents recommended new or increased reserves, with more than half specifically requesting ability to set aside funds for future Teachers Retirement System contributions. A variety of possible actions affecting employee health insurance were suggested by 16 superintendents, with 10 calling for a statewide plan to cover all public employees. Personnel costs comprise roughly three-quarters of a typical school district budget – it would be hard to achieve meaningful savings while avoiding personnel. But health insurance is one personnel component where savings for districts might be found which do not come out of the pockets of employees or retirees, perhaps thus avoiding opposition from them and their unions.

IN THEIR OWN WORDS Eliminate or alter Triborough. It is the largest impediment to negotiating a sustainable settlement in a tax cap world. - Long Island Suburb The Triboro amendment builds in increases in the personnel expense year to year, and puts districts at a disadvantage in negotiations. Unless that is changed the day will come when the state will not be able to fund the present infrastructure. - Mid-Hudson Valley Rural Reduce mandates in Middle School... i.e., Home and Careers/Tech/etc. Very few educators are certified and available for those positions... students could be better served by hiring reading and/or math specialists. - Capital Region City Allowing for "limited" reserves for TRS and health insurance to help stabilize the annual local levy. I understand the reason for audits of public reserves, and I agree with the Comptroller's Office in general -- public money should roll forward to control or reduce the levy. With that said, "limited" reserves in those two areas would be very helpful in controlling spikes. Capital Region Suburb Remove the APPR and testing requirements implemented under RTTT. The levels of bureaucracy and financial expense it has created is unsustainable. - Southern Tier Rural The special education requirements and restrictions are taking to many financial resources from other student programs. The State laws need to be amended to offer a little more local control of special education decisions. - Western New York Suburb

As in our past surveys, there were varied recommendations for changes in special education requirements and calls for an end to unfunded mandates. Several superintendents also Relaxing the ELL requirements for stressed urged changes to recently adopted regulations regarding districts in rural areas where labor shortages exacerbate the costs of securing & retaining services for children who are English Language Learners. certified personnel. - Finger Lakes Rural

In our question, we asked superintendents for recommendations that would help their districts to reduce or control costs or to produce more benefit students “within existing resources.” We were not seeking ideas that would require or generate additional revenue. Nonetheless, 54 superintendents, 25 percent of those responding to the question, did recommend an assortment of changes to the tax cap. Most frequently suggested was to make the allowable levy growth factor in the tax cap 2 percent, rather than the current lesser

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A predictable, sustainable, equitable and adequate state aid distribution formula followed closely by adjusting the tax cap to a minimum of 2%. - Western New York Rural Just make the tax cap 2%. Tying the cap to CPI creates fluctuations from year to year that make multi-year budgeting near impossible. This one change would allow districts to better predict funding one year to the next. - Long Island Suburb

SOMETHING HAS TO GIVE | October 2016 of 2 percent or the change in the Consumer Price Index over the preceding calendar year. In enacting the tax cap, lawmakers essentially made high property taxes a problem for local leaders and voters to solve. The tax cap by itself did nothing to lessen pressures contributing to high property taxes. It neither helped schools and local governments to manage costs, nor assured alternative revenues to meet costs. In the years since, action on mandate relief has been minimal, except for the 2012 enactment of “Tier VI” pension reform which will have a helpful long-term impact. The last three state budgets have produced strong overall increases in aid to education. But not all school districts have benefited and those increases will need to continue. If state government intends to keep all the rules it has prescribed to govern school financial operations, it must fund those rules.

i

Citizen’s Budget Commission. Predicting the Peak, Preparing for the Trough: An Examination of the Impact of a Possible Recession on New York State Tax Revenues. June 2016 ii

For the purposes of this survey “high poverty districts” are defined as districts whose superintendents estimated that 60 percent of more of their students are eligible for the federal Free or Reduced Price Lunch program. Government Finance Officers Association, Best Practices in School District Budgeting: 1B – Develop Principles and Policies to Guide the Budget Process. January 2015. iii

iv

Office of the State Comptroller. Making the Grade: Five Years of School District Accountability, 2009 Annual Report. February 2010.

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