Part 2 of 5 Part Series
In 1978, several property-poor Long Island, New York City, and other large urban districts combined to challenge the state’s school finance formula in Levittown v. Nyquist because of the funding disparities among their school districts and the state’s property-rich districts. The New York State Court of Appeals ruled “that the state’s constitution guaranteed all New York children an opportunity for a ‘sound basic education’” (Chambers, Levin, & Parrish, 2006, p. 3) based on the New York State Constitution’s education clause, known as the Education Article, which states that “the legislature shall provide for the maintenance and support of a system of free common schools wherein all the children can be educated” (Shrader, 2007, p. 84) even though the Court found that the constitution did not mandate equal funding. Although the finding in Levittown v. Nyquist was that funding inequities did not violate the state’s Education Article, the Court did not define a sound basic education (Chambers, et al., 2006, p. 3).
The New York State Education Department (NYSED) assembled a task force to define a “sound basic education” in response to the Court’s decision. The task force defined a “sound basic education” in terms of learning standards that resulted in a “state sponsored research and public engagement process culminating in 1996 in the issuance of the Regents Learning Standards” (Chambers, et al., 2006, p. 4). These standards established benchmarks for student achievement in seven academic content areas and ultimately the definition of adequacy “as providing to all students a full opportunity to meet the Regents Learning Standards” (Chambers, et al., 2006, p. 3).
Standards are at the core of the Campaign for Fiscal Equity’s (CFE) lawsuit challenging the constitutionality of New York State’s education funding system in CFE v. State of New York, 1993. CFE argued that the state’s school finance system failed to provide students with a sufficient opportunity to receive a state constitutionally guaranteed “sound basic education” particularly in New York City (Shrader, 2007, p. 84). In CFE I, 1995, the Court of Appeals ruled that the state has an “obligation to provide ‘a sound basic education to all the children of the state,’” including “the basic literacy, calculating, and verbal skills necessary to enable children to eventually function productively as civic participants capable of voting and serving on a jury” but the Court declared that even adequate facilities and teachers fulfill the state’s responsibility (Shrader, 2007, pp. 84-85). As a result, the Court of Appeals overturned the Appellate Division.
In CFE II, 2001, CFE prevailed in trial court and State Supreme Court Justice DeGrasse declared that “the school funding formula unconstitutional because it failed to supply New York City school children with a ‘sound basic education’ as required” and affirmed the essential components of “a sound basic education” (Shrader, 2007, pp. 85-86). Justice DeGrasse required the State of New York to ensure that all of its public schools provided an equal opportunity for a sound basic education for all of its students, to ensure that all of the Court’s standards were met, and to perform a costing-out study to determine the costs of providing a sound basic education as well as to serve as the basis for a new school finance formula.
The driving force behind the School Finance Reform Act of 2008 (SFRA) was the need for a “formulaic remedy for all districts” based on actual community characteristics that could be applied equitably to all school districts and would address the increased funding targeted primarily to Abbott districts as well as the inequities that had resulted from the imbalance of resources among districts (New Jersey Department of Education, 2007, p. 4). SFRA replaced CEIFA and the state’s unique Abbott remedies of parity aid and supplemental funding with one formula because the New Jersey State Supreme Court found CEIFA’s funding provisions unconstitutional. Although SFRA’s formula contains “three major components: equalization aid, categorical aid, and adjustment aid” (Goertz & Weiss, 2009, p. 28), it calculates aid in two ways: “wealth-equalized and categorical” (New Jersey Department of Education, 2007, p. 19).
SFRA’s wealth-equalized aid is allocated according to each district’s ability to raise enough local revenue based on its equalized property valuation and aggregate district income, both of which are indexed using the state wealth multipliers, to support its adequacy budget. The adequacy budget represents the amount of resources necessary for a district to meet state imposed standards or outcomes such as the Core Curriculum Content Standards (CCCS) and includes:
- The base amount for elementary, middle, and high school students
- The weights for at-risk and limited English proficiency (LEP) and county vocational students
- Two-thirds of the census-based costs for the general special education category
- All of the census-based costs for speech (New Jersey Department of Education, 2007, p. 19)
New Jersey’s adequacy based school funding formula seems to have been developed in response to the Court’s demands for “standard-based reforms” that “have ‘judicially manageable’ tools that allow them to devise effective remedial orders” (Rebell, 2002, p. 219).
Equalization aid is calculated using a “foundation formula based on an ‘adequacy budget’” which includes “funding for the regular education program and costs for student poverty (“at-risk” aid), limited English proficiency (LEP) students, and special education services” (Goertz & Weiss, 2009, p. 28). A district’s adequacy budget, therefore, equals the amount calculated according to the following formula:
A district’s adequacy budget equals the total of all of the base student costs plus at-risk student costs plus LEP student costs plus the combined costs of all LEP students who are also eligible for free or reduced-price lunch plus the special education census-based costs that are wealth-equalized together times the Geographic Cost Adjustment (GCA). (New Jersey Department of Education, 2007, pp. 19-20)
In contrast to wealth-equalized aid, categorical aid is not based on a district’s ability to levy local property taxes but is determined by multiplying the cost factor for a particular category by the number of students that qualify for the aid (New Jersey Department of Education, 2007, p. 19). The purpose of SFRA’s adjustment aid is to hold districts harmless but only in the short term:
Adjustment aid is a save-harmless program for districts that receive less state aid under SFRA than they did in 2007-2008, particularly Abbott districts where state approved expenditures exceeded their SFRA adequacy budgets. For 2008-09, the state guarantees that all districts will receive a minimum of 102% of their 2007- 08 state aid. Adjustment aid will be reduced in the out-years as equalization and categorical aids grow. (Goertz & Weiss, 2009, p. 28)
A district’s state aid allocation equals the amount calculated according to the following formula: state aid equals a district’s adequacy budget amount less the district’s local fair share amount to which the district’s amount of categorical aid is added (New Jersey Department of Education, 2007, p. 25).
SFRA’s impact on the Abbott districts was significant because it eliminated the Abbott’s special needs district designation and rescinded the Court prescribed remedies such as requiring spending parity with affluent districts and providing additional funding for supplemental programs. Although SFRA maintained the Abbott districts’ facilities aid, it increased:
The “fair share” or expected local tax revenues from the Abbott districts. The local share attributed to Abbott districts under SFRA is nearly double what they currently raise in local taxes. . . . This provision overrides the court’s requirement that increases in local revenues be limited due to high levels of municipal overburden in these districts. (Goertz & Weiss, 2009, p. 31)
Abbott districts received less equalization aid as a result of having to raise their required local fair share even though Abbott districts were prevented from levying the necessary amount of property taxes to raise their local fair share beyond a four percent increase (Goertz & Weiss, 2009, p. 31). Although SFRA benefited most low and middle income non-Abbott districts but only if these districts also increased their local property tax levies by the four percent state maximum, most high income districts with
The conceptual framework that has framed school finance in New York State is focused on achieving adequacy. This conceptual framework is based on trying to achieve wealth and need equalization among school districts. To meet this definition of adequacy, New York State uses the Regents Learning Standards as the barometer against which to determine whether a district is meeting its adequacy requirements as established by the school finance formula. This adequacy concept focuses on the provision of an adequate education that equalizes outcomes rather than inputs so that all students will have an equal opportunity to receive an education which meets or exceeds state standards. The rationale undergirding the adequacy concept is that a district’s financial resources should be sufficient and adjusted for cost variations beyond a local school district’s control to enable the district to meet or exceed the adequacy standards and to provide an opportunity for all students to meet the Regents Learning Standards.
The New York State school finance formula is similar to the SFRA formula in terms of the ways in which it distributes aid: flat grants, wealth-equalized aid, and effort or expense-based aid. Wealth equalized aid is distributed by the state “in inverse proportion to local fiscal capacity to offset dramatic differences in the ability of school districts to raise local revenues” and in terms of an equalized per pupil amount while expense-based aid is based on the state share of a district’s actual approved spending (University of the State of New York & The New York State Education Department, 2010, p. 9). Although flat grants per pupil distribute the same amount of state aid per pupil in every district and this aid is not wealth equalized while lump-sum grants are distributed progressively based a district’s total property value and income, the New York State school finance formula’s aid relies on a foundation amount. Total foundation aid equals selected foundation aid (a district’s foundation aid per pupil but not less than $500) times selected Total Aidable Foundation Pupil Units (TAFPU) (University of the State of New York & The New York State Education Department, 2010, p. 21). This aid is based on the cost of providing general education services, compared to the instructional costs of a successful school district, and is adjusted annually for the percentage increase in the consumer price index (
The New York State School Tax Relief (NYSTAR) program, enacted on August 7, 1997, as the New York State Real Property Tax Law, is a school property tax rebate program that is designed to lower local school property taxes and, in particular, the tax price of school property taxes with the intention of causing local school districts to increase their spending and, thereby, the level of the educational programs and services that they provide. NYSTAR provides New York homeowners with a partial exemption of a portion of their school property taxes as levied only on owner-occupied primary residences. The school district will continue to receive the same amount of property tax revenue because New York State reimburses the district to make up for what would otherwise be lost revenue as a result of the rebate as long as the district maintains the existing tax rate.
The NYSTAR program has two types of exemptions: Basic NYSTAR and Enhanced NYSTAR.
Basic NYSTAR is available for owner-occupied, primary residences where the owner’s total income is less than $500,000. Basic NYSTAR works by exempting the first $30,000 of the full value of a home from school taxes. . . . Enhanced NYSTAR provides an increased benefit for the primary residences of senior citizens (age 65 and older) with qualifying incomes. For qualifying seniors, Enhanced NYSTAR exempts the first $60,100 of the full value of their home from school taxes. (New York State Department of Taxation and Finance, 2011, p. 1)
Baker (2011b) concludes that NYSTAR aid is allocated inequitably and disproportionately benefits New York State’s affluent school districts:
STARaid in particular is allocated to more affluent downstate school districts;
STARaid, by reducing the price to local homeowners of raising an additional dollar in taxes to their schools, encouraged increased local spending on schools;
That when the relative efficiency of school districts is measured in terms of increases in measured test scores, given additional dollars spent,
STARaid appears to have encouraged less efficient spending. STARaid enabled affluent suburban districts to spend on other things not directly associated with measured outcomes, but things those communities still desired for their schools.
STARaid contributes to inequities across districts in a system that is already highly inequitable. (Baker, 2011b, p. 3)
The homeowner’s property value is reduced by the amount of the NYSTAR exemption and then divided by an equalization rate. New York State’s equalization rate equals the ratio of the homeowner’s total assessed property value less the NYSTAR exemption divided by the homeowner’s total market value whereby the district’s host municipality determines assessed property values and New York State determines market values. NYSTAR is, therefore, a state funded school property tax exemption which makes NYSTAR a state school financial aid program.
A district’s foundation aid equals its foundation amount times the Pupil Need Index (PNI) times the Regional Cost Index (RCI) all combined, less its expected minimum local contribution or what would be referred to as their local fair share in New Jersey. The RCI reflects regional variations in purchasing power around New York State based on the wages of non-school professionals. The PNI reflects the costs of providing extra time and help for disadvantaged and special needs students to succeed. PNI equals one plus the district’s Extraordinary Needs (EN) percentage and ranges between one and two. The PNI adjustments are based on a school district’s concentrations of at-risk and disadvantaged students (University of the State of New York & The New York State Education Department, 2010, pp. 21-22). The expected minimum local contribution is an amount that a district is expected to raise on its own and spend as its share of the total cost of general education which equals the lesser of the two following calculations:
- The selected actual value per pupil times a tax factor of 0.0137 times income per pupil relative to the state average which is capped between 0.65 and 2.00.
- The district’s foundation amount times its PNI times its RCI all together times one minus its Foundation Aid State Sharing Ratio.
The foundation aid state sharing ratio compares a district’s wealth measures to the state average wealth measures. It is computed by calculating the district’s Combined Wealth Ratio (CWR) that is a measure of district’s fiscal capacity. A district’s CWR is calculated by multiplying a district’s actual property value per pupil and then dividing this amount by $564,900 which is then multiplied by 0.50. This amount is then added to the total of the district’s income per pupil which is divided by $177,200 and then multiplied by 0.50 (University of the State of New York & The New York State Education Department, 2010, pp. 24-27). The state sharing ratio is the state aid to local fiscal capacity ratio which is inversely related to a district’s wealth as compared to the state average and this ratio is multiplied by 1.05 only for high need/resource capacity districts (University of the State of New York & The New York State Education Department, 2010, p. 25).