DEPARTMENT OF EDUCATION BUDGET BRIEFING

May 21, 2008

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1.4 1.7 1.8 1.9 1.9 1.8 1.8 1.8

5.75.9 5.8

6.2 6.7 7.28.1 8.7

5.96.2

7.0

7.6

8.6

9.5

10.510.5

FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008* FY2009*

City

State

Federal

$12.9b$13.9b

$14.7b

$15.9b

$17.3b

$18.7b

$20.4b$21.0 b

DRAMATIC RISE IN EDUCATION FUNDING SINCE MAYOR TOOK CONTROL IN 2002

This chart does not include increases in other categorical funds, which account for an additional $0.05 billion. FY08 and FY09 are as of the FY09 Executive Budget. Funds include pension and debt service. Figures in bars are rounded.

Total education funding up more than $8 billion. Only 1% of new dollars funded school administration.

City Funding Up 79%

State Funding Up 55%

Federal Funding Up 27%

Total Up 63%

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INCREASES HAVE LARGELY BEEN DIRECTED TO SCHOOLS

* Direct services to schools includes support services, restricted/non-restricted school programs and school admin (SSO, ISC, CSE). **School-controlled funds include teacher salaries, materials, programs for students, school support staff, pension, and fringe.

> Principals’ spending power climbed with a $4.5 billion increase in school-controlled funds > Direct services to schools (e.g., food, transportation) are up more than $2.4 billion

School Budgets: 2002 School Budgets: Today

School-controlledFunds**

$8.5 billion

Direct services to schools

$2.2 billion*

School-controlled Funds**

$13.0 billion

Direct services to schools$4.6 billion*

$10.7 billion $17.6 billionSchool Budgets: 2002 School Budgets: Today

School-controlledFunds**

$8.5 billion

Direct services to schools

$2.2 billion*

School-controlled Funds**

$13.0 billion

Direct services to schools$4.6 billion*

$10.7 billion $17.6 billion

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$350 MILLION PLUS TO SCHOOLS FROM CUTS TO THE BUREAUCRACY SINCE 2002

Bureaucracy

Then Now

> Phase I: Prior to 2007, we sent more than $190 million from the bureaucracy to schools and classrooms.

> Phase II: Since then, we were able to redirect an additional $174 million from the bureaucracy to schools and classrooms.

> Plus: We have sent another $56 million to the schools that principals can use to purchase the academic support services, provided by School Support Organizations, they consider best for their students.

Schools

>$350 million

This chart excludes the cost associated with fringe.

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FY09 BUDGET: NEW REVENUESThis year, despite hard times, the City and State are continuing to increase operating funds to NYC public schools.

NEW CITY FUNDS

NEW STATE FUNDS

$129million*

$535million*

$774 million$664

million*

NEW NYC SCHOOL FUNDS

* This excludes pension and debt service.

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BUT THE DEPARTMENT ALSO FACES NEW COSTSEach year, costs rise. This year we have $963 million in new costs we must pay.

Non-Discretionary Costs That Have Escalated

Necessary Improvements to DOE Operations and Public Commitments

• Labor• Energy• School food

• Enrollment system• Principal and teacher training• Transfer schools

$809Million

$154million

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MAKING IT WORSE: WE CAN’T SPEND MOST STATE FUNDS ON NEW NEEDSBecause of restrictions created by Albany, new funds are restricted and hard to spend on new needs. This year, only $150 million, or 26% of the State’s new aid is unrestricted, compared to $283 million, or 46% last year.

NEW STATE FUNDS

$535 million

$242million

$385 M RESTRICTED STATE DOLLARS

$150million

$150 M UNRESTRICTED STATE DOLLARS

$113million

$30million

“Maintenance of Effort” for

existing priorities

New costs eligible for C4E funds

Restricted C4E funds

$385million

Funds subject to C4E

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FILLING THE GAP: DOING EVERYTHING POSSIBLE TO SPARE SCHOOLSWe believe in maximizing the power of educators to decide how to spend money to help students learn. That’s why we’re cutting back as much as possible from central and other administrative expenses.

> We are cutting $200 million from central and other non-school budgets.

> These reductions include: Identifying areas for operational savings, such as purchasing efficiencies and

custodial spending. Identifying savings in the central administrative budget of 6% and savings in the

central headcount of 3%. For example, • Restructuring some of our accountability spending, including:

» Transitioning Quality Reviews in house; » Allowing schools with strong outcomes on their Quality Reviews and Progress Reports

to have Quality Reviews every 2 to 3 years instead of annually; • Reducing the number of annual periodic assessments in both Math and English Language

Arts to 4 from 5. • Reducing program expenditures, such as New York City Teaching Fellows, when we’re

confident it won’t have a negative impact on schools.

Identifying savings in the Integrated Service Center and other field offices’ budgets of 3% and identifying headcount savings of 4%.

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THIS LEAVES US WITH A GAP OF $99 MILLION WE MUST FILL

NEW COSTS Non-discretionary costs that have escalated

$809 million

$963 million

Necessary improvements to DOE operations and public commitments

$154 million

NEW FUNDS WE CAN USE AGAINST NEW COSTS

New York City funds $129 million

$864 million

New York State funds $535 million

Non-school budget savings $200 million

TOTAL “NEEDS” GAP

   

$99 million

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IF SCHOOLS SHARED THE BURDEN, ALL WOULD EXPERIENCE A 1.4% REDUCTION

If we could distribute new State funds equitably, all schools would experience a 1.4% reduction in total spending power. Our preference is to distribute the new State money equitably to ensure that the reduction to our schools is the same across the board.

Unfortunately, due to restrictions the State has placed on most of its new operating aid, the impact on individual schools would vary greatly.

Adjusted for changes to teachers’ salaries required by collective bargaining and school register changes, some schools would lose as much as 6% of their spending power, while others would actually experience substantial increases under the State’s mandates.

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APPEALING TO ALBANY

We are appealing to Albany to make this more equitable for our schools.

As we work to resolve this issue, we are holding back $63 million in the State’s restricted operating aid.

> If this money were distributed to schools according to Albany’s current rules, some schools would see an increase in spending power and some schools would see a decrease.

> If distributed in an equitable fashion, these funds would bring all schools to a 1.4% reduction in spending power. We will finalize budgets once this issue is resolved in Albany.

Contract for Excellence dollars are preliminary. These funds are subject to a public engagement process and approval by the State Education Department. This means that there could be changes in that budget line.

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WE ARE WORKING WITH SCHOOLS TO HELP THEM PLAN FOR NEXT YEAR

> We must implement the necessary reductions so they are both fair and manageable for schools.

> We are working with the State to get some flexibility so some schools aren’t destabilized in tough times.

> ISCs and SSOs will work with principals as they plan for next year.> We are talking to principals directly about budget implications.> We will hold C4E hearings to get public input on how principals

should spend contracts money.

The goals of Fair Student Funding stay in place: putting as much money as possible in schools, distributing funds fairly, and bringing stability and transparency to school budgeting.